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Gladwell's Line- New America's Cup legal slugfest signaled by GGYC

by Richard Gladwell on 16 Oct 2009
Carlo Borlenghi/ Alinghi

The two year plus legal saga, otherwise known as the 33rd America's Cup, took a new turn today with the release of a letter from the Challenger, Golden Gate Yacht Club saying that they were considering filing a new complaint with the New York Supreme Court.

This concerns an alleged breech of fiduciary duty, by the Defender and current Trustee, Société Nautique de Geneve.

The second and third paragraphs of the letter addressed to the Club reads as follows:

'As custodian of this unique and historic trophy, your Club has many responsibilities. As Trustee under the Deed of Gift, SNG also holds a duty of care, and consequent liability, to all participants in the 33rd Match.'

'GGYC is considering filing a complaint with the New York Courts on the grounds of breach of fiduciary duty because of your Club’s actions over the past five years. Your selection of the venue for the 33rd America’s Cup would form part of that claim.'

While the letter says the breeches have taken place over a five year period, the instances cited would not even cover five months.

The transition of the America's Cup from a vanquished Defender to the Challenger/Defender has always been a weak point in the Deed and is covered by the penultimate paragraph of the Deed of Gift.

'AND, the said party of the second part hereby accepts the said Cup subject to the said trust, terms, and conditions, and hereby covenants and agrees to and with said party of the first part that it will faithfully and will fully see that the foregoing conditions are fully observed and complied with by any contestant for the said Cup during the holding thereof by it; and that it will assign, transfer, and deliver the said Cup to the foreign Yacht Club whose representative yacht shall have won the same in accordance with the foregoing terms and conditions, provided the said foreign Club shall, by instrument in writing lawfully executed, enter with said part of the second part into the like covenants as are herein entered into by it, such instrument to contain a like provision for the successive assignees to enter into the same covenants with their respective assignors, and to be executed in duplicate, one to be retained by each Club, and a copy thereof to be forwarded to the said party of the second part.'

Essentially the legalese requires that the vanquished Defender's final act is to sign a handover agreement for the custody of the America's Cup itself and the conduct of the subsequent Match consistent with the terms of the Deed of Gift.

In this case, the previous holder Royal New Zealand Yacht Squadron would have signed such a document with current Defender Societe Nautique de Geneve, and that if this action proceeds, and is successful then the responsibility for the organisation of the Defence would lie with the previous holder RNZYS.

The reality is that while the venue may change to one of RNZYS's choosing, possibly the Hauraki Gulf in early February 2010. And some of the rules may change, the race officials would probably not, having been already approved by the International Sailing Federation. SNG would still be the Defender of the Trophy, but not organiser of the Match.

Quite who would stand the cost of that exercise is another matter entirely.

However all that is looking a long way ahead.

Next step will most likely come from SNG in the form of an Open Letter, which will rebut the points raised by GGYC.

At that point GGYC, will have to consider whether it proceeds further with the unprecedented action.

The text and references released today by Golden Gate YC are as follows:

October 15, 2009

Le Comité Central
Société Nautique de Genève
Port Noir
CH-1223 Cologny
Société Nautique de Geneve

Mr. President and Members of Le Comité Central,

33rd America’s Cup Venue

I write to the Société Nautique de Geneve as Trustee/Defender of the America’s Cup on behalf of Golden Gate Yacht Club, Challenger of Record for the 33rd edition, and our representative team BMW ORACLE Racing.

As custodian of this unique and historic trophy, your Club has many responsibilities. As Trustee under the Deed of Gift, SNG also holds a duty of care, and consequent liability, to all participants in the 33rd Match.

GGYC is considering filing a complaint with the New York Courts on the grounds of breach of fiduciary duty because of your Club’s actions over the past five years. Your selection of the venue for the 33rd America’s Cup would form part of that claim.

As Trustee, SNG has the power and duty to choose the venue for the 33rd Match. Under New York law, this duty cannot be delegated. It is a clear and inescapable responsibility. This duty lies with your Club – not with Alinghi, ACM, or Mr. Bertarelli.

SNG has announced Ras Al Khaimah as your choice of venue for the 33rd Match, and I am taking this opportunity to urge you to reconsider that choice in respect of your duty and responsibility as Trustee.

As to the suitability of Ras Al Khaimah, please take the time to read the following articles that are freely available:

• Sheikh Khalid Bin Saqr al Qasimi, said this when a Ras Al Khaimah-connected terrorist cell, planning attacks on major tourist hotels in Dubai, was arrested:
'The fact that the terrorist cell was linked to Ras Al Khaimah is the latest evidence that the close ties between the current regime in Ras Al Khaimah and Iran is not in the best interests of Ras Al Khaimah or the United Arab Emirates.'

• Sheikh Khalid Bin al Qasimi’s address to lawmakers in Washington was reported in the New York Post:

• Mr. al-Mansuri, connected to the RAK ruling family, was one of those arrested in connection with this terrorist cell:

• George Webb, head of the Canada Border Services Agency Counter Proliferation Section, interviewed by The National Post, stated that UN Sanctions-prohibited microchips destined for Iran were routed through Ras Al Khaimah:

'Ras al-Khaimah is actually leased by the Iranian government, staffed by Iranian customs.'

• Respected terrorism analyst Douglas Farah has noted links between Ras Al Khaimah, gemstones and the Taliban:

'One thing of significant importance (and which had not developed at the time of my reporting on diamonds and al Qaeda) is the emergence of both Dubai and Ras al-Khaimah (two of the seven emirates of the United Arab Emirates, one of only three governments to recognize the Taliban when it was in power the first time) as leading diamond markets and gemstone centers.'

• Viktor Bout, well-documented Russian arms trafficker now under arrest, operated from Ras Al Khaimah. United Nations List of Individual/Company Frozen Assets refers:

• Contrary to these reports, Dr. Khater Massaad states, 'There are no security issues to be concerned about in the UAE. That's a fact.' However, this recent New Zealand Herald story reports 44 terrorism-related arrests:

• Dr. Massaad also claims that the proposed venue is complete and the area is free of all security concerns: 'There has never been any security concern so far in the UAE and I don't see any reason why we should have any now!'

However, Martin Tasker of TV New Zealand visited Ras Al Khaimah. His report (6 October) showed the venue as a building site.
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