- English law historically has a deep body of case law on maritime and shipping disputes, providing more legal certainty (or at least predictability) for some parties.
- Parties often regard English courts or London maritime arbitration as experienced and specialized in yachting and shipping matters.
- The MYBA charter contract are therefore often claimed to be recognized international “standard form” in the yacht chartering industry. Brokers, owners, captains, and charterers worldwide are familiar with its layout, terms, and usage and prefer such standardized documentation to reduce drafting time. But this is a poor argument as they do not legally research the individual case and think about the consequences of using such a template without a proof of fit! Use in absence of proof!
A Legal & Contracting View on the Matter:
Real-World Example Scenario
- Situation for example: A Croatian operator (owner or agent) charters a yacht to a private German individual (consumer) cruising in Spain.
- The Contract: A MYBA standard form, governed by English law, with arbitration or court jurisdiction in England.
In practice, each element here—parties, location, and law—are from different jurisdictions, BUT in the EU.
Yet, such parties might use the MYBA form because it is what the yacht chartering industry “defaults” to. This does not come without risks.
Key Risks of Using a Non-EU (English Law) Contract in EU Waters
- Conflict with Mandatory Local (EU) Consumer Protections
- If the charterer is – most cases – a private consumer (in the example, a German citizen), EU consumer protection laws—especially from the consumer’s home jurisdiction or the place of performance—can override certain contractual provisions.
- English law provisions on liability limits, cancellation terms, or dispute resolution clauses may be invalidated if they contradict mandatory EU consumer rules or local “public policy” standards.
- Dispute Resolution and Enforcement Complications
- Post-Brexit Enforcement: Before Brexit, an English court judgment was readily enforceable throughout the EU under the Brussels Recast Regulation. Post-Brexit, enforcement often requires separate procedures under each EU state’s national laws or other international instruments (e.g., the Hague Choice of Court Convention, if applicable). This can be more costly and time-consuming.
- Jurisdiction Challenges: Even if the MYBA contract has an exclusive English jurisdiction or arbitration clause, a local court (e.g., in Spain or Germany) may assert jurisdiction if it decides local consumer or maritime rules are overriding. This leads to the risk of parallel proceedings or refusal to recognize English judgments if local rules on consumer protection or maritime safety are implicated.
- VAT and Tax Uncertainties
- Yacht charters within the EU are subject to various VAT rules depending on the place of supply, the yacht’s flag, and specific local regulations. The MYBA contract’s boilerplate on VAT may not reflect Spanish (or other EU states’) nuanced requirements.
- If the contract is under English law without thorough local tax structuring, it might omit essential references or disclaimers on VAT liability, leading to unexpected liabilities or disputes with local tax authorities.
- Local Maritime Regulations and Licensing
- Spain or Croatia may require specific licensing, local agency representation, or operational permits for commercial yacht charters. Those requirements come from local or EU regulations (e.g., concerning passenger safety, crew certifications, pollution control).
- A standard MYBA contract does not typically account for all local operational requirements; if the contract is silent or misaligned with local law, certain clauses might be unenforceable or could expose the operator to penalties.
- Potential for Unfair Terms Challenges
- In many EU jurisdictions, especially with a consumer party, courts can strike down “unfair contract terms.”
- Although the MYBA contract is widely used, some of its liability clauses or default/cancellation penalties might be viewed as excessive or insufficiently clear under local consumer protection legislation—thereby risking partial invalidation in a legal dispute.
- Layered Complexity for Both Parties
- If a dispute arises, you might face multi-layered legal complexity: English law for the contract terms, Spanish or other local laws for enforcement or mandatory regulations, and the German consumer’s laws for consumer protections.
- This multi-jurisdictional patchwork can lead to legal uncertainty, increased costs, and time delays.
Structural Differences Between Common Law Contracts and Civil Law Requirements
- Conceptual Framework
- In common law jurisdictions (such as England & Wales), much of contract law has evolved through case law and focuses on parties’ freedom to contract—with a more general approach to issues like good faith, warranties, indemnities, and liability caps.
- In civil law jurisdictions (like those in most EU member states), key principles are codified in statutes or codes. Certain contractual constructs recognized in English law may not map easily onto continental civil codes. For instance, penalty clauses, limitation-of-liability provisions, and implied duties of good faith can be significantly different or subject to mandatory rules under various EU countries’ civil codes.
- Mandatory or Prohibited Clauses
- Even if parties attempt to amend the MYBA contract with local-law “riders,” they often face mandatory local law that might automatically override or nullify certain clauses. This is especially critical with consumer contracts, where consumer protection rules can render entire sections of a standard form void if they are deemed “unfair” (pursuant to EU consumer directives transposed into national laws).
