Sacyr Denied Compensation for Panama Canal Works

Strong disappointment at the helm of the Spanish multinational Sacyr, which, despite the challenges, hoped for more traction in its solo compensation claim against the Republic of Panama for allegedly breaching their economic agreement for the Canal expansion works. Specifically, the construction company demanded up to 1.7 billion euros for the cost overruns of the work carried out between 2009 and 2016 to launch the third set of locks – inaugurated in 2016 – of this colossal project linking the Atlantic and Pacific Oceans.

The Arbitral Tribunal of the United Nations Commission on International Trade Law (UNCITRAL) dismissed on Friday even initiating the arbitration requested by the company against the Central American state, in a decision that included a dissenting opinion. Nevertheless, Sacyr asserts it will continue to pursue claims against Panama before another arbitration tribunal based in Miami (ICC), this time alongside its partners in the project, the GUPC consortium formed by other international construction firms.

The legal nuance in this case that most interested the company led by Manuel Manrique was that in the preliminary stages of the UNCITRAL process, this arbitration tribunal had accepted in 2022 that the actions of the Panama Canal Authority (ACP), operator of the infrastructure and promoter of its expansion project, could be directly attributed to this Central American state, thus potentially elevating the claim due to the alleged breach of the Agreement on Reciprocal Promotion and Protection of Investments between Spain and Panama (APPRI). However, with the refusal to delve into the substance of the matter now, even a hypothetical compensation for the Canal expansion a decade ago could not be specified, with an expected solo gain of around 1 billion.

The truth is that the claims filed so far by these companies have been a real fiasco, as in September 2020, the International Chamber of Commerce (ICC) imposed the forced return of 240 million dollars (206 million euros at the exchange rate then) to the Panamanian authorities in one of the several lawsuits both parties have exchanged in recent years. Their defeats in this legal battle, where the consortium's claims approach 3 billion dollars, have so far resulted in a negative balance of 272 million dollars (about 251 million euros).

In any case, Sacyr's management wanted to emphasize that the decision of this arbitration tribunal, based in Washington and linked to the UN, has no negative impact on its accounts. In fact, they stress that future decisions of the awards before the ICC will have a positive impact on their annual results, as everything is already provisioned in them. Thus, they hope to minimize the probable negative impact the news might have on the markets next Monday.