Case Note, MV SAIBOS – When Does a Newbuilding Become a “Vessel?”February 2002
Case Note, MV SAIBOS – When Does a Newbuilding Become a “Vessel?”
One would be tempted to conclude that a newly built ship that sailed half way around the world under its own power having completed sea trials, received an interim class certificate, and having been accepted from the shipyard by its owners, was a “vessel” under U.S. maritime law. The Court in Hyundai Heavy Industries Co., Ltd. v. M/V SAIBOS FDS, 163 F. Supp. 2d 1307, 2001 W.L. 1149040 (N.D. Ala.), suggests, however, that appearances can be deceiving.
The SAIBOS was designed to lay pipe in deep water by means of a large tower to be installed on the ship. The ship and the tower were built in Korea. The final components of the tower were to be provided, and the tower was to be installed, by a head sub-contractor in Mobile, Alabama. The SAIBOS sailed from Korea to Mobile with the incomplete tower on board.
After the ship’s arrival in Mobile, the head sub-contractor became insolvent. The shipyard and other sub-contractors whose work on the tower was completed in Korea then arrested the ship asserting maritime liens for equipment and services provided to the ship pursuant to contracts with the head sub-contractor.
The Court applied a definitional test of a “vessel” to determine whether maritime law applied to the SAIBOS. It followed a 1919 decision of the U.S. Supreme Court holding that a newbuilding becomes a vessel when it is both completed and launched, and a vessel is not completed until it is in a condition to function as intended. The SAIBOS could not lay pipe unless the tower was installed and functioning. Thus, for purposes of contract liens, it was not a “vessel.” The Court also held that the characterization of plaintiffs' contracts as maritime or non-maritime had to be made based upon the newbuilding’s status at the time the contracts were entered into and not at the time the equipment and services were provided. Since the contracts were entered into prior to the launching and delivery of the ship, they were non-maritime contracts for the construction of a vessel and no maritime lien would arise on their breach.
The Court’s holding is fully supported by its analysis of the status of the SAIBOS at the time the plaintiffs’ contracts were entered into prior to its launching. Thus, the conclusion that the SAIBOS was not a vessel during the period following its launching should be limited to issues involving contract liens. If a crewman had been injured during the transit or the ship had been involved in a collision, the Court most likely would have found the SAIBOS to have been a “vessel.”