Problems being innovative with a superyacht build

20 January 2015By Benjamin Maltby
The Maltese Falcon changed its flag state when its composite submersible ran into problems for not being made from steel.

Innovation is important for a superyacht. There’s no harm in a little one-upmanship, and the more modern a superyacht looks when it’s designed, the fresher it’s going to look to charterers and potential buyers in the years to come. Yet no matter how advanced a superyacht is, there always remains the fundamental paradox that while architects and stylists usually like to incorporate the latest design cues, naval architecture itself is a predominantly conservative discipline.

The preference is for evolution over revolution: building on experience more than inspiration. This is not surprising given that the basic design of most cargo-carrying ships has not advanced much over the last 30 years, given the technology available.

Many advances in materials are driven by the defence industry. Governments have far deeper pockets even than most superyacht buyers when it comes to research and development. This then provides a pool of innovative concepts and substances into which designers can dip, as and when they (and owners) feel brave enough.

Some technologies are more transferable than others, and there are risks involved, including not only a failure of a particular material, but, for example, the vessel’s speed not meeting expectations, the fuel consumption being too high, or just late delivery. It could just be that the gloss of a new exterior paint doesn'’t last.

Preventing faults created by innovation

Some faults may take years to become apparent: fibreglass was originally developed for aircraft during the Second World War and was gradually accepted as a boat-building material in the following decades.

Only some years later did some hydrolytic breakdown (often erroneously referred to as ‘osmosis of the structure’ or just ‘blistering’) become evident. This only happened on smaller yachts as GRP superyachts were many years away, but the risk is still there if the yard conditions, chemicals and techniques aren’t right.

So how can the adventurous buyer set about building an innovative vessel, while at the same time making sure that the project will be a success and his or her legal position is protected as far as possible?

There are a number of parties, particularly the classification society and the maritime authority in the country where the vessel is going to be registered (the flag state), which will need to be involved early on. The starting place, however, will be with the naval architect and yard.

Yards are conservative, so owners should retain control over a project that includes innovative designs.

Working with the shipyard

Yards’ capabilities and views of their function vary hugely between companies and countries, from being a mere constructor to a turnkey deliverer of dreams.

Whereas normally it’s better that the buyer contracts with one party – the yard – so that the responsibilities are clear and rest with a single entity, as the novelty of the proposed build increases so the yard’s willingness to take on sole responsibility will usually decrease.

Yards may also be reluctant to incorporate novel equipment – or equipment not previously used for this purpose – which does not carry the required safety certification.

For builds taking place within the EU, for example, the Marine Equipment Directive 96/98/EC of December 1996 applies, which requires that all equipment meets certain minimum standards and has been examined and certified by a recognised classification society.

Gaining such approval can be an expensive and time-consuming process, especially if the item is a one-off, but there is now a Mutual Recognition Agreement with the United States Coast Guard (USCG) whereby both the EU and US automatically approve each other’s authorised products.

Role of the classification societies

The arbiters of technical feasibility are the classification societies. These are essentially groups of engineers and surveyors who are experts in the technical aspects of superyacht construction and maintenance.

Traditionally, they research, establish and apply highly detailed standards for design, building and maintenance. They also provide additional consultancy services, and can start assisting long before construction begins.

Crucially in the context of novel new builds, it’s not their job to consider how the vessel or any particular feature is actually going to be used.

Society surveyors can make mistakes. In the context of new designs and materials the risk may be especially high, given the reliance on assumptions, calculations and extrapolations. Pinning blame on the society later will be almost impossible given that its non-negotiable standard terms usually try to limit or completely exclude liability for virtually any mistake.

While second opinions from other experts may be helpful, if the superyacht is being built to classification society rules, then there will be no alternative but to work closely with them.

Where the rules do not cover a specific situation, individual consideration should be given on each novel aspect, on the basis of the rules’ existing principles and criteria. Much is at the discretion of the society, so a good working relationship and ample patience is vital.

Working with the flag state

A good rapport with the flag state will also be fundamental, since they make the rules which must be adhered to when building the superyacht.

