In principle there is a design element in the whole spectrum of yacht (‘Y’) building activities, ranging from concept design to appearance, functional criteria, detailed design, choice of materials and methods of work. Unspecified design work inevitably results in consequences which are only realised following construction. The combined impact of unspecified design work in aggregate can result in radical changes in the:
· Planned and priced volume of materials incorporated in the yacht (‘Y’).
· Specified deadweight tonnage (‘DWT’) of Y.
· Specified speed and fuel consumption of Y.
· Specified meta-centric height of Y.
· Stability and trim of Y.
Consequently the yacht delivered by the yard on completion may be materially non-compliant with the yacht building contract. The performance of unspecified design work inevitably results in the incurrence by the Yard of extra man-hours and materials in carrying out the unspecified work, and subject to critical path impact and programmed float, in delay and disruption.
So, why mediate such disputes?
What the owner requires is a yacht which matches his needs.
What the yard needs is the time and money to deliver this.
The litigation/arbitration risks and costs in a boat building dispute can exceed the value/cost of performing the necessary extra work.
So, why not do a deal instead, by focussing on the problem, and working together to solve it, i.e. by scoping and pricing what needs to be done, and then entering into a ‘principled’ negotiation about how this additional cost is to be allocated, i.e. borne, between the owner and the yard?
Here there is a real benefit in preserving an ongoing commercial relationship, unless the yard goes out of business. The opportunity for doing a creative deal which satisfies the underlying commercial interests of each side, and which a judge does not have the power to impose, is only limited by the imagination of the parties’ legal representatives. In the experience of the author, these disputes invariably settle. So, why not think constructively from the outset about what needs to be done, and how and when that work can be performed, in order to get the yacht on the water without further delay and disruption? That is potentially a win/win scenario.
See also my International Conference Paper presented to the Royal Institute of Naval Architects in London about the ‘Legal and Commercial Consequences of Performing Unspecified Design Work in Ship-Conversion Projects’. You can download this on the ‘Publications’ page at www.carlislam.co.uk .
Note also – ‘ All seagoing vessels registered in the UK are assigned to a specific class, which defines their type of permitted use, determines which certification they must hold and specifies the inspection and survey regime required to comply with this certification. These classes are established and assigned by the Recognised Classification Societies, who also approve surveys and inspections.’ Google – Vessel classification and certification – GOV.UK (www.gov.uk). This states:
‘Large commercial yachts are defined as those vessels which are:
in commercial use for sport or pleasure 24 metres load line length or more or over 150 gross tonnes if built before 21 July 1968 carry no cargo and no more than 12 passengers are in commercial use for sport or pleasure
Certification for large commercial yachts.
The certificates that large commercial yachts must carry vary according to their gt. Further information on this can be found in Section 28 of the Large Commercial Yacht Code. You can download MSN 1792 (M) Large Commercial Yacht Code (LY2).’
As an example, the following is a methodology I developed years ago for a hypothetical major project dispute. The list of acronyms is set out below the Methodology:
(i) Factors:
‘S&T’ = Suspension (i.e. to avoid Liquidated Damages (‘LD’s’) and for non-payment) and Termination for (RA and non-payment).
‘RA’ = Risk analysis (including political risk; force majeure [‘FM’]; liability for latent defects; liability for unlimited consequential loss; and taxation e.g. if a permanent establishment is created onshore).
‘V’ = Variations (entitlement to extra time and costs e.g. for a change in specification; FM etc).
‘WBS’ = Work Breakdown Structure.
(ii) Equation:
Based upon S, input CPA into WBS = P.
Adjust P to account for: F; LD (insurance premiums); PB (cost); and RA = expected and planned Net profit (‘NP’).
Identify the gap between P and EURCO = ‘PEG’.
Adjust the PEG to account for V = Adjusted commercial outcome (‘ACO’).
The gap between ACO and NP is the deal-making zone [‘DMZ’]. The question then, is how to close the gap, e.g. by enhancing EURCO through specification (including time, design and materials changes), and project management efficiency/savings.
(iii) Accronyms:
‘CPA’ = Critical Path Analysis.
‘F’ = Float.
‘ERUCO’ = Expected revenue following commercial
operation.
‘LD’ = Liquidated damages.
‘M’ = Margin (calculated by reference to project
costs – which may be reduced if the time and money incurred in negotiating
contracts can be reduced through mediation).
‘P’ = Price.
‘PB’ = Performance bond.
‘S’ = Technical specification (including
completion date).
‘S&T’ = Suspension (i.e. to avoid LD’s and for
non-payment) and Termination for (RA and non-payment).
‘RA’ = Risk analysis (including political risk;
force majeure [‘FM’]; liability for latent defects; liability for unlimited
consequential loss; and taxation e.g. if a permanent establishment is created
onshore).
‘V’ = Variations (entitlement to extra time and
costs e.g. for a change in specification; FM etc).
‘WBS’ = Work Breakdown Structure.
If you are wondering how I developed this idea and methodology, during the 2nd year I worked in-house for Rolls-Royce, negotiating major projects in the Far East, and as a reward for the part I played in negotiating a major project contract awarded by a state utlity in Malaysia to my subsidiary of Rolls Royce, I undertook and successfully completed a one-year part-time training course provided by Rolls-Royce in-house, to its Project Managers of Major Projects around the world. I was a solicitor at the time, and Company Solicitor of the Rolls-Royce subsisdiary which had been awarded the multi-million pound contract in Malaysia. As far as I am aware, I was the first lawyer in the history of Rolls Royce, to undertake this training course. Two years later, I was recruited by Alstom to work in Paris. When I talked to my French colleagues about using a work breakdown structure in order to prepare for the negotiation of a major project they had no idea what I was talking about. During that time I also used the concept of WBS mapping, as a tool in settling commercial contract disputes, including a major project dispute with a utility in Iran.