By Danilo Masoni and Foo Yun Chee
MILAN/BRUSSELS Jan 20 The Panama Canal
Authority (PCA) has turned down an offer by the European
Commission to mediate in a multi-billion dollar dispute with a
Spanish-led construction consortium which threatens to halt work
on widening the century-old waterway.
The consortium, known as Grupo Unidos por el Canal (GUPC),
had threatened to suspend work by Monday unless the Panama Canal
Authority (PCA) paid $1.6 billion in cost overruns on one of the
world's largest construction projects. But on Sunday the group
backed down from the threat.
The European Commission said on Monday GPUC, led by Spanish
builder Sacyr, had requested mediation by the European
commissioner for industry Antonio Tajani, who accepted.
But the PCA immediately rejected it.
"The contract over a third set of locks has already
mechanisms to resolve disputes and none of them includes the
intervention of a third party," PCA said in a statement.
"This will only be dealt with in accordance with what the
contract says," it also said.
Earlier on Monday Tajani had told Reuters by telephone he
believed a compromise could be found allowing Panama to have the
work done and the European companies not to lose the contract.
"In the meantime it is important that the deadline date (to
stop work) be put back. This is the first step and it looks to
me as if we are heading in this direction," he had said.
Tajani also said he had spoken with the Italian and Spanish
foreign ministers and would now discuss the issue with the
European Investment Bank, which financed the project, and the
representatives of Panama in Brussels.
GUPC - which also includes Italy's Salini Impregilo SpA
, Belgium's Jan De Nul and Constructora Urbana from
Panama - won the contract in 2009 to build a third set of locks,
the main part of the project to double capacity of the near
50-mile (80 km) cargo route.
The consortium's winning bid was $1 billion lower than that
of its nearest rival.
The entire project was due to cost about $5.25 billion, but
the overruns could bump that up to nearly $7 billion.
GUPC is set to meet with the PCA and insurer Zurich North
America on Tuesday to discuss the status of the work,
including its $600 million bond on the locks project.
Canal Administrator Jorge Quijano has said the PCA is
already in discussions with other third-party contractors in
case it cannot resolve its dispute with the GUPC. He estimated
the remaining work would cost about $1.5 billion.
The canal authority has said it is willing to consider
detailed claims for the overruns through arbitration.
The canal is one of the world's most important shipping
routes and halting construction on the project would be a
setback for companies eager to move larger ships through the
waterway such as liquefied natural gas (LNG) producers who want
to ship exports from the U.S. Gulf coast to Asian markets.