Shipyard vs. Shipowner: Common Disputes and How to Resolve Them Peacefully

My name is Davide Ramponi, I am 20 years old and currently training as a shipping agent in Hamburg. In my blog, I take you with me on my journey into the exciting world of shipping. I share my knowledge, my experiences, and my progress on my way to becoming an expert in the field of Sale and Purchase – the trade with ships.

Shipbuilding projects are a fascinating combination of engineering precision, high investment, and logistical coordination. When things go well, the launch of a newbuild is a proud moment for both the shipowner and the shipyard. But when things don’t go according to plan? Disputes can quickly arise—and escalate.

From disagreements over delivery timelines to conflicts about quality standards and rising costs, disputes between shipyards and shipowners are a frequent and costly reality in the shipping industry. And while legal action is sometimes unavoidable, many conflicts can be prevented—or resolved—through better communication, clear contracts, and structured mediation.

In this blog post, I’ll walk you through the most common causes of disputes between shipowners and shipyards, explain how legal and non-legal solutions work, and offer practical strategies to avoid conflict altogether. If you’re involved in a newbuild project—or planning one—this is a must-read.

Why Do Disputes Happen in Shipbuilding?

Shipbuilding contracts are complex by nature. They involve multi-million dollar investments, long lead times, and highly technical requirements. That’s a recipe for friction—especially when expectations aren't met.

Let’s explore the three main areas where disputes typically emerge.

1. Quality Issues and Defective Workmanship

Few things frustrate shipowners more than receiving a vessel that doesn’t match agreed specifications.

🔹 Typical complaints include:

• Substandard welding or steelwork.

• Malfunctioning or missing equipment.

• Deviations from the approved technical design.

🔹 Why it happens:

• Poor oversight during construction.

• Misunderstandings between design and execution teams.

• Cost-cutting at the expense of quality.

🔹 Impact:

• Delays in sea trials and delivery.

• Costly retrofits or warranty claims.

• Loss of trust between parties.

💡 Pro tip: Many disputes could be avoided with better quality assurance processes and more frequent third-party inspections throughout the build.

2. Delays and Missed Delivery Deadlines

Time is money—especially in shipping. A delay in delivery can mean missed charter opportunities, higher financing costs, and reputational damage for the shipowner.

🔹 Typical causes of delays:

• Late arrival of key components (engines, electronics).

• Labour shortages or strikes at the shipyard.

• Design changes requested by the owner mid-project.

🔹 What shipowners say:

“We were promised a delivery date. Now the ship is six months late.”

🔹 What shipyards say:

“We’re doing our best—but delays were caused by supplier issues or changes made after the contract.”

💡 Pro tip: It’s essential to build realistic timelines with flexibility, and to include transparent penalty clauses for late delivery.

3. Cost Overruns and Payment Disputes

Financing a newbuild is already a major undertaking. When unexpected costs arise, tensions can run high.

🔹 Common triggers:

• Change orders that increase the project scope.

• Material or labour cost inflation not accounted for in the contract.

• Disagreements over milestone completion and payment timing.

🔹 Result:

• Shipowners may delay payments.

• Shipyards may withhold further work or even halt construction.

💡 Pro tip: Contracts should clearly define how cost changes are approved, and who bears which types of risks.

From Conflict to Courtroom: How Disputes Are Handled

When a dispute arises, the first question is: Can we solve this without going to court?

Here’s a breakdown of the most common resolution paths.

1. Mediation: The First Line of Defense

Mediation involves an independent third party who helps both sides reach a compromise. It’s often quicker, cheaper, and more collaborative than formal arbitration or litigation.

✅ Advantages:

• Non-binding, flexible, and confidential.

• Preserves the business relationship.

• Can be completed in weeks instead of months.

💡 When to use it: Early in the dispute—especially when both parties are open to compromise but stuck on key issues.

2. Arbitration: A Formal But Private Process

Most shipbuilding contracts include arbitration clauses, often specifying institutions like the London Maritime Arbitrators Association (LMAA) or Singapore International Arbitration Centre (SIAC).

🔹 How it works:

• Each side presents evidence.

• Arbitrators make a binding decision.

✅ Pros:

• Faster than court.

• Maritime-specialised arbitrators.

❌ Cons:

• Legal costs can still be high.

• Decisions can’t usually be appealed.

💡 Pro tip: Make sure your contract specifies a trusted arbitration venue and procedural rules upfront.

3. Litigation: The Last Resort

When all else fails, disputes may end up in court. This is usually the least desirable route, as it’s public, slow, and expensive.

💡 Warning: Lawsuits can drag on for years and severely damage reputations. Litigation should only be used if all other options have failed—or if criminal behaviour or major breaches are involved.

Best Practices to Prevent Disputes Before They Start

Prevention is always better than cure—especially when millions are at stake. Here’s how to build a healthier, more transparent relationship between shipowners and shipyards.

1. Draft a Clear and Detailed Shipbuilding Contract (SBC)

The SBC is the foundation of your relationship. The more detail it includes, the less room there is for ambiguity.

✅ Include:

• Precise specs and performance criteria.

• Penalty clauses for delays or non-conformity.

• Dispute resolution procedures (e.g., mediation first, then arbitration).

• Change order protocols and cost escalation clauses.

💡 Tip: Use established templates like BIMCO’s NEWBUILDCON—but always tailor them to your project.

2. Maintain Open Communication Throughout the Build

Most disputes stem from misunderstandings, not malice. Maintaining regular communication helps keep both sides aligned.

✅ Best practices:

• Weekly or biweekly project updates.

• Transparent reporting on progress and delays.

• Quick escalation of any issues before they grow.

💡 Bonus: A broker or technical consultant can act as a neutral mediator during the build—catching problems before they become conflicts.

3. Use Third-Party Supervision and Quality Control

External inspection agencies or owner-appointed site teams help ensure specs are met and standards are upheld.

✅ Why it works:

• Provides early warning of problems.

• Ensures transparency and accountability.

• Reduces finger-pointing if issues arise later.

💡 Note: Make sure your contract allows for site access and inspection rights.

Conclusion: Disputes Are Inevitable—But Not Unmanageable

In an ideal world, every ship would be delivered on time, on budget, and in perfect condition. In the real world, things go wrong—and when they do, tensions can flare.

🔹 Most shipyard vs. shipowner disputes come down to three things: quality issues, delivery delays, and cost overruns.

🔹 Mediation, arbitration, and litigation are the tools we use when things escalate—but with good planning, we don’t have to get there.

🔹 Clear contracts, frequent communication, and proactive quality control are your best defense against conflict.

Have you witnessed disputes during a shipbuilding project? How were they resolved—or could they have been avoided? Share your thoughts in the comments—I look forward to the discussion! ⚓⚖️