This week former Chelsea owner Roman Abramovich hit out at the UK government over their handling of the proceeds from the sale of the Blues to a Todd Boehly-fronted consortium, describing the process as “paralysing”.
Around £2.3bn is sitting frozen in a bank account with the two parties at odds over whether Ukraine, or “all” victims of the war, suggesting some Russians, get the cash.
Matthew Showler, Lucy James, and Alex Burton of international law firm Trowers & Hamlins answer the three questions lingering over this dispute – on the money, government force and what happens next.
Why can’t Ukraine get all of the Abramovich money?
Recent corporate filings from Fordstam Ltd reveal that Roman Abramovich intends to donate only the “net proceeds” from Chelsea’s sale to a “charitable foundation set up to benefit those who have suffered due to the war in Ukraine”, after settling “other balance sheet terms”.
This means Fordstam Ltd intends to settle its loans and debts before making any charitable gift from the £2.5bn sale.
The balance sheet obligations include £1.54bn in outstanding loans owed to entities controlled by Abramovich himself. The reference to “net proceeds” suggests Abramovich repaying loans to himself out of the remaining sale proceeds (and the company’s balance sheet shows net assets of just £922.9m.).
The reference to funds being paid to those “who have suffered due to the war in Ukraine” is also consistent with Abramovich’s previous position that funds should not be confined to Ukraine but could be paid to Russian recipients, creating further conflict with the Government’s position.
Importantly, no distributions can occur, whether to repay loans or fund the charitable foundation, without a licence from the Office of Financial Sanctions Implementation (OFSI). It is unlikely to be granted for this purpose.
Can the Government force all of the money to go to war victims?
The Government’s restricted options stem from the way in which asset freezes work in practice. Under the Sanctions and Anti-Money Laundering Act 2018, when an individual is sanctioned, their funds must be frozen immediately by the person in possession or control of them. However, ownership of the funds does not transfer.
The frozen assets remain the property of the designated person; they are neither confiscated nor transferred to governmental control.
This has created the current impasse. Whilst OFSI can prevent Abramovich from accessing or dealing with the Chelsea proceeds, the Government lacks the authority to seize the funds and redirect them to aid Ukraine. Any transaction involving frozen assets requires OFSI to grant a licence authorising that specific use.
Abramovich’s spokesperson has emphasised this point, stating that his investment structures have been “effectively paralysed since 2022” and that governmental approval is required for any action.
Conversely, the Government has stated it does not recognise the figures presented in Fordstam’s accounts, suggesting a dispute over the legitimacy of the loan repayments. However, challenging this structure is complicated by the fact that the funds remain Abramovich’s property.
Another obstacle to reaching agreement remains Abramovich’s unwillingness to accept terms requiring funds to be spent exclusively within Ukraine’s borders and his ostensible desire for Russian recipients to also benefit from the sale proceeds.
Next steps: How can the Government get the most out of Abramovich?
The House of Lords European Affairs Committee has described the situation as “incomprehensible”, stating that the impasse “reflects poorly on Mr Abramovich and the Government for failing to enter into a more binding commitment”. The Committee has urged the Government to “use all available legal levers to solve this impasse rapidly” and confirmed that “all of the funds should be spent in territories controlled by the Ukrainian Government”.
At the time of sale, Abramovich stated he “would not be asking for any loans to be repaid”. This declaration, combined with the condition preventing him from benefiting from the sale proceeds, may create a compelling challenge to the validity of the loans on the balance sheet, arguing that they should be written off as part of the original sale commitment. However, it is difficult to understand the legal basis for such a claim because the terms of the licence which allowed the sale of Chelsea FC are still unknown.
The Government has said that “while the door for negotiations will remain open, we are prepared to pursue this through the courts if required, to ensure people suffering in Ukraine can benefit from these proceeds as soon as possible”.