PANAMA CITY: Panama’s Supreme Court late on Thursday (Jan 29) annulled key port contracts held by a subsidiary of Hong Kong-based CK Hutchison because they were “unconstitutional”, leaving the future of operations along the Panama Canal unclear.
Panama Ports Company, a CK Hutchison subsidiary, has held contracts since the 1990s to operate container terminals at the canal’s Pacific and Atlantic entrances, separate from the waterway’s operations. The arrangement had been automatically renewed in 2021 for another 25 years.
The court said that after “extensive deliberation”, it found the laws and acts underpinning the concession contract between the state and Panama Ports Company for the development, construction, operation and management of port terminals at Balboa and Cristobal – two of the canal’s five ports – were unconstitutional.
The lawsuit to cancel the concession was brought before the Panamanian high court last year on allegations that it was based on unconstitutional laws and that the Hong Kong business was not paying taxes.
The ruling comes amid a growing US-China rivalry over global trade routes and is seen as a win for Washington, where President Donald Trump has pushed to curb Chinese influence and boost US control over the Panama Canal, which carries about 5 per cent of global maritime trade.
Trump had threatened just days into his second term last year to take back the canal – built by the United States and handed to Panama in 1999 – as he said China was effectively “operating” it.
CK Hutchison Holdings is one of Hong Kong’s largest conglomerates, spanning finance, retail, infrastructure, telecoms and logistics.
The company did not immediately respond to a request for comment. Shares for it trading in Hong Kong were down more than 4 per cent on Friday.
The court decision could disrupt CK Hutchison’s proposed sale of dozens of ports worldwide, including the Panamanian terminals, to a consortium led by BlackRock and Mediterranean Shipping, a deal valued at nearly US$23 billion.
BlackRock and Mediterranean Shipping did not immediately reply to requests for comment from Reuters.
Critics of the contracts, which were extended in recent years, argued they disadvantaged Panama, in addition to being unconstitutional.
The Supreme Court’s decision could force Panama to restructure the legal framework needed to hold port operations contracts and potentially require new tenders to operate the terminals.
Ensuring uninterrupted port operations is critical for shipping lines that rely on Panama as a transshipment hub, where containers are transferred between vessels serving multiple routes.
Analysts have flagged the likelihood that Panama Ports will lodge an arbitration complaint after losing the case.
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