The European governments who seized the villas and yachts of Russian oligarchs are now faced with a harder question: What to do?

European Union sanctions, UK, U.S., and other countries imposed harsh penalties on Russian oligarchs. This led to a sea change in Europe. Officials confiscated a yacht measuring 213 feet that Alexei Mordashov owned in Imperia (Italy), Igor Sechin’s yacht of 280 feet in La Ciotat, France, and Alisher Usmanov’s resort complex in Sardinia, worth $18 million.

President Joe BidenThe State of the Union warned the oligarchs that they would be seized by European Allies. Your ill-gotten gains are our goal.

Experts in sanctions say that freezing assets is only one part of the process. Deciding what to do with them — and who gets the proceeds — is likely to be more challenging and could touch off court battles that drag on for years.

Each country has its own laws. The latest round, which is more severe than any previous coordinated round of global sanctions against individuals, raises new legal questions.

Benjamin Maltby is a partner in Keystone Law and an expert on yacht- and luxury-asset legal issues. “The circumstances we see now are not like anything else.”

According to legal experts, sanctions don’t permit countries to take over oligarchs’ homes, boats and planes. The U.S. and Europe have announced sanctions against members of Russia’s elite that “enriched themselves at their expense” and “aided Putin in his invasion” of Ukraine. They will “frozen” their assets and prohibit them from using their property.

According to U.S. law, and many European laws, assets that have been frozen are under the control of the oligarch. However, these assets cannot be transferred or sold. Sechin, Mordsahov and others will keep their yachts but will be tied down by authorities so they can’t sail off to safer waters.

The government must show that the villa or yacht was part of any crime in order to take possession and seize the property. A warrant is required to seize an asset that was “used in committing a crime or the proceeds from illegal activity”.

Stefan Cassella is now a private practitioner and was once the Chief of Asset Forfeiture and Money Laundering Section at the U.S. Attorney’s Office for Maryland.

Legal experts warn that it may prove difficult to establish a crime committed by the oligarchs, and tie the assets directly to this crime.

Maltby suggested that the oligarchs might be able to argue that “I behaved within the Russian and European laws.” Clear evidence must exist of criminality.

It can take many years to prove criminality in asset forfeiture cases. After more than five years, the U.S. was able to recover more than $300,000,000 from Nigerian ex-military dictator Sani Abacha. Due to Pavlo Lazarenko’s highly-funded defense, the case against Pavlo Lazarenko was delayed for more than fifteen years. He was found guilty in America of money laundering.

Global asset protection is a dark art that Oligarchs master. In order to conceal their ownership, they resort to trusts, offshore jurisdictions, and shell companies. The majority of super yachts are registered as separate legal entities and not individuals. For example, Usmanov’s yacht of 512 feet, “Dilbar”, is registered in Cayman Islands by a Malta-based corporation.

Maltby stated that the identity of the real owner of the property is not public information in many of these locations. You have to get past the Gordian Knots of offshore structuring in order to determine who is the beneficial owner.

Only if the prosecutor is able to prove that the government has committed a crime, establish the relationship between the asset with the crime, and identify the owner of the asset, can a government take over ownership. The state can sell an asset if it decides to do so. The proceeds usually go to law enforcement. Congress has been working on a bipartisan bill called “Yachts for Ukraine Act”. It allows authorities to seize assets worth over $5 million that are owned in Russia by elites. The government can then sell these assets and transfer the money to Ukraine. 

Members of Parliament in the U.K. are proposing a fast track path for securing assets from oligarchs who aren’t currently sanctioned, but are under “review.”

The yachts and villas confiscated remain unclaimed in legal uncertainty, and there are likely to be disputes over their maintenance. Technically, the Oligarchs will pay the maintenance, crew, and staff costs of impounded assets. The oligarchs might refuse to pay. Authorities who are holding vessels and homes might find it difficult to get funds from the oligarchs, as they can’t conduct financial transactions or deal with sanctioned people.

It is important to maintain yachts as they are susceptible to rapid decline in price and deterioration if they aren’t maintained regularly.

Maltby stated that you could witness a situation in which the boat’s value declines and debts accumulate. The yacht can then be seized to repay the massive debts.

It is also a question of what the future holds for the crews and staff on the yachts. Maltby claimed that the future of the yacht crew and house staff is at stake. He expects them to quit the boats or run away to find work in their homelands. Forbes reports that Usmanov’s crew, which includes 96 members, was informed by the employer that normal operation has been halted and they are no longer able to receive their wages.

According to the email, a small team from Lurssen (German-shipbuilder) would oversee repairs at the shipyard and take care of “safety” and security.