How to Handle Disputes and Conflicts with a Turkish Shipyard

Building ships at a foreign shipyard always involves a certain risk of disagreements arising during the project. Cultural differences, language barriers, and conflicting expectations can create a breeding ground for conflicts. What should Norwegian shipowners do if they end up in a dispute with a Turkish shipyard? Arbitration or court proceedings?

The most important thing is to have considered the dispute resolution mechanism already at the time of contract signing. The contract should regulate the choice of law, jurisdiction, and form of dispute resolution. In our experience, it is usually a clear advantage for Norwegian parties to agree on arbitration rather than ordinary courts. This ensures neutral handling of the dispute in a specialized forum, without the risk of local peculiarities of Turkish courts. Arbitral awards are also easier to enforce internationally than ordinary judgments.

We recommend agreeing on arbitration according to the rules of a recognized international arbitration institution, such as the International Chamber of Commerce (ICC) in Paris. The contract should specify both the jurisdiction and the language of proceedings. London and English are often a natural choice for Norwegian parties.

Turkish courts' jurisdiction

Even if the contract specifies a foreign jurisdiction, Turkish courts may still consider themselves competent to make interim decisions, such as arrest or interim measures, to protect values in Turkey. This is regulated by Turkish procedural rules.

What if arbitration is not agreed?

If the contract does not contain an arbitration clause, disputes must be resolved in ordinary courts. If the parties have not agreed on jurisdiction, Turkish courts will generally consider themselves competent as long as the shipyard is located in Turkey. However, the claimant may have the opportunity to file a lawsuit in their home country based on national jurisdiction rules. The legal framework for a dispute will then be determined by the choice of law rules in the court country. The parties can agree on governing law in the contract, but Turkish courts have the ability to apply mandatory rules in Turkish law regardless of the parties' choice of law.

Seek legal assistance early

We often see that Norwegian actors wait too long to seek legal expertise when a dispute arises. Costs increase rapidly, and escalating conflict makes amicable solutions difficult. Our clear advice is to seek assistance from an experienced lawyer with special expertise in maritime contract law as soon as a disagreement arises. In the early stages, the opportunities are good for finding commercially sensible solutions, while the parties' positions tend to lock as time goes by.

Prepare thorough documentation

In meeting with an experienced legal team, the shipowner should compile all relevant documentation and communication regarding the dispute. Review the construction contract and other agreements, technical specifications, progress plans, change orders, delivery protocols, emails, meeting minutes, invoices, etc. Organize the material chronologically and thematically. Prepare a concise case presentation with a timeline and main points. This will significantly ease the lawyer's work.

Think forward – and backward

Together with an advisor, the shipowner should consider their commercial aim with a dispute. Is the goal to complete the construction according to the contract or to rescind the purchase? Should the shipyard be given the opportunity to remedy any deficiencies, or is the trust so weakened that such cooperation is excluded? Is compensation, a price reduction, or a refund of the advance desired?

At the same time, go back in time and review correspondence and events. Has the shipowner contributed to breaches or delays themselves, for example, through late or unclear delivery of drawings? Has the shipyard required change orders for matters the buyer claims are within the original contract? Clear lines and good documentation are crucial to the outcome of a dispute.

Assess negotiation and process risks

The lawyer will be able to provide a preliminary assessment of the shipowner's legal position and likely outcome based on the available material. Based on this, a balancing of cost and benefit of potential legal proceedings must be made. In some cases, it may be worth going to great lengths to reach a settlement, rather than long and uncertain dispute resolution. In other situations, avoidance will only lead to a loss of values and rights. In any case, good advice from an independent legal advisor, grounded in solid industry knowledge, is critical to making the right choices.

Conclusion

A dispute with a foreign shipyard is never a desirable situation. But with thorough preparations, wise choices, and the right legal expertise at your back, it is fully possible to protect your interests effectively.

Sterk Law Firm has extensive experience assisting Norwegian clients in small and large construction projects at Turkish shipyards. We understand the legal and commercial context. Our lawyers are ready to advise shipowners who wish to prevent or resolve disputes efficiently.