Alphabiz - Seoul Court Orders Korea Gas Corporation to Pay KRW 299.6 Billion to Samsung Heavy Industries Over Defective LNG Cargo Tanks

Photo courtesy of Yonhap News

[Alpha Biz= Kim Jisun] The Seoul Central District Court has ruled that Korea Gas Corporation (KOGAS) must pay approximately KRW 299.6 billion to Samsung Heavy Industries (SHI) in a lawsuit concerning defective Korean-type liquefied natural gas (LNG) cargo tanks, known as KC-1.

On January 16, the Civil Division 20 of the Seoul Central District Court, presided over by Judge Lee Sera, held KOGAS responsible in a recourse claim filed by SHI, ordering the payment of KRW 299.59 billion.

The dispute arose after defects were discovered in LNG carriers equipped with KC-1 cargo tanks. In January 2015, SHI signed contracts with SK Shipping’s special purpose companies SHIKC1 and SHIKC2 to build two LNG carriers using KC-1 tanks, which were delivered in February and March 2018. Following delivery, the carriers experienced “cold spots,” where sections of the hull dropped below the cargo tank’s minimum temperature. This led to operational halts and repair requests.

The shipowners subsequently filed a claim for damages at the London Arbitration Court, citing delayed repairs, reduced vessel value, and lost operation time. The arbitration panel ruled that SHI must pay SK Shipping USD 29 million (approximately KRW 3.9 billion), which SHI complied with.

In May 2024, SHI filed a recourse suit against KOGAS, claiming design defects in the KC-1 cargo tanks.

The court found KOGAS liable, stating that the corporation failed to fulfill its duty to ensure that the newly developed tanks met basic safety standards. The judgment explained: “KOGAS neglected its obligation to develop defect-free technology capable of ensuring fundamental safety in the newly developed cargo tanks, constituting unlawful conduct attributable to KOGAS.”

Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)