Several such superyachts have been seized by European governments, including billionaire Alexei Mordashov’s GBP45 million boat Lady M and a GBP444 million boat owned by businessman Andrey Melnichenko
A view of the yacht “Lady M”, owned by Russian oligarch Alexei Mordashov, at it is docked at Imperia’s harbor, Italy. AP
The UK on Tuesday seized its first superyacht of an unnamed Russian businessman as per the sanctions it has imposed upon Russia.
According to a report by the BBC, the GBP38m yacht named Phi belongs to a Russian businessman who is not currently sanctioned but has “close connections” to Russian President Vladimir Putin.
Since Russia’s invasion of Ukraine on 24 February, the UK has introduced a number of sanctions against Russian individuals and businesses.
Also read: Fleeing sanctions, Russian oligarchs seek safe ports for superyachts
The bright blue yacht, which was built in the Netherlands, features an “infinite wine cellar”, a fresh-water swimming pool and penthouse apartment on the upper deck.
According to the report, UK officials boarded Phi in Canary Wharf, east London on Tuesday. The vessel was in London for a superyacht awards ceremony and was scheduled to depart on Tuesday.
The yacht was detained under the Russia (Sanctions) (EU Exit) Regulations 2019.
While Transport Secretary Grant Shapps said “the ship won’t be going anywhere for the time being,” let’s take a look at what happens after a superyacht is detained:
Assets of Russian billionaires, including their superyachts, are in danger of being seized under the various sanctions imposed against Russia.
According to a report by Independent, several such superyachts have been seized by European governments, including billionaire Alexei Mordashov’s GBP45 million boat Lady M and a GBP444m boat – one of the world’s largest yachts – owned by businessman Andrey Melnichenko.
Both of the mega yachts were seized by authorities in Italy.
What happens when superyachts are seized?
When a country seizes a superyachts it does not gain ownership of it, rather it means the boat simply cannot be used or sold by its billionaire owner.
Deciding what to do with the superyachts, and who gets the proceeds, is likely to be more challenging and could begin court battles that may drag on for years.
Even though laws vary by country, legal experts believe the current sanctions only allow the authorities to be the custodians of these superyachts.
Benjamin Maltby, a partner at Keystone Law, told CNBC, “we’re in uncharted water, the situations we’re seeing now have never really occurred before.”
Under the sanctions announced by the US and EU countries, the assets of the Russian elite who “enriched themselves at the expense of the Russian people” and “aided Putin” in his invasion of Ukraine will be “frozen and their property blocked from use”.
Hence, the frozen assets remain the property of the oligarch, who can neither use it or sell it.
For example, Mordashov and Melnichenko will continue to be the legal owners of their yachts, however, they will be docked at Italian shores and cannot be used.
For a government to actually take ownership of an asset, a building or a yacht, it will have to first prove that the particular asset was either used as part of a crime or bought with the proceeds of illegal activity.
Stefan Cassella, former chief of the Asset Forfeiture and Money Laundering Section in the US attorney’s office in Maryland, says that the government “has to prove both the crime and the connection,” as per the CNBC report.
Proving a specific crime by the oligarchs and tying the assets directly to that crime, may almost be impossible, legal experts say.
“The oligarchs could reasonably argue ‘I acted within the laws that were in place in Russia and in Europe, ‘” Maltby said, as quoted by CNBC.
“There has to be clear evidence of criminality,” he added.
The superyacht frozen in a legal limbo also needs to be maintained and repaired from time to time, which adds another dimension of confusion to the current sanctions.
Even though the authorities may ask the oligarchs to pay for the maintenance, the owners can rightfully refuse. Even if they agree to pay, the authorities may also find it impossible to collect funds since they are not allowed to conduct any financial transactions with sanctioned individuals.
With inputs from agencies
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