Hutchison Asserts Panama has Breached Contract and Starts Arbitration
CK Hutchison fired back in its ongoing dispute over the concession to operate the port terminal at each terminus of the Panama Canal, saying it has commenced an international arbitration. The Hong Kong-based company asserts Panama has been conducting a “campaign” against its Panama Ports Company and said it would seek “extensive damages” after Panama’s Supreme Court ruled at the end of last week that the concession contract was unconstitutional.
The company contends that Panama has been targeting its subsidiary and the concession for more than a year in a campaign “marked by a range of abrupt actions … culminating in the grave and imminent future damage … while similar port sector contracts have not been targeted.” The Panama Ports Company, 90 percent owned by CK Hutchison and 10 percent by Panama, was established in 1997 to operate the terminals at Balboa and Cristobal and, in a no-bid situation, received a 25-year renewal in 2021.
The Chinese government has been critical of the court decision, calling it “unfounded, unreasonable, and absurd.” Government officials said Panama could “pay a heavy price both politically and economically” following the decision to terminate the contract.
Hutchison, in its statement, says it has sought clarity and consultations with the government over the past year, alleging the state “routinely disregarded communications.” It writes that “PPC also has consistently advised through diverse communications its concerns regarding the state campaign as it has unfolded.”
Last summer, Panama’s Attorney General’s Office said it had found irregularities in the contract and contended that the company was not meeting its obligations. It also asserted that there were shadow concessions and said it would submit the case to the Supreme Court.
CK Hutchison has vigorously denied the charges. It countered by saying in the over 28 years PPC has been in operation, it has invested more than $1.8 billion in infrastructure, technology, and human development. Chinese officials have contended that it was a politically motivated attack on the company and its operations resulting from pressure from the Trump administration, which has asserted, “China runs the Panama Canal.”
The company said the court decision is “diametrically opposed to previous decisions” by the court, while noting that similar port sector contracts have not been targeted. It asserts that the arbitration is based on a concession contract and a legal framework that has been enshrined over almost three decades.
In seeking the arbitration, which it said would proceed under the rules of the International Chamber of Commerce, it also alleges that Panama has “deployed steps to take over the operations of PPC” since the court decision was announced. It notes that the court decision has not yet been published and has not become effective.
They claim Panama has conducted unexpected site visits and issued instructions calling for unrestricted access to physical, commercial, and intellectual property. They claim the state has already commenced a port transition plan.
that matters most
Get the latest maritime news delivered to your inbox daily.
After the decision was announced, the government of Panama vowed that the ports would continue to operate normally. It outlined a plan to have Maersk’s APM Terminals take over the operations once the court decision was finalized, and while it could conduct a new tender for the concession. APM Terminals confirmed its willingness to manage the operations.
Analysts point out that the dispute is likely to stretch for years as the company pursues the arbitration. It comes as CK Hutchison was also negotiating to sell its non-Chinese terminal operations. China’s opposition, mostly focused on the operations in Panama, has sidetracked the deal.