Samsung Heavy Industries' contract for 17 Russian ships 'was wasted': 'I will file a complaint'

Samsung Heavy Industries received a contract termination notice from Russia's ZVEZDA Shipyard. Samsung Heavy Industries plans to file a lawsuit with the Singapore International Arbitration Court.

Samsung Heavy Industries announced that the shipowner Zvezda Shipyard unilaterally claimed non-compliance with the contract during negotiations and demanded a termination notice and payment of $800 million (about 110.12 billion won) in advance payment and delay interest.

In 2019, Samsung Heavy Industries received a total of 22 ship orders (15 icebreakers and 7 icebreaking shuttle tankers) from Zvezda Shipyard. This is a huge project with a total down payment of $5.7 billion (about 7.84 trillion won). Currently, Samsung Heavy Industries has built five such ships and delivered them to the shipowner Zvezda Shipyard.

The focus of this dispute is the contract for the remaining 17 of the 22 ships. In November 2020, Samsung Heavy Industries signed a contract with Zvezda Shipyard to supply blocks and equipment for 10 icebreaking LNG carriers. In October 2021, a contract was signed to supply blocks and equipment for seven icebreaker shuttle tankers. The contract amount was 485.25 million won, and Zvezda Shipyard paid an advance payment of 800 million won (a certain amount paid in advance before receiving a specific product or service).

However, just as the construction design was about to begin, Russia invaded Ukraine, the Russo-Russian war broke out, and the U.S. Treasury Department's Office of Foreign Assets Control designated and announced that Red Star Shipyard would be listed as a special sanction target.

Samsung Heavy Industries had been working on the design of some ships, but eventually stopped production in August last year and continued to negotiate the overall contract, including maintaining the contract with Zvezda Shipyard. However, on the 11th, Red Star unilaterally notified the termination of the contract for 17 ships, claiming that Samsung Heavy Industries had breached the contract.

A shipbuilding industry official said, "Fortunately, the ships that were notified of the termination of the contract have not yet started construction, so the damage is not great." He added, "The price of the LNG carrier order is not long for the order, so it is more advantageous to terminate the contract."

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