Third Country Registration of Boats and Yachts

The world yacht market is growing with increasing momentum both in our country and globally, despite the negative impact of the economic crisis. As a luxury consumer product, yachts are preferred for tourism, financing or personal use and constitute an important income item for countries operating in yacht production and registration.

Yachts, which are sea vehicles and can navigate in international waters, must be registered in a country, and must hoist that relevant country’s flag in order to determine the law and identity to be subjected to. The laws of the country in which yachts (more broadly ships) are registered, draw the framework regarding the vehicle, its financial obligations arising from the ownership and the intervention of third parties in the international law.

Yacht owners real or legal persons are not limited to the country of his/her nationality or establishment when choosing the registering country for their yachts. They can register their yachts in any country which has a marine vessel registry, and hoist the flag of that country – provided that they fulfil the registration conditions of the relevant country. This freedom that individuals have in yacht registration, has led to fierce competition among many maritime countries of the world. Countries are striving to be a focal point for yacht and sea vehicle registration on a global scale by providing advantages such as tax and diplomatic power of the flag hoisted. Because yachts (and all commercial vessels) have a very important place in world trade both in terms of themselves and their added value which is created as a result of their operation.

Yacht – Boat Registration in the State of Delaware and the Advantages

The state of Delaware in the United States of America is among the leading players in this ongoing competition between the countries for yacht registration. The state of Delaware differs from other maritime countries with its tax advantages not only for yacht and other sea vehicle owners, but also for all kinds of commercial activities, regulations in favor of yacht owners in the applicable legal order, and low registration costs. For these reasons, it has become a trusted flag state for many yacht owners. As a matter of fact, yachts are now subject to leasing, charter and similar legal relations beyond personal use. Therefore, most of the time, the yacht can sail thousands of sea miles from the owner’s location, and in case of an accident or attack, it becomes a necessity for the yacht to have the fastest and most effective legal protection.

Another reason why the state of Delaware is preferred for yacht owner natural and legal persons is that the yacht can be registered in the name of a limited liability legal entity (LLP) to be incorporated in Delaware and the legal owner is this limited liability legal entity to be incorporated, not the direct owner of the yacht. The advantage of this procedure is that it creates a legal protection shield between the personal assets of the yacht owner and itself of the yacht. The liability for the debts of the yacht is limited to the assets of the legal entity established in Delaware, and the assets of the original owner of the yacht are protected from claims that may be made by third parties. Yacht owners can also engage in any commercial activity they wish, without being limited to yacht-related transactions, with this company they will establish due to the reason that this company to be established in Delaware will be a general commercial company subject to Delaware laws.

Because of the LLP and the large share of shipping in the state of Delaware’s economy, there are many agency alternatives in Delaware for the operation, oversight, and brokerage of sea vehicles, and there are many court practices before the Delaware courts regarding a wide variety of disputes in which sea vehicles may be involved. Because the basis of the Common Law system is based on case law, how the laws will be interpreted and court case law is extremely important for the subjects in that legal system. Following the determination of the flag country to be hoisted, the process for yacht owners shall be followed as, the establishment of a limited liability company on which the boat will be registered, carrying out the inspection and survey regarding the seaworthiness of the yacht to be purchased, the conclusion of the sales contract, deregistration of the ship from the seller country registry and registration in the country of the flag to be hoisted, completion of the registration procedures in the country of the flag hoisted, and execution of the insurance procedures for the vessel and payment of the payment. Throughout these transactions, since the property subject to sale requires technical inspection and an international legal transaction will be made, it is of great importance for the purchaser to carry out the process with agents, consultants and lawyers who are experts in this field, in order to prevent greater material and administrative losses in the future.

As a result, since the yacht and boat ownership, whether for personal or commercial purposes, constitutes an important economic asset and risk, short-medium and long-term cost analysis should be carried out by taking into account the selection of the flag country, the evaluation of the legal advantages and disadvantages of the flag country according to the purpose of use of the sea vehicle, and the administrative processes of the registration country.

Atty. Duygu DOĞAN ŞAHİNER

Atty. Tolga SEVİNİR

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