Impounded fleet of Russian yachts brings new problem: who pays for their upkeep?

London: Igor Sechin’s superyacht was preparing to sail out of a harbour on the French Riviera just two days after its owner – the chief executive of Russian energy giant Rosneft and close ally of Putin – was sanctioned.

But customs agents got wind of the alleged plan, saying in a statement that the 88-metre Amore Vero was “taking steps to sail off urgently, without repairs being over”. It had been moored in La Ciotat since January for repairs and leaving would have been a breach of European Union sanctions on Russian oligarchs, French Finance Minister Bruno Le Maire said.

The luxury yacht “Dilbar” lies completely covered in the Blohm+Voss dock Elbe 17 in Hamburg, Germany,Credit:AP

Officers proceeded to tie the vessel to the dock with steel ropes, later announcing they had impounded the $US120 million ($163 million) yacht – leaving it stranded on the Mediterranean coast.

As governments seize the prized assets of Russian oligarchs, superyachts are accumulating in docks across Europe. Others in a similar situation to Sechin include metals billionaire Alisher Usmanov, whose vessel Dilbar is trapped in Hamburg, and steel tycoon Alexey Mordashov, whose asset is stuck in Imperia, northern Italy.

While this may be heralded as Western governments acting swiftly to freeze the assets of Putin’s allies, bills are racking up for maintenance and mooring fees.

Peter Huerzeler, chief executive of yacht broker Ocean Independence, says some of the oligarch’s suppliers have stopped providing services to these ships.

French authorities customs officials blocked Rosneft chief executive officer Igor Sechin’s superyacht from an urgent departure from the Mediterranean port of La Ciotat, near Marseille. However, the asset has not been seized by the state.Credit:AP

“We were involved in one case of a sanctioned individual and the first thing you do is you stop delivering a service, partly because you don’t want to work for them and also because you are not allowed to provide a service to a sanctioned individual. Your invoicing stops immediately,” he says.

“But it’s different for the crew. One of the problems is that the asset needs maintenance. If there’s no maintenance, then the asset loses its value very quickly. There will be some reserves in place as pre-payments for the crewing companies. But the question is whether you can pay them and for how long.”

Many others, however, have continued their work, including those in the South of France sending invoices to the company that controls Sechin’s yacht. La Ciotat Shipyards is still writing out invoices for mooring fees, for instance, though a company spokesman said they didn’t know who would pay the bill. Authorities are thought to have not told suppliers about the vessel’s legal status.

Sechin’s yacht had been undergoing refurbishment by yacht company MB92 when it was impounded. Asked about who would pay for the work, a spokesman for MB92 told Reuters: “We are still waiting for formal notification from customs that will clarify the official status of the vessel.”

Benjamin Maltby, a shipping lawyer at Keystone Law, says the owners are still on the hook for these sorts of bills.

“Ownership hasn’t been transferred, only possession. The yachts are said to be beneficially owned by people who have been sanctioned, so they are unable to pay their bills,” he says.

It is not only crew or refurbishment that must be paid for, but a number of services that are essential to keep the yachts in good condition.

Maltby explains that someone is needed to occasionally run the yacht’s equipment, to make sure it doesn’t fall into disrepair. The ships are barred from moving to a new port but will need to be run out of the harbour to test their engines.

He says: “Yachts need very intensive maintenance. They need to be washed down on a daily basis. The yachts are kept scrupulously clean, and they are taken out of the harbour quite regularly so that the machinery like the engines and the air conditioning units are all run up to normal operating temperatures.

“If those technical systems aren’t used, then they will break down.”

Ultimately, the authorities can’t allow the yachts to completely disintegrate as they could pose an environmental risk.

“It would be completely irresponsible to not maintain the yachts. If you don’t look after a boat properly, the metals that come into contact with the water will be eaten away. And this would take some time but eventually the boat will sink. This is obviously a massive pollution risk because they are holding tons of fuel,” Maltby says.

A sanctioned oligarch, however, is unable to pay for the services required to maintain their vessels even if they wanted to.

What happens next likely lies in the hands of the court. With the companies piling up debts, the suppliers could apply to a court to demand payment. In the world of yachting, demanding payment from a company is called an arrest – any sale could be for a fraction of a yacht’s value.

“It’s similar to the winding-up of a company,” says Maltby. “If you arrest a vessel because you’ve supplied goods to the owner who hasn’t paid, and security isn’t put up for payment, you can ask the court to seize and sell the yacht. And you will benefit from the proceeds after the court fees and legal fees have all been paid off.

“Generally, the yacht would be auctioned, or there would be a sealed bid tender process and you would get your money back. But the yacht itself would not achieve anything like its true market value.”

An auction of an oligarch’s superyacht would no doubt garner huge attention. Ocean Independence’s Huerzeler says his clients would love to go to such a high-profile event for a cut-price deal on a valuable asset, but warns that any buyer is taking on huge risks such as potential legal battles years down the line if an oligarch tries to take their yacht back.

“A lot of our clients are hoping for an auction. People are very interested in buying these yachts and they are hoping they can get some good offers on the market,” he says.

“But I’m personally very sceptical. There aren’t that many people who can and want to buy such a huge yacht. I don’t see people popping up to buy an asset with such an extreme running cost as well. And they will want proof of ownership – who is going to feel safe buying that yacht?”

Creditors of the stranded superyachts may need to find buyers willing to snap up the vessels before they lose value – and fend off the likes of Sechin if they are ever to receive payment.

Telegraph, London

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