How to buy floating dock at the state without loss?

• Transport & Logistics
• Ports and Terminals

It may be convenient and profitable to cooperate with a state-owned enterprise.

Task

The Client, large South African holding company, set a unique task for Interlegal: legal support of the multimillion deal upon sale & purchase of a floating dock to be constructed at the state shipyard.

The first specification of the task was cooperation with the state shipbuilding enterprise (Kherson State Plant “Pallada”, Ukraine).

The second specification featured long-time relations between the partners. For instance, preliminary negotiations lasted for three years, resulting in agreement between the Buyer and the Manufacturer on a composite floating dock supply, a total cost of several millions USD. As for November 2015 (i.e. at the moment of Interlegal lawyers engaged), the dock readiness made up 70%, while its further construction required for large financing.

Solution search

To attract financing for the dock construction, the Seller, previously engaged in opening a credit line, joined the deal, jointly with concluding trilateral Sale & Purchase Contract.

The Seller acted on the grounds of the Commission Agreement with the Manufacturer, whereunder the Manufacturer (the Principal) undertook to manufacture the dock and authorized the Seller (the Commissioner) to supply the complete dock to the Buyer under the present Contract.

Payment under the Contract included two stages:

• advance payment by means of direct bank transfer;
• balance payment by means of direct bank transfer after issuing the Bill of Lading fixed by the seal of state border control authorities.

In order to secure payment obligations, the Buyer issued in favour of the Seller irrevocable standby letter of credit for the period of arranged dock supply terms.
The Contract was governed by English law.

Result

The solemn ceremony of signing the Contract was held in late 2015 at SC “Ukrspecexport” who acted as the guarantor for the fulfillment of the Ukrainian shipbuilder’s contractual obligations. Nearly one-year hard work of the parties upon arranging complex technical, commercial and legal terms of the deal was over.

In our opinion, teamwork between the Parties’ representatives with their lawyers’ support is a positive example of public-private partnership in international trade, which gives hope for the successful completion of even similar projects in the future.

Our principles of cooperation with clients do not allow us to disclose company names and other confidential information.