The impact of Brexit on sailing a vessel under Dutch flag

In the ever-evolving landscape of international relations, Brexit has ushered in significant changes, affecting various industries, including maritime law. As described in my previous blog there are certain requirements that must be met in order to sail a vessel under the Dutch flag. This blog describes the repercussions of Brexit and the (im)possibilities to sail a vessel under the DutBrexitch flag if it is owned by a company or entity incorporated under the laws of and established in the United Kingdom.

Understanding Article 311 of the Dutch Commercial Code

As described in my previous blog, Article 311 of the Dutch Commercial Code sets out the criteria for a vessel to qualify as a Dutch vessel. For a vessel to sail under Dutch flag it must be owned by:

• one or more individuals who have the nationality of one of the member states of the European Union, of another state party to the agreement on the European Economic Area, of Switzerland or who are treated as nationals of the European Union under Community law;
• a company or other legal entity established in the European Union, European Economic Area, or Switzerland; or
• a natural person, company or legal person to which a. or b. do not apply, but instead is entitled to the European right of free establishment pursuant to an agreement between the European Union and a third state.

However, due to Brexit, it is clear that companies or other legal entities under the laws of the United Kingdom can no longer meet the criteria mentioned under a and/or b, as the United Kingdom is no longer a European Union member state nor a state party to the agreement on the European Economic Area. What remains is what is mentioned under c, but this would only be possible if there is an agreement in place between the European Union and the United Kingdom which grants the right of free establishment to citizens of the states that are a party to such agreement.

Brexit’s Implications

The United Kingdom’s departure from the European Union has had profound implications for businesses, and the maritime sector is no exception. In order to soften the implications, a Trade and Cooperation Agreement was concluded between the European Union and the United Kingdom and entered into force on January 1, 2021. Although this Trade and Cooperation Agreement regulates many aspects relating to mutual relations between the European Union and the United Kingdom to mitigate the effects of Brexit, it does not eliminate all the adverse effects that Brexit has on certain aspects. One of those aspects is that the Trade and Cooperation Agreement does not grant the right of free establishment to companies and other legal entities established under the laws of the United Kingdom. As a result, a vessel owned by a company or other legal entity under the laws of the United Kingdom cannot qualify as a Dutch vessel by virtue of the aforementioned possibility under c.

Challenges for UK-based Entities

Entities in the United Kingdom find themselves grappling with the new reality of being unable to fulfil the requirements set forth by Dutch law. The once seamless process of registering a vessel under the Dutch flag has now become a complex and unattainable goal for vessel owning companies and other legal entities based in the United Kingdom.

Exploring Alternatives

Given the restrictions imposed by Article 311 of the Dutch Commercial Code, vessel owning companies and other legal entities based in the United Kingdom must now explore alternative options for sailing their vessels under the Dutch flag. These will always involve (i) the establishment of a company or other legal entity that does meet the requirements of Article 311 of the Dutch Commercial Code and (ii) the transfer of the legal ownership of the vessel by the owner based in the United Kingdom to the newly established company/entity that meets the requirements of Article 311 of the Dutch Commercial Code. Such an alternative could potentially have some negative tax effects/consequences, due to taxation of the sale and transfer of assets by the owner based in the United Kingdom to another company/entity.

Conclusion

In the wake of Brexit, the maritime community faces new challenges in securing Dutch registration for vessels. Entities based in the United Kingdom must adapt to these changes by seeking legal advice and exploring alternative pathways to arrange for a vessel to sail under Dutch flag. As a deputy civil-law notary specialised in maritime and corporate law, I can provide tailored advice, by exploring legal ways and possible solutions to comply with the evolving legal landscape.

Thank you for joining me on this legal voyage. If you have any questions or topics you would like me to cover in future posts, feel free to contact me directly. Safe sailing!

Summary

Due to the effects of Brexit it has become more difficult for vessel owning companies and other legal entities that are based in the United Kingdom, to have their vessel sail under the Dutch flag. As the United Kingdom is no longer a member of the European Union nor a state party to the agreement on the European Economic Area and there is no agreement in place between the European Union and the United Kingdom which grants the right of free establishment, a vessel owned by a company/entity which is based in the United Kingdom cannot qualify as a Dutch vessel under Article 311 of the Dutch Commercial Code. In order to have such a vessel sail under the Dutch flag, the legal structure and ownership of such a vessel will always have to be changed.