Amid a row between the US and China, Panamanian authorities took control of two ports on the Panama Canal from Hong Kong conglomerate CK Hutchison.
According to Reuters, Panama published an official gazette on Monday, citing a Supreme Court ruling that cancelled key port contracts held by a subsidiary of CK Hutchison, known as Panama Ports Company (PPC).
The publication finalised the legal annulment of concessions for the Balboa and Cristobal terminals near the Panama Canal, which Panama Ports Company, a subsidiary of CK Hutchison, had operated for nearly three decades.
Who takes over now?
APM Terminals Panama, a subsidiary of the Danish Maersk group, will operate the Balboa port, while TIL Panama, part of the Mediterranean Shipping (MSC), will run operations at Cristobal, several reports, including AFP, Reuters reported.
After the Supreme Court ruling became final upon publication, the Panama Maritime Authority (AMP) has taken possession of both ports by decree to ensure uninterrupted operations, said Alberto Aleman Zubieta, head of the technical team overseeing the transition.
The government said it approved two temporary concession contracts with AMP, lasting up to 18 months, for the operation of the Balboa and Cristobal terminals.
The Supreme Court ruling, issued in late January, came amid growing US-China rivalry over global trade routes and marks a win for Washington.
US President Donald Trump has pushed to curb Chinese influence over the Panama Canal, which carries about 5% of global maritime trade.
Maersk and MSC did not immediately have a comment on the matter.
CK Hutchison objects to take over
CK Hutchison said on Tuesday that Panama’s decision to cancel key port contracts and grant temporary licences to MSC was “unlawful” and that it was considering national and international legal action against the country, reported Reuters.
“CKH considers the ruling, the executive decree, the purported termination of PPC’s concession, and the takeover of the terminals to be unlawful,” CK Hutchison said in a statement to the Hong Kong Stock Exchange.
The conglomerate claimed on Tuesday that Panama authorities threatened its employees with criminal prosecution if they defied orders to leave two strategic canal ports at the centre of a legal battle that has embroiled Beijing and Washington.
The statement came after CK Hutchison said Panamanian authorities made “direct physical entrance” to the Balboa and Cristobal ports on Monday to remove PPC employees who were threatened with criminal prosecution if they defied orders.
CK Hutchison said PPC staff were told not to make contact with the company.
“The actions by the Panama State also raise serious risks to the operations, health and safety at the Balboa and Cristobal terminals,” CK Hutchison’s statement added.
CK Hutchison said it was liaising with its legal counsel on pursuing national and international legal action against Panama and third parties.
Hong Kong’s government expressed strong dissatisfaction and opposition to Panama’s takeover in a separate statement on Tuesday, urging Panama authorities to respect the spirit of contracts and to provide a fair and just business environment.
The company’s Hong Kong-listed shares were down 1.9% on Tuesday as Hong Kong’s broader Hang Seng Index was also off 1.9%.
Panama authorities to run ports for now
Panamanian President Jose Raul Mulino said the temporary contracts had been issued as “a legitimate tool that respects asset ownership.”
“Let me be clear, this does not imply an expropriation of those assets, but rather their use to ensure the operation of the ports until their real value is determined for the corresponding actions. I repeat, this is not an expropriation,” Mulino said in a televised address on Monday afternoon.
Early in February, Mulino said the government would move forward to formalize an agreement with APM Terminals Panama to manage and control the ports once the ruling became legally binding.
Mulino said the arrangement would remain in place while 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 will be affected throughout the process.
The Panama president’s office did not immediately respond to a request outside office hours for comment on CK Hutchison’s statement.
(With inputs from Reuters)
