Three years have passed since the Brexit vote and, as many people predicted, there is still complete uncertainty over the future of relations between the United Kingdom and the European Union in all sectors including what interests us here, the yachting sector
by Federico Santini*
EVERYBODY IS AWARE THAT THE UK government’s negotiations with the European Union did not end up bearing fruit, making it distinctly possible that there will be a no-deal Brexit; indeed it is only because the exit date has been postponed from March 29th to October 31st, 2019 that a “no deal” has been avoided for the time being.
At this stage nobody really knows what is going to happen, given that both a “hard Brexit” (without any agreement reached with the EU) and a second Brexit referendum are still both possibilities. This situation means that there are still question marks, ones that I raised in an article in this magazine three years ago, over the future of the role of the British flag after Brexit.
A 2017 report by the University of Southampton entitled The UK Maritime Sectors beyond Brexit looked at the possible legal consequences of Brexit in the maritime sector and, with specific regard to the future of the British flag, highlighted the danger that the eligibility criteria for UK registration would be restricted.
The report considered the possibility that persons, whether individuals or entities, from the EU or the European Economic Area (EEA) might be excluded from being eligible in the future, and even that existing UK registrations might be automatically terminated and would consequently need to be transferred to other EU shipping registers.
Current UK shipping regulations, detailed in The Merchant Shipping (Registration of Ships) Regulations 1993, do allow persons, whether individuals or entities, established in any EU country to apply for registration in Part One of the UK Ship Register, by exercising the right of movement provided for by articles 48 and 52 of the EU Treaty.
So as to dispel these concerns and probably with a view to developing new opportunities after Brexit, the UK Government recently issued some new regulations on the eligibility criteria for inclusion in the UK Ship Register. In particular, new provisions called The Merchant Shipping (Miscellaneous Provisions) (Amendments Etc.) (EU Exit) Regulations 2018 confirmed that the same persons (whether individuals or entities) that are currently eligible to apply for registration under the British flag will also remain eligible when the UK has left the European Union.
The numerous EU residents who currently own British-flagged yachts are thus not at any risk of having to transfer them to other EU registries, as they will still be able to register them in the UK after Brexit. Furthermore, the UK Ship Register has announced that, with effect from March 29th 2019, eligibility criteria will be expanded to include all Commonwealth countries as well as many non-EU countries that were not eligible previously. These include Switzerland, Monaco, Argentina, Brazil, Aruba, Bahrain, China, Israel, Japan, Liberia, Madeira, Panama, South Korea, theUnited Arab Emirates and the US.
It thus seems clear that the UK Ship Register is aiming both at maintaining its primacy as the flag of choice in Europe, and also at taking advantage of the opportunities created by leaving the EU to attract non-EU owners,and thus compete with the British Virgin Islands’ and Cayman Islands’ registries. The measures outlined above only answer some of the questions that Brexit raises for owners who have opted for, or intend to choose, registration under the British flag, butmany other issues still remain unresolved.
Foremost amongst these is the VAT status of those yachts owned by EU residents which are already UK-registered, as well as of those which will be flagged in the UK after Brexit. But there is also the question of VAT status of UK-flagged yachts owned by British residents. We will address possible scenarios relating to these issues in forthcoming issues.
* Federico Santini: he is managing partner of the Santini & Partners Law Office in Rome. He is specialized in international law and maritime law, has consolidated experience in the yachting field especially in terms of super yachts transactions, the registration of yachts, international arbitration, insurance issues and tax related . He is a member of the Italian Association of Maritime Law and advisor for the most important law offices and of the international associations. For information or clarifications: [email protected]t