- Difficulty in Harmonizing Terminology and Legal Constructs
- Certain English-law terms and concepts (e.g., “indemnity,” “consequential loss,” “warranty versus condition,” etc.) do not always have a direct equivalent in civil law systems. Translating or “transposing” them can lead to ambiguity or misapplication in litigation before a civil law court.
- Courts in civil law jurisdictions tend to rely less on negotiating history or case law precedent to interpret ambiguous clauses and more on statutory interpretation, mandatory code provisions, and directives on unfair contract terms.
Consumer Protection Under Rome I (Article 6)
- Overriding Mandatory Protection for Consumers
- Article 6(1) of the Rome I Regulation provides that consumer contracts are governed by the law of the consumer’s habitual residence if (i) the professional pursues (or directs) commercial activities in that consumer’s state or (ii) the contract in question falls within such activities.
- If the parties choose a different law (e.g., English law in a MYBA form), that choice cannot deprive the consumer of the protection afforded by the mandatory provisions of the consumer’s habitual residence law. In practical terms, a German consumer entering into a yacht charter would still benefit from the mandatory German consumer protections—even if the written contract says “This Agreement is governed by English law.”
- Practical Consequences
- Limitations on liability, disclaimers of warranty, or binding arbitration clauses that might be enforceable under English law can be rendered unenforceable if they conflict with the stronger consumer protections under German (or other national) law.
- Attempts to adapt or rewrite the standard MYBA contract with disclaimers will not circumvent the mandatory consumer protections that the consumer would have in her/his home jurisdiction.
Jurisdiction, Litigation, and Brussels I (Recast) Regulation
- Consumer’s Right to Sue Locally
- Under the Brussels I (Recast) Regulation (Regulation (EU) 1215/2012), consumers typically have the right to bring proceedings against the professional (supplier of services) in the courts of the consumer’s domicile.
- A contractual clause conferring exclusive jurisdiction on the English courts or mandating arbitration in London often cannot be enforced against a consumer who is protected by these EU rules. Thus, even if the contract states “all disputes shall be resolved under the LMAA in London,” the consumer can frequently still sue the operator in the courts of the consumer’s home state (e.g., Germany), bypassing the contract’s forum selection.
- Post-Brexit Enforcement Complications
- If the professional obtains an English court judgment or English arbitration award, enforcement in the EU is no longer automatic as it was under the Brussels Recast Regulation pre-Brexit.
- For arbitration, the New York Convention can help but still requires local enforcement proceedings, which may assess consumer protection arguments anew. For English court judgments, local recognition rules (and possible public policy exceptions) in the EU state may impede or complicate enforcement, especially if consumer protection issues are at stake.
Why “Adapting” a Common Law Contract May Not Suffice
- Inherent Unfairness Risk (EU Consumer Law)
- The EU’s Unfair Contract Terms Directive (93/13/EEC) and national implementing laws empower courts or authorities to strike down unfair terms in consumer contracts. Common law concepts (like wide-ranging indemnities or disclaimers) are prime targets if they undermine the consumer’s statutory rights.
- Merely inserting disclaimers such as “the consumer has read, understood, and waived rights” often does not meet the transparency and fairness requirements under EU law.
- Different Legal Logic and Mandatory Provisions
- Under civil law, contractual interpretation can be anchored in principles of good faith, social/economic fairness, and mandatory code provisions. These are not purely optional add-ons but deeply embedded in how courts approach contract disputes.
- A purely “common law” approach to disclaimers and risk allocation may end up in direct conflict with these foundational civil law doctrines, making the contract (or large parts of it) unenforceable.
- Risk of Partial Nullity
- If a civil law court finds that material clauses conflict with consumer protection or other mandatory local provisions, it may either (i) rewrite them (to the consumer’s advantage) or (ii) declare them null and void. This can lead to unpredictable outcomes that are worse for the operator than if the contract had been drafted from the start under a suitable civil law framework.
Summary of Legal Statement
- Choice of Law Limits: Even if English law is chosen in a yacht charter agreement, a consumer in the EU typically retains protection under the law of their habitual residence pursuant to Article 6 of Rome I.
- Jurisdiction Limits: Under Brussels I (Recast), consumers generally have the right to sue in their home courts, and they cannot usually be forced into a foreign court or arbitration seat if mandatory consumer rules provide otherwise.
