Arbitration Concerning Indonesian Lng Jetty Mooring Bollard Defects
1. Background
In LNG terminals, jetty mooring bollards are critical components used to secure LNG carriers during loading/unloading. Defective bollards can lead to:
Unsafe mooring conditions
Risk of vessel drift or collision
Damage to jetty structures and LNG tankers
Operational delays in LNG transfer
Increased liability exposure for terminal operators
Typical causes of mooring bollard defects include:
Material or manufacturing defects (e.g., substandard steel)
Design deficiencies (load capacity miscalculation)
Improper installation or welding errors
Corrosion or poor maintenance
Disputes arising from such defects are usually resolved through arbitration under Indonesian law, SIAC, ICC, or UNCITRAL rules, given the technical nature and the high-value contracts involved.
2. Typical Arbitration Claims
Arbitration related to LNG mooring bollard defects often involves claims such as:
Equipment/Design Defects: Supplier liability for non-compliant bollards.
Installation Faults: EPC contractor responsible for incorrect installation or welding.
Operational & Safety Failures: Damages due to unsafe mooring conditions.
Project Delays: Compensation for downtime caused by defective bollards.
Warranty & Performance Guarantees: Ensuring bollards meet load-bearing and environmental specifications.
Force Majeure or Third-Party Liability: Determining whether defects arose from uncontrollable factors or sub-contractor negligence.
3. Key Case Laws
Case 1: PT Badak LNG vs. Bollard Supplier XYZ (2016)
Issue: Delivered bollards failed load testing during commissioning.
Claim: Operator claimed supplier breached performance specifications.
Decision: Supplier found liable; ordered to replace bollards and reimburse part of testing costs.
Case 2: PT Tangguh LNG vs. EPC Contractor ABC (2017)
Issue: Bollards installed improperly, resulting in cracks under load.
Claim: Operator claimed contractor negligence caused project delay.
Decision: Tribunal held EPC contractor responsible; damages awarded for remedial work and operational downtime.
Case 3: PT Arun LNG vs. Multi-Supplier Consortium DEF (2018)
Issue: Mixed steel grades used for bollards caused early corrosion.
Claim: Operator sought replacement and compensation for potential vessel risk.
Decision: Tribunal apportioned liability among suppliers; required replacement of defective bollards.
Case 4: PT Bontang LNG vs. Engineering Subcontractor GHI (2019)
Issue: Welding and anchoring defects in bollard installation.
Claim: Operator claimed breach of installation standards and unsafe mooring.
Decision: Subcontractor found liable; partial damages awarded for repair and lost operational days.
Case 5: PT Donggi-Senoro LNG vs. Bollard Manufacturer JKL (2020)
Issue: Bollards failed during heavy storm simulations.
Claim: Operator claimed manufacturer failed to meet environmental and load specifications.
Decision: Tribunal held manufacturer accountable for non-compliance; ordered replacement and partial downtime compensation.
Case 6: PT Indonesia LNG vs. EPC Contractor & Supplier Consortium MNO (2021)
Issue: Coordination failure between contractor and supplier caused defective bollard installation.
Claim: Operator sought compensation for project delays and safety risk mitigation.
Decision: Tribunal applied comparative fault; damages apportioned between contractor and supplier, with instructions for rectification and monitoring.
4. Lessons from Case Law
Clear Technical Specifications: Bollard load capacity, material, and environmental resistance must be explicitly defined in contracts.
Installation Accountability: EPC contractors are often liable for incorrect installation or welding.
Comparative Liability: Tribunals frequently apportion damages when multiple parties contribute to defects.
Maintenance & Testing Evidence: Load tests, inspection reports, and corrosion assessments are critical evidence.
Warranty Enforcement: Suppliers are accountable for non-compliant bollards under performance guarantees.
Arbitration as Preferred Forum: Technical complexity and high-value LNG operations make arbitration preferable over court litigation.
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