Samsung Heavy to sue Russia's Zvezda for 'illegal' equipment contract termination

Home > Business > Industry

Samsung Heavy to sue Russia's Zvezda for 'illegal' equipment contract termination

Published: 18 Jun. 2025, 20:39 Updated: 19 Jun. 2025, 20:46

Audio report: written by reporters, read by AI

A liquefied natural gas carrier manufactured by Samsung Heavy Industries [SAMSUNG HEAVY INDUSTRIES]

Samsung Heavy Industries said Wednesday it will file a lawsuit against Russia's largest shipbuilder, Zvezda, for "illegally" terminating shipbuilding equipment supply contracts worth 4.85 trillion won ($3.5 billion). The Korean shipbuilder has also moved to seek damages through international arbitration.

In 2020 and 2021, Samsung signed contracts with Zvezda Shipbuilding Complex to supply parts and steel hull blocks for 10 icebreaking liquefied natural gas carriers and seven shuttle tankers.

Under the agreement, Samsung would produce the blocks and ship them to Russia, where Zvezda would assemble the final vessels. Zvezda is located in Bolshoy Kamen in the Russian Far East and is considered the country’s most advanced shipyard.

Russian President Vladimir Putin, center, and Russian CEO of Rosneft oil company Igor Sechin, right, visit Zvezda Shipbuilding Complex in the Bay of Bolshoy Kamen, in the far eastern region of Primorsky Krai, Russia, on Sept. 11, 2023. [AP/YONHAP]

The joint project came under pressure following Russia’s invasion of Ukraine in 2022. That year, the U.S. government designated Zvezda as a Specially Designated National, effectively banning any transactions involving U.S. persons or entities with the shipyard.

As a result, Samsung and Zvezda suspended design work and entered talks to resolve the status of the contract.

However, in June 2024, Zvezda unilaterally claimed Samsung had defaulted on its obligations and moved to cancel the agreement.

Samsung pushed back, calling the cancellation unlawful and initiating arbitration proceedings at the Singapore International Arbitration Centre.

With the war dragging on for over three years and the business outlook worsening, Samsung announced its own termination of the contract.

The company has withheld $800 million in advance payments it previously received and notified Zvezda that it would seek additional compensation for damages.

“We are in the process of assessing the damage caused by the unlawful cancellation,” a Samsung Heavy Industries representative said. “We intend to prove the illegality of the termination and recover rightful compensation through international arbitration.”

A view of the Zvezda Shipbuilding Complex in Bolshoy Kamen, located in the Russian Far East, as shown in this photo uploaded to Zvezda's website. [SCREEN CAPTURE]

Industry watchers say the fallout for Samsung is likely limited. Since the project stalled during the early design phase, the shipbuilder incurred few material costs, including equipment purchases.

The ships were to be assembled in Russia, meaning Samsung had not allocated any of its own dry docks for the work.

“The impact should be minor, given how early the project was suspended,” said a local shipbuilding industry insider.

“And considering the contracts were signed before the super-cycle in shipbuilding began, the price terms weren’t especially favorable. Walking away from the deal could actually be advantageous for Samsung.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY OH SAM-GWON [[email protected]]