The timely topic of the charter market formed the discussion of the third SuperYacht Times webinar which was hosted by yachting expert Hein Velema. In a bid to keep the industry informed in such uncertain times, SuperYacht Times brought together an expert panel to share insights into their side of the charter market and shed some light on the outcome of the thousands of charter contracts signed, or due to be signed, this year.
For 45-minutes, Edmiston CEO Jamie Edmiston, charter broker for Camper & Nicholsons Barbara Dawson, Jessica Taylor, solicitor at HFW and Thompson Westwood & White Yachts’ charter manager James Graham-Cloete sat in discussion with over 500 participants listening in. For those who didn’t manage to make the webinar, catch up here on the best bits and take some key points away on what the current situation is, and what those on the panel predict for the future.
The current situation
James Graham-Cloete, Thompson Westwood & White Yachts: “We were about 50% up on bookings by the end of February for the 2020 season and 50% up as a company compared to the year before. But now in light of the corona-crisis, the number of general charter inquiries coming in was already down by around 50% by early March and in the last week or so we are down by approximately 95%. Certainly now more and more of our bookings are looking to postpone their charters to later in the season or to 2021. For the very few requests we are still getting for charter, as some think it is safer to be onboard somewhere, the safest thing is to say no.”
Barbara Dawson, Camper & Nicholsons: “Right now I'm dealing with the high-risk charter clients that were supposed to be cruising in April and June. I have had very few issues and we've been able to negotiate and work out between the parties. Everybody appreciates the situation the world is in right now.”
Jessica Taylor, HFW: “The MYBA contracts have been around for quite a long time and enables a lot of charters to be signed with very little or no legal input at all. But in this instance, we’ve got a very unusual situation and the MYBA contract probably doesn't protect charters as much as they would like due to its force majeure clause. This clause protects against events which are beyond the reasonable control of the parties. The charterer can lose their first deposit or the second instalment, depending on how many instalments there are and, whether those instalments have fallen due. The contract doesn't expressly give the charterer a right to cancel for a force majeure event - this in particular is what we've been advising on a lot in these recent weeks.”
Jamie Edmiston, Edmiston: “We've had a couple of charters which have been cancelled or were forced to cancel at the last minute. In both instances, we were fortunate to have all parties realise that this was due to special circumstances. Since the coronavirus crisis started we have seen very few enquiries, if any, and there has been a significant drop in the last four weeks and revenue has declined substantially; which I suspect will be the case for some time. I think there is so much uncertainty about what is going to happen.”
James Graham-Cloete, Thompson Westwood & White Yachts: “My instinct is that we're going to see restrictions in place across the globe for months to come. I am hopeful that the worst part will be over by the summer and there will still be a small amount of business to be done in September. If so, we will have to be prepared to act quickly and plan for owners and crew. I think we will be lucky to do 25% of a normal summer's business, but nobody knows what will happen.”
Barbara Dawson, Camper & Nicholsons: “The whole industry has the opportunity to concentrate on negotiations. It's our duty. We need to do our due diligence here and as brokers, it is important to look at both sides of the scenario. The MYBA Addendum has given several different clauses for brokers to use accordingly - it is not necessarily to be used in its entirety as it depends on each situation and what's negotiated.”
Jessica Taylor, HFW: “Every contract is fact or case-specific, but the current COVID-19 crisis should supersede the force majeure provision. The doctrine of frustration in a contract is the last resort. The MYBA agreement is subject to this under English Law and applies if a contract becomes absolutely impossible to perform or illegal. In instances where you have a force majeure clause in a contract, very often the courts are reluctant to find that frustration applies because there has already been consideration of force majeure. Only if the courts or the arbitrators for the contract decided to be more lenient because of the terrible situation that the world is facing during the pandemic, then only is there a chance.”
Jamie Edmiston, Edmiston: “I think when things do improve, people will want to get back on yachts and yachting will survive. There may be some opportunities for charters to take place later on in the season but for the early part of the summer, charters will be limited, if not completely written off. Now, we have to adapt our businesses, and the lack of charter income is going to mean we have to adapt the way we run. Hopefully, we can offset some of the loss in charter via sales transactions, which we believe there will be the opportunity to do so as yachts, we think, will come on to the market across the board whether they're on the charter market already or not. A yacht is a highly discretionary purchase and so owners may sell and come back into the market again in a couple of years.”
To catch up on the previous SuperYacht Times webinars or to see the full upcoming programme, click here.