Shipbuilding contract disputes need 'open dialogue'

Ship owners and ship yards in dispute over breaches in shipbuilding contracts should have an 'open dialogue', a Singapore-based lawyer has said. The global economic turmoil and collapse in freight rates have led to more defaults by ship owners who find themselves unable to pay for contracts signed earlier. ''The action needed is to renegotiate with the (ship) yard,'' said Chee Chuen Yee, partner for Wikborg Rein & Co.
''The first step (for ship builders) is to speak to the yard and start an early dialogue,'' Chee told delegates during the 2nd Asian Maritime Law Conference held in Singapore in April.
Problems typically encountered by ship owners include lack of financing for remaining installments, no charter or inability to fulfill obligations under the contract.
Defaulters should be encouraged to approach the yards with a clear proposal on how to honor the contract, Chee said.
Proposals could include cancelling or suspending the ship construction, requesting a price reduction or delayed delivery, she said.
''The yards should also perceive a win-win situation by talking with the defaulters,'' she said.
Chee added that if a series of vessels was involved, the contract for earlier deliveries might be saved if the yard offered price reductions or allowed cancellations of later vessels.
''Some would get hurt more than others, but it seems inevitable under such situations. The way forward seems to be an open dialogue,'' she said.