The expansion of the Panama canal and its ruling international contract: A mega-project sailing in troubled waters?

AutorIrene Nuviala Lapieza
CargoPhD Candidate at the University of Zaragoza.
Páginas1-38
www.reei.org
DOI: 10.17103/reei.33.12
THE EXPANSION OF THE PANAMA CANAL AND ITS
RULING INTERNATIONAL CONTRACT: A MEGA-
PROJECT SAILING IN TROUBLED WATERS?
LA EXPANSIÓN DEL CANAL DE PANA Y EL
CONTRATO INTERNACIONAL QUE LA REGULA: ¿UN
MEGA-PROYECTO NAVEGANDO EN AGUAS
TURBULENTAS?
Irene Nuviala Lapieza
Summary: I. INTRODUCTION. II. THE PANAMA CANAL AND ITS EXPANSION:
MAIN FACTS. III. THE EXPANSION PROJECT OF THE PANAMA CANAL: SCOPE,
ACTORS AND KEY LEGAL ISSUES. IV. CLAUSE 20 OF THE PANAMA CONTRACT:
CLAIMS, DISPUTES AND ARBITRATION. V. CURRENT STATUS OF THE CLAIMS
ARISEN IN THE PANAMA CONTRACT: DAB AND ARBITRAL PROCEDURES.
VI. CONCLUSIONS.
ABSTRACT: The world has recently witnessed the inaug uration of the Panama Canal Expansion. This civil
engineering mega-project, resulting from a particular historical, political and economic background, is
going to globally reconfigure the maritime transport. The Panama Canal Expa nsion includes the creation
of a new lane by the design and construction of the third set of locks, which ha s undergone to a qualified
tender pro cess. The relationships between the parties (the Spanish led co nsortium Grupo Unidos por el
Canal as the contractor and the Pana ma Canal Authority as the Employer) and the different actors o f the
project are configured by an extraordinarily complex international contract drawn from a FIDIC form but
Fecha de recepción del original: 28 de marzo de 2017. Fecha de aceptación de la versión final: 18 de
mayo de 2017.
Irene Nuviala Lapieza holds a La w Degree (Universidad de Zaragoza), a Masters in Taxation
(Universidad Pompeu Fabra) and a Masters in Translation (Universidad de Zaragoza). She is currently
preparing her doctoral thesis in the Faculty of Law, Universidad de Zaragoza. In the teaching field, Irene
Nuviala Lapieza has given several courses of Legal En glish to law pr ofessionals interested in the
international practice. She is also a member to the directory of arbitrators of the Bar Association in
Zaragoza (Real e Ilustre Colegio de Abogados de Zaragoza), in which she is admitted to the practice. As
for her professional activity, Irene Nuviala Lapieza ha s experience as an in -house lawyer of a
multinational co mpany and as a member of the International Mercantile Law department in an
outstanding international law firm based in Spain. She is specialized in the contractual practice of
industry and construction sector. She has published several scientific contributions in this matter. Irene
Nuviala Lapieza is very grateful to Professor Katia Fach Gómez for her generous and accurate inputs,
which encourage to excellence. The author also thanks Professor Jesús Astigarraga Goenaga for his
always good advice. Comments and suggestions shall be welcome by the a uthor at the following email
address: irenenuviala@gmail.com
[33] REVISTA ELECTRÓNICA DE ESTUDIOS INTERNACIONALES (2017)
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DOI: 10.17103/reei.33.12
substantially amended taking into account t he particularities of this mega-project. The contractual
provision ruling the dispute resolution terms sets forth a multi-tier clause that addresses in first place to
the negotiation between the p arties, continues with a Dispute Resolution Board (DAB) and finally ends
with an arbitration. The referred escalated clause shall be insightfully analyzed in this paper, in light of
the status quo of the worth million claims filed b y the contractor up to this date.
RESUMEN: El mundo ha sido testigo recientemente de la inaugura ción de la ampliación del Cana l de
Pana má. Este mega-pr oyecto de ingeniería civil, producto de un peculiar contexto histórico, político y
económico, va a r econfigura r el transpor te marítimo a nivel global. La a mpliación del Canal de Pa namá
incluye la cr eación de una nueva vía mediante el diseño y construcción del ter cer juego de esclusa s, que
se ha sometido a un cua lificado proceso de adjudicación. Las relaciones entre las partes (el consorcio
liderado por Grupo Unidos por el Canal como contr atista y la Autoridad del Ca nal de Panamá como
Empleador) y entr e los diferentes actores del pr oyecto están reguladas por un complejísimo contrato
internacio nal que par te de uno de los modelos F IDIC, pero introduce abunda ntes modificaciones
teniendo en cuenta las par ticularidades de este mega proyecto. La disposición contractual en mater ia de
resolución de conflictos esta blece una multitier clause, que r emite en pr imer luga r a la negociació n entre
las par tes, continúa con una junta de resolució n de conflictos (DAB) y termina finalmente con un
arbitr aje. La referida cláusula esca lonada va a ser objeto de análisis detalla do en el presente a rtículo, a
la luz del status quo de las millonar ias reclamaciones formulad as hasta el momento por el contra tista.
