Chelsea Playing For Time: Why Roman Abramovich Slowing Down Transfer of Funds to Ukraine From Selling FC Chelsea

Photo AFP/EAST NEWS/Chelsea fans are holding Ukrainian flags before the final match of the English League Cup. London, February 27, 2022.

Will the money received for the sale of the English football club Chelsea by russian oligarch Roman Abramovich ever reach Ukraine? 

This story began back in February 2022, immediately after the full-scale russian invasion of Ukraine. Back then the owner of the English team handed over the club’s management to the trustees of the Chelsea Foundation amid calls in the British Parliament to include him in the sanctions list.

And in early March, in an official statement, Abramovich declared his plans to sell the club and promised that all the proceeds would be transferred to victims of the russian war through a trust fund to be created later.

To understand Abramovich’s motives, we need to go back to 2003, when the then-governor of the Chukotka Autonomous Region, Roman Abramovich, purchased an English football club founded in 1905 for £140 million. The infusion of large sums of money, not always of transparent origin, into the acquisition of talented players has yielded tangible results: if the club has won three international and seven national tournaments in 98 years before the purchase, in 19 years under Abramovich it has received six international and 16 national trophies.

This is still one of the most striking examples of the russian expansion seeking greater international influence.

Ownership of the famous club opened the door to socializing with influential people around the world, although it did not grant Roman Arkadievich British citizenship. There was no reason to get rid of such an asset if Putin had not tried a full-scale military takeover of Ukraine.

We still don’t know for certain whether it was the oligarch’s psychic abilities or some kind of knowledge that made him quickly reorganize ten offshore trusts in Cyprus and Jerry on February 4, 2022. He managed to register seven of his children as their beneficial owners and gave them 51% to 100% of the property, ranging from shares in russian companies to luxury real estate, yachts, helicopters, and private jets. The total value of these assets is at least $4 billion.

However, Portugal which granted Roman Abramovich citizenship in 2021, blocked the sale of his €10 million estate, which the oligarch sought to make 15 days before russia’s full-scale invasion of Ukraine, using the Delaware-based Millhouse Views LLC, which manages his assets.

Therefore, it would be inaccurate to assume that Abramovich voluntarily decided to sell his most valuable asset. On the bright side, the sanctions pressure and persistent, swift action made by the British government saved Chelsea for its fans.

However, the main question remains: when will the funds received from the football club sale, which are currently waiting in blocked accounts at Barclays Bank, be used to help and compensate Ukrainians affected by the russian invasion?

Sanctions and Difficulties With Selling the Club

After the start of the full-scale invasion, the British government declared that Mr. Abramovich was subject to the provisions of the russia Regulations, which freeze assets owned by him and prohibit the provision of funds or economic resources to him or for his benefit. These provisions also apply to FC Chelsea.

As it was officially stated, “Her Majesty’s Treasury, as the designated authority, will review an application for a license to sell FC Chelsea as an exception to said provisions. If the transaction is licensed and goes through, all proceeds from the sale will be deposited in a UK bank account, and frozen.

The Treasury will not issue a license allowing any part of the proceeds of the sale to be used in a manner that directly or indirectly benefits Roman Abramovich.

Moreover, the Treasury will only issue a license that guarantees that these funds will be used exclusively for humanitarian purposes in Ukraine. The United Kingdom will work closely with the Portuguese government and the European Commission in reviewing the application for such a license and the allocation of the proceeds.”

Eventually, on March 10, 2022, the Crown imposed restrictive measures on the oligarch because of his ties to the Russian authorities.

His assets were frozen and he was banned from conducting transactions with UK citizens and businesses. As a result, both the sale of the club and the idea of using the proceeds to help the war victims were questioned.

Realizing the consequences of the restrictive measures for FC Chelsea, the British government allowed the club to continue operating and authorized the sale of the club as an exception from the provisions, provided that Abramovich did not benefit from it.

Thus, in May 2022, American billionaire Todd Boley and a consortium of investors officially completed the purchase of FC Chelsea for $5.25 billion. The club confirmed that $3.1 billion will be deposited into a bank account in the UK and locked until all details of the funds’ transfer to the victims of russian aggression are clarified.

All Proceeds – to Ukraine

A year after the previous contradictions were resolved, a new and rather unusual problem emerged.

In July of this year, the British government informed the Foundation that it could only receive funds if their spending would be limited to the geographical borders of Ukraine. Such condition is stipulated in the agreement with the European Union on how the funds can be distributed, the government assures.

Thus, not a single request from Ukrainians abroad, and there are more than 8 million of them, can be considered.

This idea was opposed not only by the Foundation, which will distribute the funds, but also by a number of non-governmental organizations.

They are convinced that, others, like African countries suffering from food shortages related to the war in Ukraine also deserve compensation from Chelsea’s money.

However, even if the Chelsea Foundation agrees to the government’s terms, there is one more factor.

