Shipbuilding Law Blog

"What was initially billed as a lucrative order from a European customer has pushed a Shandong Province shipbuilding company to the brink of bankruptcy and ruined its relationship with one of China’s biggest banks….. Shipyard industry experts in China said Rushan was apparently trapped as a consequence of its own inexperience. A Jiangsu Province shipbuilder’s legal affairs manager said that a smart shipbuilder “should sign a supplemental agreement with a buyer, agreeing that if the buyer makes any changes to a ship, resulting in changes to deadweight tonnage, the buyer cannot hold the shipbuilder accountable.” This is something Rushan apparently failed to do. “Without experience,” a bank source familiar with Rushan’s dilemma said, “you have to accept possible risks.” Read more in CAIXIN Online,  Shandong Shipyard’s Lesson: Don’t Rock the Bank

Questions to ponder: Q: Do you have a policy designed to safeguard the company against contractual risks which could render a project unprofitable or jeopardize the company? Q: When the worst happens will your explanation be acceptable to shareholders? Companies in the offshore and shipbuilding sector are subjected to perennial contractual risks. Such risks are often identified as Risk Factors inter alia in their Prospectus as follows: ·       We may incur additional costs in the event of disputes, claims or defects ·       We may incur liquidated damages in the event of delays ·       We may be affected by delays or premature termination of projects by customers ·       We are exposed to potential liability for pollution or environmental damage ·       Force majeure events and disruptions to facilities may affect our financial position  ·       We face the risk of significant increase in the price or shortage of steel or other materials ·       We are affected