The superyacht industry continues to feel the effects 2022 Russian Invasion of Ukraine, where countries including the US, EU, and UK imposed sanctions on Russia with the aim of pressuring individuals or entities to cease actions destabilizing Ukraine or threatening its territorial integrity. The damage was felt in different parts of the sector. From a brokerage perspective, the first quarter of 2024 presented an overall decline of sales by 14.3% from the same period in 2023, partly attributed to the sanctions and paucity of Russian clients. Meanwhile, figures of ownership by nationality have plummeted for the second consecutive year when it comes to Russian owners, falling from 9.1% in 2022 to 7.8% in 2024.
As for the Russian-owned superyachts in the fleet, we have witnessed the highly publicized seizures and detentions made by several jurisdictions, so much so that a dedicated Wikipedia page was created to follow the progress of all 29 affected vessels. The 60-meter Phi continues to be embroiled in legal battles in the UK, while the 135-meter Flying Fox returned to the charter market after her seizure by the US government. Perhaps the most glaring example of a seized asset’s journey, however, is the 92-meter Royal Romance. Delivered by Feadship in 2015 to owner Viktor Medvedchuk, Royal Romance was seized in 2022 as she was docked in Croatia. Medvedchuk is known to be a close ally of Russian President Vladimir Putin and was placed under sanctions by the United States.
Far from a sinuous path, the vessel continues to face uncertainty amidst efforts to auction her off. After a Croatian court ruling granted ownership of the yacht to the Asset Recovery and Management Agency ( ARMA) of Ukraine, ARMA spearheaded plans to auction Royal Romance with a bidding competition to find a suitable central agent. The stipulations provided that the entrants were not to be placed under any sanctions list, not to have representatives of the aggressor countries, to have a minimum of three years experience in organizing yacht sales, and to have “an impeccable business reputation.”
All seemed hopeful when the Agency notified the public of the winner in May 2024, selecting auction house Troostwijk Auctions. However, the first detour arrived when negotiations between the two parties fizzled out a few days following the announcement. In a statement shared with The Maritime Observer, the auction house stated “Troostwijk will not be the auction platform to enable the sale. While we strongly support Ukraine and their efforts, there were too many questions and unresolved issues that we had to decline the opportunity”. An update from the Agency arrived days after, announcing the participation of Boathouse Auctions, an online yacht auction marketplace based in the United States, who entered into the initial negotiations for the sale of the 92-meter yacht.
In the next step taken to implement the auction, ARMA has confirmed Royal Romance’s new flagged status under Ukrainian Jurdisiction, calling it a “historic moment for our country”, and for the first time where “a seized asset located abroad has received state registration to Ukraine.” Yet, Royal Romance continues to experience delays due to a more protracted process, and this is owed to several factors.
When the auctioning of Royal Romance was made known, it was noted that proceeds of the sale“ will be used to support Ukraine’s defense capability,”. For any prospective bidder, this may bring reluctance in deciding whether to go through with purchasing the yacht, not only from an optical standpoint but with the turbid waters surrounding the sale and what would follow. Moreover, per Ukrainian legislation, Medvedchuk’s case is categorized as a criminal case. Should he be acquitted, funds of the sale will be returned to him.
Conversely, the first Russian-owned superyacht to have been listed for auction, Axioma, saw a more seamless path from her seizure to sale. Seized in Gibraltar, the 72.5-meter yacht was originally owned by Dmitry Pumpyansky, who owed more than $20 million to US investment bank JP Morgan but could not pay back the loan due to sanctions imposed on him following the Russian invasion. Therefore, Gibraltar courts ordered the yacht to be sold. It was sold to an undisclosed buyer for $37.5 million in September 2022 to the successful bidder, with the proceeds going to the bank and a clean title awarded. It is a contrast of different legal considerations when it comes to different jurisdictions. Royal Romance and Axioma, two high-value assets were placed under international sanctions with different timelines and outcomes. It remains to be seen what happens with Royal Romance if it will eventually find a new owner and the ramifications that would follow post-sale.