A year after a shipbuilding contract dispute emerged between Otto Marine unit Otto Offshore and GC Rieber Shipping ASA, a settlement has been reached.
Otto Marine announced that it has entered into a 'mutually beneficial global settlement' with GC Rieber, which includes settling the claims from last year and terminating the joint venture agreement for Polar Marine II Pte Ltd - the firm that is 49 per cent owned by Otto Marine and 51 per cent owned by GC Rieber.
The joint venture included four vessels and as part of the settlement, Otto Offshore will take over three of them while GC Rieber will take over the remaining one.
Of the three vessels, Otto Offshore had chartered out one and also announced yesterday that it had agreed to sell another one for 24.1 million euros (S$43.8 million). The sale is not expected to have a material impact on the consolidated net tangible assets per share or earnings per share of Otto Marine for its financial year ending Dec 31, 2010.
Prior to the dispute, Otto Marine and GC Rieber had entered into a joint venture to operate and manage vessels on charter through their joint venture vehicle, Polar Marine II.
The dispute over a 23.5 million euro contract came to a head in October last year, during what had already been a dismal time for the offshore sector.
Otto Offshore had tried to postpone the delivery of a vessel to Polar Marine II to Oct 30, 2009.
On Sept 25, 2009, Polar Marine II had in turn told Otto Offshore that if the refund guarantee under the shipbuilding contract was not extended before Sept 27, it would issue a notice of cancellation and make a claim on the refund guarantee.
Polar Marine II also undertook to withdraw the notice of cancellation and the claim under the refund guarantee - if the refund guarantee were to be extended on or before Oct 1, 2009.
Polar Marine went on to both issue a notice of cancellation and make a claim on the refund guarantee two days later.
On Sept 28, 2009, Otto Offshore extended the refund guarantee, but Polar Marine refused to withdraw the notice of termination and its demand under the refund guarantee, as it had previously undertaken to. This resulted in Otto Offshore serving an arbitration notice on Polar Marine II - in which management and control was maintained by GC Rieber.