- No Simple “Fix” via Riders: Attempting to “adapt” a common-law-based MYBA contract with riders does not fully reconcile the fundamental differences between English common law and EU civil law, nor does it circumvent mandatory consumer protection. Core clauses (particularly those limiting liability or restricting forum) are likely to be invalidated if they conflict with civil code provisions or are found unfair under EU consumer law.
- Practical Consequence: The operator (e.g., a Croatian or Spanish charter provider) who uses an English-law MYBA contract with an EU consumer (e.g., German) risks partial or complete unenforceability of key contract clauses. If a dispute arises, local consumer protection rules and courts in the consumer’s domicile will likely govern, regardless of a contractual choice of English law.
Conclusion: Because of Rome I’s Article 6 and the Brussels I (Recast) Regulation on jurisdiction, combined with the overarching EU consumer protection regime, it is inherently problematic to impose a purely English-law-based charter contract upon an EU consumer in a civil law setting. The structural differences in legal doctrines, mandatory consumer rules, and jurisdictional guarantees for consumers can override large portions of a standard MYBA form. In practice, reliance on such a contract creates significant legal uncertainty and enforcement risk, which cannot be cured by small contractual riders or disclaimers.
An Economic View on the Matter:
The MYBA “Stakeholder” Mechanism
Under a typical MYBA Charter Agreement, the broker is not only acting as an intermediary but also as a stakeholder. This means:
- Payment Schedule
- The charterer usually pays the charter fee in two or three installments—often 50% upon signing and 50% a few weeks before the start date.
- These funds are held in the broker’s client account (“stakeholder account”).
- Release of Funds
- Under the standard form, the broker will generally not release the entire charter fee to the owner in advance.
- Instead, the funds often remain in escrow until the charter is completed and any disputes or claims are resolved (or, at a minimum, the broker has no reason to continue holding the funds).
- Rationale
- This system aims to protect both parties: it reassures the charterer that the owner will deliver the yacht and the agreed-upon services, while also guaranteeing the owner that the charterer has paid the fees into a secure account.
- The broker, acting as stakeholder, is theoretically neutral, holding the funds in trust.
Why This Is a Disadvantage for Owners
- Upfront Cost Burden
- Despite a portion of the charter fee being paid into the stakeholder account, the owner frequently must pay all operational costs upfront: crew wages, berthing fees, insurance, maintenance, and any special preparations for the charter.
- If the MYBA contract is strict about releasing funds only after completion, the owner is effectively financing the entire charter operation before receiving net proceeds.
- Risk of Charterer’s Claims
- If the charterer complains (e.g., about the condition of the yacht, itinerary changes, or service quality), the broker may withhold funds pending resolution. In some scenarios, the broker may wait for a formal settlement or arbitration/court decision.
- The owner, therefore, faces the possibility of long delays in getting paid—or, in the worst case, not getting paid at all if the dispute drags on and the charterer’s claims are upheld or settled unfavorably.
- Cash Flow and Liquidity Issues
- Because the owner is deprived of operating funds until after the charter ends, it can create significant cash flow pressure—especially if multiple charters are arranged back-to-back.
- Smaller or less capitalized operators can find themselves in a precarious financial position, essentially reliant on the broker’s release of funds.
- Limited Leverage Once the Charter Has Begun
- After the yacht is delivered and cruising has started, the owner’s leverage is low because the broker controls the stakeholder account. If disputes arise (even minor ones), the broker may be compelled to hold back a substantial sum until clarity is reached.
Contractual and Practical Considerations
- Potential Workarounds
- Earlier Partial Releases: Owners sometimes negotiate a phased release schedule (e.g., a portion of the funds released to the owner on commencement of the charter).
- APA (Advanced Provisioning Allowance): Under MYBA, the APA typically goes directly to the yacht (to the captain’s account) for fuel, food, and other expenses. However, it may not cover all overhead or capital costs (like insurance, crew salaries, or mortgages).
- Amended Stakeholder Clauses: In some bespoke agreements (or via addenda), owners and brokers agree that “no claims” or “minor disputes” will only result in withholding a specific amount (e.g., an agreed percentage) rather than the entire sum.
- Broker vs. Escrow Agent
- Some owners prefer an independent escrow agent (e.g., a law firm’s client account) rather than the broker. This can add neutrality and sometimes more predictable rules for when and how funds are released.
- Commercial Terms
- Highly sought-after or well-capitalized owners sometimes have the market power to insist on more favorable terms. Conversely, owners operating standard MYBA forms in a competitive market often must accept the usual stakeholder arrangement to secure bookings.
- Legal Risks
- If the contract is governed by English law (as most MYBA standard forms are), the stakeholder arrangement is valid in principle. However, local mandatory rules (e.g., EU consumer protection for a private charterer) could influence how disputes are resolved.
