Amid a dispute between the US and China, Panamanian authorities have seized control of two ports on the Panama Canal from Hong Kong conglomerate CK Hutchison.
Panama published an official gazette on Monday citing a Supreme Court ruling that voided key port contracts held by a subsidiary of CK Hutchison, known as the Panama Ports Company (PPC), according to Reuters.
The publication completed the legal cancellation of the concessions for the Balboa and Cristobal terminals near the Panama Canal, which the Panama Ports Company, a subsidiary of CK Hutchison, had operated for nearly three decades.
Who’s taking over now?
APM Terminals Panama, a subsidiary of Denmark’s Maersk Group, will operate the port of Balboa, while TIL Panama, part of Mediterranean Shipping (MSC), will run operations in Cristobal, several reports, including AFP, said Reuters.
After the Supreme Court decision became final upon publication, Panama’s Maritime Authority (AMP) took over both ports by decree to ensure uninterrupted operations, said Alberto Aleman Zubieta, head of the technical team overseeing the transition.
The government said it had approved two temporary concession agreements with AMP for up to 18 months to operate the Balboa and Cristobal terminals.
The Supreme Court ruling, issued in late January, comes amid growing rivalry between the US and China over global trade routes and marks a victory for Washington.
US President Donald Trump has pushed to limit Chinese influence over the Panama Canal, which carries about 5% of global maritime trade.
Maersk and MSC did not immediately comment on the matter.
CK Hutchison objects to the takeover
CK Hutchison said on Tuesday that Panama’s decision to cancel key port contracts and grant MSC temporary licenses was “unlawful” and that it was considering domestic and international legal action against the country, Reuters reported.
“CKH considers the decision, the executive order, the purported termination of PPC’s concession and the takeover of the terminals to be illegal,” CK Hutchison said in a statement to the Hong Kong Stock Exchange.
The conglomerate claimed on Tuesday that Panamanian authorities threatened its employees with criminal prosecution if they defied orders to leave two strategic canal ports at the center of a legal battle that has embroiled Beijing and Washington.
The statement came after CK Hutchison said Panamanian authorities made “direct physical entry” into the ports of Balboa and Cristobal on Monday to remove PPC employees who faced criminal charges if they defied orders.
CK Hutchison said PPC staff were told not to contact the company.
“The actions of the State of Panama also pose serious risks to operations, health and safety at the Balboa and Cristobal terminals,” CK Hutchison added in a statement.
CK Hutchison said it is liaising with its legal counsel in pursuing domestic and international legal action against Panama and third parties.
In a separate statement on Tuesday, the Hong Kong government expressed strong displeasure and disapproval of Panama’s takeover and called on Panamanian authorities to respect the spirit of the treaties and ensure a fair and just business environment.
Shares in the Hong Kong-listed company fell 1.9% on Tuesday, while Hong Kong’s broader Hang Seng index fell 1.9%.
Panamanian authorities will operate the ports for the time being
Panamanian President Jose Raul Mulino said the temporary contracts were issued as a “legitimate instrument that respects the ownership of assets”.
“To be clear, this does not mean the expropriation of these assets, but rather their use to ensure the operation of the ports until their true value is determined for appropriate actions. I repeat, this is not an expropriation,” Mulino said in a televised address Monday afternoon.
In early February, Mulino said the government would move to formalize an agreement with APM Terminals Panama to manage and control the ports once the decision becomes legally binding.
Mulino said the arrangement will remain in place until the state develops a new “competitive” concession framework to be awarded in the future, “with the humility not to repeat the mistakes of the past.”
He said neither port operations nor employment would be affected during the process.
The office of the Panamanian president did not immediately respond to an out-of-hours request for comment on CK Hutchison’s statement.
(With inputs from Reuters)
