Can government force £2.5bn Abramovich Chelsea funds to Ukraine?
Last week the UK government threatened to take Russian oligarch Roman Abramovich to court to make sure the £2.5bn raised from his sale of Chelsea FC went to Ukraine.
Abramovich owned Chelsea from 2003 until his forced sale in 2022 following Russia’s illegal invasion of Ukraine.
But the proceeds of the sale to a consortium fronted by Todd Boehly after Abramovich was granted a special licence to sell the club, amounting to £2.5bn, have since been frozen in a bank account awaiting a decision on where the funds are spent.
Both the UK government and Abramovich have previously agreed that the billions will go to victims of the war in Eastern Europe, but exactly where appears contentious.
The UK government insists that the proceeds must only head to Ukrainian victims, while Abramovich reportedly wants all victims of war to receive a cut of the pie – suggesting he may want Russians to receive compensation too. Abramovich has denied he has close links to Russian president Vladimir Putin.
Abramovich seeking to block?
Alex Burton, litigation partner at City law firm Trowers & Hamlins says that though Abramovich can “seek to block” the spending of the funds, he has a “limited ability” to decide how they’re spent.
Burton continues that the assets are still owned by the Russian but “the funds can only be dealt with in accordance with the terms of the licence granted by OFSI [Office of Financial Sanctions Implementation]”.
And because the sale of the club took place entirely in the UK, and with Abramovich a sanctioned individual, the proceeds were caught by the UK sanctions regime.
“The impact of this was that the sale proceeds were frozen,” added Matthew Showler, also of Trowers & Hamlins. “It also meant that the frozen proceeds of the sale were to go to a charity in a jurisdiction agreed by the Government for the purposes of helping victims of the war in Ukraine.”
It is understandable, then, as to why the two parties are at an impasse; the government said it is “determined to see the proceeds from the sale of Chelsea Football Club reach humanitarian causes in Ukraine, following Russia’s illegal full-scale invasion”, while adding that they are “deeply frustrated that it has not been possible to reach agreement on this with Mr Abramovich so far”.
The end game
So how does this play out? Well, no one is quite sure, but Trowers & Hamlins’s Lucy James states that “the current impasse is clearly unsustainable and in the absence of an agreement the escalation of this matter before the Courts is inevitable”.
Concludes Showler: “There is not really any precedent [for this impasse with Abramovich]. This is about the interpretation of the OFSI regime and the steps OFSI takes in the context of a war.
“It has never really happened before. It is very difficult to say with certainty as to what will happen but ultimately it will be open to the Government to try and pass legislation that deals with a specific desired outcome.”
A sale that happened over three years ago continues to rumble on, and with the likelihood of world peace seemingly at rock bottom it is likely that the squabble over £2.5bn frozen in a bank account will need to be settled in the courtroom.
“This impasse reflects badly on both Mr Abramovich and the government, which ought to have pushed for a more binding commitment,” a House of Lords committee report said last year.