Shipbuilding Contracts - the value of Defence Club cover

Shipbuilding over recent years has shown a dramatic increase in terms of ship numbers and also the yards involved. The subsequent financial crisis of 2008 has led to a rise in the number of disputes under new building contracts, as shipyards which took on a significant number of contracts find themselves racing to meet delivery deadlines, or running into financial difficulties as credit lines dry up.

Although shipbuilding contracts are frequently based on one of a number of standard forms, in reality each contract is different with terms varying widely. The contract terms will be dependent on the yard, the type of ship involved, the financing arrangements, and the buyer's requirements for compliance with specifications and design, quality of workmanship and delivery timing.

The following summarises some of the areas in which disputes can arise:

1. Faulty design/inherent defect/ poor workmanship
2. Price and payment
3. Delivery date
4. Insurance
5. Option Agreements
6. Subcontracting
7. Assignment
8. Governing law & jurisdiction

Are all FD&D covers the same?

In short, no. Many FD&D providers place limits on the extent of FD&D cover that is available for shipbuilding disputes. In addition many insist on mandatory deductibles without limit which can mean that the Member’s contribution to the costs of the case can be considerable.

Shipbuilding cases are invariably very expensive and therefore it is important that any limits or other restrictions are fully explored. The UKDC’s experience in managing shipbuilding disputes and its cover in this area are unrivalled.

Read the full details in the attached review.