In a new series of coordinated global sanctions against Russia for their invasion of Ukraine, dozens of superyachts worth billions of dollars have been seized from their Russian oligarch owners, many of whom are close friends and allies of Russian President Vladimir Putin.
Due to the pace of the demands placed on law enforcement for headline seizures, it seems there was little time left for any pre-seizure planning, in line with the international best practice on seized assets. This has left authorities struggling to decide the fates of the world’s most expensive superyachts as they sit depreciating because seizing and freezing is not the same as confiscating and forfeiting.
When assets are seized, if the owners or assets are suspected to be involved with any type of criminal office, the law gives the authorities permission to seize the assets before any eventual attempts to legally confiscate and sell them. Provisions are usually made in seizure law for authorities to apply to sell assets that depreciate rapidly or have high maintenance costs, like superyachts.
However, if these yachts have restrictions placed on them due to sanctions related offences or do not get a Receiver or Manager with the relevant permissions appointed by the court; then these countries are not allowed to take ownership of the assets and are potentially creating their own multi-billion dollar scrap yard where the value of these yachts will haemorrhage away rapidly.
If the authorities don’t have a plan in place, these superyachts are likely to waste away because there isn’t anyone willing to foot the storage bill. These yachts require millions of dollars in annual maintenance, staffing, fuel and insurance, let alone the docking costs alone which can cost tens of thousands of dollars every month! Without the proper care, these assets can lose up to 30% of their value in a short period of time and if left unstaffed could fail inspections and lose its insurance altogether. As these boats continue to be left, the authorities run the risk that the owners could be delisted from sanctions and demand their boats back, likely with additional compensation payments if their assets haven’t been managed properly.
A recent opinion piece in The Washington Post asked the question whether the seizures are even going far enough:
“The West is using economic tools to force Russian President Vladimir Putin’s hand but has left untouched the one economic tool that could have the most impact. Now is the moment when governments around the world should demand transparency from all those principalities and states hiding the ill-gotten gains of the Russian oligarchs and thousands of other bad actors in tax havens and shell companies.”
The author continued to point out that the global governments could be doing something more meaningful than taking away individuals’ property:
“The release of the Panama and Pandora papers demonstrates that, at this very moment, someone knows exactly where their money is hidden. Let’s call for the divulgence of those accounts immediately under serious threat of punishment for anyone aiding their subterfuge. Why chase the yachts of these oligarchs, which are mere bath toys, when every hour lost spells more death? End the secrecy and piracy of tax shelters and shell companies, and we end a major source of their power.”
While it may be a cynical view, it’s likely that there are too many politicians who would also be affected by these disclosures for measures like this to ever be passed. Targeting outlandish assets, like expensive superyachts, is a safe balance for these governments to demonstrate a reaction to the public without upsetting their donors and the dirty money that sadly fuels too many economies.
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