KEYWORDS Panama Canal, Panama Canal expansion, international contracting, international investments,
engineering co ntracts, FIDIC, international disputes, negotiation, dispute resolution b oard (DAB),
arbitration, ADR, multi-tier clauses.
PALABRAS CLAVE: Canal de Pana má, Expansión del Canal de Panamá, contratación i nternacional,
inversiones internacio nales, contratos de ingeniería, FIDIC, disputas internacionales, negociación, Junta
de Resolución de Conflictos (DAB), arbitraje, ADR, cláusulas multi-tier.
I. INTRODUCTION
The Panama Canal construction is one of the major feats of civil engineering of the
twentieth century in the world. Its construction changed the coined conception of trade
and transport worldwide.
The expansion of the Panama Canal, which has roamed for decades in the Central
American country and officially rose in 2006, has created a heated debate in technical
instances, as well as in the economic and commercial milieu. It is foreseen that upon
completion of the expansion works, the commercial load capacity of the passageway
shall basically double (from 330 to 600 million Tm per year) and the vessels traffic shall
also be considerably increased (from 12.500 to 16.000 ships per year)
1.
1 VENTOSA, J.R. “Un hito glob al. La ampliación del Canal d e Panamá obra con protagonismo español,
reconfigurará el comercio mundial”, Revista del Ministerio de Fomento, Nº 664, 2016, pp. 10-13
https://www.fomento.gob.es/NR/rdonlyres/67195B33-20A5-4CC8-8256-
DA4D7438869B/139298/Se10_17.pdf.
All the websites cited in this paper are up to date as were accessed in May 15th, 2017.
The expansion of the Panama ca nal and its ruling inter national contra ct: A mega-pr oject sailing in
troubled water s?
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DOI: 10.17103/reei.33.12
Among the immense works, there is a particular project whose current scenario was not
expected to be so discouraging in its conception: the construction of the third set of
locks that operationally allow the use of the new maritime passageway in the Panama
Canal. This key part of the project has been repeatedly delayed and suspected to have
been underrated in the public bid for its adjudication, due to the wealth of the claims
that are in dispute up to this date.
This paper aims to highlight the crucial importance of the legal matters in the project for
the expansion of the Panama Canal. More specifically, the extraordinarily complex
contract for the construction of the third set of locks is the key to properly understand
the often brief and inaccurate legal references that are nowadays being published in the
news, general and economic press, and several technical forums.
A detailed presentation of the most relevant clauses of the referred contract for the
construction of the third set of locks finds an enhanced justification in the international
law context. The legal aspect of the expansion presents numerous features of interest
such as an international bid process in which multinational lobby groups have been
represented; an abundance of different public and private actors governments,
representatives, technocrats, banks and insurance companies, as well as a reputed
neutral gatekeeper that sets the rules in the game: the International Federation of
Consulting Engineers (commonly known as FIDIC, acronym for its French
name Fédération Internationale Des Ingénieurs-Conseils); and a highly technified and
legally complex contract that aims to balance the relationships between the various
stakeholders.
As will be detailed below, the expansion works of the Panama Canal are foreseen to
keep generating important legal and economic consequences in the future. Therefore,
this paper deems necessary to carry out a systematic analysis of the contractual grounds
of this international project. The present paper is relevant not only to adequately
apprehend the legal status quo of this endeavor, but also to contribute to predict the
result of the current claims mainly elucidated in the corresponding dispute adjudication
board (DAB) and arbitral court, which are in dispute up to this date on site as well as
in Miami and London. Likewise, this paper may also be useful from an educational
innovation perspective, as well as in the context of postgraduate programs for legal and
non-legal professionals, due to its eminently practical and multidisciplinary approach.
This paper shall start by presenting a brief historical background to portray the scenario
in which the project arose, and to address the process by which the adjudication of the
Panama Canal expansion took place (section II). Getting into the contractual terms of
the expansion works, Section III shall analyze the most important clauses of the
international contract, with a specific focus on the dispute resolution provisions and its
practical relevance to this international project. Afterwards, the paper shall reflect an
updated vision of the current claims and its state (section IV). Finally, some
considerations and perspectives shall be framed around the examined facts (section V).

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