EU to help resolve Panama Canal dispute

(BRUSSELS) - The EU will mediate in a dispute on cost overruns so that work to upgrade the Panama Canal -- one of the world's most important shipping routes -- can go ahead as planned, an official said Monday.

"I can confirm that the (three European companies involved) ... requested mediation over the weekend from" EU Industry Commissioner Antonio Tajani, a European Commission spokesman said.

Tajani had taken a similar role in other countries in the past "and wants to find a reasonable solution for all parties," spokesman Olivier Bailly said.

The "first concrete result ... is that the companies have lifted their ultimatum today (and) they will continue to work in Panama until we find a solution," Bailly said.

Tajani will shortly contact the interested governments, companies and Panama, he added

In the dispute over cost overruns, the Grupo Unidos por el Canal (GUPC) consortium, led by Spanish builder Sacyr, had said it might stop work Monday unless Panama paid $1.6 billion to compensate for the cost overruns.

The consortium said Sunday however that there was "no reason to make any change tomorrow in the status of the construction," arguing that GUPC could cease work at any time it deemed necessary.

GUPC, which includes Impreglio of Italy, Belgium's Jan de Nul and Constructora Urbana of Panama, has agreed to negotiate with the canal authority within the contract terms.

The canal upgrade is costing $5.2 billion, including GUPC's $3.2 billion contract to build a third set of locks for the century-old canal which currently can handle ships of up to 5,000 cargo containers on the Atlantic-Pacific shortcut.

The project aims to allow the 80-kilometre (50-mile) waterway, which handles five percent of global maritime trade, to take ships that can carry 12,000 containers.

In the dispute, GUPC says it faces costly overruns because the canal authority gave the builders incorrect information regarding the area's geology.

The work began in 2009 and was due to be completed this year, but the project was extended to 2015 after a first disagreement between the canal authority and GUPC over the quality of the cement used.