null: nullpx
Logo image
Latin America & Caribbean

Trump loses arbitration to win back control of Panama hotel

Donald Trump's hotel management company suffered another legal defeat Tuesday when an international arbitrator ruled against returning control of a landmark hotel in Panama to the president's company.
28 Mar 2018 – 11:18 AM EDT
Default image alt
The Trump name comes off a sign at the entrance to the Trump Ocean Club International Hotel & Tower, where a dispute is ongoing for control of the hotel's management. March 5, 2018. Crédito: Univision

An international arbitration court ruled late Tuesday against the Trump Organization's effort to win back control of a landmark luxury hotel in Panama after it was evicted by the owners earlier this month over allegations of "horrific" mismanagement.

The arbitrator's decision effectively upheld the firing of Trump's hotel staff, the takeover of its bank accounts and physical removal of the Trump name from the hotel, which made headlines on March 5.

It appears to leave the Trump Organization with no other legal recourse except to seek damages for loss of income over the 12 years left on its management contract in Panama, according to the 32-page ruling, details of which were viewed by Univision.

Trump's hotel management company was seeking an emergency court order to restore the status quo at the former Trump International Tower & Hotel in Panama, allowing it to return to running the 70-story mixed use condo hotel with a distinctive sail-like design that dominates Panama City's Pacific coast skyline.

The arbitrator for the International Chamber of Commerce (ICC), the world’s leading court for settling commercial disputes, found that the management contract had been breached, but wrote: "I cannot conclude that TrumpCo has met the standard ... for allowing a provisional order mandating a reversion to the status quo."

The court's decision represents a major setback for the Trump hotel group after it also lost control of hotels in Canada and New York and raises questions over its legal strategy. Ironically, one of Trump's arbitration attorneys authored a paper outlining the legal precedent for limited legal remedy in breach of contract cases in the hotel industry. Because of the conflict of interest Trump had to find a replacement lawyer at the last minute.

Lawyers for the Trump Organization were not immediately available to comment. The hotel owners declined to comment citing the privacy of arbitration rulings.

The dispute began as a private legal matter. But between late February and early March the two sides waged a very public battle for physical control over the hotel. Trump's company barricaded itself in the hotel and hired security guards. The owners responded by getting a court order from a Panama judge, and bringing police in tactical gear to evict Trump's staff, all in front of journalists and cameras.

Trump brand removed, new cocktail menu

After the March 5 firing, the hotel's name was changed to The Bahia Grand Panama and the Trump brand was removed from all items in the rooms, from bathrobes to soap, as well as the hotel restaurant menus.

The cocktail menu in the hotel bar also changed, with additions that now include a 'Stormy Jack Daniels,' as well as a 'Little Rocket Man' and a 'Fire and Fury,' honoring some of Trump's recent newsmaking highlights.

The Trump hotels website still lists the Panama property among its available destinations for bookings, but it's unable to make reservations.

The Panama hotel was the Trump Organization's first venture in Latin America and opened in 2011 to great fanfare, with Donald Trump and his children Ivanka, Donald Jr. and Eric in attendance. Also on hand was Panama's then president, Ricardo Martinelli, who is currently languishing in jail in Miami while he fights extradition on corruption charges. The hotel's 369 rooms and 600 condo units were originally licensed under the Trump brand and the Trump Organization was contracted to manage the condos and the hotel.

But allegations of poor management and improper spending surfaced in recent years. The condo owners were the first to rebel and threw Trump's management team out in 2015. Last summer a Miami-based private equity firm, Ithaca Capital Partners, purchased 200 of the hotel rooms giving it majority ownership and, together with the rest of the owners, mounted a campaign to remove Trump's company.

The Trump Organization is also facing a $15 million claim for damages from Ithaca Capital over its alleged gross mismanagement of the hotel. The Trump Organization initially countered with a lawsuit seeking $150 million in damages, which it has since reduced to $9 million.

The Trump Organization has denied any improper behavior, and has accused Ithaca Capital and its Cyprus-born president, Orestes Fintiklis, of "mob-style tactics" to illegally take control of the hotel.

In arguments in a New York court last week, Ithaca lawyer Joshua Bernstein described Trump’s lawsuit as consisting of “wild and frivolous” allegations.

In court papers, Bernstein called the claim a “conspicuous effort to bully the hotel’s owners into dropping their well-supported claims of mismanagement against Trump and to divert attention from Trump’s failures as a hotel operator.”

Cargando galería