Sembcorp Marine subsidiary

Sembcorp Marine’s subsidiary faces arbitration over allegations of breach and payment claims

Singapore-based offshore builder Sembcorp Marine has informed that its wholly-owned subsidiary, Jurong Shipyard, is facing arbitration under four separate contracts due to allegations of a breach of contract and payment claims exceeding $76 million pertaining to the termination of these contracts.

One of Sembcorp Marine's yards (for illustration purposes); Source: Sembcorp Marine

Sembcorp Marine reported on Friday that its subsidiary, Jurong Shipyard, had received a notice of commencement of four arbitrations from a vendor under four separate contracts for the supply of certain equipment for some of its projects.

Based on the company’s statement, Jurong Shipyard maintains that the contracts for the supply of equipment were validly suspended or terminated. Therefore, Sembcorp Marine’s subsidiary is engaged in discussions over the payment claims from the vendor for such suspension or termination, but have yet to reach an agreement.

According to Sembcorp Marine, the vendor has now commenced arbitration proceedings making allegations of breach and payment claims. The company reveals that the amounts purportedly claimed are for invoices of approximately $76 million along with other costs and interests under the four contracts, all of which remains to be proved by the vendor.

“Jurong Shipyard has engaged legal advisers for the four arbitrations proceedings and will defend all claims made against it,” added Sembcorp Marine in its announcement.

The firm intends to provide updates on material developments on this matter as appropriate. It is worth reminding that this is not the first time one of Sembcorp Marine’s subsidiaries was involved in an arbitration process. A few years ago, Sembcorp Marine launched arbitration proceedings in April 2016 against the Brazilian drilling contractor, Sete Brazil.

This came on the heels of reports that Sete Brasil was getting ready to file for bankruptcy protection, as it was subsequently linked to the largest corruption scandal in Brazil, the Lava Jato, which blocked it from obtaining the previously approved bank loans that were meant to be used for rig payments.

Furthermore, Sete Brasil – which was formed in 2011 to own and operate drilling rigs to be used by Petrobras for drilling offshore Brazil – reached the initial settlement with Sembcorp Marine in relation to a total of seven drillship contracts worth $5.6 billion in early October 2019.

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In February 2020, Sembcorp Marine confirmed that all conditions for the settlement with Sete Brasil had been fulfilled and it was going to terminate its arbitration proceedings against the Sete Group as part of the settlement agreement.

—————————————————————————————————————————————-The article has been amended on 28 December 2021, correcting the parts identifying Jurong Shipyard as “Brazilian wholly-owned subsidiary” to “wholly-owned subsidiary, Jurong Shipyard.