Panamanian Court Strikes Down Hong Kong Firm’s Canal Contract

The ruling delivers a victory to President Trump, who has said he wants the U.S. to control the canal, and a blow to the longtime ports operator, CK Hutchison.

A top court in Panama ruled on Thursday that a lucrative port contract held by a Hong Kong company was unconstitutional, a decision that will most likely deepen tensions between the United States and China in Latin America.

The decision against the company, CK Hutchison, could eventually clear the way for U.S. and European companies to operate the strategically important ports. Last year, President Trump backed a deal that would have transferred control of the Panamanian ports and many others to a group led by a large American financial firm.

The court said its ruling followed “extensive deliberation” after the Panamanian government brought a lawsuit that claimed audit irregularities.

On Friday, Panama’s president, José Raúl Mulino, said that, once the court’s decision took effect, the ports would be leased out to new operators “under terms and conditions that are favorable to Panama.”

Secretary of State Marco Rubio said Friday on X that the United States was “encouraged” by the court decision.

CK Hutchison has run the Balboa and Cristobal ports at either end of the Panama Canal since 1997. The canal handles an estimated 5 percent of the world’s seaborne trade. On Thursday, CK Hutchison’s Panamanian subsidiary said it had “complied with its contractual and legal obligations" relating to the ports.

The ports became a battlefront in the broader showdown between Beijing and Washington in which Mr. Trump, without providing evidence, accused China of running the canal. This thrust CK Hutchison, a conglomerate controlled by Li Ka-shing, Hong Kong’s most famous tycoon, into the geopolitical spotlight. Beijing has in recent years asserted increasing political control over Hong Kong.

At a briefing in Beijing on Friday, a spokesman for the Chinese Foreign Ministry said China would “take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises.”

CK Hutchison proposed a deal last year to sell the two Panama ports as well as 40 others to a consortium of investors led by BlackRock, the world’s largest asset manager.

In last year’s State of the Union address, Mr. Trump linked the deal to his efforts to bring back control of the Panama Canal to United States, which ceded the waterway to Panama in 2000.

“My administration will be reclaiming the Panama Canal, and we’ve already started doing it,” Mr. Trump said. “Just today, a large American company announced they are buying both ports around the Panama Canal.”

But the deal was held up after China said it was reviewing it.

The decision by Panama’s Supreme Court could, on the face of it, hand Mr. Trump a victory when he has gone to extraordinary lengths to assert U.S. power in Latin America. This month, he seized Nicolás Maduro, Venezuela’s autocratic leader, and imposed a blockade on tankers trying to transport Venezuelan oil, much of which has been sold to China.

Some analysts said Mr. Trump’s statements about taking back the canal had most likely influenced how Panama’s institutions handled the CK Hutchison case.

“I don’t want to say that the Panamanian Supreme Court doesn’t have any independence and autonomy,” said Benjamin N. Gedan, director of Latin America program at the Stimson Center, a research organization. “But they were under an enormous amount of pressure to help Panama navigate this complex geopolitical situation.”

A Panamanian government official disputed assertions that American pressure had led to the court decision, noting that it stemmed from legal actions filed years earlier.

“The actions themselves reflect the normal operation of Panama’s rule of law and the independence of its institutions, not pressure from any foreign government,” Alberto Alemán Zubieta, a special adviser to President Mulino on port and logistics, said in a statement.

And the ports in Panama may not end up under the control of the BlackRock group or another American company. If, as expected, CK Hutchison is forced to relinquish the ports, Panama will invite bids from around the world for the long-term contracts to operate them. During that process, another company would most likely operate them temporarily.

APM Terminals, part of Maersk, the Danish logistics giant, said on Friday that it was willing “to assume the temporary operation of both terminals.” APM Terminals bought a railroad last year that runs next to the canal, which is managed by a Panamanian government agency.

BlackRock declined to comment.

The Panamanian court decision itself appeared to rest on technical grounds that the extension of CK Hutchison’s port contracts didn’t follow the proper approval process, said Alec Tracy, general counsel and chief operating officer of Admiralty Harbour, a Hong Kong investment firm.

Panama’s comptroller brought a case last year, alleging that a recent extension of CK Hutchison’s contract cost the country over $1 billion in tax revenue.

The court’s ruling is likely to be interpreted as a setback by Beijing, which took greater interest in the controversy over the canal as relations between the United States and China deteriorated sharply last year over tariffs.

After Beijing objected to the BlackRock deal, CK Hutchison announced that it was considering inviting another investor, from China, into the deal.

Chinese media reported that the investor was COSCO, the Chinese state-owned shipping behemoth. Analysts said that decision was most likely a move to appease Beijing.

While COSCO is not expected to be part of any deal for the Panamanian ports, analysts said its involvement in the other 40 or so CK Hutchison ports would allow China to be more assertive globally than if CK Hutchison had held on to them.

Ryan Berg, a director of the Americas program at the Center for Strategic and International Studies, a research organization, said getting CK Hutchison out of Panama while giving COSCO a role in the other ports would be “a Pyrrhic victory for the United States,” because of COSCO’s close ties to China’s government and navy.

Jack Nicas contributed reporting from Mexico City, and Murphy Zhao from Hong Kong.

Related Content