Sinolam International Pte Ltd, a Singapore-based company, has initiated international arbitration proceedings against the Republic of Panama. The company is seeking over 140 million US dollars in compensation following Panama’s cancellation of a major natural gas power generation license in April 2024. The dispute centers on the terminated Gas to Power Panama (GTPP) project and has been filed with the World Bank’s International Centre for Settlement of Investment Disputes in Washington, D.C.
The case represents a significant international investment dispute for Panama. It directly invokes protections under a bilateral trade pact. Sinolam claims the government’s abrupt termination of its license violated key provisions of the Panama-Singapore Free Trade Agreement.
Company Alleges Treaty Violations and Uncompensated Losses
In a public statement, Sinolam asserted that Panamanian authorities provided no prior warning before revoking the license. The company also claims it was denied a right to be heard. The canceled GTPP project planned to build a 325-megawatt natural gas-fired power plant in Puerto Pilón, Colón Province, with a potential expansion to 441 megawatts.
“Panama’s conduct violated fundamental obligations under the applicable investment treaty, including protection against arbitrary and discriminatory treatment and uncompensated expropriation. Sinolam seeks full compensation for losses suffered, including invested capital and the destruction of the project’s value,” [Translated from Spanish]
The firm argues its entire investment is now lost. Officials framed the arbitration as a last resort after failed negotiations with the government.
Regulator Cites Repeated Delays and Lapsed Permits
Panama’s regulatory agency provided a different rationale for the cancellation. The National Authority of Public Services (Panama) issued Resolution AN No. 19123-Elec on April 26, 2024. This document denied a requested extension and definitively canceled the license held by Sinolam Smarter Energy LNG Power Inc.
The resolution stated that multiple extensions had already been granted for the project’s start of commercial operations. A critical connection permit from the state transmission company, Etesa, was no longer valid. This lapse technically prevented any plant construction or operation. Authorities also noted the company failed to renew a required construction bond guarantee.
“Sinolam Smarter Energy LNG Power does not have the necessary documentation to maintain the definitive license,” [Translated from Spanish] the ASEP warned at the time of the cancellation.
These regulatory shortcomings formed the legal basis for the government’s action. The decision highlights ongoing challenges in managing large-scale infrastructure commitments.
Broader Implications for Investment and Energy Security
The arbitration claim arrives as Panama seeks to attract foreign capital while modernizing its energy matrix. The GTPP project itself aimed to provide cleaner and more stable electricity. Its stated goal was helping meet the country’s growing power demand.
Kenneth Zhang, Sinolam’s Chief Executive Officer, expressed disappointment at the breakdown. He confirmed the company pursued amicable solutions before resorting to legal action. The case will now proceed under established international investment law protocols.
Outcomes of such arbitrations can influence a country’s perceived risk for future foreign investors. They also test the enforcement mechanisms within modern trade agreements. Panama must now prepare its defense before the international tribunal. The government’s response will be closely watched by both the energy sector and the international business community.