- If the charterer is considered a consumer, local or EU consumer laws might further complicate or delay the release of funds, since the broker (as stakeholder) may fear liability if releasing funds prematurely to the owner.
Conclusion and “Statement” on the Disadvantage
Statement:
“The MYBA contract’s typical stakeholder clause, whereby the broker holds the charter fee in escrow until the charter’s end, imposes a substantial financial burden on the owner/operator. Owners must often cover all operational and capital expenses upfront without guaranteed access to the charter fee. In the event of disputes—especially with consumer charterers—the broker may withhold funds for extended periods, effectively depriving the owner of compensation. While this structure aims to protect charterers and instill trust in the yachting industry, it remains a significant disadvantage for owners, who face potential cash flow issues and heightened risk if the charterer raises any claims.”
Owners should carefully assess this aspect of MYBA contracts and, where feasible, negotiate partial or phased payment releases or use an independent escrow agent to mitigate the downside risk of delayed or withheld funds.
A Financial & Legal View on the Matter
I want to draw your attention on another very important issues surrounding brokers acting as stakeholders (escrow holders) in EU jurisdictions—especially in places like Germany, where only certain regulated professions (attorneys, notaries, tax advisors) can legally maintain protected trust accounts (z. B. “Anwalts-Anderkonto”). This creates problems when a standard MYBA contract assumes the broker can hold client funds in escrow.
- Limited Ability to Hold Escrow in the EU
- In many EU countries (e.g., Germany, Austria, France), strict regulations govern who may hold client monies in a segregated, insolvency-protected trust account. Typically, only attorneys, notaries, and sometimes tax advisors with a legal duty of neutrality and professional liability insurance can offer such escrow services.
- A yacht broker (unlike a lawyer or notary) generally does not have the legal status to run a protected trust account in these jurisdictions. A typical broker’s “client account” is not automatically recognized as a valid escrow account under local law.
- Risk of Insolvency
- If the broker becomes insolvent or bankrupt, funds in the broker’s business/client account may not be immune to seizure by creditors. A true attorney’s trust account (Anderkonto) in Germany, for instance, remains separate from the attorney’s personal or firm assets—meaning creditors cannot touch it.
- With a broker’s standard account, there is no such robust ring-fencing, so owners and charterers risk losing money if the broker’s finances collapse.
- Neutrality and Professional Duties
- In jurisdictions with regulated escrow accounts, the escrow agent has legal duties to remain neutral and release funds only according to the escrow agreement. This is not automatically guaranteed if the broker is simply playing the stakeholder role without any professional licensing.
- If disputes arise (e.g., charterer complains about yacht condition), the broker may be caught between commercial interests, loyalty to the owner, and the duty to protect the charterer’s funds—without a clear legal framework dictating how and when to release money.
- Conflict With MYBA “Stakeholder” Assumptions
- The MYBA form traditionally contemplates the broker as a neutral stakeholder holding charter fees. In many EU civil-law jurisdictions, this role conflicts with local rules on who may maintain client funds under escrow.
- As a result, the standard MYBA arrangement may not align with local law or best practices. Relying on a broker’s account might be legally precarious—and in some cases, it could be challenged for not meeting statutory escrow requirements.
- Possible Solutions
- Use a licensed professional escrow agent: For instance, an attorney, notary, or escrow company authorized in the relevant EU country, holding the funds in a legally recognized trust account.
- Amend MYBA form: Incorporate a clause that designates a locally qualified stakeholder (e.g., law firm trust account) instead of the broker.
- Insurance or Bond: Ensure the broker, if acting as stakeholder, provides evidence of insurance or bonding that would cover any shortfalls due to insolvency, though this still may not satisfy strict local escrow rules.
Summary Statement
“In several EU jurisdictions, a yacht broker cannot lawfully operate a fully protected trust account akin to an attorney or notary’s ‘Anderkonto.’ This legal mismatch creates a significant risk for both charterers and owners if the broker holds charter funds. In the event of the broker’s insolvency or a dispute, the funds may not be protected from creditors nor properly neutral. Consequently, the standard MYBA escrow (‘stakeholder’) clause, which assumes the broker’s ability to hold funds securely, runs into potential conflict with mandatory local rules. Owners and charterers should consider using a regulated escrow agent or amending the contractual mechanism to ensure legal compliance and financial security.”
Note: This statement is provided for informational purposes. Parties facing these issues should seek specific advice from qualified lawyers in the relevant EU jurisdictions to fully address the consumer and cross-border enforcement complexities.