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  • 1.

    Restrictions on foreign participation and investment
    Is the shipbuilding industry in your country open to foreign participation and investment? If it is open, please specify any restrictions on foreign participation.

  • 2.

    Government ownership of shipbuilding facilities
    Does government retain ownership or control of any shipbuilding facilities and, if so, why? Are there any plans for the government divesting itself of that participation or control?

  • 3.

    Statutory formalities
    Are there any statutory formalities in your jurisdiction that must be complied with in entering into a shipbuilding contract?

  • 4.

    Choice of law
    May the parties to a shipbuilding contract select the law to apply to the contract, and is this choice of law upheld by the courts?

  • 5.

    Nature of shipbuilding contracts
    Is a shipbuilding contract regarded as a contract for the sale of goods, as a contract for the supply of workmanship and materials, or as a contract sui generis?

  • 6.

    Hull number
    Is the hull number stated in the contract essential to the vessel’s description or is it a mere label?

  • 7.

    Deviation from description
    Do ‘approximate’ dimensions and description of the vessel allow the builder to deviate from the figure stated? If so, what latitude does the builder have?

  • 8.

    Guaranteed standards of performance
    May parties incorporate guaranteed standards of performance whose breach entitles the buyer to liquidated damages or rescission? Are there any trade standards in your jurisdiction for coating, noise, vibration, etc?

  • 9.

    Quality standards
    Do statutory provisions or previous cases in your jurisdiction give greater definition to contractual quality standards?

  • 10.

    Classification society
    Where the builder contracts with the classification society to ensure that construction of the vessel leads to the buyer’s desired class notation, does the society owe a duty of care to the buyer, or can the buyer successfully sue the classification society, if certain defects in the vessel escape the attention of the class surveyors?

  • 11.

    Flag-state authorities
    Have the flag-state authorities of your jurisdiction outsourced compliance with flag-state legislation to the classification societies? If so, to what extent?

  • 12.

    Registration in the name of the builder or the buyer
    Does your jurisdiction allow for registration of the vessel under construction in the local ships register in the name of the builder or the buyer? If this possibility exists, what are the legal consequences of this registration?

  • 13.

    Title to the vessel
    May the parties contract that title will pass from the builder to the buyer during construction? Will title pass gradually, upon the progress of the vessel’s construction, or at a certain stage? What is the earliest stage a buyer can obtain title to the vessel?

  • 14.

    Passing of risk
    Will risk pass to the buyer with title, or will the risk remain with the builder until delivery and acceptance?

  • 15.

    Subcontracting
    May a shipbuilder subcontract part or all of the contract and, if so, will this have a bearing on the builder’s liability towards the buyer? Is there a custom to include a maker’s list of major suppliers and subcontractors in the contract?

  • 16.

    Extraterritorial construction
    Must the builder inform the buyer of any intention to have certain main items constructed in another country than that where the builder is located, or is it immaterial where and by whom certain performance of the contract is made?

  • 17.

    Fixed-price and labour-and-cost-plus contracts
    Does the law in your country have different provisions for ‘fixed-price’ contracts and ‘labour-and-cost-plus’ contracts?

  • 18.

    Price increases
    Does the builder have any statutory remedies available to charge the buyer for price increases of labour and materials despite the contract having a fixed price?

  • 19.

    Retracting consent to a price increase
    Can a buyer retract consent to an increase in price by arguing that consent was induced by economic duress?

  • 20.

    Exclusions of buyers’ rights
    May the builder and the buyer agree to exclude the buyer’s right to set off, suspend payment or deduct certain amounts?

  • 21.

    Refund guarantees
    If the contract price is payable by the buyer in pre-delivery instalments, are there any rules in regard to the form and wording of refund guarantees? Is permission from any authority required for the builder to have the refund guarantees issued?

  • 22.

    Advance payment and parent company guarantees
    What formalities govern the issuance of advance payment guarantees and parent company guarantees?

  • 23.

    Financing of construction with a mortgage
    Can the builder or buyer create and register a mortgage over the vessel under construction to secure construction financing?

  • 24.

