Superyachts, the Fifth Amendment and the French Revolution
The Founding Fathers, the French proletariat and 205ft luxury yachts may never have been mentioned in the same instance before; yet all are prominent features of discussion since the latest development from US legislators.
US Congress voted in favour of controversial new legislation earlier this month that would make it easier for US Justice Department to seize Russian oligarchs’ assets and transfer part of the money to Ukraine. This money could be used either for humanitarian relief or to support the war against Russia following the invasion. Whilst the congress has voted heavily in its favour, some industry critics have questioned its constitutional integrity.
If it passes, yachts like $300m Amadea (pictured above), belonging to sanctioned Russian oligarch Suleiman Kerimov, could be sold and the proceeds sent to Ukraine, after its arrest last week in Fiji at the request of the US government.
“This seizure of Suleiman Kerimov’s vessel, Amadea, nearly 8,000 miles from Washington, D.C., symbolises the reach of the Department of Justice as we continue to work with our global partners to disrupt the sense of impunity of those who have supported corruption and the suffering of so many,” said Andrew Adams, director of Task Force KleptoCapture, the US Department of Justice unit established to enforce sanctions on Russian oligarchs. “This Task Force will continue to bring to bear every resource available in this unprecedented, multinational series of enforcement actions against the Russian regime and its enablers.”
The proposed bill, the Asset Seizure for Ukraine Reconstruction Act, could speed the sale of assets such as Amadea, was passed by Congress on April 27th. The proceeds of the sold assets could be “used for the benefit of the people of Ukraine”.
The proceeds of the enforced sales could be directed to: US government provided security forces, post-conflict reconstruction, humanitarian assistance, provisions, and information technologies. Another provision identifies potential beneficiaries as “humanitarian and development assistance for the Russian people, including democracy and human rights programming and monitoring”.
An interagency working group, headed by the US Secretary of State, will be established to determine how the government can seize and confiscate assets under the jurisdiction of the US. But as recent yacht seizures in Fiji, Spain and the Dominican Republic show, governments are willing to co-operate with the US authorities despite their lack of jurisdiction.
Not everyone is a fan of the new bill. Robb Maass, partner with law firm Alley, Maass, Rogers & Lindsay, tells us: “It feels that this bill violates the tradition of due process that we are so proud of in this country.”
According to the bill, the seized superyachts may be held, used, administered, or sold, he said. “It is not generally the process you would take; seize yachts, sell them, ask questions later,” says Maass. “There must be some form of due process here. Yes, seize yachts and sell them. But not before they have been given a fair chance to contest the sale in court.”
Maass is not alone in voicing opposition to the enforced yacht sales. Bob Allen, partner, Robert Allen Law, agrees with him. “The seizures are an exercise of raw power – illegal, brutal, and uncivilised,” he tells Superyacht Investor. “If anyone is formally accused of a crime, they should be put on trial. And let the chips fall where they may.”
But the current proposed legislation falls short of international legal standard, Allen argues. “I don’t believe that this law, even if it passes, conforms to the standards of the US Constitution or international law. It is a transparent attempt to legitimise the blatant abuse of power.”
Unintended consequences of the legislation are a worry for Maass. “There is justifiable uproar about what is happening in Ukraine. But seizing Russian-owned yachts, sooner or later, will catch someone who doesn’t deserve this to happen.”
Also, the US government’s targeting of Russian-owned assets, has raised concern that US interests overseas may receive similar treatment. Allen says: “If this law is enacted and then acted on, what does this portend for the safety of private investments in Russia, China, and elsewhere around the world? That when there is a conflict, the assets of non-enemies can be seized and sold?”
Allen even sees a surprising historical precedent. “As little as anyone may like Putin or his friends, seizures without trials are the same as the rule of the mob – no different than during the French Revolution. Except that, in this case, the mob are the leaders of the Western powers.”
The bill has progressed to the Senate’s Committee of Foreign Relations. To become US law, which seems likely, the legislation needs only to be passed by the Senate and the president.
Maass tells SYI, “The likelihood is that it will be supported. Everyone is against Putin and his allies. If a politician is up for office for example, it won’t sell well with the home folks if they go against this. Selling seized Russian yachts is like mom and apple pie. How could anyone oppose this?”
Allen believes that if the law passes, it will erode constitutional integrity. “To be specific, the Fifth Amendment to the US Constitution provides that ‘No person… shall be deprived… of property, without due process of law; nor shall private property be taken for public use without just compensation.’ It is also a fundamental principle of the law of civilised nations that individuals are innocent until proven guilty.”
The bill is the latest development in the US’s attempt to mount pressure on Russian business and oligarchs to bring an end to the conflict in Ukraine. “The reality is, however, is that we [the west] have imposed sanctions and seized assets to bring peace to Ukraine and that is yet to happen,” says Maass.
“But the idea that oligarchs are going to Putin and pressuring him to stop the war because it is affecting them is ridiculous. If they are, he would most probably say to them ‘Quit your whining, I made you what you are.’ Putin is not beholden to them. No, they are beholden to Putin.”