The UK government and former Chelsea FC owner Roman Abramovich are locked in a high-stakes dispute over the £2.3 billion proceeds from the club's sale, with the funds currently frozen in a bank account. The central conflict revolves around whether the money should be directed exclusively to Ukraine or to "all victims" of the war, a definition that could include some Russian recipients.
The Financial Stalemate: Why Can't Ukraine Access the Funds?
Recent corporate filings from Fordstam Ltd, the company through which Abramovich owned Chelsea, reveal a significant obstacle. The former owner intends to donate only the "net proceeds" from the £2.5 billion sale to a charitable foundation after settling balance sheet obligations.
These obligations include £1.54 billion in outstanding loans owed to entities controlled by Abramovich himself. This structure suggests a plan for Abramovich to repay loans to himself from the sale proceeds before any charitable gift is made. The company's balance sheet shows net assets of just £922.9 million.
Furthermore, Abramovich's stated intention to benefit those who have "suffered due to the war in Ukraine" aligns with his previous position that funds should not be confined to Ukraine alone. This directly conflicts with the Government's stance.
Legal Limitations: Can the Government Seize the Money?
The government's hands are partially tied by the mechanics of asset freezes under the Sanctions and Anti-Money Laundering Act 2018. When an individual is sanctioned, their funds must be frozen, but ownership does not transfer to the state. The frozen assets remain the legal property of the designated person.
This legal reality has created the current impasse. While the Office of Financial Sanctions Implementation (OFSI) can prevent Abramovich from accessing the Chelsea proceeds, the government lacks the direct authority to confiscate and redirect them to Ukraine. Any transaction involving these frozen assets requires a specific licence from OFSI, which is unlikely to be granted for the proposed loan repayments.
A spokesperson for Abramovich described the situation as "effectively paralysing" since 2022, emphasising that governmental approval is required for any action. The government, meanwhile, has stated it does not recognise the figures in Fordstam's accounts, challenging the legitimacy of the loan repayments.
What Happens Next? Potential Paths to a Resolution
The House of Lords European Affairs Committee has labelled the situation "incomprehensible" and criticised both parties for failing to reach a binding agreement. The committee has urged the government to "use all available legal levers to solve this impasse rapidly" and confirmed that all funds should be spent in territories controlled by the Ukrainian government.
One potential avenue for the government involves challenging the validity of the loans. At the time of the sale, Abramovich stated he "would not be asking for any loans to be repaid". This declaration, combined with the sale's condition preventing him from benefiting from the proceeds, could form the basis of a legal argument to write off these balance sheet obligations.
The government has stated 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". The terms of the licence that allowed the sale of Chelsea FC remain unknown, adding another layer of complexity to this protracted financial and diplomatic battle.
