State vessels and maritime law

While there’s been much recent discussion about building a new British royal yacht, it is often forgotten that a significant portion of the world’s superyacht fleet consists of royal and presidential yachts.

These vessels occupy a particular place in international maritime law – often acting as floating embassies, extending extravagant hospitality and prestige. And just as diplomats hold special privileges in foreign countries, so do state vessels.

For yachts, these diplomatic privileges take the form of immunity from seizure and delay. But such immunity is not automatic: it arises only because in the past various governments have reached negotiated, reciprocal agreements.

This is important because it means that the immunity has a legal as well as a political foundation. So it is therefore possible to state precisely what the extent of the privilege is in any given set of circumstances.

State vessel legal immunity

So why have such immunity anyway? The answer is that, like warships, state yachts are the floating embodiment of a particular nation, and to try to ensnare such vessels in foreign legal proceedings could be seen as a slap in the face of a foreign country, and diplomatically embarrassing.

To make sure such faux pas do not happen, the treatment of state yachts is enshrined in the national laws of most states. It is a similar concept to the legal sanctity of foreign embassies.

But a line has to be drawn somewhere with regard to foreign sovereign immunities, to prevent them being taken advantage of. So a distinction is drawn between activities undertaken using these vessels which are commercial in nature, and those of a governmental or public nature.

For yachts, ‘commercial’ simply means it has been chartered. While this tenet was enshrined in the Brussels Convention on Immunity of State Owned Vessels 1926, later in the European Convention on State Immunity 1972, and the Law of the Sea Convention 1982, these conventions must still have been enacted into particular countries’ domestic law to have any effect. This means that the commercial/non-commercial principle is not uniformly applied.

In the UK, the State Immunity Act 1978 strips immunity even where there is just an intention that the yacht be chartered – therefore encompassing charter positioning passages. In the US, the Foreign Sovereign Immunities Act 1976 allows for state yachts to be seized not only when being used commercially, but also to enforce a mortgage on the vessel. In France, the courts have held that a vessel may be seized simply when it is not performing a public act of state – which in reality is most of the time.

In most parts of the world, the privilege is what lawyers call ‘restrictive’ in nature. This means if you want to rely on this privilege you have to demonstrate that your yacht is a state yacht and the circumstances justify what you’re seeking to rely on.

Being immune from seizure and delay is, almost literally, a ‘get out of jail free’ card for an owner who disputes a bill, for example. Seizing a yacht is a dramatic and effective method for recovering debts. There is nothing like it in land-based law.

Normally, if you were to supply goods or services to a yacht, and weren’t paid, you could only sue the person or company with whom you agreed to deliver the supplies or do the work. Liens cut through contractual matrices.

Arresting state vessels

Arrests are governed by the law of the jurisdiction in which the yacht is situated at the time. The yacht’s flag and the nationality of the individual or company seeking redress usually makes no difference. The arresting court can also become the trial court, making it possible to ‘forum shop’ for a country with favourable laws.

Bringing an action against a ship is a remedy which has been around since ancient times. It exists because, traditionally, ships were owned by their captains and if anyone who had supplied goods or services to the ship was left unpaid, the captain could sail off, never to be seen again.

Some see arrest as a punishment in itself. It isn’t: it’s just a way of detaining the yacht in order to force the owner to provide financial security, which could be in the form of a cash deposit or bank guarantee. Then the yacht is free to leave.

Contrary to popular belief, at no time is the yacht actually chained to the dock. The order is served on the yacht and if the captain attempts to leave he or she will be in contempt of court and criminally liable.

In the UK, a warrant of arrest will not be issued against a state yacht where, by any convention or treaty, the UK has undertaken to minimise the possibility of arrest until notice has been served on a consular officer of that state.

Many countries have made similar ad hoc bilateral agreements not to arrest each other’s state vessels, in spite of any immunity laws allowing for arrest where they are being used commercially.

If a state yacht is found to be in need of salvage assistance, the International Convention on Salvage 1989 will not apply if the vessel is entitled to immunity. This means that, unless the state owner consents, it may be impossible to arrest a salvaged yacht if financial security is wanted pending the litigation or arbitration of any salvage claim.

Where a state yacht has been sailed negligently, perhaps causing a collision, it remains possible to bring an action against the officer in charge at the time personally for negligence, just as it would be in any other situation: individuals cannot normally shelter from immunity afforded to the yacht.

Retaining power of arrest

To ensure that the vital right to arrest is retained, suppliers’ contracts should always include a ‘law and jurisdiction’ clause. It is surprising how often this is omitted, even by sophisticated suppliers.

It is a simple matter to include an extension to such a clause so that the yacht’s owning company is not entitled to claim any immunity in relation to itself (or any of its assets) under any law or in any jurisdiction in connection with any legal proceedings relating to the agreement.

The owner should also be asked to irrevocably agree not to claim – and waive – such immunity. As it is always open to the owner to claim that national laws providing immunity will trump whatever is written in the contract, there is no guarantee that such a clause will be effective, but it is the most any supplier can realistically do.

When a royal yacht isn’t a royal yacht

To be clear, not all yachts owned by royalty will be royal yachts in the context of international law.

In those jurisdictions where the royal family is part-and-parcel of the state itself (for instance, where states are monarchies), it will usually be clear whether or not a royal yacht is a state yacht.

The situation becomes less clear when the royal family has a purely symbolic role. Some royal households, while subject to widespread popular support and approval, are in fact constitutionally separate from the states they reign.

Further, some state yachts are owned by private owning companies, perhaps based in popular offshore jurisdictions, usually to place the yacht in a ring fence from potential legal liability.

Where this is the case the legal owner will be the owning company, not the royal personality or state, so any immunity would fall away. Given this, it would be preferable for state yachts which are to be chartered to be owned within the traditional company owning structure.

When ownership is through such a company, the normal rules regarding whether it is possible to view the individual ‘beneficial’ owner as the actual legal owner will apply. This is known as ‘lifting the corporate veil’. It is usually only possible to reveal the beneficial owner where there has been tax evasion or an intent to defraud creditors – which is hardly likely in the case of state yachts.

While it is worth bearing in mind the immunity that state yachts enjoy, it is important not to lose sight of the fact that their owners are more likely to remain solvent, and will certainly behave after an incident in a manner which could be described, quite literally, as diplomatic.

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: May 2009. Revised: 5 August 2012.