The Italian company Salino Impregilo, as an investor and not as member of the construction consortium, is claiming the Panamanian government for a $2.2 billion payment for alleged loss of ROI and compensatory damages.
At a time when the third set of locks is 91% complete, the Italian company Salino Impregilo is arguing that "... as a result of the alleged violations (agreement on the Promotion and Protection of Investments signed in 2009 between the two countries) the company suffered in their role as "Investor" - additional costs in 2000 estimated 2.2 billion dollars.
The agreement between the Panama Canal Authority and the consortium GUPC has been framed within the conditions of the original contract and rules out paying for cost overruns which are outside of the contract.
The Third Set of Locks project will be completed within the terms of the contract, as the Panama Canal Authority has demanded since the beginning.
The Canal Authority has reported that the preliminary agreements reached days ago have failed to materialize.
The ACP considered this week "critical" in making a decision whether to restart the project restarting as soon as possible.
From a press release issued by the Panama Canal Authority:
Panama City, February 18, 2014. - The Panama Canal Authority (ACP) reports that despite its efforts to agree with Grupo Unidos por el Canal (GUPC) to reviving the works on the Third Set of Locks, the positions between the parties remain far apart.
The former president of Sacyr reportedly stated that the Spanish construction company mismanaged the claims for cost overruns stemming from the problems with the concrete used for the work.
According to an article in Laestrella.com.pa, Luis Del Rivero, ex president of the Spanish company Sacyr, said "You cannot go for two and a half years without having resolved an issue, if an advance has been given, and you live with the terms of the advance, you can not then put a gun to someones head to demand more money. "
Grupo Unidos por el Canal has announced the suspension of works, with suppliers and workers appearing as the first victims.
There are about three hundred subcontractors and suppliers to the construction consortium GUPC and about 3000 workers, the first to be directly affected by the stoppage of work on the expansion of the Canal, as the company declares insolvency after being unable to pay debts and wages.
The Panama Canal Authority has reported that the consortium GUPC has ceased trading and it is making preparations to be able to carry on the project under its own management.
The main challenge now facing the Canal Authority (ACP), is "not to make any false move that could cause the loss of the performance bond of $400 million, deposited with the insurer Zurich American," according to an article in Prensa.com.
The construction consortium is insisting that the Panama Canal Authority cofinance the $1.6 billion cost overrun while they wait for a decision from the arbitration process over who should pay.
Despite the optimism expressed by President Martinelli himself over the latest timeframe to be agreed, negotiations between the consortium Grupo Unidos por el Canal (GUPC) and the Panama Canal Authority (ACP), have been called off, even though both sides have said they will continue to seek solutions to the problem.
The Zurich insurance company will not disburse the bond to complete the work if the ACP terminates the contract with the consortium Grupo Unidos por el Canal.
The insurance firm Zurich, which holds a performance bond for the work for $400 million, would not be willing to honor the guarantee if the Canal Authority completes the work using another contractor, part of the ACP's plan B which it is considering.
The construction consortium has rejected the proposed solutions one by one, as they know that being replaced would be more expensive for the ACP than to acquiesce to its demands.
The alleged light at the end of the tunnel that led to an agreement in principle to resolve the alleged illiquidity of Grupo Unidos por el Canal (GUPC), was dimmed when the consortium led by Sacyr and Impregilo returned to its extremist position: Pay the overruns of $1.6 billion, or the works will be halted.
The construction consortium has not carried out its threat to stop construction work at the end of the prescribed period, while Canal Administration prepares to take on the project.
And on Monday there were revelations of another proposal by consortium Grupo Unidos por el Canal (GUPC) for the continuation of the work, which was that the parties in conflict co-finance the so-called contingency costs, while they wait for a decision from the arbitration proceedings established in the contract, over who should pay.
The Consortium announced that for now it will not suspend the works, but the ACP is warning that the pace of construction has dropped by 70%.
The consortium Grupo Unidos por el Canal, led by the Spanish Sacyr announced it will postpone the work stoppage until the Panama Canal Authority (ACP) agrees to assume cost overruns, but in the view of the ACP there is violation of the contract because the low levels of production have no justification.
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