Shipping and the Law in the recent and current market
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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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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. Dealing with market collapse. - PowerPoint PPT Presentation
Transcript of Shipping and the Law in the recent and current market
Shipping and the Lawin 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
22 April 2023
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 valuesDrying up of credit and then demand
22 April 2023
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
22 April 2023
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
22 April 2023
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”
22 April 2023
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
22 April 2023
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
(i) The existence of long-standing relationship with the shipbuilder
(ii) The extent of the instalments of the price paid by the shipowner at the time of the renegotiation.
22 April 2023
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
22 April 2023
A distressed newbuilding – purchaser options?
AND ALWAYS HIRE A GOOD LAW FIRM !
Shipping and the Lawin 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
