A remark attributed, wrongly, to V.I. Lenin has become popular. In the commonest version, it runs, “There are decades when nothing happens; and there are weeks when decades happen.” Lenin didn’t say it, but it catches the mood of the moment.
A lot is happening, mostly because the Russian government decided to do the unthinkable, and invade a neighbouring state, a big one, on the grounds of old-fashioned irredentism. This, as the Kenyan ambassador to the United Nations quickly pointed out, is not done now, since much of the world is made up of nations invented by empires that are no longer around, and it gets murderously messy.
It is easy to start a war, but as every schoolboy knows, plans never survive contact with the enemy, and things start to happen fast in ways that political leaders cannot control. Stopping a war can be difficult.
From this, some things follow.
The nation which is most closely associated with Russian offshore money and with wealthy Russian expatriates is Britain. Britain is seen as a politically stable place to park money in real estate, whilst the British legal and banking systems, and indeed British purveyors of luxuries, like superyachts and private jet aircraft, are well able to look after people with serious money.
National governments have abandoned any attempt to regulate the ships that operate under their flags
These systems for hiding wealth safely and for looking after the seriously rich were developed in London 70 years ago, to look after a different group of wealthy expatriates – the Greek shipowners who were worried that the Greek civil war might end with Greece becoming a communist state. The subtle political impetus for the development of these systems to protect the wealth of Greek shipping families came from a well-known friend of Greece and Greek shipping, Sir Winston Churchill, who liked to spend holidays as the guest of Aristotle Onassis, onboard Onassis’ yacht, the Christina, and who had agreed with Stalin 10 years earlier that Greece would stay “in the West”.
If you are in shipping, you have grown up with a set of legal fictions which were originally American, but which were developed by London lawyers, with the encouragement of Churchill, to help the Greeks.
These are part of your “mental furniture”, and if you are in shipping and less than, say, 50 years old, you have grown up with the formal acknowledgement of those fictions, and with a series of codes written round the fictions, in the form of the ISM Code, Port State Control and the procedures and processes that hang off them. The effect has been to remove national governments’ ability to tax, and otherwise to control, merchant shipping, whilst giving shipping quite effective international regulation. Two cheers for that London institution, the IMO.
You have seen shipping become safer, and a great deal cleaner, with the help of classification societies and other industry bodies and indeed with the help of insurers, as national governments have abandoned the attempt to regulate the ships that operate under their flags. We don’t find this strange, until we try to explain it to non-shipping people.
In the past few days, the strangeness of the world of these legal fictions has become plain to everyone, well beyond the little worlds of merchant shipping, film making, and taking care of very rich people, one of which we all inhabit. These three little bubbles tend to clump together, sharing an interest in tax avoidance, and some shipping people live comfortably in all three.
The searchlight of public interest that is now being shone on London’s rich Russians is going to catch shipowning, and perhaps film making, too.
People who live outside these three bubbles don’t much like these arrangements. The British are starting to feel ashamed of, and even embarrassed by, the close relationship between Russian offshore money and British politics.
Prime minister Johnson is careful to say that cash gifts to his political party all come from Russians who are also British citizens, 700 of whom became British by spending a couple of million pounds in Britain, and he carefully forgets to say that the law requiring political donations to be made only by British subjects is there because 40 years ago John Latsis bunged the Conservative Party, then headed by Mrs Thatcher, two million quid, and there was a scandal.
There is another scandal now. It’s bigger. We don’t know how big this one will become; it’s still growing.
What we can see at this stage is that if governments look past the veil of incorporation to grab an oligarch’s superyacht, the legal fictions that they brush aside are those that protect shipowners’ assets.
This isn’t surprising; the legal fictions have the same origin and the same purpose. What we can’t be sure of, now, is whether they will survive.
For all the news on how the invasion of Ukraine is affecting global shipping, check out Splash’s dedicated coverage here.