April, 2020 - Coronavirus & Shipbuilding
- Date: 30/04/2020
As the COVID-19 pandemic continues to affect global trade, this briefing considers the particular issues facing parties to shipbuilding contracts.
The disruption caused by COVID-19 is being felt harshly by some shipbuilders and buyers, as yards struggle to maintain their significant workforce and encounter difficulties in securing materials.
Added to the concerns over delay and disruption at the yard, buyers and builders are also confronted by the oil price crash, the declining financial outlook, and a likely drop in demand for certain types of ships, including passenger and off-shore ships.
Many yards have been forced to close and those that remain open face workforce reductions, a lack of materials and delays in equipment delivery, all of which raise the spectre of liquidated damages claims by buyers and even cancellation for delay. With many yards giving notice of force majeure and some governments issuing so-called “force majeure certificates” or blanket announcements of force majeure on “all projects and contracts”, it will be of primary importance for builders and buyers to consider the contractual force majeure and cancellation provisions in their shipbuilding contracts.