CK Hutchison Files Arbitral Claim Against Maersk Over Panama Terminals

CK Hutchison, the Hong Kong-based ports giant, has filed an arbitral claim against AP Moller-Maersk. The case expands on an earlier arbitral claim that Hutchison filed against the Panamanian government, alleging that it has illegally seized two of Hutchison's container terminal leases.

Until this year, CK Hutchison was the operator of container terminals in Balboa and Cristobal, Panama, among dozens of its other global holdings. Following pressure from the Trump administration to reduce Chinese "influence" at the Panama Canal, the Panamanian government launched an investigation into the circumstances of CK Hutchison's contracts, which had been in place uninterrupted since 1997 and had been renewed in 2021. After the government audit, Panama claimed that Hutchison had underpaid for its concession by about $1.2 billion. In February, Panama's supreme court concluded that the laws establishing the terminal concessions were not valid, paving the way for the government to seize the two terminals.

After the takeover, Panama offered temporary contracts for the ports' operations to MSC and to APM Terminals, Maersk's container-terminal division. The facilities are running smoothly under new management, according to Panama - but not to Hutchison's satisfaction. The company and its Panamanian subsidiary are seeking $2 billion in damages in an arbitral proceeding against the government of Panama, alleging "radical breaches" of contract.

Panama has been at pains to emphasize that it is not expropriating CK Hutchison's two terminals, but is rather issuing temporary licenses for Maersk and MSC to manage them. Hutchison considers the ruling "unlawful" and a risk to "health and safety" at the two terminal complexes; it has heavy backing from the Chinese government, which claims that the Panamanian supreme court ruling is "unreasonable and absurd."

Maersk now faces a separate arbitration proceeding of its own. Hutchison has filed a claim against the number-two ocean carrier for "aligning" with the Panamanian government, aiding the takeover and the installation of new terminal operators. The company has yet to comment on the claim.