Vinalines appealing $3.1 million fine
Vinalines appealing $3.1 million fine
A big player in the local shipping industry, Vinalines is faced with having to pay a fine amounting to VND65 billion ($3.1 million). The fine is the result of a contract violation involving Vinalines’ implementation of its Van Phong international transshipment port project in the south-central province of Khanh Hoa.
Vinalines’ breach of contract with a South Korean firm looks to cost it $3.1 million in fines Photo: Le Toan
Early last week, Vinalines’ management sent an urgent dispatch to the government proposing the repeal of a verdict by the Vietnam International Arbitration Centre (VIAC). The claim against Vinalines was filed by the South Korean contractor SK E&C who executed the bidding package 6b1 belonging to Van Phong international transshipment port in southern Khanh Hoa province.
The South Korean contractor claimed it was saddled with heavy losses after Vinalines unilaterally terminated the implementation of the 6b1 package in September 2012, while the contract was still in the development stage.
After considering the case submitted by SK E&C, in early January this year the VIAC issued verdict 28/12 requiring Vinalines to compensate the Korean contractor to the tune of VND47.9 billion ($2.28 million). The VIAC also stipulated that Vinalines should bear the cost of arbitration, which amounted to VND573 million ($27,280).
Over a month later, the VIAC enacted Decision 65, which made some amendments to verdict 28/12 and went some way towards explaining it.
Accordingly, the Arbitration Council raised the Vinalines’ fine from VND47.9 billion to VND65.2 billion or $3.1 million (including cumulative interest) and hiked the arbitration fee up to VND781 million ($37,190).
“The verdict is not compliant with the law, and does not truly reflect the essence of the case. It seriously violates the arbitration procedures and is damaging to the rights and legitimate benefits of Vinalines,” said Vinalines general director Le Anh Son.
In October 2009, Vinalines and a contractor consortium consisting of SK E&C and the Vietnam Waterway Construction Corporation (Vinawaco) inked a VND1 trillion ($47.6million) contract on conducting package 6b1 on wharf construction at Van Phong international transshipment port.
The contract got underway soon afterwards and was slated for completion within 20 months.
As to why it halted contract implementation in September 2012, Vinalines said that at that time the Government Office had enacted Dispatch 6881, wherein Deputy Prime Minister Hoang Trung Hai instructed them to halt implementation of the Van Phong port project based on proposals from the Transport, and Planning and Investment ministries.
Vinalines explained that the local economy has faced numerous hardships and was affected by the global economic downturn, so the government had decided to temporarily halt the construction of several investment projects to focus capital on priority areas.
According to Vinalines, in light of Clause 294 of the Commercial Law, contract violators would not be held responsible if the violation came from the implementation of a decision by competent government agencies that were unknown to relevant parties at the time of signing the contract. As such, Vinalines argued that they would not bear the responsibility for halting the implementation of package 6b1.
For the amount of work that the Korean contractor had executed, Vinalines said it had given an advance of VND87.6 billion ($4.1 million) to the contractor, which surpassed the value of the work completed.
A Vinalines source stated that contract 6b1 had been handled by the Vinalines, SK E&C and Vinawaco consortium under close supervision from consultant units – Meihardt-TEDI Port and Van Phong Economic Zone Authority. That VIAC did not invite these related parties to participate in the procedural process seriously violated current law as well as the arbitration procedure process, the source claimed.
Vinalines also argued that VIAC’s issuance of a second verdict via Decision 65 seriously violated the law. The developer has turned to the Hanoi People’s Court to request that the VIAC verdict be overturned. A final decision about the case remains forthcoming after the court agreed to begin handling the case in March 2014.
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