Panama Court Finds CK Hutchison's Port Terminal Concession Unconstitutional
The Supreme Court of Panama announced late on Thursday, January 29, that it had found the laws establishing CK Hutchison’s concession to operate terminals at the ports at the terminus of the Panama Canal unconstitutional. The government quickly issued a statement assuring that the terminal operations would continue uninterrupted, while the company and the governments in Hong Kong and Beijing denounced the decision, alluding to political motivations.
The court, in its brief statement, said it had conducted “extensive deliberation and discussion” before concluding that the 1997 acts were unconstitutional under Panama’s law. They are related to the concession contract between Panam and the Panama Ports Company, 90 percent owned by CK Hutchison, for the development, construction, operation, administration, and management of the port terminals for containers, ro-ro, passengers, bulk cargo, and general cargo in the ports of Balboa and Cristóbal. They did not say when the decision would become final.
Panama’s Controller, Anel Flores, brought the case to the court last July after completing an audit of the operation of the terminals, and under increasing political pressure from Donald Trump and the United States, which was threatening to take back the Canal after asserting that China controlled the Canal. Flores said the audit found irregularities that had cost the government $300 million since 2021 and an estimated $1.2 billion since 1997. He asserted that payments had not been made, there were accounting errors, and “ghost concessions” in the ports.
Panama’s President Jose Raul Mulino issued a statement asserting that the terminal operations would continue. He said in the interim, the government would work with the Panama Maritime Authority and Hutchison’s company. Panama said there would then be a transitional phase until a new concession process could be completed, during which Maersk’s APM Terminals would operate the terminals.
CK Hutchison established the Panama Ports Company in 1997 to operate the terminals, with Panama owning a 10 percent interest. In 2021, the concession was extended for 25 years without a formal bidding process.
Hutchison quickly responded, saying the concession was the result of a transparent international bidding process and that it had complied with its contractual and legal obligations. Over the 28 years, the company states it has invested more than $1.8 billion in infrastructure, technology, and human development.
The company issued a statement on January 29 saying the new ruling “lacks legal basis.” It asserts the court’s decision is “diametrically opposed” to previous rulings and would “undermine the reputation of Panama as a reliable jurisdiction.” Beijing echoed the same sentiment, issuing a warning to all Chinese companies doing business in Panama. The Chinese government said it would act to protect the business interests of Chinese companies.
Hutchison is based in Hong Kong, and the local government, although often at odds with the company, issued a statement saying it “opposes any foreign government using coercive, repressive, or other unreasonable means.”
It is unclear when the court would finalize its decision and make it effective. Hutchison also said it “permanently reserves all rights, including recourse to national and international legal proceedings.”
APM issued a statement confirming its willingness to assume the temporary operation of both terminals. It emphasized this would be carried out in full accordance with the legal requirements.
The decision also cast further doubt on the deal CK Hutchison announced nearly a year ago to sell its Panama company to an investment group led by the US’s BlackRock, with investment from MSC’s Terminal Investments Ltd. The deal was stalled due to Chinese opposition. Recently, it was speculated in the press that Hutchison was looking to split its terminal operations and sell them off piecemeal to address China’s objections. In addition to Panama, the company was to sell its operations in more than 20 countries, keeping only the terminals in China.
Concurrent with the news, the Panama Canal Authority announced today it had published the prequalification documents for two new proposed terminals. Panama has a total of five ports, although Balboa and Cristobal are the most critical as they are at each terminus of the Canal. The Authority said the new project calls for terminals on both the Atlantic and Pacific coasts and aims to increase Panama’s transshipment capacity to between 5 and 6 million TEU annually.
that matters most
Get the latest maritime news delivered to your inbox daily.
The Authority reports it has met with representatives from APM Terminals, Cosco Shipping Ports, CMA Terminals, DP World, Hanseatic Global Terminals, MOL, PSA International, SSA Marine-Grupo Carrix, Terminal Investment Limited, ONE, and Evergreen regarding the new terminals. They expected to conduct a tender this year for the new operations.