Corrected: IM Skaugen wins arbitration against engine maker MAN Diesel & Turbo

IM Skaugen Group has won an arbitration proceeding against MAN Diesel & Turbo SE in relation to disputes on Skaugen’s purchase of 12 marine diesel propulsion systems from MAN, a Volkswagen Group affiliate.

The dispute concerned whether or not Skaugen was entitled to terminate the contract for the purchase and sale of two sets of marine diesel engines of the type 6L 48/60B with related propellers, which MAN had producted and tested in 2008-09.

“IM Skaugen believes that the MAN company has fraudulently misrepresented the fuel consumption on many, or all of, the 12 marine diesel propulsion systems sold to our company,” Skaugen said in a statement.

“We believe that the engines consume more fuel than was promised, agreed/warranted and subsequently documented by MAN in the official and required Factory Acceptance Tests (FATS). MAN has admitted to manipulating the FATs when it comes to three of our 12 marine diesel engines and this was done to conceal the excess fuel consumption. This in itself constitutes fraud,” the statement said.

The arbitration tribunal concluded that Skaugen was entitled to terminate the engine purchase contract, which Skaugen had already done in 2012, and ordered MAN to refund Skaugen its downpayment plus legal and other costs totalling around EUR6.7m ($7.45m). With the inclusion of interest on the pre-paid funds the arbitration awarded recovery of approximately $8m to Skaugen.

Skaugen said it has obtained documents showing that MAN’s fradulent manipulations have been carried out on a regular basis for more than 10 years and for many of its clients.

“MAN has since then stated that these fraudulent activities were discontinued by spring 2011, and MAN accepted a fine in Augsburg local court (dated 28 March 2013) for its unethical activities such as manipulations of FAT tests on its diesel engines,” Skaugen said.

Meanwhile, Skaugen said it has a pending litgation ongoing in Norway to enable the Norwegian courts to hear its claim for tort for the fraud committed regarding its purchase of marine propulsion systems from MAN and to recover not only its additional/excessive fuel costs on vessels currently in operation, but also other related costs and losses incurred as a result of the fraud.

Updated - removes incorrect $15m figure from opening paragraph

Posted 19 May 2017

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