(Bloomberg) -- The Netherlands’ largest shipbuilder is suing the Dutch government for losses inflicted on its business by sanctions against Russia, a rare instance of a European company taking its grievances to court over the corporate fallout from the invasion of Ukraine.

Damen Shipyards Group NV is seeking compensation because it “suffers damages” as a result of sanctions, the company’s spokesperson, Rick van de Weg, told Bloomberg. The case hasn’t been publicly disclosed until now.

“Before the sanctions, Damen had signed contracts with Russian ship buyers, and after the invasion of Ukraine the Dutch government decided that such contracts may not be honored by the Dutch business community,” he said via email. “The government has not offered Damen compensation for that damage.”

Damen, based in the Dutch city of Gorinchem, filed its lawsuit at the Court of Rotterdam on May 10, according to the court’s spokesperson. The case has yet to move forward but is expected to proceed next year. 

The Dutch Ministry of Foreign Affairs, which is in charge of the country’s sanctions oversight, declined to comment. As a member of the European Union, the Netherlands must comply with all the curbs imposed by the bloc.

Legal Showdowns

The legal challenge will add a new twist to courtroom battles playing out over the sanctions by focusing attention on the toll taken on businesses that catered to a market once considered among the most promising in the emerging world. 

The yacht industry in particular came under the spotlight soon after the February 2022 invasion as the US and its allies looked to punish Russian tycoons deemed close to President Vladimir Putin by going after their luxury assets. 

The Netherlands is currently keeping 23 luxury vessels and several aircraft under surveillance in relation to sanctions against Russia and Belarus, according to Dutch government data.

Damen Shipyards is a family-owned Dutch company founded in 1927 that builds a range of vessels, from warships to dredgers. 

It’s also been selling luxury yachts to the ultra-rich, including prominent Russian businessmen like Oleg Tinkov, a onetime billionaire who recently had UK sanctions against him lifted after denouncing the invasion. Damen was repairing a yacht linked to Russian oligarch Roman Abramovich at the start of the war, according to the Guardian newspaper.

The company wouldn’t comment on its clients. 

Company Footprint

Damen had an engineering branch in Russia before the war, which provided services for shipbuilding projects next to “service hubs” in Novorossiysk and St. Petersburg. Days before Putin ordered the attack on Ukraine, Damen delivered a dredger to Russia for use in the Arctic region.

The war was “having a major impact” on the company, according to a statement last year. Within a week after the invasion, Damen said it had suspended the delivery of vessels and the signing of new contracts with Russian and Belarusian clients. 

The company also said it expected to be “hard at work on finding solutions for the vessels already under construction and on the associated legal procedures.”

It isn’t clear what, if any, presence it still has in Russia. The company didn’t respond to questions about its current operations there. 

Damen closed its operations in the Ukrainian cities of Kherson and Mykolayiv after the invasion, with one of its workers killed, and said it evacuated hundreds of Ukrainian employees and their relatives to safety abroad. 

Despite saying it suffered because of sanctions, Damen notched strong results last year even as it blamed the measures against Russia for a decrease in the number of completed vessels. 

Still, the production value reached a record €2.5 billion ($2.6 billion) in 2022, according to a statement earlier this year. The order book matched the record of €8.8 billion a year earlier. 

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