Odfjell vs. Sevmash in court

08.05.2009
The Norwegian shipping company Odfjell demands more than USD 100 million from Russia's Sevmash naval yard after it cancelled the construction of 12 chemical carriers last year.

Odfjell decided to cancel the contract due to serious delays in construction and continued price increases. The contract was said to be valid USD 45 million for each of the 12 carriers, in total USD 540 million.

When the contract for the first eight chemical carriers was signed in 2004 it was the biggest business contract between a Norwegian and Russian company ever. In June 2006, another contract for additional four carriers was signed during an official ceremony in Severodvinsk, Arkhangelsk Oblast, where Sevmash is located.

A news-release placed at the web-site of Sevmash from the ceremony is followed by a photo of General Director of Sevmash Vladimir Pastukhov and president of Odfjell ASA, Bernt Daniel Odfjell shaking hands. The text under the image says: "Cooperation will be last for a long time."

The first ship in the series was to be delivered in October 2007. The vessels in order were IMO type II fully coated vessels of about 45 000 dwt., supposed to replace some of Odfjell's older single hull chemical carriers.

But, the cooperation between Odfjell and Sevmash was not to "last for a long time." When the contract was cancelled in February last year BarentsObserver.com wrote that Odfjell management was very disappointed.

- They (Sevmash) have shown no will to try to understand that this is a commercial project. They have deliberately sabotaged and delayed the project, Odfjell's chief Terje Storeng said.

He also said that the Russian shipyard had acted with disrespect as well as a lack of will to meet the contract conditions.

According to the Norwegian business newspaper Dagens Næringsliv the compensation Odfjell demands from Sevmash is more than USD 100 million.

In a press-release shortly after Odfjell cancelled the deal in February last year, Sevmash maintains that it has no understanding of Odfjell's accusation about the alleged deliberate delays in the project. "Sevmash categorically rebuffs this accusation and confirms that it has met all obligations with regard to the construction of the vessels," Sevmash wrote.

Sevmash also confirms that it will continue the construction of the tankers and sell them for market prices, which in the next turn will help the company avoid losses.

The case will come up for a court in Sweden by the end of May, and a final result is expected by September according to Dagens Næringsliv.

Source: www.barentsobserver.com, photo: General Director of Sevmash Vladimir Pastukhov and president of Odfjell ASA, Bernt Daniel Odfjell shaking hands in June 2006 (Sevmash.ru)