russian superyacht stuck in central London causes major problems

Phi is one of more than a dozen russian superyachts detained around the world following russia's full-scale invasion of Ukraine. But many of these detentions have led to enormous legal and financial difficulties for the governments responsible for them.

 

‘The detention of superyachts was very high-profile, it could have made the front page of the newspapers,’ says Tom Keatinge, director of the Centre for the Study of Financial Crime and Security at the Royal United Services Institute.

 

‘But it didn't achieve much in terms of the war and burdened governments with problems they hadn't anticipated.’ On 29 July, the UK Supreme Court rejected the shipowner's appeal, meaning that Phi remains moored in South Dock in London's Canary Wharf business district.

 

‘Welcome to Phi,’ says Captain Guy Booth, ‘here in the heart of London, not where we would like to be.’

 

On board, he shows off the superyacht's luxurious amenities, such as a heated freshwater swimming pool. ‘We can set it at any height we want, and it can reach a depth of 1.7 metres,’ he says.

 

Nearby is a gas fireplace and a lounge area that converts into a cinema, while the owner's cabin has a private terrace.

 

In March 2022, the superyacht was seized under a law that allows the British government to detain Russian-linked vessels in order to put pressure on the russian elite, who in turn exert pressure on President Vladimir Putin.

 

But the owner of Phi and Captain Bout's employer, Sergei Naumenko, did not agree to this.

 

The Russian real estate mogul has filed a series of lawsuits against the Department for Transport to have the superyacht's arrest lifted. These cases have gone from the High Court to the Court of Appeal and the Supreme Court.

 

If the Supreme Court rules against him, the yacht's owner plans to take the case to the European Court of Human Rights.

 

His legal team argues that since Naumenko has never been subject to financial sanctions by the United Kingdom and has no ties to russian President Vladimir Putin, the detention of the superyacht violates his legal right to peacefully enjoy his property.

 

But the government has so far successfully argued that it has the right to seize the assets of wealthy russians to put pressure on the russian government.

 

Phi's problems are far from unique.

 

Detained Russian superyachts around the world are creating legal problems and tens of millions of dollars in bills for their maintenance.

 

‘I think governments clearly didn't anticipate all these legal issues surrounding the detention of yachts,’ says Alex Finley, a former CIA officer who served in Europe and has written about russian superyachts and sanctions.

 

The cost of maintaining superyachts is enormous, typically at least 10% of their value per year. That can mean annual fees of millions or, in the case of larger vessels, tens of millions of pounds.

 

‘It costs some governments a lot of money,’ Finley says.

 

As the owner of Phi is not subject to financial sanctions, he pays for its maintenance.

 

But many of the superyachts detained around the world are owned by people subject to financial sanctions, so local laws mean they cannot transfer money to maintain their vessels.

 

In Italy, authorities have reportedly paid more than £23 million (almost $30 million) since March 2022 to maintain a $600 million sailing yacht owned by someone under sanctions.

 

The country also owns several smaller superyachts.

 

In the United States, maintaining the 106-metre Amadea cost the government over $30 million.

 

The authorities planned to sell the superyacht, which is moored in San Diego, to recoup maintenance costs and raise funds to support Ukraine's military efforts.

 

However, this has been repeatedly postponed due to legal battles over who officially owns the vessel.

 

The Ukrainian authorities faced similar difficulties. Since 2022, they have been trying, without success so far, to sell the russian-linked superyacht Royal Romance, which is moored in Croatia.

 

Only one superyacht was sold at the request of the government that owned it.

 

This is the Alfa Nero, which cost Antigua and Barbuda $28,000 a week to maintain. The vessel was bought by a Turkish billionaire for $40 million. However, both the new owner and the Antiguan government were sued by the daughter of a russian industrialist, who claimed that the superyacht belonged to her.

 

Tom Keatinge of the Centre for the Study of Financial Crime believes that the high-profile arrests of superyachts distracted Western governments from more effective measures that would have hit the russian army's finances and resources.

 

"Was it right to go after the oligarchs? Probably yes. Was it right to reduce everything to the oligarchs? Absolutely not. We should have focused on the things that mattered from day one."

 

Legal complications surrounding russian superyachts may also deter buyers from attempting to purchase the detained vessels, especially when their ownership may not be recognised by hostile countries.

 

‘It's entirely possible,’ says Benjamin Maltby, a leading superyacht lawyer at Keystone Law, "that a yacht that has been sold could end up in a different jurisdiction, and the port authorities will go back to the owner and say, 'You're not the owner.

 

‘Behind the law are politics, politicians and their whims,’ he adds.

 

Meanwhile, in Britain, Captain Booth says he is concerned about the state of disrepair caused by Phi's detention in South Dock, which lacks proper port facilities.

 

‘The worst-case scenario would be a fire on board,’ he says, adding that the vessel still has problems after its maiden voyage.

 

‘The flames would spread very quickly,’ he adds. ‘Aluminium burns at 3,500°C.’

 

‘The boat will simply sink here in Kenner's Wharf.’

 

When asked about the risks of keeping the Phi in Kenner's Wharf, the Department for Transport issued a statement saying it ‘cannot comment on Captain But's statements due to ongoing legal proceedings.’

 

The Canal and River Trust, which manages the dock, says: ‘The harbour master continues to seek clarification from the Department for Transport on the status of this vessel. Our priority remains the safe and secure operation of the West India Docks.’

 

Phi's future may be decided by the High Court on Tuesday.

 

But the fate of many other russian superyachts and the question of who will ultimately pay for them is unlikely to be resolved anytime soon.

 

Source: NV