A court in Seoul has ruled that natural gas company Korea Gas Corporation (KOGAS) must pay damages to shipbuilder Samsung Heavy Industries (SHI) for losses tied to defective LNG cargo tanks installed on two gas carriers.
In its recent judgment, the South Korean court found KOGAS largely responsible for the losses suffered by SHI. The court ordered the gas company to pay KRW299.6 billion to SHI, covering losses arising from LNG cargo tanks that were later found to have design defects.
The dispute stems from arbitration proceedings before the London Maritime Arbitrators Association (LMAA), where SK Shipping brought a claim against SHI. SK Shipping argued that problems with the cargo tanks caused delays, financial losses and depreciation of the vessels. The LMAA tribunal ordered SHI to pay nearly KRW400 billion in damages to SK Shipping, as well as additional settlement-related costs.
Following the arbitration award, SHI filed a lawsuit in South Korea against KOGAS to recover the sums it had been ordered to pay. Earlier this month, the Seoul court accepted SHI’s position that KOGAS was responsible for the design of the tanks at issue. At the same time, the court held that SHI also bore part of the responsibility and therefore limited KOGAS’s share of the compensation to KRW299.6 billion.
The LNG cargo tanks at the centre of the dispute were developed by KOGAS and installed on the LNG carriers SK Serenity and SK Spica. Both vessels were built by SHI and delivered to SK Shipping in the first quarter of 2018.
Defects in the cargo tanks were discovered only after delivery. SK Shipping later reported gas leaks and cracks, which required SK Serenity and SK Spica to return to the shipyard on four separate occasions for repairs. The repair work generated additional costs of more than KRW100 billion.
Because of this repeated repair cycle, neither SK Serenity nor SK Spica completed a single commercial voyage. Operations were suspended, and the two LNG carriers have remained idle for around six years.
With this ruling, the court has confirmed that KOGAS must bear most of the financial impact arising from the cargo tank design, while also recognising that SHI retains a degree of responsibility for the project. The damages award compensates the shipyard for losses linked to the installation of the defective LNG cargo tanks.
