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Saturday, 21 November 2015

Contract Termination: MPM vs Sembcorp Marine?

Back to Sembcorp Marine's History.  

Does anyone doubt that Sembcorp Marine didn't learn much from this bloody painful lesson and their future termination clauses are not drafted with extreme caution to avoid another repeated case?

CW8888: 1995 to 2006 . That is more than 10 yrs and 3.3 times the contract value

SembCorp to pay Allseas vessel compensation

(Asia-Pacific) - SembCorp Industries has agreed to pay $424.8 million to Swiss group Allseas to settle more than a 10-year old dispute over the conversion of a vessel into a pipelay vessel.

Allseas had commissioned SembCorp's subsidiary Sembawang Corp Ltd. to convert bulk carrier Solitaire into a pipe lay vessel in 1993.

But it terminated the $142.34 million contract two years later, alleging that SembCorp had failed to complete the work on time.

Both parties then took each other to court and the case has been under arbitration in London since 1995.


  1. Legal fees are terribly expensive. Whoever lost the fight. One is going to burn a big hole while the other may be in financial deep shit.

    Look at this

    OSIM chief financial officer Peter Lee told a group of analysts and investors on Tuesday evening that the profit fall of about S$6 million can be attributed to "several millions" of legal costs

    1. Allseas is different league (higher level) compared to MPM. Allseas is Dutch n the owner Mr Hereema is known to be one of the most shrewd businessman around.

      MPM has no choice as I believe (guess) SCM will not allow them to cancel nor postpone.

      Imagine MPM to take delivery a rig "if" without job, storage, equipment warranty?, will kill them...

      So it's a show hand situation.... we shall see

  2. the Solitaire case (and also Keppel's Varg FPSO case) were bitter lessons for both Singapore yard groups when it comes to the risks associated with LSTK contracts for non-standard vessels. Thereafter, they stayed away from LSTK contracts, even for their standard in-house jackup designs -- until the GFC when they were forced to accept such contracts and on 20/80 payment terms. However, risks are less as Keppel (MOD V B) and SCM (Baker Pacific and JU2000E) have built many of these designs to-date, for reputable drilling contractors on time, on budget.
    MPM's claim is that they rejected delivery due to cracks in the rig's legs. Now while this is not unheard of, the Singapore yards usually have stringent quality controls, especially when it comes to the leg sets, which are the most critical structure on jackups.
    Will be interesting to see what happens..

    1. Getting interesting liao.

      PPLS is of the view that the purported termination by MPD is to avoid its obligation to pay the 2nd disbursement of 10% of the contract price (US$21.43 million), that has already accrued and due to PPLS immediately on the execution of the contract. This payment was deferred twice at the request of MPD, and is payable by 30 November 2015.

      As for dispute resolution, as the contract is still subsisting, and the disputes are technical in nature, PPLS will be inviting MPD to refer the disputes to the Classification Society, whose decision shall be final and binding on the parties as provided for under the contract.


      A classification society is a non-governmental organization that establishes and maintains technical standards for the construction and operation of ships and offshore structures. The society will also validate that construction is according to these standards and carry out regular surveys in service to ensure compliance with the standards


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