Author: Kasia

Imagine you want to buy your dream yacht. Or maybe you are looking to sell one? It all seems simple, right? In reality, however, in the face of international sanctions imposed on Russia, this process can be full of pitfalls. Russia’s aggression against Ukraine has triggered a wave of restrictions aimed at complicating the lives of those attempting to bypass these bans. One of the key tools in the effort is obligation to check the sources of financing. How to avoid trouble? You will find out in this article.

International Sanctions in Response to Russian Aggression

After Russia’s annexation of Crimea in 2014, the international community, including the UN and the EU, imposed a series of sanctions aimed at weakening Russia’s economy and forcing it to withdraw from Ukraine. These sanctions were tightened after Russia’s full-scale invasion of Ukraine in 2022.

Key legal acts include:

• EU regulations, including AML (Anti-Money Laundering) directives,
• Polish laws and regulations on countering money laundering and terrorism financing, as well as sanctions.

Sanctions have also affected the yacht market, particularly luxury yachts. Initially, supply chains suffered the most, but now the sale and purchase of yachts have become significantly more challenging.

The obligation to verify sources of financing

The obligation to verify sources of financing is not just a bureaucratic formality. It is the first line of defense against money laundering and the financing of terrorism. In the context of sanctions imposed on Russia, it aims to prevent individuals and entities linked to the Russian government from circumventing them.

Procedures and tools for verifying sources of financing

In practice, verifying the sources of financing includes:

• identyfing and verifying the identity of customers,
• monitoring transactions and conducting risk analysis,
• reporting suspicious transactions to the relevant authorities.

Examples of measures to prevent sanction evasion in yacht purchases:

1. Thorough verification of the buyer’s identity:
   • checking the identity of the individual or legal entity purchasing the yacht,
   • determining if the buyer is listed on sanction lists (e.g. EU or OFAC sanction list).
2. Analysis of the origin of funds:
   • thoroughly checking the sources of financing for the yacht purchase, including analyzing cash flows and transaction history.
   • Providing documentation confirming the legal origin of the funds (e.g. bank documents, tax returns).
3. Verification of ultimate beneficial owners:
   • identifying and verifying the real beneficiaries of the purchase to avoid situations where a sanctioned individual is hiding behind intermediaries or offshore comapnies,
   • applying the “Know Your Customer” (KYC) and “Know Your Customer’s Customer” (KYCC) principles.
4. Monitoring unusual and high-value transactions:
   • increased vigilance regarding transactions that deviate from the norm or involve very high amounts,
   • using analytical tools to detect and report suspicious transactions.
5. International cooperation and information exchange:
   • collaborating with international regulatory and law enforcement agencies to exchange information on potential sanction evasion attempts,
   • using international databases and financial information exchange platforms.

Consequences of non-compliance

Improper verification if financing sources can lead to serious legal and financial consequences, including:

1. Administrative penalties, such as:
   • Financial fines,
   • Operational bans.
2. Criminal consequences, such as:
   • criminal liability for individuals,
   • asset confiscation,
   • criminal liability for breaking sanctions.
3. Other consequences, such as:
   • loss of reputation,
   • downgrading of credit ratings,
   • civil liability, primarily involving compensation claims.

The obligation to verify financing sources is a key element in enforcing sanctions imposed on Russia in response to its aggression against Ukraine. Companies and financial institutions must implement strict compliance procedures to prevent money laundering and sanctions evasion. Continuous education and procedure updates are essential, given the changing legal landscape.

As early as 2021, EU law mandated the implementation of whistleblower protection regulations into Polish law. Three years later, in September, the appropriate regulations will finally come into effect.

The new obligations will impact approximately 32,000 companies and 16,000 public entities. In this article, we will explain who the new regulations affect, who qualifies as whistleblower, what their protection entails, and which entities must or can implement these procedures.

Who is whistleblower

The Whistleblower Protection Act, passed in June this year, will come into force on September 25, 2024. The new law aims to increase transparency and accountability in Polish companies. Importantly, it applies to both private and public sectors.

The Act defines a whistleblower as a natural person who reports or publicly discloses information about legal violations obtained in a work-related context.

