Lawrence Graham Urges Swift Action On Problem Deals

Thursday, July 05, 2001
Lawrence Graham says shipping companies caught up in disputes involving insolvency and receivership need not come away from the table empty-handed, provided the dispute is handled correctly. In the latest issue of its Lawgram newsletter, Lawrence Graham explains that it was recently called in to advise on the legal aspects of a dispute involving a trawler being built at Romania's Manglia yard. The yard was hit by labour disputes, and the company which placed the order for the vessel missed its repayment to the bank. There was a dispute about payment guarantees, a late-delivery claim by the Scandinavian end-buyer, a claim by the yard for outstanding construction bills, and an argument over an advance VAT guarantee paid to the Romanian authorities. The dispute was settled quickly, despite the fact that it involved five different jurisdictions, three key languages, and several corporate and financial disciplines. Lawrence Graham partner Mike Lax says, "Even business deals with seemingly cast-iron financial guarantees should be closely monitored from the start. Once it becomes clear that there is a problem, immediate action should be taken to identify and manage the risk of financial loss. And careful consideration should be given to the choice of solution. While in many cases it may be more straightforward to abandon the original deal, it might be better to simply restructure the arrangement. It can be easier to tie up existing loose ends than risk creating new ones."
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