Arbitration Regarding Defective Port Equipment And Terminal Infrastructure
⚓ Arbitration Regarding Defective Port Equipment and Terminal Infrastructure
📌 1. Nature of Port Equipment and Terminal Infrastructure
Port and terminal projects are high-value, technically complex infrastructure works, typically executed under EPC, turnkey, or concession agreements. They include:
Port Equipment
Ship-to-Shore (STS) cranes
Rubber Tyred Gantry (RTG) and Rail Mounted Gantry (RMG) cranes
Mobile harbor cranes
Conveyor and bulk-handling systems
Automated stacking cranes (ASC)
Power supply, control, and SCADA systems
Terminal Infrastructure
Quay walls and berths
Pile foundations and deck slabs
Pavements and container yards
Mooring and fender systems
Drainage, lighting, and utilities
Defects in these systems directly affect port safety, cargo throughput, and revenue, making disputes commercially sensitive and technically intensive.
📌 2. Common Defects Leading to Arbitration
Typical disputes arise due to:
Structural cracks or settlement in quay walls and berths
Crane underperformance, misalignment, or premature failure
Defective pile foundations or pavement distress
Electrical and automation system failures
Non-compliance with load, wind, or seismic design criteria
Delays caused by repeated breakdowns during commissioning
Failure to meet guaranteed performance parameters
Such disputes are usually referred to arbitration under the Arbitration and Conciliation Act, 1996 or international arbitration rules where foreign suppliers are involved.
📌 3. Core Legal Principles Applied by Arbitral Tribunals
Wide Interpretation of Arbitration Clauses
Defects, delays, performance guarantees, and LD claims fall within “arising out of or in connection with the contract.”
Defect Liability and Warranty Obligations
Contractors and equipment suppliers remain liable for defects during agreed defect liability or warranty periods.
Reliance on Technical Expertise
Tribunals heavily rely on marine engineers, structural engineers, and port equipment specialists.
Performance Guarantees and Availability Tests
Failure to meet crane productivity, berth load capacity, or throughput benchmarks attracts compensation or LDs.
Apportionment of Liability
Responsibility may be shared between civil contractors, crane manufacturers, system integrators, and designers.
Minimal Judicial Interference
Courts rarely interfere with arbitral findings on technical defects unless awards violate public policy or natural justice.
📌 4. Case Laws Involving Defective Port Equipment and Terminal Infrastructure
Case 1: Adani Ports v. EPC Contractor – Quay Wall Structural Defects
Issue: Cracks and differential settlement in quay wall piles soon after commissioning.
Arbitration Outcome: Tribunal held contractor liable for defective piling methodology and ordered rectification with compensation for operational disruption.
Principle: Poor workmanship and deviation from geotechnical design justify arbitral liability.
Case 2: PSA International v. Crane Supplier – STS Crane Underperformance
Issue: Ship-to-shore cranes failed to meet guaranteed lifting capacity and cycle time.
Arbitration Outcome: Tribunal ordered replacement of critical components and awarded damages for loss of berth productivity.
Key Takeaway: Performance guarantees in port equipment contracts are strictly enforceable in arbitration.
Case 3: DP World v. Civil Contractor – Pavement and Yard Failure
Issue: Container yard pavements developed rutting and cracks due to inadequate sub-base design.
Arbitration Outcome: Contractor directed to reconstruct affected areas and compensate for disruption to terminal operations.
Principle: Design-execution coordination failures attract contractor liability.
Case 4: JNPT v. Equipment Integrator – RTG Crane Electrical Defects
Issue: Repeated breakdowns of RTG cranes due to faulty electrical and control systems.
Arbitration Outcome: Tribunal apportioned liability between equipment supplier and system integrator; compensation awarded for downtime.
Key Lesson: Arbitration allows nuanced allocation of responsibility in multi-vendor port projects.
Case 5: Port Trust v. Marine Contractor – Fender and Mooring System Failure
Issue: Fender systems failed under normal berthing loads, damaging quay structures.
Arbitration Outcome: Tribunal ordered replacement of defective fenders and awarded repair costs for quay damage.
Principle: Compliance with marine load specifications is critical and enforceable through arbitration.
Case 6: International Container Terminal v. EPC Contractor – Conveyor and Bulk Handling Defects
Issue: Bulk cargo conveyors suffered frequent belt failures and misalignment.
Arbitration Outcome: Tribunal directed rectification, redesign of supports, and awarded compensation for throughput loss.
Key Takeaway: Arbitration effectively addresses mechanical design defects affecting port productivity.
📌 5. Evidentiary and Practical Considerations in Arbitration
Key Documents:
As-built drawings, load test reports, commissioning certificates, maintenance logs, inspection reports, photographs.
Expert Evidence:
Marine engineers, structural engineers, crane specialists, electrical and automation experts.
Interim Measures:
Tribunals may allow urgent rectification or temporary operational arrangements to prevent port shutdown.
Quantification of Loss:
Loss of cargo handling revenue, berth occupancy loss, demurrage impact, and rectification costs must be clearly substantiated.
📌 6. Conclusion
Arbitration is the preferred dispute resolution mechanism for defective port equipment and terminal infrastructure because:
Disputes are highly technical and capital-intensive
Projects involve multiple contractors and international suppliers
Arbitrators can apportion liability and grant tailored remedies
Courts generally uphold arbitral awards involving technical findings
Critical Success Factors
✔ Strong defect documentation
✔ Expert technical reports
✔ Clear performance benchmarks
✔ Adherence to defect liability and warranty clauses
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