Shipbuilding - Litigation Readiness


Shipbuilding - Litigation Readiness

Shipbuilders operate in a litigious environment and are subjected to perennial contractual risks. Even where   proper legal resources are deployed at the front-end and during construction to manage contractual disputes, most do not have contingencies for arbitration or litigation. (perhaps thinking that it is a once in a 50 year storm/event)

Consequently, legal or claim specialists (professionals) are only involved after the facts when matters come to a head. This will be precarious as Seller may have taken an unreasonable position based on amateur advice or prejudice their case though misguided communications.

By the time professionals arrive on the scene, they face a massive task getting to speed with the facts, ploughing through voluminous documents and interviewing witnesses. Some key witnesses may have already left the shipyard or may be untraceable or may not want to get involved. In the worst scenario Seller’s action may be time barred if they fail to comply with time limit for commencing action or filing of defence. Nanjing Tianshun Shipbuilding Co Ltd v Orchard Tankers Pte Ltd [2011] EWHC 164 (comm).

External Expertise & Resources - Shipyards must have professionals on a retainer, shadowing the Project Manager and Contracts Manager and giving them prompt legal support on a need to basis. An ideal combination would be a Legal Expert and a Technical & Quantum Expert.

Documentary Evidence - Seller must ensure that its Document Control, (supervised preferably by the internal legal) is able to collate evidence necessary to support any particular dispute at short notice from the following source into a dedicated folder. This would include (without limitation), the contract, project diary, relevant documents, correspondences/emails, photos, reports, critical path analysis (where applicable), list of witnesses & their contacts and witness statements. A Summary of the Facts and preliminary Scott Schedule should also be prepared to assist the Legal Expert and Technical & Quantum Expert expedites their work.

Hopefully, top management will avoid becoming key witness in lengthy arbitration or litigation. Their time should be spent in getting deals; to increase their company’s profit or to defray the costs of the legal proceedings.

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