Panama Supreme Court Declares Hong Kong Firm’s Canal Port Contracts Unconstitutional

By De Puy & Asociados

Panama’s Supreme Court unanimously ruled that the concession contracts held by Panama Ports Company (PPC), a subsidiary of Hong Kong-based CK Hutchison Holdings, to operate the Balboa and Cristóbal ports at the Panama Canal are unconstitutional, nullifying decades-old agreements that had governed the facilities. The decision came after a legal challenge asserting that the contracts violated constitutional requirements and lacked proper legal procedure for renewal.

The contracts at issue had been in place since the 1990s and were extended in 2021, making PPC the exclusive operator of the two major container terminals at either end of the canal. The Supreme Court’s ruling means those concessions are void, raising questions about their future management and existing sales plans involving the assets.

Following the decision, CK Hutchison’s subsidiary initiated international arbitration proceedings against the Republic of Panama under the rules of the International Chamber of Commerce, contesting the annulment and seeking compensation. The company stated it disagreed with the court’s determination and is exploring legal avenues to protect its interests.

The ruling prompted a diplomatic response from China. The Hong Kong and Macau Affairs Office criticized the Panamanian court’s decision as “absurd,” “shameful” and harmful to the rights of Hong Kong enterprises, warning that Panama could face “heavy prices” if it proceeded with the annulment. Beijing’s remarks also accused outside actors of influencing the outcome, framing the situation within broader geopolitical tensions.

Panamanian officials, including President José Raúl Mulino, rejected external pressure, affirming that Panama would not be intimidated and that its legal and judicial processes would stand. Government representatives described the court’s ruling as a sovereign legal matter, emphasizing adherence to the rule of law and the independence of the judiciary.

In the interim, the Panama Maritime Authority announced that Danish firm A.P. Moller-Maersk would assume temporary operations of the ports, ensuring continuity while the legal framework and future concession processes are arranged. Panama has also indicated plans to open a new, competitive concession process for the port operations.