Cryengine 3 will be using a custom made in-house physics engine http://www.gamephys.com/2010/02/06/...-engine-no-havok-physics-or-physx-middleware/
Another advantage of the Cryengine 3 is that it is delivered with a physics engine that has been developed by Crytek and doesnt use middleware like PhysX or Havok. The in-house creation allows the destruction of almost any object (trees, vehicles or buildings).