Samsung Heavy Industries to Pay 378.1 Billion KRW in Compensation to Shipowner for 'Korean-Style LNG Cargo Tank Defect'

Samsung Heavy Industries announced on the 18th that it will compensate the shipowner $290 million, equivalent to 378.1 billion KRW, for defects that occurred in the cargo tanks of LNG carriers it built.

The London arbitration tribunal ruled on the 15th (local time) that the defects in the LNG carrier cargo tanks were not fully repaired within a reasonable repair period. It decided that Samsung Heavy Industries, the builder, must compensate the shipowners, SK Shipping's special purpose companies (SPCs) 'SHIKC1' and 'SHIKC2', for the depreciation in the value of the two LNG carriers delivered by Samsung Heavy Industries.

LNG carrier built by Samsung Heavy Industries (Photo by Samsung Heavy Industries)

However, the tribunal judged that Samsung Heavy Industries is not liable for SK Shipping's losses caused by the LNG carriers' inability to operate normally due to defects such as cold spots (freezing phenomena).

The shipowner's claim for damages, stating that the value of the vessels declined due to incomplete repairs beyond a reasonable repair period for the LNG cargo tank defects, was partially acknowledged.

Samsung Heavy Industries signed a shipbuilding contract with the shipowner in January 2015 for two LNG carriers equipped with the Korean-type cargo tank 'KC-1', and delivered the vessels in February and March 2018, respectively. The shipowner halted operations due to issues such as cold spots in the cargo tanks during vessel operation, and repairs were subsequently carried out.

Thereafter, the shipowner filed a claim for damages against Samsung Heavy Industries, citing losses such as vessel value depreciation and loss of operation due to delayed repairs of the cargo tank defects, leading to arbitration proceedings in London.

A Samsung Heavy Industries official stated, "The first trial ruling in the domestic lawsuit revealed that the cold spot defects in the LNG carriers were entirely the responsibility of Korea Gas Corporation, which developed the KC-1." He added, "We plan to recover the compensation through a subrogation lawsuit against Korea Gas Corporation." He also said, "We will continue consultations to resolve the multilateral dispute involving SK Shipping, Korea Gas Corporation, and others."

Meanwhile, the Seoul Central District Court ruled in October in the first trial lawsuit among Samsung Heavy Industries, SK Shipping, and Korea Gas Corporation (including its subsidiary KLT) regarding the suspension of operation of the two LNG carriers. The court held Korea Gas Corporation, the developer of the Korean-type cargo tank, responsible for design defects and ordered Samsung Heavy Industries to pay 72.6 billion KRW for repair costs and SK Shipping to pay 115.4 billion KRW for loss of operation. The court dismissed Korea Gas Corporation's claim for substitute charter costs against SK Shipping.

This content was produced with the assistance of AI translation services.