Vietnam shipping lines hit by costly dispute with S.Korean contractor

Vinalines Sky, a cargo ship belong to the state-run shipping line, was held as “hostage” by SK E&C in mid-March, following a ruling by the Vietnam International Arbitration Center (VIAC) that Vinalines has to pay VND135 billion (US$6.37 million) in steel pile purchase and late payment interest for the South Korean company.

SK E&C has been contracted to supply the said steel piles for the Van Phong transshipment port project, based in Vietnam’s coastal Khanh Hoa Province, but Vinalines refused to check and take over the equipment and settle payment, saying the piles are below standard.

Vinalines Sky is a 42,714-ton cargo ship that was manufactured in Japan in 1997. The detained ship has caused $400,000 damage for Vinalines.

Vinalines is considering paying deposit to release its vessel, even though the detention of the ship over the payment dispute “is beyond normal limit,” said Nguyen Truong Son, director of the shipping line’s Project Management Board No.1.

Vinalines refused to check and take over the steel piles imported by SK E&C due to a number of conflicts, sending the South Korean company to put its Vietnamese partner to the VIAC.

The VIAC then ruled that Vinalines clear the VND135 billion payment for the piles that the Vietnamese company said do not meet the conditions to be checked and taken over.

The Vietnamese shipping line also lodged a lawsuit to the Hanoi People’s Court, asking to void the VIAC ruling.

“While the Hanoi court has yet to open a hearing for the case, the detention of Vinalines Sky is against the law and SK E&C has to be held responsible for all financial damages of Vinalines from this detention,” Vinalines said.

Son, the Vinalines official, said the batch of 544 steel piles supplied by SK E&C does not meet the quality standard to be checked and taken over.

The piles do not meet standard and lack the manufacturing records, he said.

In an assessment report, SK E&C also admitted that some of the piles were rusted during transport, and were later fixed by paint coating. But this solution was rejected by Vinalines.

The Van Phong transshipment port project broke ground late 2009 but was suspended in August 2010 due to a series of issues, including the pipe payment dispute between Vinalines and SK E&C.