Sembcorp Marine lawyers up for rig dispute case

Pacific Class 400

Sembcorp Marine’s PPL Shipyard on Tuesday started a court action in the Singapore High Court against Marco Polo Marine, a parent company of Marco Polo Drilling, as their rig construction dispute keeps heating up. 

To remind, PPL Shipyard (PPLS) was building a jack-up rig of a Pacific Class 400 series for MP Drilling, due for delivery on November 30, 2015.

However, MP Drilling cancelled the contract on November 17 citing PPL Shipyard’s failure to comply with its contractual obligations, including defects found on the newbuild rig. MP Drilling refused to take the delivery of the rig at the same time asking for a refund from the yard of the initial amount of 10% of the contract price, which is approximately $21.4 million.

On the other hand, PPL Shipyard asked of MP Drilling payment of the second disbursement by November 30, 2015. PPLS also claimed that MP Drilling’s decision to terminate the contract was made to avoid its obligation to pay the second disbursement.

PPLS has on December 1, 2015 served a termination notice on Marco Polo Drilling terminating the contract after MP Drilling failed to pay the second disbursement of 10% of the contract price by November 30, 2015.

According to PPLS, the second disbursement was immediately due upon the execution of the contract on February 26, 2014. MP Drilling was initially allowed to pay the second disbursement by February 11, 2015. However on MPD’s requests, the payment of the second disbursement was deferred twice, first to no later June 30, 2015 and subsequently to no later November 30, 2015. MPD also agreed to pay interest on the second disbursement up to the date of payment, PPLS explained.

Following the termination of the contract, PPL Shipyard demanded that MPD immediately pay the second disbursement and interest for the month of November 2015. MPD failed to pay these sums by the stipulated deadline and it remains liable to pay the second disbursement as it became due at the date of execution of the contract on February 26, 2014, PPL Shipyard said on Tuesday.

MPD’s obligations under the contract including its obligation to pay the second disbursement is guaranteed by Marco Polo Marine (MPM) under the parent company performance guarantee. Therefore, on December 1, 2015, PPLS demanded that MPM, as guarantor, perform MPD’s obligations in full under the contract and pay the second disbursement and the November interest. As MPM did not pay the sums by the stipulated deadline, PPL Shipyard started the court action against it.

 

MP Drilling refutes PPL’s payment demand

According to MP Drilling, the company on Tuesday received a termination of the rig construction contract, regardless, MP Drilling said, of the fact that the contract had already been terminated on November 14 by MP Drilling.

MP Drilling further added that PPL also demanded for the payment of second 10% of the contract price (amounting to $21.43 million) and interest alleged to have accrued thereon for the month of November 2015 (amounting to $77,399.80).

Separately, the company has received from PPL a written demand for payment of the sums pursuant to the parent company guarantee previously given by the company in relation to the rig construction contract.

PPL’s legal counsel has also written to MP Drilling’s legal counsel to state that PPL has started legal action against the company under the guarantee.

“The Board would like to reiterate its position that neither the company nor MP Drilling is under any obligation to make the payments claimed by PPL whether under the rig construction contract or the guarantee and that there is no basis for the notice of termination of the rig construction contract to be issued by PPL,” Marco Polo Marine emphasized.

The company further noted that under the terms of the guarantee, PPL has no basis to start legal action against MP Drilling in the Singapore courts.

Offshore Energy Today Staff

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