Treaty claim win for Manus McMullan KC

The International Centre for Settlement of Investment Disputes (ICSID) has issued its final award in the arbitration brought against the Republic of Panama, dismissing all claims brought by Sacyr SA in relation to the Panama Canal expansion project.

The dispute, brought under the Kingdom of Spain – Republic of Panama Bilateral Investment Treaty (BIT), and governed by the UNCITRAL Arbitration Rules, centered on allegations that Panama’s treaty obligations had been breached when the Panama Canal Authority allegedly misrepresented geological and seismic risks during the tender phase of the Third Set of Locks Project (TSLP).  Other serious allegations concerning pre and post tender conduct were also made including claims that a change in the minimum wage was discriminatory.  Sacyr claimed that it’s rights to fair and equitable treatment (FET) had been breached and that there had been a failure to provide it’s investment with full protection and security (“FPS”).

Sacyr sought over US$2.36 billion in damages, including sunk costs, return on investment for lost opportunities and reputational harm.  The Tribunal, composed of John Beechey CBE (President), Prof. Zachary Douglas KC, and Dr. Horacio Grigera Naón, held hearings in Washington, D.C. in June 2024. 

All claims were dismissed.

Key Findings

The Tribunal dismissed all claims on the merits, finding that the conduct complained of was commercial, not sovereign, and therefore did not breach the BIT’s FET standard.  Allegations of concealing test results and seismic design flaws were unsubstantiated. Sacyr’s allegations of deliberate misrepresentation and sovereign abuse failed.

The Tribunal emphasized that investment treaties protect against sovereign—not contractual—risk, and that Sacyr’s claims were essentially contractual disputes reframed as treaty violations. Had the Tribunal not dismissed the claims on the merits, it would have concluded that Sacyr’s claims were inadmissible as their essential basis was the contract.

The Tribunal also found that a law (Decree 6) increasing the minimum wage for workers on the expansion programme was not discriminatory against Sacyr and that another contractor had not been treated more favourably.  Thus, there was no breach of the FET standard.

 Sacyr was ordered to pay US$6.39 million to Panama covering legal fees, expert costs, and arbitration expenses.

Representation

Manus McMullan KC was instructed as advocate in the case by the Office of Investment Arbitration of the Ministry of Economy and Finance of the Republic of Panama. The Office of investment Arbitration is led by Dra. Margie-Lys Jaime.

He acted alongside Arnold and Porter, whose team was led by Mélida Hodgson and Whitney Debevoise III.

Under the constitution of the Republic of Panama the Panama Canal Authority is an autonomous public entity.  It is separate from the Government of Panama.  The case was a direct attack on that autonomy.  The good work of the technical and legal teams of the Panama Canal Authority in preparing for, and administering, the TSLP project and wider expansion programme meant the claims in this case were without merit.  Also crucial to the success in the arbitration was the work of ACP’s legal team made up of Lic. Karla Arias and Lic. Agenor Correa, General Counsel of the Panama Canal Authority.