Where the vessel is to be chartered, such rules are detailed and comprehensive. The UK’s Large Commercial Yacht Code (up to 12 passengers) and Passenger Yacht Code (13-36 passengers) are the international benchmarks for detailed superyacht design and materials standards.

As with classification society rules, there is scope for discretion – especially as many of the rules will give a particular technical standard and then state ‘or equivalent’ afterwards. The question, of course, is whether a new solution can be considered as an equivalent.

There is a wide choice of flag states available, and some can be surprisingly commercially focused when compared with the classification societies. Some owners have changed flags when faced with inflexible officials. But given that it dictates the rules and standards satisfied, the choice of flag state – and whether classification society rules have been satisfied – is of great interest to the vessel’s insurance underwriter.

While theoretically anything can be insured, a vessel flagged in an unknown jurisdiction will almost certainly be uninsurable, and flags with a poor reputation for standards will normally pose a greater risk and attract a higher premium. The flag can also have an effect on the vessel’s marketability both for chartering and sale.

Titania during her refit, in which her stern was extended.

Innovation requires boundaries

So where does all this leave the buyer wanting to avoid the inherent risk of unproven designs and materials not working?

The adage that good fences make good neighbours is key: the clear (contractual) allocation of responsibilities is vital if parties aren’t to blame each other for any miscalculations. It may be possible to sue parties with whom the buyer hasn'’t contracted for negligence, even if there’s no direct contractual link, but this will be far harder.

Throughout the build there must be continual discussion and compromise to iron out issues. So there needs to be clear mechanisms in the build and consultancy contracts to facilitate this.

Where compromise cannot be reached, it is more important than ever to have effective dispute resolution procedures in place – which may help to prevent the erosion of goodwill. The buyer will also need to have a contract management system to ensure that the research and the build progress smoothly, and to keep lines of communication open.

The buyer’s role as overseer

Whereas it normally makes good sense for buyers to insist on yards taking control and responsibility for design, with increasing novelty not only will yards’ readiness to shoulder responsibility decrease, but the buyer may want greater control to ensure that his or her innovative vision is realised.

There is also the prospect of the development of desirable new superyacht designs, and perhaps even new technology that may have applications beyond yachting, meaning that the buyer should consider retaining intellectual property and commercial exploitation rights.

Further, there is potentially much prestige attached to building an innovative superyacht, this has a value which the buyer might consider exchanging with the yard for, say, an extended post-launch warranty period.

The more ground-breaking a superyacht is, the more central the buyer’s role will be, acting as a negotiator and integrator. Of course, in reality this means putting together a particularly strong project management team.

The playwright George Bernard Shaw once quipped that reasonable people adapt themselves to the world, while unreasonable people adapt the world to themselves – hence progress depends on unreasonable people.

That may be true in many situations, but in the arena of superyacht development, reasonableness is key. Challenging the innate conservativeness of yards and authorities requires an experienced and practical team, and the right guidance.

Owners will need to find…

  • A yard which:
  1. Is receptive to new ideas;
  2. Has a history of producing innovative vessels; and
  3. Is willing to take on some responsibility for the innovation(s).
  • A classification society which:
  1. Is a member of the International Society of Classification Societies;
  2. Is acceptable to the proposed insurance underwriter;
  3. Is receptive to new ideas; and
  4. Really understands superyachts.
  • A flag state which:
  1. Is on the Paris Memorandum of Understanding on Port State Controls White List;
  2. Is acceptable to the proposed insurance underwriter;
  3. Has a flexible attitude towards rules and equivalents; and
  4. Will not affect the finished vessel’s sale or charter marketability.
  • An insurance underwriter which:
  1. Welcomes unusual marine risks; and
  2. Is prepared to insure the finished vessel for a reasonable premium.

Benjamin Maltby is an English barrister with consultants MatrixLloyd, providing impartial guidance on all aspects of large yacht purchase, building, ownership and operation.

Originally published: September 2010. Updated September 2012.