Photo Credit; Splash
Samsung Heavy Files $3.5 Billion Lawsuit Against Russia’s Zvezda Shipyard
South Korean shipbuilder Samsung Heavy Industries has initiated international arbitration proceedings in Singapore against Russia’s Zvezda Shipbuilding Complex, alleging wrongful contract termination and seeking damages totalling approximately KRW 4.85 trillion (US$3.54 billion). This legal action was filed following Zvezda’s unilateral cancellation in June 2024 of two major ship-equipment contracts — one for ten icebreaking LNG carriers and another for seven icebreaking shuttle tankers. The contracts, awarded in 2020 and 2021, involved the supply of hull blocks and structural modules to be assembled at Zvezda’s Far Eastern facility.
Samsung Heavy denies any default on its obligations. In response to Zvezda’s demand for the return of US$800 million in advance payments, Samsung retained the funds as negotiations continued. The company subsequently filed for arbitration in July 2024 at the Singapore International Arbitration Centre, asserting that Zvezda’s termination was unlawful.
Despite attempts to negotiate, continued geopolitical uncertainty stemming from the Russia‑Ukraine war and US and South Korean sanctions on Zvezda prompted Samsung to formally withdraw from the contracts and pursue full compensation for both direct and indirect losses. Industry insiders suggest financial exposure for Samsung remains limited, as the project was suspended during early design stages and did not require the commitment of docking facilities.
This dispute highlights the challenges faced by global shipbuilders operating under shifting geopolitical conditions. Force majeure clauses and arbitration procedures will likely attract scrutiny, as Samsung seeks to defend its rights and recover advance payments through the legal process.
