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GUEST COLUMN – Steffen Pedersen –
Steffen Pedersen is a partner based in the
Singapore office of Thomas Cooper. The firm was
established in 1825 and is the oldest maritime
firm founded in London. It has offices in London,
Madrid, Paris, Piraeus, São Paulo and Singapore
and is licensed to practice English, Hong Kong,
French and Spanish law and run arbitrations under
Singapore law. Pedersen represents clients in negotiations and advises
on construction contracts globally, including handling disputes for
yards and Owners in both court and arbitration. Dual qualified as
a Hong Kong and English solicitor, he has spent his entire career in
the Far East, where he grew up. He also speaks the Scandinavian
languages and Mandarin Chinese.
[email protected]
http://www.thomascooperlaw.comHAVING A SUPERYACHT built is a
significant investment. From a buyer’s
perspective, it is vital that the Yacht
Construction Agreement (YCA) ensures
timely delivery of the desired superyacht
and adequately protects the buyer’s
rights and remedies. To help achieve
this, there are many dos and don’ts when
entering a YCA. Here are some of the
more crucial points to remember.Choose Yard Carefully
Do your homework on the yard
you are considering contracting.
A yard that has a good reputation
and long, unblemished track record
is likely to be a safer bet. A longer
track record suggests financial and commercial strength. The yard’s
experience should hopefully translate into the timely and trouble-free
completion of your superyacht.Due Diligence And Independent Guarantees
It is not given that the yard itself will be your contractual counterparty.
If your counterparty (whether the yard or another company) has limited
assets, steps should be taken to protect your position. This is especially
important where you are making milestone payments during the
construction process. If you have no protection, you are pouring money
into a hole from which it likely cannot be retrieved.
To protect yourself, the YCA should make clear that milestone
payments are ‘advances’ and refundable if the YCA is terminated. A
third-party guarantee should be sought to secure refund in case the
contractual counterparty fails to make refund.
Alternatively, the YCA could provide that title to the superyacht
passes gradually to you during construction with each milestone
payment. In that case, you have ownership of the superyacht. The
downside is that you risk being left as Owner of a half-built superyacht
at a yard in a foreign country. You will then need to arrange for towage
to another yard for completion (possibly involving export to another
country) – that might not be straightforward and could create more
headache than a simple refund.
Naturally, if you ask for guarantees ensure the proposed guarantor is
a substantial entity.Never Accept Standard Term Contracts
These will often be biased unfairly in favour of the yard. There will be
few situations in which a yard contract will not be negotiable.Make Provisions For Changes And Delays
Changes are common in superyacht construction projects. The YCA
should outline who is liable for which particular changes and the delays
they cause. The effect of those delays should be agreed. Normally, if
the buyer is liable, the delivery date is extended. If the yard is liable,
liquidated damages should follow.Where And When Delivery Should Occur
Place of delivery will impact on taxes that apply to the sale. Time of
delivery will normally trigger the last instalment payment, and runningPROTECT YOUR INTEREST
THE DOS AND DON’TS WHEN ENTERING A SUPERYACHT CONSTRUCTION AGREEMENT
of the yard’s warranties. As most
issues are detected within the first few
months of use, time of delivery should
be when you intend to physically take
over and start using the superyacht.
Sub-contractor and supplier
warranties should also be assigned to
the buyer on delivery.Consider Dispute
Resolution Clauses
People normally pay little
attention to dispute resolution
clauses. However, careful drafting
here could make the difference
between having viable remedies and
losing your entire investment.
Most yards will, as a default, want to have their local law and court
decide any disputes. In some countries, a yard’s ‘home-field advantage’ may
be a serious problem for a foreign buyer.
Choosing a neutral third venue is usually an achievable compromise.
England and Hong Kong are always good choices, with long legal
traditions and a reputation for complete impartiality.
If privacy and speedy dispute resolution is desired, choose arbitration.Consult A Maritime Lawyer Before Entering Contract
Maritime law is a specialised field with many subtleties. Experience
of maritime construction contracts is vital to protect the buyer’s position
properly. Remember, once you are legally bound, it is a lot more
difficult to protect you from a bad bargain or unfavourable contract
terms. You do not want to discover down the road that your rights are
unenforceable.
At the end of the day superyachts cost millions. Engaging a maritime
lawyer to protect your interest is a sound investment.Afterword
There are many world-class yards out there, and relatively few
buyers. Your bargaining position should be strong. With the right
professional team looking out for your interests, you can ensure
smooth construction and delivery of your dream superyacht, and
many years of luxurious yachting.