Brexit and The Gibraltar Ship Registry

Brexit and The Gibraltar Ship Registry

Due to its strategic location at the entrance of the Western Mediterranean, Gibraltar has historically been a maritime centre, and today enjoys an enviable degree of maritime trade. This includes not only the servicing of ships calling at Gibraltar by providing bunkers, provisions, crew changes etc., but also in servicing their Flag State requirements which Gibraltar does by having its own Ship Register. All ships undertaking international trade are required to be registered in an acceptable jurisdiction that meets internationally agreed minimum safety, manning and other standards, which have been agreed by countries through a series of maritime conventions, which obligations the Flag State is required to regulate, manage, and supervise, with regard to its own fleet of registered ships.

As a British Dependent Territory, ships registered in Gibraltar are British Ships entitled to all the protections and privileges afforded to vessels registered at other British Ports of Registry. Being a British Flag, Gibraltar operates its supervisory regime as a Flag State under the guidelines issued by the UK Maritime Coastguard Agency. The result is that the Gibraltar Flag enjoys considerable international credibility and prestige as part of the family of British registered ships.

Gibraltar registered ships are entitled to fly the red ensign defaced with the Armorial Bearings of Gibraltar, the Castle and Keys, and also entitled to the protection of the Royal Navy. We are seeing a good example of the latter where the Royal Navy is presently engaged in escorting British registered ships in the Strait of Hormuz owing to rising tensions with Iran.

In addition, Gibraltar is also part of the EU by virtue of Britain’s membership, with special derogations most importantly from the VAT regime. The Gibraltar Register is nevertheless classed as an EU “Member State’s Register” as defined in the Annex to the Official Journal of the European Communities (97/C 205/5 No. C 205/15).

As a result of its status as an EU flag exempted from VAT, the Registry has enjoyed significant growth in the last few years particularly as a flag of choice for those shipping companies wanting to conduct intra European trade, as well as non-European resident yacht owners wishing to navigate EU waters free from VAT. The favourable tax climate for shipping companies in Gibraltar has no doubt also attracted its fair share of ships to the Register, but the sceptre of Brexit would not, at first sight, appear to augur well for the Register given the significance of its EU status and ability to trade freely in EU waters, to its recent growth. Indeed it is fair to say that Gibraltar has already suffered a decrease in its registered tonnage of merchant ships since the 2016 referendum, owing to the present uncertainty, with migration of tonnage to a number of other EU flags.

That said, Brexit can make us all rather myopic and forget that the Gibraltar Register has other advantages quite apart from its status as an EU Flag, which will continue post-Brexit. Unlike other popular registries, for example Marshall Islands and Liberia, the Gibraltar registry is a non-profit registry unconstrained by the commercial imperatives normally associated with privately run registers. This results in a greater degree of credibility, certainty and sense of their permanence, as well an ability to set its tonnage taxes and fees at competitive rates. Gibraltar has always been attractive to Banks as it is a jurisdiction based on English law that provides certainty and clarity, having been the maritime law of choice for centuries.

Moreover, Gibraltar is on the Paris MoU White List of international Flag States. This means that Gibraltar Vessels are less targeted by Port State Controls in Paris MoU areas and will not, as a matter of course, be  inspected as frequently as Ships registered in other Flag States which appear on the Grey and Black Lists. Detentions by Port State Control can result in serious delays to a ship’s voyage and operations which inevitably result in additional costs, and also put shipowners at risk of breach of their charter operations with penalties ensuing. The Gibraltar Register is also a qualifying flag state in the US Coastguard QUALSHIP 21 Initiative.  Reducing the risk of Port State Inspections is clearly also an attractive feature of the Register.

Similarly, Gibraltar was never a part of the EU VAT regime and as such offered a good springboard for yachts wishing to navigate EU waters and benefiting from VAT free navigation through temporary importation relief. This would remain a feature of Gibraltar that would attract yacht owners, in particular superyacht owners, to the Register. As a result, Gibraltar will be presenting at the Monaco Boat Show for the third year in succession with growth seemingly in view.

The impending gloom that seems to permeate Brexit ignores the fact that the Gibraltar register still has the ingredients to offer the international shipping and yachting community a credible, prestigious and user friendly Flag State. Gibraltar still offers a full British Register, based on sound English law, in a friendly tax environment, serviced by very skilled professionals. We simply need to make Gibraltar seen and heard a bit more.

07-08-2019 | By Raymond A. Triay