Panama authorities made direct physical entry into the terminals at Balboa and Cristobal on Monday and assumed administrative and operational control, ending nearly three decades of Hong Kong-based CK Hutchison’s presence at two of the world’s most strategically significant port installations, and triggering a simultaneous diplomatic protest from Hong Kong, a warning of economic consequences from Beijing, and a declaration by the company that it would pursue international arbitration against the Panamanian state.
The Panama Maritime Authority published the Supreme Court ruling in the official gazette on Monday, finalising the legal annulment of concessions for the Balboa and Cristobal terminals near the Panama Canal, which Panama Ports Company, a subsidiary of CK Hutchison, had operated since 1997.
The publication formalised a ruling issued in late January that declared the concessions unconstitutional. The canal handles approximately 40 per cent of US container traffic and five per cent of global maritime trade. CK Hutchison said the takeover was “unlawful” and was the culmination of a campaign by the Panamanian state against its subsidiary.
CK Hutchison said Panama authorities threatened its employees with criminal prosecution if they defied orders to leave. Staff were told not to make contact with the company. PPC denounced the move as an “illegal takeover without transparency or coordination” and said Panama’s actions were “confiscatory.” CK Hutchison added that none of the actions were “advised to or co-ordinated with PPC.”
Interim operations were transferred to Danish shipping giant A.P. Møller-Maersk and Swiss-based Mediterranean Shipping Co. Ports director Max Florez said an 18-month transition period now begins before contracts are awarded under a new international tender. Panamanian President José Raúl Mulino sought to defuse the legal characterisation of the move. “This does not imply the expropriation of those assets, but rather their use to guarantee the operation of the ports until their real value is determined for the corresponding actions,” he said.
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Hong Kong’s Secretary for Commerce and Economic Development Algernon Yau summoned Panama’s Consul General in Hong Kong to convey the SAR’s strong dissatisfaction and opposition, accusing Panama of undermining the sanctity of contracts. The Hong Kong government said it would “staunchly support the legitimate rights and interests of Hong Kong corporations overseas.” China’s Foreign Ministry spokesperson Mao Ning said Beijing would “firmly safeguard the company’s legitimate and lawful rights and interests.”
China’s Hong Kong and Macau Affairs Office had previously warned that the Panamanian court’s ruling was “absurd, shameful and pathetic” and that Panama would pay “heavy prices both politically and economically” if it proceeded.
The Panama court’s ruling was seen as a major victory for the United States. Trump had pushed to curb Chinese influence over the canal, claiming without evidence that China was “running” it. CK Hutchison subsequently negotiated a $23 billion deal with a BlackRock-led consortium to sell its non-Chinese port assets. US Ambassador to Panama Kevin Cabrera defended the Panamanian authorities, saying they had the right to have their judicial system make its own decisions and that the Supreme Court ruling was “very good” for the people of Panama. That $23 billion sale, under which the Balboa and Cristobal ports were to have passed to the BlackRock consortium under a negotiated transaction, now faces profound uncertainty given that Panama has transferred interim control to Maersk and MSC rather than waiting for a buyer.
CK Hutchison’s Hong Kong-listed shares closed 2.6 per cent lower on Tuesday, trimming year-to-date gains to around 15 per cent. The company said it would continue to consult legal advisers regarding all available recourse, including international proceedings against Panama and third parties. The company has said it will challenge Panama’s decision before the International Chamber of Commerce.
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The dispute has been building since the start of Trump’s second term. On his first day in office, he declared in his inaugural address that the United States had been “treated very badly” by Panama and that China was operating the canal, a claim he has repeated without providing supporting evidence. Panama initially offered reassurances, then allowed its Supreme Court to annul the concession that had been renewed as recently as 2021 for a further 25 years. The state takeover marks the latest twist in a yearlong saga for CK Hutchison, caught in a three-way fight between China, the United States, and Panama.
No indication was given as to when a new international tender for the ports’ long-term operation would be launched. CK Hutchison’s arbitration proceedings before the International Chamber of Commerce are expected to run for several years before any ruling is issued.