$4 billion LNG lawsuit going ahead as arbitration starts

Sinolam International, a Singapore-based investment company focused on oil, gas, and power investments in emerging markets in Asia and Latin America, has decided to move forward with a lawsuit related to Panama’s liquefied natural gas (LNG)-to-power market by submitting an arbitration request under the International Centre for Settlement of Investment Disputes (ICSID) Convention against the Republic of Panama in connection with the cancellation of a license for a major gas-fired power generation project.

The arbitration is said to arise under the Panama-Singapore free trade agreement (FTA), as actions that have been taken are perceived to violate it. The ICSID, an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and states, is part of the World Bank Group.

Sinolam LNG Terminal and Sinolam Smarter Energy LNG Power, Panamanian energy infrastructure developers focused on LNG-to-power solutions in emerging markets, will be moving forward with the lawsuit filed against AES Corporation in December 2025, which seeks $4 billion in damages related to practices that affected their participation in Panama’s LNG-to-power market.

The project, which was designed to deliver reliable, efficient, and lower-emission electricity to support the country’s growing energy needs, involved the development of a modern combined-cycle, gas-fired power plant, initially planned as a 325 MW facility and later expanded to 441 MW.  

Designed to operate with high thermal efficiency and flexible dispatch capability, the gas-to-power project was intended to stabilize the Panamanian grid, respond to demand fluctuations, and complement other sources of generation.

Sinolam claims to have made substantial investments to advance the project and prepare it for construction and operation, with the expectation that it would contribute meaningfully to the country’s electricity supply and system stability.

However, Panama reportedly abruptly cancelled the project’s license through regulatory action taken in 2024 without prior notice that termination was under consideration and without allowing the company to be heard.

The firm underlined: “Panama’s conduct violated fundamental obligations under the applicable investment treaty, including protection against arbitrary and discriminatory treatment and uncompensated expropriation.”

In light of this, Sinolam seeks full compensation for the losses it has suffered, including invested capital and the destruction of the project’s value. The company currently values its loss at over $140 million.

Kenneth Zhang, Sinolam’s CEO, commented: “After serious efforts to reach an amicable resolution, Sinolam has initiated arbitration proceedings under the Panama-Singapore free trade agreement.

“This is a last resort to protect our lawful investment and to uphold the principles of transparency, fairness, and respect for international commitments that underpin cross-border investment. This step reflects our confidence in a rules-based process.”

Over the past 30 months, the government of Panama has allegedly cancelled several major foreign investment concessions owned by Asian companies valued at billions of dollars, as well as a large Canadian-owned copper mine.

“This has eroded the trust of foreign investors in Panama. Sinolam remains committed to resolving the dispute through the ICSID arbitration process and looks forward to vindicating its rights,” emphasized the firm.