Latvian  Shipping  Company and its direct subsidiary Latreefers Inc (in

liquidation) are the subject of proceedings brought by Stocznia Gdanska

SA  ("the  Polish  Shipyard"). The litigation, which is taking place in

the  English  courts,  arises out of six English law contracts with the

Polish Shipyard to construct six reefer vessels.



The  reefer  contracts,  entered  into in 1992, were between the Polish

Shipyard and a direct subsidiary of Latvian Shipping Company Latreefers

Inc. Latvian Shipping Company is not party to the reefer contracts, nor

a contractual guarantor of Latreefers' obligations.





A deposit of approximately 5 % of the total deal, approximately US$8.47

million in aggregate, was paid to the Polish Shipyard on signing of the

contracts.  Subsequently,  during  1993,  but before the first keel was

laid,  Latreefers  sought  to renegotiate the reefer contracts due to a

change   in   the   reefer  market.  The  Polish  Shipyard  refused  to

renegotiate,  as  it  was  contractually entitled to do, and Latreefers

decided not to perform the reefer contracts. In 1994 the latter was not

a party to the contracts.



The  court proceedings have confirmed that the Latvian Shipping Company

is  not  party  to the reefer contracts, nor a contractual guarantor of

Latreefers'  obligations.  However,  by  virtue of the Latvian Shipping

Company's  contractual arrangements with a third party (the Isle of Man

agent  which incorporated and administered Latreefers) Latvian Shipping

Company  has  been  held by the High Court to be liable in tort towards

the Polish Shipyard.



This decision has been appealed by the Latvian Shipping Company and the

judgement  of  the  Court  of  Appeal in London was awaited on June 21,

2002.



Court of Appeal in London judgement on June 21, 2001 rejected appeal of

Latvian  Shipping Company and previous High Court judgement remained in

force.  The  Polish Shipyard has asked for damages in the amount of USD

37 - 48 million as well as interest and costs of litigation.



Presently,  Latvian  Shipping  Company  considers  the possibility of a

further  appeal  to  the  House  of Lords. The possibility to file such

appeal  will become known in July, 2002 and if the appeal will be filed

it  is  not  known  when  House  of  Lords will rule and announce their

judgement.



If  such  appeal  to House of Lords is not filed or is over ruled court

proceeding  will  take  place and amount of The Polish Shipyard damages

will  be  set.  The court hearing to decide on the loss suffered by the

Polish Shipyard is expected to take place in



October  2002.  Presently  company  has  made  provisions  for possible

damages for the first 2 reefers that were built and later sold to third

parties  for  the amount US$9 million less than put in reefers contract

Latvian  Shipping Company has been advised that any judgement in favour

of  the  Polish Shipyard for remaining 4 reefers that were not built is

likely to be for an amount considerably less than the amount claimed.