- Fleet - Is the auction above board?

By Conor Feasey

Is the auction above board?

With negotiations underway for Royal Romance to be sold at an American auction house, a Ukrainian law expert offers insights on the contentious move…

An offer for the sale of the 92-metre Royal Romance has been made to Boathouse Auctions after the previous agreement with Troostwijk Auctions collapsed. According to Olena Duma, Head of the National Agency, in a statement today (14 May), negotiations with its representatives have already begun.

“This is the first time that Ukraine has faced the issue of selling a seized asset of this scale abroad. The yacht must be sold, and the proceeds from its sale must strengthen Ukraine's defence capability against the enemy,” says Duma. “The National Agency is doing everything possible and in a very short time, including appealing to the Prosecutor General's Office, law enforcement agencies of Ukraine and Croatian authorities to extend the temporary arrest measures provided by Croatian law.”

Following the initial approval on 23 April, after a competitive selection process, the Netherlands-based auction Troostwijk Auctions house had a period of five working days to present a proposal to ARMA to agree, a draft of which had to be supplied to the National Agency.

On 30 April however, Troostwijk Auctions informed ARMA in a letter that it refused to continue negotiations to prepare and sign an agreement on organising the auction. The reasons given are confidential and not subject to disclosure.

“I regret to inform you that, at the end of April, ARMA selected Trostwijk Auctions to handle the auction of the superyacht, the Royal Romance. Subsequently, there have been intensive discussions with ARMA and advisors. However, negotiations to finalise an agreement for the auction within the given deadline did not materialise,” a source with knowledge of the situation told SuperyachtNews at the time. The source and the firm have not responded for further comments on the matter.

There have been some questions surrounding the legitimacy of the auction. However, speaking with SuperyachtNews, Kateryna Ryzhenko, Deputy Executive Director for Legal Affairs at Transparency International Ukraine, details how the yacht has been seized under Ukrainian law, how its sale will manifest and why its new owner will be protected.

“According to a Guide for Practitioners on Managing Seized and Confiscated Assets from the World Bank's Stolen Asset Recovery Initiative (StAR), seized assets may be sold before the final adjudication of the case, if permitted by the jurisdiction’s forfeiture laws, through an interim sale order by the court or with the consent of the asset’s owner,” says Ryzhenko. “Some jurisdictions allow interim sales of assets such as rapidly depreciating assets that are easily replaceable, for example, aircraft, marine vessels, and vehicles.”

Under current Ukrainian legislation, seized assets are managed in three main ways:

- Money and precious metals are placed in the ARMA’s deposit accounts in state-owned banks.

- Movable and immovable property, securities, property rights, and other rights are transferred to managers determined by the ARMA or sold if these items are difficult to store or they deteriorate quickly.

- In exceptional cases, movable and immovable property, securities, property rights, and other rights are transferred to a legal entity under the ministry or other executive body determined by the Cabinet of Ministers (this procedure is regulated in a separate Article 21-1 of the ARMA Law).

“The asset management function does not violate the right to peaceful enjoyment of one’s property guaranteed under Article 1 of the Protocol to the Convention of Protection of Human Rights and Fundamental Freedoms or Article 41 of the Constitution of Ukraine,” adds Ryzhenko.

Regarding ARMA’s general activities, Ryzhenko notes that there are there are areas of improvement needed to make this body truly effective. Currently, Ukrainian legislation allows it to buy military bonds from the proceeds of a sale from the auction. According to Art. 21 of the ARMA Law, the proceeds from the sale of assets are credited directly to the ARMA’s deposit accounts.

“From the introduction of martial law by the Decree of the President of Ukraine on 24 February 2022 until its termination or cancellation, and for one month thereafter, ARMA may decide to purchase military bonds using funds [from auctions] in the National Agency's accounts in national currency,” explains Ryzhenko. These purchases are subject to approval by the Cabinet of Ministers of Ukraine and may not exceed 80 per cent of the funds in the National Agency's deposit accounts.

“That is how an interim sale of the yacht will finance Ukrainian military infrastructure. There is also a clear difference under Ukrainian legislation between the sanction mechanisms and criminal procedure. The case of the Medvedchuk’s yacht is going through criminal legislation,” continues Ryzhenko.

Royal Romance was seized by a court decision in March 2022, and this was subsequently upheld by the appellate court. Viktor Medvedchuk is facing serious charges under the Criminal Code of Ukraine. The wealthy businessman leads the pro-Russian For Life party in Ukraine, his daughter has President Putin as a godfather and has consistently been labelled a traitor by Ukrainian authorities and the press. Now, he is suspected of committing high treason, and of financing terrorism. These allegations indicate that he is believed to have engaged in activities that severely undermine Ukrainian national security and support Russian actions.

In the context of the criminal investigation, the money will be returned to Medvedchuk if he is acquitted, or confiscated by the state if he is convicted. According to Article 21 of the ARMA Law, if assets that had their seizure cancelled were sold by ARMA, the proceeds, along with interest accrued from the bank's use of those funds, must be returned by ARMA in a non-cash form to the legal owner at the time of sale.

The seizure could have been cancelled during the pretrial investigation or trial if the owner proved that it was no longer necessary or was imposed unreasonably (Article 174 of the Criminal Procedure Code of Ukraine). The court may also cancel the seizure in cases of acquittal, closure of criminal proceedings if the property is not subject to special confiscation, failure to impose a penalty of confiscation or dismissal of a civil claim.

The active phase of the pretrial investigation in the “Medvedchuk case” has now concluded. This means that the investigation has gathered all necessary evidence, and the focus will shift to preparing for trial.

In terms of what this means for Royal Romance’s new owner, Ryzhenko concludes that the yacht will be sold with a clear title, with the legal means in place to ensure that Ukraine bears the cost and responsibility of the sale. “There is a risk of Medvedchuk’s acquittal or cancellation of seizure, but it should not impact the rights of the new owner because Ukrainian legislation has mechanisms for transferring money in case of cancellation of seizure,” she adds.

FEADSHIP 2014 2015 Delivered
92.50m 14.30m 3.85m 2933

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