Quentin Bargate - Bargate Murray Solicitors
The past 20 years have seen steady growth in the number and size of pleasure yachts and other leisure crafts coupled with an explosion in the number of professionally crewed superyachts and megayachts, many of which are operated on a commercial basis for charter by the wealthy. The superyacht industry has, in recent years, evolved as a distinct and separate industry alongside mainstream shipping, but with subtle differences of approach and traps for the non-specialist.“
Q. Quentin, please tell my readers a bit about yourself.
I have a great passion for the law but, first and foremost, I am a devoted family man. I have three sons - Alex, Edd and Will, all of whom my wife, Glynis, and I are very proud.
I was trained and have spent much of my career in top City law firms. After qualifying in 1981, I spent a year reading for a Master’s degree in Marine Law and Policy at Cardiff University, and then joined the Shipping Group at Lovell White and King (now Hogan Lovells). I cut my teeth there on mainstream commercial shipping and commodities work, before moving to join Simmons & Simmons in mid-1987, where I set up their Shipping and International Trade Group. I was made a partner in 1990. I enjoyed considerable freedom of action at Simmons & Simmons. We undertook some high end work for a variety of mainstream shipping, insurance and commodities clients over the 17 years I spent there. I still have many friends at Simmons & Simmons.
Towards the end of my time at Simmons & Simmons, I begun to undertake more yacht-related work after having won a pitch to a Swiss family office to act on a major yacht project. Of all the work I had done at Simmons & Simmons, I found the yacht work the most fascinating, and not just from a purely legal perspective. In 2004, I fulfilled a long standing ambition to set up my own firm, now called Bargate Murray. The firm continues to go from strength to strength and has become a global leader in Superyacht law. Outside of the law, I have a strong interest in photography. I am an Associate of the Royal Photographic Society and in April 2008, writing under my “Douglas Freer” pen name, Elsevier published my book on Stock Photography, which went on to be something of a best seller! My photog- raphy does, however, play second fiddle to my family and business life.
Q. So, Quentin, what does a superyacht lawyer do?
With a new-build yacht project, I am heavily involved in negotiating the build contract and specification. There are key terms that must be addressed and often involve lengthy negotiation. These terms include penalties for late delivery, refund guarantees, payment schedules, permissible delay, class and flag, “Variation to Contract” procedures and many, many others. With a second-hand yacht, much depends on whether we are acting for a buyer or a seller, but essentially, the focus is on ensuring both sides know exactly what they are getting. A survey is usually essential, as are the usual checks to ensure that any charges or encumbrances, such as a mortgage, are discharged before delivery.
Once a yacht has been purchased, there is often a lot more to do. Bargate Murray are experts on Seafarer Employment Agreements, for example, and we also assist with insurances and handle disputes. If the intention is to charter in Europe, we can assist with VAT importation structures.
Q. As the global financial crisis restricted the flow of finance and the billionaire financiers became fewer and more cautious, the yacht market undoubtedly suffered. Where are we now?
Whilst it is undoubtedly true that the financial crisis had a global effect on wealth and the yacht market suffered a downturn from about 2008 onwards, the market is now picking up. I do not necessarily believe that the reduced market activity was entirely down simply to a lack of funding. I think this was a commonly held misconception. While cash flow is obviously important, there was also some sensitivity to being seen to be too ostentatious when many were suffering a cut in living standards. In fact, the yacht industry employs hundreds of thousands of professional staff and, in my view, is of considerable benefit to society, providing employment in yachting and the many supporting industries. I think this complex backdrop largely informs where we find ourselves now, with the yacht market again on the rise and with high net worth individuals more willing to re-enter the market. All those prospective yacht owners who wanted to buy in the post-2008 era are looking to yards for build slots – many yards tell me that their order books are full, so the demand is clearly there. We are enjoying the consequential benefits of a market on the rise - our yacht department has never been busier.
Q. Bargate Murray naturally attends industry events such as the Monaco Yacht Show and the London Boat Show. Essential? What was the feeling at these events during 2014?
