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November 10, 2005

Sale-and-Purchase squalls ahead?

The North of England P&I Club has warned Greek shipowners they face an increase in sale-and-purchase disputes as second-hand ship values fall and the industry embarks on a buying spree.

The warning was given at a seminar in Piraeus on November 9, which the club organized in conjunction with sale-and-purchase experts from shipping law firms Ince & Co and Mills & Co.

According to North of England's Greek office manager Tony Allen: "Many commentators expect freight markets to fall next year and this is likely to see second-hand tonnage prices dropping from their current high levels, which in turn will increase the potential for disputes with sale-and-purchase contracts. This is particularly true in Greece, where there is a huge amount of liquidity at the moment and many shipowners are waiting for second-prices to fall before they reinvest in ships.'"

North of England director Mike Salthouse says the club has experienced relatively few sale- and-purchase disputes over the past three years. "Buyers' strong desire to acquire ships means they have been reluctant to take issue with conventional areas that give rise to disputes because they know if they are too aggressive the seller may withdraw the ship from sale. However, next year we expect the commercial balance between buyers and sellers to become much more equal. This, coupled with the fact that rapid changes in ship values have historically seen an increase in the number ship sales which collapse, will inevitably increase the number of disputes."'

Yesterday's seminar at the Piraeus Yacht Club was one of a series North of England is holding for its members, brokers, managers and underwriters around the world on sale-and-purchase disputes and how to avoid them. A similar event was held in London in September 2005 and further events are planned in Hamburg, Singapore and Hong Kong.

The seminar addressed buyers' remedies for misrepresentation in the context of the widely used Norwegian Saleform 1993, and breaches of the U.K. Sales of Goods Act. It also covered some of the more well-publicized potential areas of dispute, such as the issue of when vessels are ready for delivery under the Norwegian Saleform and the sorts of claims buyers may be able to pursue against a seller in relation to the condition of the vessel on delivery.

The effect of third-party contracts such as charterparties on the sale and, conversely, the impact of the sale on those contracts was also considered. Overall the seminar was geared towards emphasizing the loss-prevention steps which buyers and sellers of second-hand tonnage can take to protect their positions and avoid disputes.