Royal Caribbean Cruise Lines 2013 Annual Report Download - page 37
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PART I
If we fail to maintain compliance with the various appli-
cable data collection and privacy laws or with credit
card industry standards or other applicable data
security standards, we could be exposed to fines,
penalties, restrictions, litigation or other expenses,
and our business could be adversely impacted. In
addition, even if we are fully compliant with legal
standards and contractual requirements, we still may
not be able to prevent security breaches involving
sensitive data. Any breach, theft, loss, or fraudulent
use of guest, employee or company data could cause
consumers to lose confidence in the security of our
information technology systems and choose not to
purchase from us and expose us to risks of data loss,
business disruption, litigation and other liability, any
of which could adversely affect our business.
A change in our tax status under the United States
Internal Revenue Code, or other jurisdictions, may
have adverse effects on our income.
We and a number of our subsidiaries are foreign
corporations that derive income from a United States
trade or business and/or from sources within the
United States. Drinker Biddle & Reath LLP, our United
States tax counsel, has delivered to us an opinion,
based on certain representations and assumptions
set forth in it, to the effect that this income, to the
extent derived from or incidental to the international
operation of a ship or ships, is exempt from United
States federal income tax pursuant to Section 883
of the Internal Revenue Code. We believe that most
of our income (including that of our subsidiaries) is
derived from or incidental to the international opera-
tion of a ship or ships.
Our ability to rely on Section 883 could change in the
future. For example, U.S. tax legislation has been pro-
posed that would eliminate the availability of Section
883 to us and would thereby cause a portion of our
international shipping income to be subject to tax in
the United States. Moreover, changes could occur in
the future with respect to the identity, residence or
holdings of our direct or indirect shareholders, trading
volume or trading frequency of our shares, or relevant
foreign tax laws of Liberia or Malta such that they no
longer qualify as equivalent exemption jurisdictions,
that could affect our eligibility for the Section 883
exemption. Accordingly, there can be no assurance
that we will continue to be exempt from United States
income tax on United States source shipping income
in the future. If we were not entitled to the benefit of
Section 883, we and our subsidiaries would be subject
to United States taxation on a portion of the income
derived from or incidental to the international opera-
tion of our ships, which would reduce our net income.
Additionally, portions of our business are operated
by companies that are within tonnage tax regimes of
the U.K. and Malta. Further, some of the operations of
these companies are conducted in jurisdictions where
we rely on tax treaties to provide exemption from tax-
ation. To the extent the tonnage tax laws of these
countries change or we do not continue to meet the
applicable qualification requirements or if tax treaties
are changed or revoked, we may be required to pay
higher income tax in these jurisdictions, adversely
impacting our results of operations.
As budgetary constraints continue to adversely impact
the jurisdictions in which we operate, increases in
income tax regulations or tax reform affecting our
operations may be imposed.
We are not a United States corporation and our share-
holders may be subject to the uncertainties of a foreign
legal system in protecting their interests.
Our corporate affairs are governed by our Articles
of Incorporation and By-Laws and by the Business
Corporation Act of Liberia. The provisions of the
Business Corporation Act of Liberia resemble provi-
sions of the corporation laws of a number of states in
the United States. However, while most states have
a fairly well developed body of case law interpreting
their respective corporate statutes, there are very
few judicial cases in Liberia interpreting the Business
Corporation Act of Liberia. As such, the rights and
fiduciary responsibilities of directors under Liberian
law are not as clearly established as the rights and
fiduciary responsibilities of directors under statutes or
judicial precedent in existence in certain United States
jurisdictions. For example, the right of shareholders
to bring a derivative action in Liberian courts may be
more limited than in United States jurisdictions. There
may also be practical difficulties for shareholders
attempting to bring suit in Liberia and Liberian courts
may or may not recognize and enforce foreign judg-
ments. Thus, our public shareholders may have more
difficulty in protecting their interests with respect
to actions by management, directors or controlling
shareholders than would shareholders of a corpora-
tion incorporated in a United States jurisdiction.
Litigation, enforcement actions, fines or penalties
could adversely impact our financial condition or
results of operations and/or damage our reputation.
Our business is subject to various United States and
international laws and regulations that could lead to
enforcement actions, fines, civil or criminal penalties
or the assertion of litigation claims and damages. In
addition, improper conduct by our employees, agents
or joint venture partners could damage our reputa-
tion and/or lead to litigation or legal proceedings that
could result in civil or criminal penalties, including
substantial monetary fines. In certain circumstances
it may not be economical to defend against such
matters and/or a legal strategy may not ultimately