Tucked away on the third floor of the Government Administration Building, the Maritime Authority of the Cayman Islands does much of its work out of the public spotlight.
Even when the territory’s maritime sector is involved in high-profile events – such as last month when Goldman Sachs seized the Cayman-registered luxury yacht of a Texas billionaire who defaulted on a loan with the financial firm – the Maritime Authority plays very little role in such affairs.
“If there’s need for courts to have access to the information, we’d step in,” said Maritime Authority CEO Joel Walton, explaining that his department otherwise stays out of the high-profile disputes that make international headlines.
While Mr. Walton said his department does not need attention for the work it does, the lack of prominence has contributed to misconceptions both locally and abroad about the Maritime Authority.
Locally, perhaps because the statutory body is also commonly referred to as the Shipping Registry, “most people think we’re actually in the business of shipping products,” he said.
Internationally, the misconception is more critical: People abroad understand that the Maritime Authority facilitates the registration of yachts, but many of them think that millionaires and billionaires register their yachts here because “they’re trying to hide their assets,” said Mr. Walton, adding that such a conception is “nonsense.”
What the Maritime Authority actually does is far different from the conventional wisdom, he said. With some 50 employees and 40 subcontractors spread in more than 20 locations throughout the world, the department is primarily focused on conducting safety and other regulatory inspections on many of the hundreds of yachts under construction.
“We focus heavily on technical competence,” said Mr. Walton. “That’s what we sell.”
The authority has a large client base, being involved in the construction process of roughly 40 percent of all the yachts being built at any given time, according to Mr. Walton. Owners can build their yachts to several different passenger codes, which allows them to charter 12 to 36 passengers, depending on the code.
So many shipyards choose to build their yachts to Cayman standards for good reason: The territory was recently ranked first on the “white list” of the 2016 annual report for the Paris MOU on Port State Control – the administrative agreement between 27 maritime authorities that deals with enforcing safety, environmental, and other regulations.
“That means the vessels we regulate were considered by 26 European countries and Canada as the highest quality in the world in terms of all things regulatory,” said Mr. Walton.
The high-quality standards offer yacht owners multiple potential benefits, including lower insurance premiums, higher resale values, and the option to conduct commercial charters, said John Aune, the deputy director for the Maritime Authority’s Global Commercial Services division.
Moreover, registering with Cayman should give owners peace of mind knowing that their vessel is built with extreme care to attention, he said.
Cayman developed a world-class shipping registry out of necessity. With comparatively few natural resources to compete with the natural sailing destinations of the world, the territory’s public policymakers were forced to innovate in order to attract business, said Mr. Walton.
“We said, ‘We don’t have marinas; we don’t have shallow water or beautiful islands.’ So we said, ‘What can we do to make an impact?’ And we chose yachting,” said Mr. Walton, who has been CEO of the authority since 2004. “We said, ‘We’re going to go in as a niche market, we’re going to hire the best people we can afford, we’re going to put them in all the major ship-building yards in the world, and we’re going to make sure we can answer the questions and grow with the industry.”
But like most of the territory’s economic pillars, the Maritime Authority is still largely dependent on the ebb and flow of the global economy, even with a registry that was second to none. And while other industries have at least partially recovered since the 2008 financial crisis, the yachting sector remains largely stagnant, said Mr. Walton.
“To put things in context, in February 2009 we had 289 yachts under construction with us. That was 40 percent of the world market,” he said. “Today it’s 130. But both numbers represent 40 percent of the market.”
The slowdown has impacted the authority not only because it has impacted the shipping industry – with fewer shipping and cargo vessels being licensed – but also because it has spilled into the yachting sector, he said.
“It’s an inter-related industry: You’ll find that people in shipping a lot of times own a yacht,” said Mr. Walton. “It’s all a part of the same cycle. So once shipping is down, it’s a ripple effect all the way through.”
“And the ones that still do have money, for them it can be difficult to spend money on a new yacht if their clients are hurting,” added Mr. Aune. “People basically get more careful with spending money all around.”
Nevertheless, according to its latest public annual reports, the Maritime Authority managed profits of $924,671 and $275,740 in 2013/14 and 2014/15, respectively – though its revenue entails an annual stipend from government of some $430,000. These profits came after the department lost about $1.3 million from 2009 to 2013 – losses Mr. Walton attributed in part to when central government “dumped” the Maritime Authority’s employee retirement benefits onto its books when the authority was made a statutory body in 2005.
To further boost those profits, government could grab some “low-hanging fruit” in terms of policies that would increase the number of revenue generators available to the Maritime Authority, said the authority’s CEO.
Simple policy changes
One of the simplest policy changes would be to loosen marriage laws in order to allow ships to have marriages aboard without the presence of a Cayman certified marriage officer, said Mr. Walton. The current legislation is a major barrier to having cruise ships register under the Cayman flag, he said, because cruises would be required to have a Cayman marriage officer on board in order to conduct weddings throughout the world.
Another simple reform would be to make Cayman a “one-stop shop” for registration, much like some of its competitors.
“Right now, to register a vessel with us, you have to come here, you have the [Certificate of British Registry], then you have to go to [Utility Regulation and Competition Office] for your ship radio license, and then you have to go to get your company registered,” explained Kenrick Ebanks, the executive director of the GSC. “But in the Marshall Islands, for example, it’s a one-stop shop.”