Autoridad Del Canal De Panamá v Sacyr, SA & Ors, Court of Appeal - Commercial Court, September 05, 2017, [2017] EWHC 2228 (Comm)

Issuing Organization:Commercial Court
Actores:Autoridad Del Canal De Panamá v Sacyr, SA & Ors
Resolution Date:September 05, 2017

Case No: CL-2016-000741

Neutral Citation Number: [2017] EWHC 2228 (Comm)




Rolls Building, 7 Rolls Buildings

Fetter Lane, London

Date: 05/09/2017

Before :


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Between :

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Graham Dunning QC, Manus McMullan QC and Damien Walker (instructed by Mayer Brown International LLP and Vinson & Elkins RLLP) for the Claimant

Rhodri Davies QC and Nehali Shah (instructed by Norton Rose Fulbright LLP) for the First Defendant

David Foxton QC and James Sheehan (instructed by White & Case LLP) for the Second, Third and Fifth Defendants.

Christopher Harris (instructed by Reynolds Porter Chamberlain LLP) for the Fourth Defendant

Hearing dates: Monday 26th June to Thursday 29th June 2017

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JudgmentMr Justice Blair :

  1. This is a claim by the claimant employer which is the beneficiary under six advance payment guarantees (``APGs''), each subject to English law/exclusive jurisdiction, which were entered into by the defendants, a consortium of construction contractors, in relation to advance payments made by the employer. It is one of a number of disputes between the parties, which are otherwise the subject of ICC arbitration in Miami. The claim is for US$288,275,465.20, which though a substantial number, is a relatively small part of the overall picture.

  2. The factual background is the widening of the Panama Canal, a major engineering project which took place (in broad terms) between the commencement of the procurement process in 2007, and the opening of a third set of locks on 26 June 2016. The new locks allow passage through the canal of all but the largest vessels, thereby making an important contribution to global trade.

  3. The issues for determination by this court concern:

    (1) An application by the defendants for a stay of the proceedings under s.9 of the Arbitration Act 1996 (which provides for a mandatory stay in respect of a matter which under an arbitration agreement is to be referred to arbitration);

    (2) An application by the claimant for summary judgment under the APGs on the primary basis that the APGs are first demand instruments; and

    (3) An alternative application by the defendants for a stay of the proceedings on case management grounds pending the resolution of the issue by arbitration.

    Further claims by ACP for declaratory relief relating to (among other things) jurisdictional issues were in the event not pursued on these applications.

    Factual framework and relevant agreements

  4. There is a considerable body of material before the court, and as is to be expected with such a project, the facts are complex. As well as lengthy skeleton arguments, a chronology, and a dramatis personae, there was a considerable volume of factual evidence in the form of witness statements and exhibits (which were helpfully combined and filed chronologically). There was also some expert evidence of Panamanian law. For the purposes of the hearing, there were however few factual disputes, and such disputes are not in any event for resolution on applications of this kind.

    The parties

  5. The claimant, Autoridad del Canal de Panamá (``ACP''), is a Panamanian public corporation. It is the employer under the project. ACP seeks summary judgment under the APGs in respect of advance payments made to the contractor.

  6. The contractor is Grupo Unidos por el Canal S.A. (``GUPC''), a company incorporated in Panama. GUPC became contractor by a process of assignment in 2010 as outlined below.

  7. The first to fourth defendants own GUPC which is their corporate vehicle for the project, and the five defendants are as follows:

    (1) The first defendant, Sacyr, S.A., is a Spanish company.

    (2) The second defendant, Salini-Impregilo S.P.A., is an Italian company.

    (3) The third defendant, Jan de Nul, N.V., is a Belgian company.

    (4) The fourth defendant, Constructora Urbana S.A., is a Panamanian company.

    (5) The fifth defendant, Sofidra S.A., is a Luxembourg company, and the third defendant's parent company.

  8. In general, it is unnecessary to distinguish between the defendants, each of which entered into advance payment guarantees with ACP as beneficiary, which now seek a stay of these proceedings in favour of arbitration under various agreements.

    The design and construction contract

  9. ACP began the procurement process for the project in August 2007. The first to fourth defendants entered into a joint venture agreement in November 2007 so as to participate jointly in the procurement process.

