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Published byJosé Manuel Álvarez Chávez Modified over 6 years ago
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Shipping and the Law in the recent and current market
“Dealing with market collapse – renegotiating or cancelling the distressed shipbuilding contract” Simon Curtis Senior Partner, Curtis Davis Garrard LLP, London Naples, Monday 24 October 2011
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Dealing with market collapse
A TEN YEAR ROLLERCOASTER RIDE The Up Cycle Consistently increasing shipbuilding prices in the period to mid-2008 Rapid development of additional shipbuilding capacity The Down Cycle Post 2008 collapse in newbuilding values Drying up of credit and then demand 03 December 2018
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Dealing with market collapse
SHIPBUILDING CONTRACT LAWYERS Have seen a decline in the number and value shipbuilding projects BUT... A big rise in demand for help with “distressed” projects 03 December 2018
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Dealing with market collapse
BOTH SHIPBUILDERS AND OWNERS ARE EXPERIENCING SUBSTANTIAL ECONOMIC DISTRESS Shipowners are seeking to renegotiate or cancel contracts Shipbuilders seeking to enforce agreements and generally to preserve economic value 03 December 2018
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A distressed newbuilding – purchaser options?
A DECLINE IN NEWBUILDING VALUES WILL NOT ASSIST THE PURCHASER There is no entitlement in English law for the shipowner to seek a release from, or adjustment of, the contract terms by reason of market collapse or disruption There is normally no right to claim “force majeure” Shipbuilding contracts do not provide for a sharing of financial “pain” 03 December 2018
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A distressed newbuilding – purchaser options?
THE OWNER’S OPTIONS – SHIPBUILDER DEFAULT The Shipbuilder’s default (late delivery or where the vessel fails to meet minimum performance parameters) may enable the shipowner to cancel or renegotiate the contract But this is a dangerous game unless the default is clear - London courts and arbitrators often reluctant to allow owners to “play the market” if the vessel is largely compliant 03 December 2018
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A distressed newbuilding – purchaser options?
THE OWNER’S OPTIONS – NO SHIPBUILDER DEFAULT The shipowner’s position is obviously much weaker. A successful outcome depends more on commercial factors, including The existence of long-standing relationship with the shipbuilder The extent of the instalments of the price paid by the shipowner at the time of the renegotiation. 03 December 2018
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A distressed newbuilding – purchaser options?
KEY FACTORS IN ANY RENEGOTIATION Confidentiality essential Delivery deferral easier to achieve than price reduction Contract cancellations are easier to negotiate when part of multi-ship newbuilding order 03 December 2018
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A distressed newbuilding – purchaser options?
AND ALWAYS HIRE A GOOD LAW FIRM ! 03 December 2018
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Shipping and the Law in the recent and current market
“Dealing with market collapse – renegotiating or cancelling the distressed shipbuilding contract” Simon Curtis Senior Partner, Curtis Davis Garrard LLP, London Naples, Monday 24 October 2011
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