This applies not only to full-time employees but also to temporary workers and individuals providing services under civil contracts, entrepreneurs, shareholders, members of legal entities’ boards, interns, volunteers, officials, and soldiers.

The adopted regulations aim to provide protection for these individuals if they report legal violations.

Who is required to implement internal reporting procedures

In Poland, the obligation to establish internal reporting procedures applies to private and public entities that employ or contract at least 50 people for paid work, as of January 1 or July 1 of a given year. Exempt from this obligation are organizational units of municipalities or counties with fewer than 10,000 residents.

The count of 50 people includes employees (converted into full-time equivalents) and individuals providing paid work under any contract other than employment.

Workplaces with fewer than 50 people performing paid work are not required to implement procedures, but it is worth considering.

The Act in practice

The new regulations require companies and institutions to create internal reporting channels. These are meant to facilitate the reporting of legal violations in verbal, written, or electronic form while ensuring the confidentiality of the identities of all parties involved.

Workplaces must also develop and implement detailed procedures for handling reports, specifying verification steps and corrective actions, as well as conduct regular training sessions for employees. The goal is to inform them of their rights, responsibilities, and mechanisms of protection against retaliation.

Additionally, the reporting system must be regularly monitored and updated to ensure its effectiveness and compliance with the law. This will help build trust and promote a culture of transparency and accountability within the organization.

Whistleblower under protection

Employees can report violations in three ways: through internal reporting channels established by private and public entities, external reporting to relevant state bodies (e.g., the Ombudsman), or through public disclosure.

Regardless of the chosen method, once a violation is disclosed, the employee is granted protection, provided there are reasonable grounds to believe that the reported or disclosed information is true and that it concerns a legal violation.

No retaliatory actions or attempts at such actions can be taken against the whistleblower. If the whistleblower is or was employed, or is expected to be employed, they cannot be discriminated against by refusal of employment, dismissal, reduction in pay, withholding promotion, demotion, mobbing, or any other form of discrimination.

Retaliatory actions also include attempts or threats of such actions. A whistleblower who falls victim to retaliation is entitled to compensation or redress.

On the other hand, a person harmed by knowingly false information reported by a whistleblower has the right to seek compensation or redress from the whistleblower for personal rights violations.

The consequences of failing to implement internal reporting procedures

The Act provides for the possibility of imposing a fine on employers if they fail to establish a reporting procedure or do so in violation of significant requirements.

In this context, the introduction of whistleblower protection laws may be seen by employers as an additional burden. However, it is worth viewing this revolutionary obligation from the perspective of the benefits it can bring to an organization.

Obtaining information about irregularities within the company allows for quick corrective action, avoiding legal and financial consequences, and protecting the company’s reputation.

Adapting companies to the new law

The ability to report violations through whistleblowers is highly valuable to comapnies. It is worth considering in workplaces with fewer than 50 employees as well.

Introducing whistleblower tools, even for businesses not required to do so, can prevent or limit the damage caused by violations, thanks to a quick response.

The new regulations also present an ideal opportunity to introduce other internal polices, such as codes of ethics or anti-mobbing procedures.

Although implementing the new laws may be challenging, it is worth analyzing all the pros and cons, and seeking professional assistance if necessary.

Operating a yacht is not only a pleasure but also a responsibility. Every sailor, regardless of experience, should be aware of the risks associated with sailing. Proper yacht insurance is key to ensuring peace of mind and financial protection in the event of unforeseen circumstances.

Types of yacht insurance

There are many types of insurance available for sailors. Let’s review the basic products:

• liability insurance (OC) – covers damage caused to third parties during a yacht voyage. This insurance protects the yacht owner from claims made by third parties,
• casco insurance – covers material damages to the yacht, such as damage to the hull, equipment, or other elements of the vessel. It is particularly important if the yacht is new or valuable. Casco insurance can also cover damages caused by weather conditions, collisions, or acts of vandalism,
• accident insurance (NNW) for crew members – protects the crew from the consequences of accidents that may occur on board. The policy covers medical expenses, rehabilitation, and compensation in the event of permanent injury of death,
• personal belongings insurance – protects items on board of yacht, such as electronic equipment, clothing, or other valuable possessions. This is particularly important for those who frequently carry valuable items on their yachts.