    Liability for defective design (after delivery)
    Do courts consider defective design to fall within the scope of poor workmanship for which the shipbuilder is liable under the warranty clause of the contract?

  • 25.

    Remedies for defectiveness (after delivery)
    Are there any remedies available to third parties against the shipbuilder for defectiveness?

  • 26.

    Liquidated damages clauses
    If the contract contains a liquidated damages clause or a penalty provision for late delivery or not meeting guaranteed performance criteria, must the agreed level of compensation represent a genuine link with the damage suffered? Can courts mitigate liquidated damages or penalties agreed in the contract, and for what reasons?

  • 27.

    Preclusion from claiming higher actual damages
    If the building contract contains a liquidated damages provision, for example, for late delivery, is the buyer then precluded from claiming proven higher damages?

  • 28.

    Force majeure
    Are the parties free to design the force majeure clause of the contract?

  • 29.

    Umbrella insurance
    Is certain ‘umbrella’ insurance available in the market covering the builder and all subcontractors of a particular project for the builder’s risks?

  • 30.

    Disagreement on modifications
    Will courts or arbitration tribunals in your jurisdiction be prepared to set terms if the parties are unable to reach agreement on alteration to key terms of the contract or a modification to the specification?

  • 31.

    Acceptance of the vessel
    Does the buyer’s signature of a protocol of delivery and acceptance, stating that the buyer’s acceptance of the vessel shall be final and binding so far as conformity of the vessel to the contract and specifications is concerned, preclude a subsequent claim for breach of performance warranties or for defects latent at the time of delivery?

  • 32.

    Liens and encumbrances
    Can suppliers or subcontractors of the shipbuilder exercise a lien over the vessel or work or equipment ready to be incorporated in the vessel for any unpaid invoices? Is there an implied term or statutory provision that at the time of delivery the vessel shall be free from all liens, charges and encumbrances?

  • 33.

    Reservation of title in materials and equipment
    Does a reservation of title by a subcontractor or supplier of materials and equipment survive affixing to or incorporation in the vessel under construction?

  • 34.

    Third-party creditors’ security
    Assuming title to the vessel under construction vests with the builder, can third-party creditors of the builder obtain a security attachment or enforcement lien over the vessel or equipment to be incorporated in the vessel to secure their claim against the builder?

  • 35.

    Subcontractor’s and manufacturer’s warranties
    Can a subcontractor’s or manufacturer’s warranty be assigned to the buyer? Does legislation entitle the buyer to make a direct claim under the subcontractor’s or manufacturer’s warranty?

  • 36.

    Default of the builder
    Where a builder defaults in the performance of the contract, is there a legal requirement to put the builder in default by sending an official notice before the buyer’s remedies begin to accrue? What remedies will be open to the buyer?

  • 37.

    Remedies for protracted non-performance
    Are there any remedies available to the shipowner in the event of protracted failure to construct or continue construction by the shipbuilder apart from the contractual provisions?

  • 38.

    Builder’s insolvency
    Would a buyer’s contractual right to terminate for the builder’s insolvency be enforceable in your jurisdiction?

  • 39.

    Judicial proceedings or arbitration
    What institution will most commonly be agreed on by the parties to decide disputes?

  • 40.

    Buyer’s right to complete construction
    Would a buyer’s contractual right to take possession of the vessel under construction and continue construction survive the bankruptcy or moratorium of creditors of the builder?

  • 41.

    ADR/mediation
    In your jurisdiction, do parties tend to incorporate an ADR clause in shipbuilding contracts?

  • 42.

    Default of the buyer
    Where the buyer defaults in the performance of the contract, what remedies will be available to the builder? What are the consequences of the builder’s cancellation of the contract?

  • 43.

    Standard contract forms
    Are any standard forms predominantly used in your jurisdiction as a starting point for drafting a shipbuilding contract?

  • 44.

    Assignment of the contract
    What are the statutory requirements for assigning the contract to a third party?

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Haynes and Boone CDG, LLP is an international commercial law firm providing a full spectrum of legal services, with particular experience in London serving the energy, shipping, financial services and corporate sectors.

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