Samsung Heavy Industries, a South Korean shipbuilder, has lost an arbitration in London over defects and repairs to two LNG gas carriers built by the company. The dispute, which has been ongoing since 2018, involves domestically designed tank systems. SK Shipping was awarded $290 million in a partial victory, and negotiations are ongoing for a settlement involving Samsung Heavy Industries, SK Shipping, and Korea Gas.
The vessels, built in 2015, were found to have defects in their LNG transportation tanks shortly after commissioning. The tanks, known as KC-1, were developed by Korea Gas Corporation and applied land cargo hold technology. The defects caused the vessels to be laid up, leading to a long-running battle over liability and damages between the companies. The London Maritime Arbitrators Association ruled in favor of SK Shipping, finding that the repairs had not been completed in a reasonable amount of time.
Negotiations are now underway between the three companies to resolve the multiple lawsuits and claims filed in arbitration. If the three-party negotiations fail, Samsung Heavy Industries plans to sue Korea Gas for the amount of compensation ordered to be paid to SK Shipping. Meanwhile, South Korea has developed a new domestically-built containment system, known as KC-2, which is expected to provide a new competitive advantage in the LNG carrier sector.
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