It is generally presumed that big arbitrations generally go to New York or London. However, the case between the Panama Canal Authority ("ACP") and the contractor consortium constructing the Panama Canal known as Grupos Unidos por el Canal ("GUPC") have recently begun preliminary discussions for arbitrating their $1.6 billion dispute regarding alleged cost overruns on the largest infrastructure project in the Western Hemisphere.
Photograph taken from news.nationalgeographic.com July 31, 2014
Miami's legal community has focused over the past 15 years on developing the expertise and venues to handle arbitration cases, particularly for disputes arising in Latin America. This is especially important, as Miami has the legal expertise, the language capabilities and the cultural experience to handle disputes arising out of Latin America.
The Dispute at Issue
According to previous statements from ACP and GUPC, the disagreement began in 2012, three years after GUPC beat out Bechtel with a lower bid and began building a series of larger canal locks to accommodate larger ships. GUPC is comprised of Sacyr Vallehermoso, a Spanish contractor leading the consortium, Impregilo of Italy, Jan de Nul of Belgium and CUSA of Panama.
In October 2012, GUPC filed a claim for $585 million in unforeseeable concrete design changes. ACP rejected the claim and it was submitted to the Dispute Adjudication Board of the International Chamber of Commerce ("ICC").
The ICC had yet to ruled when GUPC presented a disruption claim for $900 million December 23, 2013. A week later, GUPC threatened a work stoppage starting January 20, 2014 if ACP did not pay the combined claims, which amounted to half of the original project cost.
ACP claimed a breach of contract and insisted on holding GUPC to its original bid of $3.2 billion.
Work stopped for a few weeks in February, then resumed at a 30 percent level because GUPC did not have the cash flow to rehire all of its subcontractors. A breakthrough came March 15 when insurer Zurich North America provided a $400 million surety bond, and GUPC and ACP each put up matching funds of $100 million.
The parties will discuss scheduling this week and negotiate the rules of the road on how to proceed with the exchange of information. The parties are following the ICC rules.
One way or another, the Panama Canal expansion will get done, and the project partners will settle their differences, but what international arbitration experts will remember is they worked out their problems in Miami.
If you are interested in learning more about the details of this unique arbitration or wish to contact me in general, you may do so at mov@chaloslaw.com.