Six States Criticize China for Detaining Panama-Flagged Ships

The container terminal at Balboa (CK Hutchison file image)

The U.S. government and five small Latin American states have issued a statement pushing back on perceived Chinese retaliation against Panama in connection with the CK Hutchison port lease dispute.

Last year, following heavy pressure from Washington over perceived Chinese influence in the canal zone, Panama initiated a review of Hutchison's operating contracts at the ports of Balboa and Cristobal. The authorities claimed that they had found enough irregularities to move to revoke the leases, and they filed suit in Panamanian court. In February, Panama's supreme court ruled against CK Hutchison, finding that its contract was unconstitutional and it would have to give up control of terminal leases at Balboa and Cristobal. Over Hutchison's objections, the Panamanian government ejected the company from the ports and placed the facilities under new management. Hutchison has filed an arbitration case seeking $2 billion in compensation.

China responded with anger against the Panamanian government after the court ruling. The Hong Kong and Macau Affairs Office (with jurisdiction over CK Hutchison) called the ruling "shameful and pathetic," and warned that there would be "heavy prices" for invalidating the lease.

At Chinese seaports, port state control officers detained about 70 Panama-flagged vessels for various alleged violations in March, according to the Federal Maritime Commission - far more than the norm, and equivalent to three quarters of all detentions in China that month. The concentrated inspections have sparked widespread speculation that China may be using the PSC process to penalize Panama by targeting vessels in its flag registry. The six signatories to Tuesday's letter - Costa Rica, Guyana, Trinidad and Tobago, the United States, and landlocked Paraguay and Bolivia - have accused China of applying "targeted economic pressure" on Panama via detentions.

"These actions – following the decision of Panama’s independent Supreme Court regarding the Balboa and Cristobal terminals – are a blatant attempt to politicize maritime trade and infringe on the sovereignty of the nations of our hemisphere," the signatories said. "Panama is a pillar of our maritime trading system, and as such must remain free from any undue external pressure. Any attempts to undermine Panama’s sovereignty are a threat to us all."

The six states warned that they will be "monitoring with vigilance," and they expressed their solidarity with Panama.