Panama Canal dispute over expansion delays going to arbitration

Friday, June 7, 2013

The legal dispute between the consortium responsible for expanding the Panama Canal, Grupo Unidos por el Canal (GUPC), and the Panama Canal Authority (ACP) will be resolved in arbitration, according to information provided to BNamericas by the ACP.

"In accordance with the procedure set out in the contract, the ACP has denied the claims submitted...and GUPC is permitted to appeal to the Dispute Review Board [DRB]," stated the ACP.

Last year, GUPC presented a claim for US$588mn due to delays on the construction of the third set of locks, the largest project under ACP's US$5.25bn canal expansion plan.

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GUPC has claimed that it is not responsible for the delay to the works, which will incur a financial penalty.

The consortium argued that the delays arose due to the ACP's repeated rejection of the type and mix of cement that should be used to cast the lock structures.

ACP denied GUPC's claim citing "the contract clearly establishes that the quality of the cement aggregate and the responsibility to produce it rests entirely with GUPC, not ACP."

In terms of the design of the cement mix, "GUPC did not produce the necessary documentation, in accordance with the contract, for the revision of the mix, nor its approval," according to the ACP.

GUPC "has not proven, in any way, the amount sought in its complaint," the canal authority said.

Under the terms of the contract, the dispute will be referred to the DRB, an international dispute resolution mechanism, and should either party disagree with the resolution, the final decision will be made by the Arbitration Tribunal in accordance with rules laid out by the International Commerce Chamber.

The Panama Canal expansion is expected to be operational by June 2015, a delay of almost six months from the original schedule.