Western Marine Shipyard's deal with the Dubai-based company Al Rashid Shipping Ltd could have been a testament to Bangladesh's craftsmanship – with three made-in-Bangladesh vessels carrying the UAE flag traversing the seas and delivering goods across the globe.
But, instead, the deal signed in 2018 ended up in a very expensive lawsuit.
Al Rashid Shipping filed an admiralty suit against Western Marine, demanding a refund of around $5 million and accusing the Bangladeshi shipyard of missing its delivery deadline.
In a petition submitted to the High Court in June last year, Al Rashid Shipping stated that the demanded sum included payments made so far, expenses incurred, loss of profit, interest, and legal expenses. It had already cancelled the contract with Western Marine on 18 May 2020.
Al Rashid Shipping had signed two agreements worth more than $5.9 million with the Bangladeshi shipyard for the fabrication, construction, installation of machinery, launch and delivery of a 67-metre AHTS vessel and two 6,500 tonne deadweight (DWT) tankers, maintaining all international standards.
Though Western Marine Shipyard was contractually obligated to deliver all three vessels to the Dubai-based company within 18 months of the first stage payment, the shipyard did not even begin to construct the ships. It took payments of more than $1 million, though.
The deal was signed on 4 October 2018, but Western Marine has only managed to fabricate a plate since then. After signing the deal, Al Rashid paid $500,000 as the first stage payment for the AHTS vessel on 17 October 2018, and $340,000 for the two tankers on 7 February 2019.
Instead, the company paid their workers arrears, their employees Eid bonuses and other bills with the money sent by Al Rashid Shipping, sources told The Business Standard.
As per the contract, Western Marine could only receive the second stage payment after 25% of the steel was erected in panel or block form. But the shipbuilder kept asking for more funds from its client on multiple occasions without commencing the construction in breach of the agreement, the petition says.
Commenting on the matter, Al Rashid Shipping Ltd's lawyer Shah Muhammad Ezaz Rahman said, "We already sent a large sum of money to Western Marine Shipyard, but they have not begun building the ships as per the agreement.
"This is a matter of preserving the image of our country. The debacle has put us into a lot of difficulty."
He said, "During a hearing held last month, the High Court set 7 February for the next hearing, providing an opportunity to fix the matter amicably. However, we have yet to receive a proposal from the shipyard."
When contacted, Western Marine Shipyard's Managing Director Sohail Hasan said, "We worked according to their payment. We bought rods, imported steel, made the design, and got it approved."
The official said, "We had to pay salaries and Eid bonuses to 400-500 workers, and the electricity bills and transportation bills for the yard. To pay these expenses, we took the money as an advance, which will be adjusted with the next stage payment."
Al Rashid Shipping's petition
Despite receiving the fist stage payments for all three vessels, Western Marine did not start constructing the ships, and kept asking for more money from Al Rashid Shipping on multiple occasions – citing a lack of funds.
In the petition, Al Rashid Shipping says the shipyard had also assured it that the money would be adjusted with the next stage payments.
Al Rashid Shipping has sent $1,013,587 to Western Marine in several installments since 2018.
The Dubai-based company sent the engines and propulsion systems for the vessels from Japan, which arrived at the Chittagong port on 29 April 2019. But the ship-builder did not take the deliveries. The machinery remains at the port till this day.
On 21 May 2019, Western Marine requested Al Rashid Shipping to release the second milestone payment for the tanker project, without making any progress on the ship construction.
Three months after the engines and propulsion systems arrived, Western Marine told Al Rashid Shipping that to release the goods from the port, they needed money to pay the port's demurrage charge, CNF charges, transportation charges, and other miscellaneous expenses.
The shipyard also provided a cost estimation to the client, which then clarified that if Western Marine could show good progress, it could release the payments to help them. But the shipyard failed to show any.
Meanwhile, the validity of the warranty for the engines, gearbox and Rexpeller propellers expired in February 2020, which means Al Rashid Shipping will have to bear all risks regarding the systems because of Western Marine's negligence.
Cancellation of the agreement
On 18 May 2020, Al Rashid Shipping confirmed its decision to cancel the agreement and requested Western Marine for a refund. The ship-maker has yet to reply to this notice.
Addressing the matter, Western Marine MD Sohail Hasan said, "Al Rashid Shipping sent two engines, but we did not make any payment against the engines and did not open any LCs [letters of credit].
"For these reasons we failed to release those systems from the port. Al Rashid Shipping then sent us the required documents, but it took some time. Moreover, the process of releasing goods is a slow process in our country as the port authority and bond are related to it."
Sohail said, "We had to spend some money for the necessary documentation and needed more to release the machinery from the port. We told them [Al Rashid Shipping] that the money will be adjusted with the next stage payment. But at that stage they went to the court."
He added, "The High Court has given us the opportunity to solve the matter amicably. If we sit and try together, we will find a solution. Moreover, we will be able to reduce port charges, customs and minimise the damage."
Western Marine still wants to build their ships "as we have done before", said the official.
Commenting on the issue, president of the Association of Export Oriented Shipbuilding Industries of Bangladesh Abdullahel Bari said, "This matter is regrettable because it is not only related to the image of Western Marine Shipyard but also for the country as well.
"The image of our shipbuilding industry could be impacted. Ignominy spreads rapidly from one place to another."
Bari said, "We have to address this incident properly so that we can secure a large portion of the Middle Eastern market in the coming days. If we can create a market in the Middle East – if we create goodwill – nobody will be able to push us back."