Shipbuilding technology transfer: challenges and opportunities

English

by Khaled Faouri, General Counsel of Etihad Ship Building

Shipbuilders that are unable to invest enough capital to upgrade their facilities and technology could find significant benefits through strategic alliances with more technically capable shipyards to acquire technology. In some cases, leading yards might form strategic alliances in the form of JV, M&As or technical co-operation agreements, in order to strengthen their worldwide market position.

Protection of Intellectual Property Rights (IPRs)

The need to protect IPRs appears at an early stage in the relationship between yards and their suppliers. Yards have a need to disclose technical requirements and solutions in order to safely calculate the project both under technical and commercial terms. Shipyards also have to share their knowledge with classification societies, which perform a variety of functions. The relationship between yards and ship-owners is equally characterized by a direct and broad exchange of knowledge-based details of the vessel.

Today, copyrights, registered designs and patents are the main instruments to protect IPRs, with the need to take additional measures to ensure compliance with related IP provisions in the IP laws of the hosting country and to ensure these IP provisions are enforceable.

 Joint Ventures in Shipbuilding Sector

Every country with a coastline considers some kind of naval military capability as an absolute necessity. Wherever possible these naval vessels should be produced domestically, generally through joint ventures and associated technology transfers. A successful example can be seen in the case of FINCANTIERI S.P.A‘s joint venture with Al Fattan Industries and Melara in Abu Dhabi, creating Etihad Ship Building in 2010 to become one of most important national pillars that is able to build an advanced military and commercial vessels locally through this JV.

In less than five years from its inception, ESB has strengthened its position as one of the most important shipbuilding companies in the Middle East, so that became an important vehicle for the technology transfer to local and regional partners through signing several contracts valued above 1bn dirham related to providing services to naval ships already constructed by Fincantieri to both the UAE and Iraqi Navy; in addition to new naval warships to be built in the UAE subject to an important contracts under discussion that will result into complete transfer of technology program to local shipyards.

Recommendations

These kind of projects are strategic to both local shipyards who wish to develop its capabilities and expertise, and to the technology partner who wish to expand market share and save competitiveness by securing and protecting its IPRs. The agreement on technology transfer cannot by itself only guarantee reaching the purpose of the joint venture, especially to the local partner who wishes to enhance his capabilities, without taking real steps on the ground to implement such agreements. Provided however, both parties are subject to certain legal arrangements such as strong corporate governance and internal shareholders agreement to ensure protection of both parties’ best interests in reaching successfully to the purpose.

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