China’s Hong Kong and Macau affairs office issued a scathing criticism of the Panama Supreme Court’s ruling that CK Hutchison’s contract to operate two Panama Canal-adjacent ports is unconstitutional—further ramping up international rhetoric surrounding the future of the gateways.
“The ruling is legally absurd, logically flawed and utterly ridiculous,” the office said, calling the court decision “truly shameful and pathetic.”The office said Panama would “pay a heavy price” both politically and economically from the decision, emphasizing that the country would lose its credibility among international investors and damage the interests of Chinese and Hong Kong-based companies in the region.
“The port concession agreement was signed fairly and voluntarily by both parties and has been approved by multiple Panamanian governments and Congresses,” the statement read. “The fact that Panama has now ruled the contract unconstitutional means that it can similarly rule other concession agreements approved at any time in the future as unconstitutional.”
Panama’s President José Raúl Mulino “firmly” rejected the statement from Hong Kong and Macau.
“Panama is a rule-of-law state and respects the decisions of the judicial branch, which is independent of the central government,” said Mulino in a post on X Wednesday morning.
According to the president, Panama’s foreign ministry will issue a statement on the matter and “adopt the corresponding decisions.”
Panama Ports Company (PPC), the CK Hutchison subsidiary that operates both the Balboa and Cristóbal ports, said Wednesday that it has begun arbitration proceedings against Panama.The company is seeking “extensive damages” on its allegations that the Republic of Panama breached the 25-year contract extension, which was signed in 2021. PPC has managed the twin ports since 1997, but a government audit at the gateways early last year found contractual irregularities that allegedly cost Panama $1.3 billion in revenues over that timeframe.
In its statement, the PPC said Panama’s ruling was a reversal of its longstanding positions regarding the contract’s legal framework.
Additionally, the company claimed that the Panamanian government “routinely disregarded communications, efforts to consult and requests for clarity” over the past year as it aimed to quell the dispute.
The Supreme Court’s ruling and the ensuing legal action from the Hong Kong-based port operator follow a year that has brought the Panama Canal and both ports under the microscope from both the U.S. and China.
U.S. President Donald Trump and his administration have made it a goal to rid the canal of Chinese influence, with the Commander in Chief asserting the U.S. would “take back” the canal it conceded to Panama in 1999.
Last March, Hutchison entered a deal to sell 43 ports including the two Panama terminals to Mediterranean Shipping Company (MSC) and hedge fund BlackRock for $23 billion. But the inclusion of BlackRock, an American company, concerned Chinese officials.
China’s antitrust regulator launched an investigation into the deal, soon putting it on thin ice. Later in the year, the Chinese government reportedly demanded that state-owned ocean carrier Cosco Shipping get a controlling stake in the acquisition or it would block it.
By voiding Hutchison’s contract, such a transaction would not be able to take place, giving what some would call a victory to the U.S. and Trump.
PPC said the Panamanian government has broadly deployed steps to take over the operations of the two ports since last Friday, even though the official court ruling has yet to be published.
As part of the port transition plan, PPC says the government has made unexpected site visits and instructed the company to provide it unrestricted access to physical, commercial and intellectual property.
Maersk-owned APM Terminals is supposed to assume control of the Balboa and Cristóbal ports in the interim term, but a date has not been set and will only be established when the Supreme Court finalizes the ruling. APM is expected to operate the terminals until a new concession can be bid on and awarded.
Shortly after the high court’s decision, U.S. Secretary of State Marco Rubio said the U.S. was encouraged by the ruling. Support also came from House Select Committee on China Chairman John Moolenaar (R-Mich.), who called it a “win for America, Panama and all of our allies.”
In a press conference Wednesday, Chinese Foreign Ministry spokesperson Lin Jian said U.S. representatives’ words and actions illustrate the country’s “Cold War mentality and ideological bias.”