Key element of a good insurance offer

When choosing yacht insurance, we always want to select the best option. The aspects to pay attention to vary depending on the specific product, but there are a few universal elements of a good insurance offer, such as:

• sum insured – the maximum amount that can be claimed from the insurance. It should be adequate to the value of the yacht and potential repair costs. Make sure the sum insured covers the full value the yacht and the costs of possible repairs or replacement.
• navigational area – the geographical scope where the policy is valid. Ensure it covers the areas where you plan to sail, whether in Poland, the European Union, or other waters. It’s important that the geographical scope matches your sailing plans,
• force majeure – the definition of events not covered by the insurance, such as extreme weather conditions or acts of war. The fewer exclusions, the better for the insured. It’s crucial to fully understand which events are excluded from the insurance protection,
• deductible – the policyholder’s contribution to the damage. The lower the deductible, the better for the policyholder. It’s worth checking the amount of the deductible in different scenarios, such as total loss, partial damage, or theft. Often, increasing the premium can remove the deductible entirely.
• reputation of the insurer – it is important that the insurer is reliable and has a good reputation. The speed of response to claims and reliability of contact are key. It’s a good idea to check reviews from other clients and gather information about their experiences with the insurer.

Summary

There are many yacht insurance products on the market. When choosing a specific type of insurance, we should be guided by our needs. Insurance provides real protection in the event of unforeseen incidents – so it’s worth taking the time to choose wisely and consulting with a broker who can select the best product.

The Posidonia 2024 maritime exhibition took place in Greec at the beginning of June. Although some time has passed since the event, experts and participants are still sharing their opinions on this year’s edition. And no wonder – it was the largest maritime industry exhibition in Europe’s history.

We were there too. We walked through the entire exhibition hall, visited every pavilion, and spoke with many industry representatives. Now it’s time for our observations!

Every two years

Posidonia gains importance with each edition. The size of the exhibition hall where it’s held is astounding. Yet, this year’s edition could not accommodate all participants, and organizers had to move some exhibitors outside into tents. The scale of the event was impressive.

Around 2,000 exhibitors from around the world presented their products or services. It is estimated that more than 40,000 people participated in the event. Posidonia had never reached such a scale before.

This may be why the organizers don’t attempt to hold Posidonia annually. Since its inception, all 28 editions have been held every two years. Given the size of the fair, this is understandable – preparing such a large event in every detail might even make two years seem insufficient.

Who is on the rise

The exhibition hall was divided into several segments with pathways leading to pavilions. There were many interested attendees around them, occasionally making idt difficult to move through.

The presence of Asian citizens was particularly noticeable, with their numbers far surpassing others. Organizers reported that of all countries participating, China saw the biggest increase in the number of companies attending. After a two-year break, they returned with 180 companies, which marks a nearly 50% increase the previous edition.

This perfectly illustrates who is on the economic rise. After a slight pandemic-induced slowdown, the Chinese economy revived in the last three quarters of 2023. This trend has continued in 2024, as confirmed by the strong presence of Asian representation at events like Posidonia.

China’s economic growth enables them to open up to new markets, especially in Europe. Global trade is also picking up, along with maritime transport and ports. The Chinese, who were among the first to notice this, see great development and profit opportunities in the maritime economy. Posidonia was therefore the ideal place for them to acquire new business partners, which they did – and with notable success.

China leads the way

The significant presence of Chinese representatives at Posidonia is also due to their dominance in the shipbuilding market. Chinese production of components for energy transformation is also growing rapidly. Asian wind farm and photovoltaic components are cheaper than Europeans ones, as are electrolyzers. This is becoming a challenge for Europe, as European offshore wind energy will have to compete with cheaper Chinese products.

