Panama’s Supreme Court has ruled that the concession held by a subsidiary of Hong Kong’s CK Hutchison Holdings to operate ports at both ends of the Panama Canal is unconstitutional. This decision supports a stated U.S. objective to prevent Chinese influence over the strategic waterway.
The court’s ruling followed an audit by Panama’s comptroller, which cited alleged irregularities in the 25-year extension of the concession, initially granted in 2021.
Geopolitical Implications
The Trump administration had previously made blocking China’s influence over the Panama Canal a priority. U.S. Secretary of State Marco Rubio highlighted the U.S. perspective that the operation of these ports constituted a national security issue, even though the Panamanian government and canal authority maintained that China had no influence over operations.
U.S. Secretary of State Marco Rubio highlighted the U.S. perspective that the operation of these ports constituted a national security issue.
Former President Donald Trump had suggested that Panama should return control of the canal to the U.S.
The court’s statement did not provide immediate guidance on the future status of the ports.
Responses to the Ruling
Panama Ports Company (PPC)
CK Hutchison’s subsidiary, Panama Ports Company (PPC), stated it had not yet been officially notified of the decision. PPC maintained that its concession was awarded through a transparent international bidding process.
PPC’s statement asserted that the ruling “lacks legal basis and jeopardizes not only PPC and its contract, but also the well-being and stability of thousands of Panamanian families who depend directly and indirectly on port activity, but also the rule of law and legal certainty in the country.”
The company reserved all rights to pursue legal action.
Hong Kong Government
The Hong Kong government firmly rejected the ruling, stating its opposition to any foreign government using coercive or unreasonable means to harm the business interests of Hong Kong enterprises. It urged the Panamanian government to respect contracts and provide a fair business environment, also advising Hong Kong enterprises to review their investments in Panama.
China's Foreign Ministry
In Beijing, China’s foreign ministry spokesperson, Guo Jiakun, stated that China would take necessary measures to safeguard the legitimate rights and interests of "the Chinese company."
Political Analyst's View
Political analyst Edwin Cabrera indicated that after official notifications, the matter of the ports' operation would fall to Panama’s executive branch, specifically the Panama Maritime Authority, and expressed an impression that port operations would continue.
Prior Deal and Audit Findings
Last year, CK Hutchison Holdings announced a deal to sell its majority stake in the Panamanian ports and other global ports to an international consortium, including BlackRock Inc. This deal appeared to stall following reported objections from the Chinese government. In July, CK Hutchison indicated it was considering a Chinese investor to join the consortium, a move interpreted by some as an effort to address Beijing’s concerns. No further information has been released by CK Hutchison.
The company’s position highlights the challenges faced by Hong Kong business elites in navigating Beijing’s expectations, especially during strained U.S.-China relations. CK Hutchison is owned by the family of Hong Kong’s richest man, Li Ka-shing.
Panama’s comptroller simultaneously audited the concession to PPC, which had held the contract since 1997 and saw it renewed for 25 years in 2021 by the prior Panamanian administration. Comptroller Anel Flores reported that the audit found unpaid payments, accounting errors, and the apparent existence of a "ghost" concession operating within the ports since 2015. PPC denied these allegations.
The audit estimated that these irregularities had cost the government approximately $300 million since the concession extension and an estimated $1.2 billion over the original 25-year contract. Flores also stated that the extension was granted without his office's required endorsement.
On July 30, the comptroller formally challenged the Panama Ports Company’s contract before the Supreme Court.