KUALA LUMPUR (Nov 7): Southern Steel Bhd (KL:SSTEEL) said it has settled its legal dispute over the construction of a hot rolled coils (HRC) plant with Italian plant builder Danieli & C Officine Meccaniche SpA, which started in August 2016.
The parties have inked a settlement agreement on Wednesday, it said, under which Danieli agreed to pay Southern Steel’s wholly owned Southern HRC Sdn Bhd (SHRC) €42.48 million (RM187.08 million), which comprises €35.48 million for the HRC plant and €7 million for related spare parts and equipment on an “as is where is” basis.
In return, SHRC will transfer ownership of the plant to Danieli.
Both parties will also withdraw the respective legal proceedings initiated by them, ending the more-than-eight-year-long dispute.
SHRC will also grant one-year access to Danieli for the Italian company to dismantle and remove the plant from SHRC’s site.
The legal battle began when SHRC in 2016 terminated the contract it awarded Danieli to design and build a plant for the production of HRC, as well as a services agreement, claiming it had failed to fulfil its contractual obligations. This pushed the parties into arbitration.
In 2019, the Singapore Tribunal ruled in favour of SHRC and ordered for the contract and services agreement to be rescinded. It also ordered Danieli to repay SHRC the contract price of €92.7 million — minus €15 million and RM270 million in the plant’s diminution in value, which would work out to about RM99.15 million based on the latest exchange rate — as well as RM176.25 million in damages. SHRC, in return, would transfer the plant, together with equipment installed thereon, to Danieli.
In 2022, the Singapore Court of Appeal affirmed the tribunal's ruling but set aside the RM176.25 million damages awarded.
Shares of Southern Steel closed up two sen or 4% to 52 sen, giving it a market capitalisation of RM310 million.