By Bruce Putterill, Senior Partner
Recent developments at the international level should mean fair seas and a prosperous voyage for top-quality registries such as the Cayman Islands, but those that do not pass muster could be in for something of a storm.
As a British port of registry with Category I status, the Port of George Town, Cayman Islands, is already one of the world’s leading registries, qualified to register vessels of all sizes and classes, from yachts to supertankers. In the superyacht sector it is now clearly established as the world’s leader. The registry has a reputation for quality, efficiency and personal service, and adheres to the highest international standards of marine safety. As the twin concerns of environmental protection and the prevention of terrorism impel international organisations to clamp down on registries that do not apply such high standards, Cayman is well placed to step into the breach.
One of the international organisations leading the charge is the OECD. At its International Forum at the end of April, a key issue was transparency in the ownership and control of ships. A study prepared by the OECD’s Maritime Transport Committee in March articulated the concern that, through the combination of lax registry requirements relating to owners with jurisdictions that allow, for example, bearer shares or the ownership of vessels by foundations and similar entities, it was relatively easy for unscrupulous owners to conceal their identity. The report mentioned Panama, Antigua and the Marshall Islands as potential problem areas, and expressed particular concern over the so-called ‘open’ registers or ‘flags of convenience’, where the nationality of the owner is not relevant.
The Cayman Islands is neither an open register nor a flag of convenience. To qualify for registration in the Cayman Islands, the owner of a majority of the shares of a vessel (British flag ships are divided into 64 shares) must be either a British Subject, a national of a European Union state, or a company incorporated and having its principal place of business in the Cayman Islands, in the United Kingdom, certain other designated British Dependent Territories, or the European Union. Legitimate confidentiality is afforded through the fact that if a Cayman company is used, the ownership details of the company are not open to public inspection, but this does obscure ownership from the authorities where criminal investigations are concerned.
Cayman’s anti money laundering laws and regulations, which are fully compliant with international standards, ensure that the providers of registered office services know exactly who the true ultimate beneficial owners are. Those service providers also have strict obligations to report suspicion of money laundering. Through them the regulatory authorities can access information needed to investigate crime. Bearer shares, never a major feature of Cayman’s financial services industry, have for some three years been subject to a requirement that they be held by a local custodian, and are therefore not available as a means of concealing ownership from the proper authorities.
The OECD’s other main concern has been the elimination of substandard shipping, prompted by the disastrous sinking of the single-hulled oil tanker Prestige off the coast of Spain last November. Prestige was registered in the Bahamas, owned by a Liberian company and managed in Athens. The OECD’s concern relates to the difficulty in attributing responsibility in such cases, and the organisation is also looking at ways to put pressure on registries to apply the highest standards to the ships on their books. Since Cayman already applies those standards and registers only qualified owners, we believe its position as offshore registry of choice will only be enhanced.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.