  10. On 11 August 2009, ACP and the first to fourth defendants (then acting as an unincorporated consortium), entered into a contract for the design and construction of the third set of locks (referred to below as the ``Main Contract'', or simply the ``Contract''). The Main Contract incorporated conditions relating to the contractual relationship between the parties (the ``Conditions of the Contract''). It is subject to Panamanian law, and contains a detailed dispute resolution procedure, ultimately leading to arbitration in Miami under the ICC rules.

    The assignment of the Main Contract and the original JSG

  11. For reasons related in part to Panamanian labour regulations, it became necessary for the contractor to be a Panamanian-incorporated company. This was already in the parties' contemplation: sub-clause 1.7 of the Conditions of the Contract provides for a mechanism to assign the Main Contract to ``a company incorporated and operating under the laws of the Republic of Panama with the sole purpose of carrying out and completing the Contract and all obligations of the contractor thereunder''.

  12. GUPC was incorporated on 23 November 2009. The Main Contract was novated from the consortium to GUPC by an Assignment and Acceptance Agreement dated 31 May 2010. This agreement, which is governed by Panamanian law, provides that:

    ``2. The Assignor hereby irrevocably assigns, to the Assignee, and the Assignee hereby assumes from the Assignor, all of the Assignor's rights and obligations, warranties, duties, liabilities and undertakings under and pursuant to the Contract and according to the terms of the Contract, which assignment and assumption shall be effective from the original date of the Contract, subject to the consent and agreement of the Employer to the assignment hereunder [...]; provided that the Assignor and each of the Members of the Assignor shall remain jointly and severally liable [...] pursuant to the Joint and Several Guarantee.''

  13. In accordance with these arrangements, and so as to maintain their individual liability to ACP as employer, on 31 May 2010 the first to fourth defendants entered into a Joint and Several Guarantee of GUPC's obligations (the ``JSG''), the fifth defendant entering into a similar guarantee of the third defendant's obligations under the JSG. This has been described as the ``original'' JSG.

  14. Under the JSG:

    ``1.1 Each of the Guarantors, jointly and severally:

    (a) as primary obligor and not as surety, unconditionally, jointly and severally guarantees to the Employer the due and punctual performance by the New Contractor of each and all the obligations, warranties, duties and undertakings of the Contractor under and pursuant to the Contract according to the terms of the Contract; and

    (b) if the New Contractor is in breach of any of its obligations, warranties, duties and undertakings as set out in sub-paragraph (a), shall upon demand by the Employer from time to time, forthwith perform the obligations, warranties, duties and undertakings of which the New Contractor is in breach in the same manner that the Contractor is required to perform such obligations, warranties, duties and undertakings according to the terms of the Contract.''

    ``2.3 The obligations of each of the Guarantors hereunder are primary and not by way of surety and none of the Guarantors shall be entitled as against the Employer to any right of set-off or counterclaim...''

    ``2.5 None of the Guarantors shall have any greater liability to the Employer under the Guarantee than such Guarantor would have had to the Employer had such Guarantor been an original party to the Contract in place of the New Contractor...''

    ``3.2 Determinations of interest rate and amounts under this Guarantee shall be made by the Employer, which determinations shall be conclusive and binding hereunder in the absence of manifest error.''

  15. The JSG covers any variations made to the Main Contract:

    ``Recital (A) The Guarantors [...] and the Employer have entered into a contract, on a joint and several basis, for the design and construction of a third set of locks dated August 11th, 2009 (as amended, modified or supplemented, ``Contract'')...''

    ``2.2 Each of the Guarantors authorizes the Contractor and the Employer to make any addendum, variation or amendment to the Contract or the Works without reference to it or any other Guarantor, and agrees that this Guarantee shall apply to such addendum, variation or amendment.''

    ``2.4 Each of the Guarantors' obligations under this Guarantee are continuing and accordingly shall remain in full force and effect [...] until all obligations, warranties, duties and undertakings now or hereafter to be carried out or performed by the Contractor under the Contract shall have been satisfied or performed in full...''

  16. By paragraph 9, the JSG is governed by Panamanian law, and provides that ``[a]ny dispute arising out of, under or in connection with this Guarantee or out of the subject matter of this Guarantee shall be finally settled'' by ICC arbitration the venue of which is to be Miami, Florida. The arbitration agreement and any related arbitrations are governed by the United States Federal Arbitration Act.

    The Panamanian law Advance Payment JSG

  17. By mid-2012, it appears that GUPC was facing cash flow difficulties, as a result of...

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