Singapore-listed offshore services provider Otto Marine has been advised by its lawyers that the USD8.88 million claim against its wholly owned subsidiary Otto Venture is “vexatious” and that it has a good chance of defending against the arbitration.
The lawyers also advised Otto Marine that the likelihood of the entire amount of the claim being successful is low. Plus, the claimants, an undisclosed holding company and its wholly owned subsidiary, cannot justify or meaningfully quantify the full amount of the claim. Therefore, the lawyers felt that Otto Marine has more than an even chance of successfully defending the arbitration.
On 3 September 2014, Otto Ventures entered a term sheet with the claimants pertaining to the acquisition and operation of two offshore support vessels (OSVs). The claimants then commenced arbitration proceedings with the Singapore International Arbitration Centre (SIAC) against Otto Ventures, claiming losses of approximately USD8.88 million caused by Otto Ventures’ alleged breach of the term sheet by refusing to co-operate fully in securing the requisite financing for the vessels.
According to Otto Marine’s filing in Singapore Exchange (SGX), the first procedural meeting of the arbitration was held on 4 May 2015, to decide and agree on the timelines for all documents to be submitted in the arbitration.
In the meantime, the claimants had earlier, contrary to the term sheet which included an arbitration clause, issued a writ of summons against Otto Ventures for the claim as well. Otto Ventures then responded by applying successfully to the court for legal proceedings in the suit to be stayed in favour of the arbitration.
Meanwhile, Otto Ventures had also issued a loan of USD650,000 to the holding company pursuant to a loan agreement on 3 September 2014.
Under the provision of the loan agreement, the loan is payable by or on 20 December 2014 should the vessels not be transferred to a joint venture company by then. However, the holding company has so far not repaid the loan, according to Otto Marine’s filing in SGX.
Subsequently, Otto Ventures informed the claimants of its intentions to terminate the term sheet as the claimants have failed to ensure the vessels were delivered within the contractually stipulated time and the joint venture company’s failure to obtain financing.