Oligarchs: UBO sightings on the rise, seizures follow
No not unidentified flying objects (UFO). It’s ultimate beneficial owners (UBO), namely oligarchs, who have been sought out in recent weeks.
Whilst sanctions lists have grown in response to the intensifying conflict in Ukraine, governments have been arresting and seizing the superyachts owned (or beneficially owned) by sanctioned individuals.
Nearly half a dozen have been seized so far, with others “blocked” or detained. Yachts include: Sailing Yacht A, Valerie, Lady M and Amore Vero. Others have headed for safer waters, Roman Abramovich’s Solaris is currently in the Aegean Sea “awaiting orders”.
On Tuesday (March 14th), The White House press secretary, Jen Psaki said the seizures are “just the beginning”. And after the fourth round of EU sanctions this week, Spanish prime minister, Pedro Sánchez warned “there will be more” seizures.Identifying who owns the yacht, the UBO, can be a challenge for authorities.
Miguel Ángel Serra, partner, Albors Galiano Portales tells SYI: “The difficulty with yachts, and not only yachts, is the link between it and the ultimate beneficial owners of that yacht. It’s sometimes difficult because between the two there are many intermediary companies located in various tax havens, which do not provide information about who are the shareholders etc.” Also, have you ever seen a Russian-flagged superyacht? Serra never has.
Numbers have grown too. When Serra began dealing with sanctions issues relating to Russia back in March 2014 there were only 21 individuals on the EU sanctions list. “As of today, we have 718 individuals and entities [on the list] and new additions are made often.”
The Pandora Papers, first leaked in October 2021, have proven a useful source in linking the oligarchy to their superyachts, according to Serra. But this is not always definitive and, even when it is, can take time to consider. That’s why a shoot-first-ask-questions-later policy on arrest and seizure has been key to the detainment of yachts across Europe and the US.
“The state attorney in Spain supports the immobilisation of yachts before proving beneficial ownership. This is very important in seizing the yachts,” says Serra. He also warns more seizures of large (80m plus) superyachts are imminent.
Although minor in comparison to the sufferings of many right now, this is not a victory for the industry by any means. “For example, what do the shipyards do when a yacht which is moored or in dock for works is immobilised? That space is already pressurised with the demand we see right now.”
“Also, your crew, it is difficult to pay them from blocked accounts,” adds Serra. “Who will pay the payroll? And who will manage and maintain the yacht if nobody can be paid? Obviously the UBO is the person who feels it [sanctions] most, but it presents a problem for the whole industry.” The situation is completely unprecedented, according to Benjamin Maltby, partner, Keystone Law. Usually, yachts are arrested in respect of allegedly unpaid debts from supplies of goods and services. “That is undertaken to obtain financial security because yachts are typically owned by a shell company and their only asset is the yacht. So, if you can’t get hold of the yacht it is difficult enforce,” he tells SYI. Usual protocol follows that the owner would put up financial security and once that is in place, usually by a bank guarantee, then the vessel is “free to go”.
But the current situation is different because the authorities are depriving the owners use of their asset. “So, it’s not a means, it’s actually an end in itself,” adds Maltby. “And because of that there is no obvious endgame to it.”
The impact is largely symbolic because of the global superyacht fleet, less than 10% have a Russian UBO, “never mind about alleged connections to the ruling elite”, says Maltby.
Like Serra, Maltby believes there will be a negative impact on our industry, but only in the short term. Over time, he thinks recent events will help to improve the public image of the superyacht industry and make it “more durable as a result”.
Subscribe to our free newsletter
For more opinions from Superyacht Investor, subscribe to our email newsletter.