A shipbuilding contract is a long-term affaire, the success of which will depend on the parties’ continuing agreement and cooperation throughout the construction process. This article looks at some of the problems that may arise when that relationship breaks down, as illustrated in a selection of ICC arbitral awards. Whatever the nature of the ship – be it a luxury yacht, a vessel intended for industrial use, or a passenger ferry – the difficulties that may arise are common to all vessels and concern not only the actual construction of the vessel, but also its design, delivery and subsequent use. Typical subjects of dispute are the quality of the design and the technology and intellectual property it uses, the delivery, acceptance and handover of the vessel, the transfer of ownership, and the warranties covering the period of initial use.

To use an analogy coined by the famous French jurist Professor Georges Ripert, a ship resembles a human being; its construction and operation could be compared to the birth and upbringing of a child by its parents (the parties). The child may fall victim to disputes over custody and be taken hostage by one or other parent in the event of a divorce (issues surrounding possession), may be ill-treated by being given tasks too difficult for it or quite simply abandoned for not living up to expectations (allegations of non-conformity), or it may have been born with an ailment requiring urgent care which the parents refuse or are slow to acknowledge (discovery of hidden defects). Just as the family courts in such situations will be guided by the child’s interest, so arbitrators are guided by the interest of the ship. In the cases discussed, they show considerable pragmatism and a sense of reality when resolving the disputes, which not infrequently are caused by ambiguities or a lack of precision in the parties’ contracts.

The arbitrators tend to shun excessive formalism, which would be inappropriate in situations where not only the existence and future of a vessel, but also the survival of a shipyard may be at stake. Their first point of reference, however, is the parties’ contract, which is all-important in a sector of activity where contractual freedom is predominant. They also look to the parties’ original intentions where these have become derailed or altered, as well as applicable law and professional practices.