It has become known that the funds from the sale of the club, which were to be used to compensate for the consequences of the war, are currently on the frozen account of Fordstam Limited. It is owned by Roman Abramovich and is the former parent company of FC Chelsea.

However, due to the failure to submit the required documentation, there is a very real risk of Fordstam being excluded from the British company register and the legal entity being terminated.

In this case, the funds from the company’s account will be considered as ownerless and will become the property of the Crown.

Arguments of International Law

As for the stance of international law on the purposes for which Abramovich’s money is used, its provisions are more likely to favor the charitable foundation.

The Basic Principles on the Status of Non-Governmental Organizations in Europe (OSCE, 2004) stipulate that public authorities are called upon to cooperate with non-governmental organizations (NGOs), including charitable foundations, to achieve their goals, but not to dictate their own policies.

As long as an NGO does not violate the law, any external subjects should not influence the conduct of its internal affairs, the document says.

One of the principles ofthe European Consensus on Humanitarian Aid states that humanitarian aid should be targeted primarily at the most vulnerable. According to rough estimates, there are more such people currently staying in Ukraine.

The British government can be accused of contradicting the principles of neutrality, impartiality and independence of humanitarian aid listed in the above-mentioned document.

3.1 billion, compared to the $400 billion Ukraine needs to restore, may not be a large sum, but it is vital for those directly affected by the almost daily shelling. For rational reasons, those who are most affected need help the fastest.

Instead, the issue of Africa is debatable, as many countries on the continent have not condemned, and some have even supported, russia’s unprovoked aggression.

Voluntary Compensation or Personal Interests?

Abramovich’s kind gesture coincides ideologically with the British Foreign Office’s proposal to authorize the voluntary transfer of assets from russian sanctioned individuals to help Ukraine.

Persons under sanctions are currently able to allocate funds specifically to support the recovery and reconstruction of Ukraine.

The British government clarified that the donations will not have any impact on the easing or lifting of sanctions. The authorities plan to create a special fund to distribute donations from russians.

The key issue is not even the existence of such goodwill, but its regulation in British law.

The British authorities already took care of the possibility of seizing private property. For example, the 1925 Property Law lists seven forms of transferring property to the state, including voluntary transfer. The Law provides that voluntary transfer applies to movable and immovable, tangible and intellectual property, natural resources, etc.

Bank accounts can be transferred to the state only through the recognition of an intestate succession or as seized by the government for a number of reasons (debt collection, tax payment, criminal confiscation, etc.).

However, there is a voluntary transfer procedure that can be carried out by both residents and non-residents of the UK, including foreign individuals, legal entities and organizations.

Obviously, future law should address the specific circumstances of russia’s war against Ukraine. The fact that there is a certain regulatory framework for voluntary transfer means that the government will have to specify the purpose of the transfer and establish a body to use these assets to help victims.

However, there is increasing pessimism about the prospects for voluntary compensation of victims of the russian war in Ukraine by russian oligarchs. Therefore, in addition to legal regulation, we should consider other factors that may affect the situation.

First, the British government will seek further to preserve its own reputation and prestige of FC Chelsea.

The fact that FC Chelsea could not operate properly due to sanctions and funding restrictions could have a significant impact on fan sentiment and their support for the Crown.

Since there is no law in the UK that regulates the confiscation of private assets, the government will have to make unpopular and politically difficult decisions.

Another issue is that the seizure of Abramovich’s money has not yet been completed. If the situation does not change before the war ends, russian oligarchs will have a pretext to sue for the lifting of sanctions, as Yevgeny Shvidler is already doing, seeking a court order to unblock his assets, which were frozen by the Crown in March 2022.

Thus, the hope for goodwill should be backed up by rigorous legal norms that will help seize the money of those involved in russian crimes in Ukraine.

To find a way to effectively and fairly resolve the situation with Chelsea’s funds, the parties must prioritize compensation for the victims of russian aggression.

To achieve the stated goal, we need a well-constructed model of using the funds, rather than a game of chicken between the government and the oligarchs. In the case of Abramovich’s money, such a model can be created if there is legal regulation of the use of russian money for compensating victims of the war in Ukraine.

If the counterproductive discussions and disputes continue, the best way out would be to channel the locked funds to the Compensation Fund, which should be financed by russian assets under the mechanism of the International Register of Damage Caused by the Aggression of the russian federation against Ukraine, in accordance with the decision of the Summit of Heads of State and Government of the Council of Europe held in Reykjavik on May 16-17, 2023.

Moreover, as of today, 45 countries, including the United Kingdom, have joined the expanded partial agreement on the establishment of the Registry.

The study was conducted within the framework of the ANTS project “russian Assets as a Source to Restore the Ukrainian Economy”, which is implemented in cooperation with the National Democratic Institute (NDI) funded by the National Endowment for Democracy (NED).

Written by

Sofiia Kosarevych, analyst at the Dnistrianskyi Center

Yaroslav Sydorovych, senior expert of the project “russian Assets as a Source to Restore the Ukrainian Economy” of the National Interests Advocacy Network”ANTS”

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