Sanctions trap Roman Abramovich in rent payments to Queen Elizabeth


These sanctions are designed to prevent the oligarchs from making money in the West – to inflict financial suffering on those close to President Vladimir Putin. But they have also spawned a series of rules that disrupt more common transactions related to the properties and businesses they own. These include land rent payments to the monarchy.

Mr Abramovich paid $140million for a 15-bedroom house in 2011 just down the street from Kensington Palace, the home of Prince William. Although he owns the mansion built in 1848 – complete with the sky-lit underground swimming pool he built under extensive gardens – the land below is owned by the Crown Estate, an entity created by Parliament which oversees a portfolio of properties. approximately $18 billion worth of land and other assets in the name of the British Crown.

Under the terms of a 125-year ground lease, Mr Abramovich must make modest lease payments – which start at £10,000 a year and go up to £160,000 over the term of the lease – to the Crown Estate , according to land records.

A spokeswoman for Crown Estates said the organization was reviewing its portfolio and doing everything possible “to quickly comply with the introduction of any sanctions or other guidelines that may apply”. She declined to comment on specific properties or Mr. Abramovich.

A spokeswoman for Mr. Abramovich did not respond to requests for comment.

Sanctions under UK law prohibit any UK company or individual from receiving, paying or transferring money related to a sanctioned individual. According to the law, the sanctioned oligarchs must request exceptions for any payment in the form of special licenses from the Financial Sanctions Implementation Office.

It means that while sanctioned oligarchs could keep their homes in the UK, without permits they cannot pay gardeners, pay a utility bill or pay pensions to their staff, lawyers have said. They can’t even pay lawyers to sort through the new sanctions bureaucracy, according to the Office of Financial Sanctions Implementation, although lawyers can provide legal advice and not get paid.

“It’s extremely restrictive,” said Paul Feldberg, a London-based partner at Jenner & Block who works on sanctions. While the government is likely to grant some leniency on basic expenses, “You will not be able to get a license to increase your personal wealth. »

Under the terms of a 125-year ground lease, Roman Abramovich is required to make modest lease payments to the Crown Estate.


Photo:

Martin Meissner/Associated Press

The British government was quick to offer Mr Abramovich a license to allow his Chelsea football club to continue to operate, although this was highly restrictive, preventing the football team from carrying out commercial such as selling jerseys or hamburgers during games.

A UK Treasury spokesman said any payments outside the Chelsea license would require a clean license.

To keep his homes in good repair, Mr Abramovich would likely need a ‘basic needs’ license, which would give the sanctioned person the right to make payments such as mortgages, pensions for employees and bonuses. ‘assurance. Sanctions lawyers said Mr Abramovich should be eligible for such a license, although the treatment could be lengthy – and what is included is up to the UK authorities.

What if he is unable to pay or obtain a license for his rent? The Crown Estate spokeswoman declined to comment.

Shams Rahman, a lawyer at the Edwin Coe law firm, worked on a case involving a neighboring property with a lease similar to that of Mr Abramovich. He said that in theory, if the Crown Estate is not paid, he could begin the process of taking possession of the property.

But it would be a long road that could be disputed, he said, adding that the rights granted to landowners in the UK mean that Mr Abramovich and any other oligarch are unlikely to have their properties seized any time soon.

Corrections & Amplifications
Under a 125-year ground lease, Mr. Abramovich has to make modest lease payments. An earlier version of this article had misspelled Mr. Abramovich’s last name as Ambrovich.

Write to Eliot Brown at Eliot.Brown@wsj.com

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