Chinese manufacturers are also relocating their production to ASEAN countries, increasing maritime transport and the supply of goods from these countries to Europe, the Americas, and Africa. The growth of Chinese component imports is driving demand for maritime transport, which is evident from the rising container throughput in European ports. Asians also aim to take the lead in this area. The acquisition of a majority stake in the Port of Piraeus by the Chinese maritime giant COSCO confirms this. In the context of Posidonia, located just 10 kilometers from the port, this gave symbolic significance to China’s presence in Europe.

Where does Poland fit in?

Polish companies were not absent at Posidonia. The national pavilion featured Poland’s largest ports, including Gdańsk, Gdynia and Szczecin-Świnoujście, as well as state-owned shipyards and private enterprises. We showed the world that we have great potential and are simply good in this industry.

Additionally, private companies set up individual stands in the exhibition hall, seeing this as an opportunity to establish new contacts and secure business partners from around the world.
Despite being somewhere overshadowed by the overwhelming presence of foreign companies, particularly from China, the Polish stand performed very well. Each presented its best products and services. The Polich Embassy in Greece even organized a special seminar dedicated to the Polish maritime industry.

Whether the efforts and presence of our state-owned companies at Posidonia will yield the desired results remains to be seen over the next two years. By then, the next edition of the exhibition will take place. It also depends on how many foreign entities will trust us and in which direction the broadly understood maritime economy will develop.

Buying or selling a yacht is a significant decision that requires careful preparation and the drafting of a detailed agreement. One of the important elements of such an agreement is contractual penalties. In this article, we will explain what contractual penalties are, who they protect, and what their limitations are.

What are contractual penalties

Contractual penalties are predetermined amounts specified in the contract that one party agrees to pay to the other in case of non-performance of the contract.

For example, if the seller fails to deliver the yacht on time, they may be obligated to pay an additional amount as a contractual penalty.

Contractual penalties differ from compensation, as they are agreed upon in advance and do not require proving any damages.

Who do contractual penalties protect

Contractual penalties are designed to protect the interests of both parties to the contract. They ensure that both sides will make an effort to fulfill the contract to avoid additional costs. Additionally, the responsible party will know in advance the cost of their potential negligence.

Contractual penalties in other countries

Contractual penalties are not only present in Polish law but also in other countries.

In most European countries, contractual penalties are widely accepted and regulated by civil codes. However, in exceptional cases, courts may reduce their amount, but only in situations of extreme disproportionality.

In the United States, contractual penalties are also accepted and enforced, provided they are reasonable and proportional. It is important to remember that the rules surrounding penalties may vary by state, with additional requirements or limitations that must be met.

Limitations on contractual penalties

Contractual penalties must be proportional to the value of the contract and the potential damages. If a court finds that the panalty is too high, it may reduce or invalidate it. It is also important to note that penalties cannot be used as a tool for abusing the other party in the contract.

It is significant to understand that contractual penalties apply to obligations other than payments. If a party delays in making a payment, they will be required to pay interest, not a penalty. Interest, however, is a broad topic, much like penalties, and will be discussed later.

There may also be instances where contractual penalties do not cover the full extent of the damage. It is worth considering this in the contract and specifying what should happen in such cases.

Practical tips for drafting contractual penalties

When drafting a yach purchase agreement, it is important to keep a few key points in mind:

• clearly define the conditions – contractual penalties should be clearly outlined and understandable to both parties,

• proportionality – the amount of the penalties should be adequte to the value of the contract and the potential damages,
• negotiations – it is worth negotiating the amount of the penalties to ensure they are acceptable to both parties.

Summary

Contractual penalties are an important element of yacht purchase agreements that protect the interests of both parties. It is essential that they are proportional and well-formulated to avoid legal problems. In case of doubts, it is advisable to consult with a lawyer specializing in yacht law.

FAQ (Frequently Asked Questions)

• How do contractual penalties differ from compensation?
  Contractual penalties are predetermined amounts that do not require proving damage, whereas compensation requires evidence of the incurred damage.
• Can the amount of contractual penalty be negotiated?
  Yes, the amount of the contractual penalties can and should be negotiated to make them acceptable to both parties.
• What are the consequences of not including contractual penalties in the agreement?
  The absence of contractual penalties may result in less protection for the parties’ interest on case on nor-performance of the contract.