South Korean company announces arbitration with Russian shipyard
South Korean shipbuilder Samsung Heavy Industries (SHI) has decided to retain $800 million in advance payments made by a Russian customer for the supply of equipment and components for newly designed tankers, and has formally refused to fulfil the purchase orders. This was announced by SHI in notices posted on South Korea's electronic corporate disclosure system.
Contracts were signed in 2020 and 2021 between SHI and the Zvezda shipyard. In 2023, SHI halted production of equipment for the ships, citing geopolitical complications in business relations with Russia and the risk of the customer being added to the sanctions list, according to media reports. In February 2024, the shipyard was added to the US Treasury Department's sanctions list. South Korea also added the company to its sanctions list, according to Global Arbitration Review.
Zvezda demanded that the $800 million in advance payments be returned with interest. SHI said it had been negotiating with the owner of the newly designed tankers regarding performance of the contracts, but in June 2024, Zvezda notified SHI that it was terminating them. In response, SHI initiated proceedings at the Singapore International Arbitration Centre (SIAC), asking for the arbitration tribunal's ruling on the legality of the Russian shipyard's unilateral contract terminations.
In published notices, SHI states that it has decided to formally terminate the contracts with Zvezda and to seek compensation in the SIAC arbitration proceedings for the alleged losses incurred.