Arbitration Involving Port Dredging, Reclamation, And Terminal Infrastructure Defects
1. Introduction
Port and terminal projects involve dredging, reclamation, quay construction, berths, and supporting infrastructure. Disputes often arise due to:
Defective dredging or reclamation works, causing navigational hazards or insufficient water depth.
Structural defects in quay walls, jetties, or terminal pavements.
Mechanical and electrical infrastructure failures, including cargo handling equipment and utilities.
Delays in completion, affecting port operations and shipping schedules.
Breach of warranties or defect liability obligations under EPC or turnkey contracts.
Arbitration is preferred because:
Projects are technically and environmentally complex.
Multiple stakeholders are involved: EPC contractors, marine consultants, subcontractors, and equipment suppliers.
Arbitration allows confidentiality and expert assessment, which is critical for commercial and safety considerations.
2. Typical Arbitration Issues
Dredging and Reclamation Defects
Inadequate dredging leading to insufficient navigable depth.
Improper reclamation causing settlement, erosion, or unstable reclaimed land.
Structural Defects in Terminal Infrastructure
Quay walls, jetties, and berths suffering cracks, settlement, or alignment issues.
Pavement or deck failures under heavy cargo handling loads.
Mechanical and Electrical Failures
Defective cranes, conveyors, lighting, or power supply installations.
Malfunctioning pumps, valves, or drainage systems.
Delays and Operational Disruption
Late completion affecting shipping schedules and revenue.
Warranty, SLA, and Defect Liability Disputes
Contractors or suppliers failing to rectify defects within defect liability periods.
3. Legal & Arbitration Principles Applied
Reference to Technical Standards: PIANC guidelines, ISO, DNV, and local port construction codes.
Expert Evidence: Marine engineers, structural engineers, and surveyors assess dredging, reclamation, and civil defects.
Contractual Interpretation: EPC, turnkey, and O&M contracts reviewed for warranties, defect liability, and performance guarantees.
Apportionment of Liability: Responsibility may be shared among contractors, subcontractors, and consultants.
Remedies: Rectification, replacement, compensation for operational losses, liquidated damages, or monitoring costs.
4. Illustrative Case Laws
Case 1: Dredging Depth Deficiency
Facts: Dredged navigation channel failed to achieve contractually guaranteed depth, restricting ship movements.
Arbitration Decision: Contractor liable; rectification dredging and compensation for lost operational revenue awarded.
Principle: Contractors are responsible for achieving guaranteed dredging specifications.
Case 2: Reclamation Settlement Issues
Facts: Reclaimed port area settled unevenly, causing pavement and utility damage.
Arbitration Decision: Contractor liable for poor compaction and methodology; rectification and supervision costs awarded.
Principle: Settlement or reclamation defects attract strict liability.
Case 3: Quay Wall Cracking
Facts: Newly constructed quay walls developed cracks due to inadequate reinforcement.
Arbitration Decision: Contractor and structural consultant jointly liable; rectification and monitoring costs awarded.
Principle: Structural defects during defect liability period are actionable.
Case 4: Terminal Pavement Failure
Facts: Cargo handling areas developed surface deformations due to substandard concrete and poor compaction.
Arbitration Decision: Contractor liable; tribunal ordered rectification and expert supervision.
Principle: Pavement and deck quality is enforceable under EPC contracts.
Case 5: Port Crane Installation Defects
Facts: Cranes and mechanical handling equipment installed incorrectly, causing operational delays.
Arbitration Decision: Supplier and contractor jointly liable; rectification and downtime compensation awarded.
Principle: Mechanical installation defects affecting operations are actionable.
Case 6: Delay in Terminal Commissioning
Facts: Delayed completion of berths and utilities affected shipping operations.
Arbitration Decision: Main contractor held liable for liquidated damages; subcontractors partially liable based on defective work.
Principle: Timely commissioning is a contractual obligation enforceable via arbitration.
Case 7 (Additional Example): Electrical and Drainage Defects
Facts: Terminal power distribution and drainage systems malfunctioned, causing operational disruption.
Arbitration Decision: Contractor and supplier jointly liable; rectification, replacement, and supervision costs awarded.
Principle: Electrical and drainage installation defects are enforceable under defect liability clauses.
5. Key Takeaways
Technical Expertise is Critical: Marine, structural, and mechanical experts are essential in arbitration.
Contractual Clarity Reduces Disputes: EPC and turnkey contracts should specify defect liability, warranties, and performance standards.
Shared Liability is Common: Tribunals often apportion responsibility among contractors, consultants, and suppliers.
Operational and Safety Defects Are Enforceable: Failures affecting shipping operations or structural safety attract strict liability.
Rectification and Cost Recovery: Awards frequently mandate defect rectification, replacement, and expert supervision.
Delay Damages Are Recoverable: Arbitration enforces compensation for late completion affecting port operations.
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