In keeping with my view on the increased market activity, the sentiment at the main industry events has been very positive. The Monaco Yacht Show 2014 was particularly successful for us. We had quite a large presence at the show and even hosted a Russian-themed party in homage to our Russian clientele.
Q. With the considerable depth and breadth of experience you have in this sector, are there common problems you have experienced with complex contract negotiations and are they easily resolved?
Post-2008, there seems to have been an increase in the amount of finance-backed yacht transactions where, rather than borrowing the sale proceeds from the bank (who are even less inclined to offer yacht finance following the crash), the buyer looks to negotiate finance directly with the seller.
The upshot tends to be deals where the buyer takes delivery of the yacht against part payment of the sale proceeds, with the balance becoming payable over a period of months or perhaps years. In other words, it is the seller, and not a bank, that takes the credit risk. When acting for the seller, as I often do, this increases the complexity of the deal considerably because the sale documentation will need to securitise the debt the buyer will owe on completion. It is not, however, an insurmountable problem. My team and I recently worked on such a deal and, through careful drafting of the usual marine finance documents (marine mortgage, deed of covenants, deed of assignment of insurances and so on), the risk to the seller can be mitigated and managed effectively.
Q. Piracy – how big an issue is this? Are we getting the full story?
In short, so far as yachting goes, I am not sure there is much of a story. Whilst we have advised yacht owners on piracy risks, superyachts do not tend to venture into piracy hotspots such as, for example, the Gulf of Aden. There is not much piracy going on in the common yachting destinations of the Mediterranean and Caribbean to my knowledge!
Q. Confidentiality and personal service are no doubt essential when dealing with high net worth individuals. What USP does Bargate Murray bring to this arena?
Just that. A personal service. When a client brings a matter to the firm, they will deal with the partner running it every step of the way. Our key clients have been with the firm for over ten years. All matters are partner-led, and I am very pleased to be working with some very able colleagues at Bargate Murray. This is where being a boutique firm really does play into our hands.
Q. What are your recent highlights in yachting law?
We have been deeply involved in how the new Russian Controlled Foreign Companies (“CFC”) rules might impact on Russian-owned superyachts. We are currently working with our international network of advisors based in Russia and elsewhere to determine whether there are any non-linear ownership structures that might best comply with them. Again, on the tax theme, we recently provided some complex advice relating to the acquisition of a yacht within the EU which, as it was being sold by a mortgagee in possession (a well-known bank), did not have the usual VAT “history” that one might expect. This made the VAT aspect of our usual due diligence checks a little
more involved that would be usual.
Q. In your opinion, what do you consider to be the main challenges you face in your particular industry sector in the year ahead?
In short, the main challenge seems to be an ever-increasing regulatory burden. For example, a number of countries connected to the superyacht industry seem to be clamping down on their wealthier citizens by enacting legislation that is directed at penalising perceived tax avoidance. Take, for example, the Russian CFC rules (see above). The main driver behind them is to discourage Russian tax residents from holding profits in companies domiciled in certain “offshore” jurisdictions. Unfortunately there are a number of these “offshore” jurisdictions that are among those with the most expert and yacht-friendly shipping registries and it often makes sense to incorporate the company that is set up to own the yacht in the same place. Any individual looking to stay within the confines of the CFC rules may therefore be forced to revise the structure they use to own and enjoy their yacht, and this is a question I anticipate dealing with more and more as the law is applied.
Q. How do you try to best represent your clients?
Always with complete impartiality and integrity. Our ethos focuses on providing a top quality service but in a friendly and approachable way. In a transactional matter, we find our clients are best served by adopting this approach but, in the context of litigation proceedings, we are reasonable but firm – always protecting the client’s interests and going for the jugular where necessary. It can be a mistake, in my view, that some lawyers make to assume an aggressive approach is the best approach. I know from my experience as an arbitrator and supporter of mediation that the people who determine disputes, be they a judge or an arbitrator, are not particularly impressed by an over-excited and aggressive party. They are far more concerned with getting to the bottom of the facts on which the dispute turns and would rather a party acts reasonably and focuses their attention on these issues.