Samsung Heavy sues KOGAS over faulty LNG carriers
Samsung Heavy Industries filed a lawsuit against Korea Gas Corp. (KOGAS) to avoid taking responsibility for defective cargo holds installed in two liquefied natural gas (LNG) carriers sold to SK Shipping in 2018, the shipbuilder said Tuesday.
The latest legal battle came as Samsung Heavy paid $290 million to SK Shipping earlier this month in compliance with the London Maritime Arbitrators Association’s decision last December.
Samsung Heavy says that KOGAS should reimburse the entire amount as the state-owned natural gas company led the development of the problematic cargo holds, the exterior walls of which developed frost when sailing through cold regions.
“We are confident the money will be returned as the Seoul Central District Court ordered KOGAS last October to pay us 72.6 billion won ($53 million) in compensation for costs to repair the vessels and 115.4 billion won to SK Shipping in compensation for its loss from suspended operations of the ships,” a Samsung Heavy official said.
The shipbuilder added that it had initially sought a joint acquisition of the LNG carriers with KOGAS, instead of engaging in a legal battle with the gas firm.
“After a test operation following four rounds of repairs, a KOGAS subsidiary that designed the cargo hold said that a classification society concluded that the LNG carriers can sail if the sea temperature is 6 degrees Celsius or higher,” the Samsung Heavy official said. “We considered joint acquisition of the ships with KOGAS to continue domestic development of cargo holds for LNG carriers.”
Due to the difference in costs each company must bear, however, both sides failed to reach an agreement.
KOGAS has cried foul over the local court’s ruling forcing it to take complete responsibility for the defects. It claims that the defects may have resulted from a mistake on Samsung Heavy’s part in the construction of the vessels.
“This case was sent to an appellate court after we lodged an appeal last November,” a KOGAS official said. “We are doing our best to overturn the lower court’s ruling.”
The cargo hold named KC-1 was designed by KC LNG Tech, a joint venture between KOGAS and Korea’s three largest shipbuilders, in order to reduce dependence on foreign technologies. However, its defects have prompted multiple lawsuits here and overseas between companies that participated in the project.