Samsung Heavy Industries disclosed on Dec. 18 the arbitration tribunal’s decision regarding the damage compensation for defects in the cargo holds of two liquefied natural gas (LNG) carriers they built.
On Dec. 15 (local time), the London arbitration tribunal ruled that Samsung Heavy Industries must pay US$290 million to the shipowners, SHIKC1 and SHIKC2, special purpose companies (SPCs) of SK shipping. This decision was made after finding that the defects in the cargo holds of the two delivered LNG carriers were not fully repaired within a reasonable period.
The tribunal determined that Samsung Heavy Industries is not liable for compensation for losses incurred by SK shipping due to issues like cold spots (freezing phenomena) that prevented the LNG carriers from operating normally. However, they partially accepted the shipowners’ claim that the value of the ships decreased due to the failure of completing repairs even after a reasonable period had passed for fixing the cargo hold defects.
Previously, Samsung Heavy Industries signed a contract in January 2015 to build two LNG carriers featuring the Korean-designed KC-1 cargo hold and delivered the vessels in February and March 2018, respectively.
However, the shipowners halted operations and commissioned repairs, citing issues with the cargo holds. They also claimed damages against Samsung Heavy Industries at the arbitration court for the decline in ship value and loss of earnings due to the delay in repairing the cargo hold defects.
Samsung Heavy Industries has emphasized that the defects related to the LNG cargo holds are the responsibility of Korea Gas Corporation, the developer of KC-1, and announced plans to file a lawsuit against the organization for the recovery of the compensation amount.