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| Representatives from Daewoo Shipbuilding & Marine Engineering (DSME) and Inpex Operations Australia pose after signing a contract for the operation of a floating production storage and offloading (FPSO) vessel in Australia, in this March 2012 file photo. Courtesy of DSME |
By Park Jae-hyuk
A mega-size international lawsuit from Inpex Operations Australia, a Japanese-owned petroleum and exploration company, has become another complication for Daewoo Shipbuilding & Marine Engineering (DSME), which has been moving to normalize business operations since the unionized workers of its subcontractor firms ended their 51-day strike last month.
DSME said in its regulatory filing on Friday that the Japanese company had submitted a request for arbitration to the International Chamber of Commerce a day earlier, demanding the Korean firm compensate it $970 million for the delayed commissioning of a floating production storage and offloading (FPSO) vessel, as well as manufacturing defects.
The Korean firm emphasized that the Japanese company had previously agreed to changes to their contract signed in March 2012. According to DSME, the FPSO departed from its shipyard on Geoje Island in South Gyeongsang Province in 2017, and was delivered to Inpex in 2019 for operation in Australia.
"Most of Inpex's claims are groundless, and it exaggerated its losses," the shipbuilder said. "At this moment, it is stably producing liquefied natural gas (LNG), liquefied petroleum gas and condensate for exports."
Given that the amount of compensation that Inpex asked for reaches 57.3 percent of DSME's equity capital, the shipbuilder vowed to minimize the litigation's impact on its financial stability.
"We will continue to work towards settling the dispute," the company said.
The cash-strapped shipbuilder, which is under the control of creditors led by the state-run Korea Development Bank (KDB), says it already suffered an 800-billion-won ($614 million) loss due to the recent strike.
It was also forced to cancel two out of three orders for icebreaking LNG carriers from Russian clients, who refused to pay for the vessels, citing international sanctions.
In addition, DSME's regular employees are protesting KDB Chairman Kang Seog-hoon's latest remarks that the creditors are considering splitting the shipbuilder's warship division from its commercial ship division.
The series of controversies have been viewed as obstacles to DSME normalizing its operations, so market insiders are paying close attention to how the legal dispute with Inpex will unfold.
Some observers did not rule out the possibility of an out-of-court settlement, considering the fact that Samsung Heavy Industries also settled its legal dispute with Inpex by mutual agreement last year, after they had countersued each other for a dispute over a central processing facility (CPF) in Australia.
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