SHIP25 – A New Standard Form Shipbuilding Contract for a New Era

In 2024, a revision project was therefore initiated. Negotiations were carried out between the Norwegian Shipowners’ Association and Nordisk Defence Club, representing the shipowners' interests, and the Norwegian Shipbuilders and Wikborg Rein, representing the builders' interests. The result is SHIP25.

SHIP25 is not merely a facelift of SHIP 2000. It is a comprehensive revision, designed to address today’s regulatory, technological, and commercial realities. At the same time, SHIP25 is built on the same fundamental principles as SHIP 2000, making it a true part of the long standing tradition in Norway for balanced, agreed form shipbuilding contracts. A selection of  new features in SHIP25 is highlighted below.

Project Management

Recognising that shipbuilding requires close cooperation, SHIP25 modernises the procedures for project management. The builder must now give the buyer electronic access to drawings and documentation, after which the buyer – just as under SHIP 2000 – must provide approvals or comments within fixed deadlines. 

In line with what is generally market practice already, the builder must also provide the buyer with preliminary schedules, followed by detailed schedules, and – throughout the performance of the contract – monthly progress reports. Each report must include:

• The updated status of construction progress,
• An amended building schedule (if applicable),
• A comparison of actual progress against the building schedule, including completion percentages of major components,
• A list of agreed modifications or changes,
• Photographs documenting construction progress (where relevant), and
• The status of major subcontractors’ deliveries and services, including any major issues.

The aim is to keep the project on track and bring issues to light at an early stage.

The roles and responsibilities of the buyers' representatives have also been clarified in SHIP25. Under SHIP 2000 the buyers' representatives were required to notify the builder of errors discovered during the build. In SHIP25, it is clarified that failure to provide such notices may result in the buyer becoming responsible for additional costs and time unnecessarily caused by the missing notification from the buyer. 

Liability regime for subcontractors designated by the buyer

In general, the builder is responsible for delays, defects and deficiencies caused by subcontractors as if they were caused by the builder itself. In practice, builders are often required under shipbuilding contracts to procure supplies from a specific supplier designated by the buyer. In these cases, there is little the builder can do to manage the risk of delay. SHIP25 responds to such situations by establishing a more balanced liability regime for such supplies, incentivising buyers to allow builders at least two choices of subcontractor for each supply. 

Refund Guarantees

Refund guarantees are a key feature of any shipbuilding contract; they secure the buyer’s right to refund of pre-delivery instalments in the event of termination. In SHIP 2000, however, they were only lightly regulated. SHIP25 responds by requiring the parties to include the terms of refund guarantees in an appendix, with default terms applying if they do not. The builder must also ensure that the guarantees remain valid until actual delivery, even where delays arise. If the builder fails to renew a guarantee within 45 days of its expiry, the buyer may terminate the contract and call on all guarantees. In this way, the buyer is protected throughout the construction period.

New Compliance Clauses

Compliance has become a defining feature of modern shipping. SHIP25 therefore includes new provisions on safety and human rights, anti-bribery and corruption, cyber security, and export controls and sanctions. These clauses ensure that the contract is aligned with today’s compliance landscape in a balanced and practical manner. Key elements include:

Safety and Human Rights

The builder must construct the vessel in compliance with applicable health, safety, and environmental laws. The buyer may carry out audits at the builder’s premisses to assess compliance, and the builder must notify the buyer in writing of any serious incidents. If the buyer is subject to the Norwegian Transparency Act, the builder must cooperate as necessary to enable compliance.

Anti-Bribery and Corruption

Both parties must comply with applicable local and international anti-bribery and corruption laws when performing their rights and obligations under the contract.

Export Controls and Sanctions

Both parties must warrant compliance with applicable export control laws and sanctions. Breach of these warranties entitles the non-breaching party to terminate the contract, in some cases after a rectification period. In cases where termination is not due to a party itself becoming sanctioned or violating sanctions, SHIP25 provides for a balanced outcome in which the parties share the resulting loss, recognising that the current geopolitical climate may lead to contractual breach situations where none of the parties in reality are to blame.

Opt-Ins

Shipbuilding projects differ in character, and may require different contractual structures. To accommodate this, SHIP25 introduces several notable opt-ins:

Design Responsibility

By default, the builder assumes full responsibility for the vessel’s design as under SHIP 2000. In practice, vessel design is often provided by a separate designer under a design contract.  In such cases, the parties may alternatively agree to limit the builder’s liability for design to the terms of that design contract. This may reduce the contract price for a vessel, encourage the use of specialist designers, and allow a broader range of shipyards to compete for the shipbuilding project, including those without in-house design capability.

Progressive Title

By default, the builder retains ownership of the vessel until delivery, with the buyer making pre-delivery instalments against refund guarantees. Alternatively, the parties may agree that the buyer acquires progressive title as construction advances. This presupposes that progressive title can in fact be registered in the relevant jurisdiction – a possibility in Norway, but not in many other jurisdictions. Where available, such an arrangement removes the need for refund guarantees and ensures that the hull and materials remain outside the grasp of the builder’s bankruptcy estate and/or mortgagees. 

Price Adjustment

By default, the builder commits to a fixed contract price for the vessel on signing of the shipbuilding contract. Alternatively, the parties may adopt two price adjustment mechanisms:

Index Regulation: The contract price is adjusted if the aggregate increase in a defined reference index between signing and delivery exceeds a pre-agreed threshold. This enables the parties to share extraordinary inflation risk.

Budget Pricing: The parties agree budget prices for specified systems, components, or materials, deferring the buyer’s final decision until after signing. Provided the decision is made within the agreed timeframe, the builder undertakes to supply at cost plus an agreed mark-up. This gives the buyer flexibility and spares the builder from pricing in uncertainties at the outset.

Arbitration

Disputes are an unfortunate yet inevitable aspect of shipbuilding. SHIP25 retains arbitration as the chosen method of dispute resolution, but moves away from ad hoc proceedings. Instead, it adopts the Nordic Offshore and Maritime Arbitration Association (NOMA) Arbitration Rules by default, with claims not exceeding NOK 5,000,000 falling under the NOMA Fast Track Arbitration Rules. In this way, SHIP25 facilitates a structured, efficient, and pragmatic Nordic approach to resolving disputes.

Closing Remarks

Much has changed in the shipping industry since 2000. Building on the solid foundations of SHIP 2000, SHIP25 responds to these developments with a modern and balanced contractual framework. It is therefore well placed to carry forward the success of its predecessor and to remain the reliable, go-to standard form shipbuilding contract for shipbuilding projects in the Nordics and beyond.

Joint newsletter from Nordisk Defence Club and Wikborg Rein. Benedicte Urrang, Magne Andersen, Peter Jebsen & Morten Valen Eide