EC steps in to mediate in Panama Canal dispute

Row casts further doubt over 2015 scheduled completion date

NEWS, Projects, Dispute, EC, Expansion, Mediation, Panama Canal

The European Commission has stepped into the row between a European consortium and the Panama Canal Authority.

Antonio Tajani, deputy president of the EC, has started a process of mediation between the two parties as the dispute over expansion works on the Panama Canal continues to rumble on.

Panama hired the consortium, Grupo Unidos por el Canal, in 2009 to build a third set of locks in the canal for $3.1bn. The project will allow bigger ships to pass through the canal and is more than two-thirds complete.

When finished, it would allow the Central American nation to quadruple its yearly income of $1bn from toll fees it charges to shipping firms that use the maritime shortcut.

But the consortium, which is 96%-controlled by Spain's Sacyr SA and Italy's Salini Impregilo SpA, threatened in December to halt construction, by the end of Monday, if not paid an extra $1.6bn for cost overruns it says were unavoidable.

The consortium, known as GUPC, reduced its immediate demand to $400m two weeks ago and on Monday, offered another proposal which calls for the builders and Panama to "co-finance" the project, which it said currently sees monthly costs of more than $100m and employs some 10,000 people.

However, the Panama Canal Authority, again offered a chilly response.

"This solution is not contemplated within the contract," the canal authority said in an emailed statement on Monday afternoon, adding it is preparing a more complete response.

GUPC also said in its latest proposal that it was suspending its threat to halt construction altogether. But that seemed rather moot given that earlier in the day the canal authority said GUPC has already reduced activity at the site by 70% to 75%.

The continued dispute puts further doubt to a scheduled completion date of June 2015.

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