Panama’s Comptroller Asks Court to Void Hutchison’s Terminal Concession

Balboa prot Panama — Hutchison's operation of the terminals in Panama is now being challenged by the country's Comptroller General (CK Hutchison file photo)

The struggle over the operations of the terminals at each terminus of the Panama Canal continues with Panama’s Comptroller General announcing his office has filed lawsuits seeking to void the 2021 contract extension with CK Hutchison. It is the latest twist in the political wrangling that has seen Donald Trump assert China controls the Panama Canal while Panama’s Government has defended its sovereignty.

Anel Bolo Flores, Comptroller General of Panama, has spoken out against the contract extension granted by the prior government in 2021 to Panama Ports Company, which is 90 percent owned by CK Hutchison. The government of Panama has a 10 percent ownership stake in the company. In April, under political pressure from the United States, the Comptroller General reported that his office was starting an audit of the contract and the renewal process.

Speaking at a press briefing in Panama, Flores said on July 31, “The contract was bad, one-sided and abusive, against the interest of the country,” Bloomberg reports. Without releasing the details of his audit, Flores said the contract extension was “poorly negotiated.” He contends the audit found “many irregularities.”

CK Hutchison in April issued a detailed statement asserting that the contract is “valid, in force, and compliant with all legal requirements.” It highlighted that in 2020, the Office of the Comptroller General of the Republic concluded that the company was “in substantial compliance with the clauses and obligations of the concession contract,” which was also later certified in 2021by the Panama Maritime Authority.

The company has been in Panama since 1997, as the United States moved to complete the handover of the Canal under the 1977 treaty. Hutchison operates terminals in Balboa and Cristobal and in 2021 was awarded a 25-year extension of its concession in a no-bid process.

Flores has repeatedly spoken against the process conducted by the prior government and contends the renewal was “never legally authorized.” He cites tax breaks and amendments, which he says are costing Panama up to $1.3 billion in lost revenue.

The Comptroller General’s office said it is filing two legal cases with the country’s Supreme Court. One seeks to declare the extension unconstitutional, and the other seeks to void the 2021 agreement.

Also at issue is the proposed sale of the Panama Ports Company to an investment group led by BlackRock and MSC’s Terminal Investments Ltd. Trump hailed the deal as returning the Panama Canal to U.S. control, but the deal has encountered strong opposition from China, which says it is U.S. manipulation that would harm Chinese trade.

Flores commented as part of his briefing, saying, “They are talking about billion-dollar deals here, which do not include Panama, the true owner of the Panamanian ports," reports Reuters. "That is why we have taken the actions we are taking, because we are not satisfied."

The lockup agreement between Hutchison, BlackRock, and TiL expired on July 27, but Hutchison reported on Monday that talks were continuing. It said they were exploring inviting a Chinese investor to join the consortium, a step that is seen as face-saving for the Chinese government. Adding a further element to the negotiations, CMA CGM’s CFO told investors on Tuesday, the French company is looking at the deal and expressed interest in possibly acquiring some of the terminal assets controlled by CK Hutchison.

Hutchison reported in March that it had reached two parallel tentative agreements with the BlackRock-TiL consortium. One was for the acquisition of the Panama company operating the Balboa and Cristobal terminals. The other deal is for the 43 ports operations worldwide outside China.

Panama’s President Jose Raul Mulino told reporters during his weekly briefing on Thursday that maybe the solution would be a public-private partnership to run the terminals. He said the situation is now in the hands of the court, but that he does not think the Hutchison contract would continue or be amended. He has been adamant that the canal and its operations are Panama's and that he would ensure it remains a Panamanian asset. Earlier this year, he took steps to end some of China's involvement with Panama while rejecting Trump's claims of Chinese domination.