Russia’s Arctic LNG 2 escalates legal fight with South Korean shipbuilder

South Korean shipbuilder Hanwha Ocean is facing a new international arbitration claim of about 1.37 trillion won ($1 billion) from LLC Arctic LNG 2 over three ice-breaking LNG carriers ordered for Russia’s Arctic LNG 2 project.

Arctic LNG 2 filed the claim with the Singapore International Arbitration Centre (SIAC) on Sept. 1, alleging that Hanwha Ocean breached “Step In Agreements” linked to shipbuilding contracts the company terminated in 2022. The claim amounts to 22.2% of Hanwha Ocean’s consolidated equity of 6.175 trillion won at the end of 2025. The $1 billion figure is preliminary, with the claimant saying the amount could exceed that sum as the arbitration proceeds, according to the iMarine news portal.

The dispute stems from contracts signed in October 2020 by Daewoo Shipbuilding & Marine Engineering, now Hanwha Ocean, with three Russian shipowners — Elixon, Azoria and Glorina — for three 172,500-cubic-meter Arc7 ice-breaking LNG carriers. The contracts were worth about $850 million, with delivery scheduled by July 31, 2023.

Western sanctions imposed after Russia’s invasion of Ukraine disrupted the contracts, prompting the shipyard to terminate them in May, July and November 2022.

The three shipowners subsequently launched separate SIAC arbitration proceedings in May 2023, seeking fulfillment of the contracts and damages of up to 1.159 trillion won ($862 million). That case remains unresolved, with written submissions and evidence still being exchanged in 2026.

The new case is separate because Arctic LNG 2 was the intended charterer rather than the direct contracting party. It has instead based its claim on alleged breaches of the Step In Agreements, which allowed a third party to exercise certain contractual rights if the original parties failed to meet their obligations.

Hanwha Ocean said it would constitute an arbitral tribunal and submit its defense under SIAC rules while continuing to seek an amicable settlement. The company said the claim could change during the proceedings.

Industry insiders said the two cases would have to be assessed separately but warned that the continuing disputes could prolong legal uncertainty surrounding Hanwha Ocean’s Russia-related operations.

By Tamilla Hasanova