On Tuesday, February 24th, Hong Kong-based CK Hutchison Holdings Limited (referred to as CK Hutchison) announced that the Panamanian authorities forcibly took over administrative and operational control of its two strategic ports located in the Panama Canal. CK Hutchison’s employees were removed and warned to comply with the instructions from the Panamanian government, or they could face criminal prosecution.
Panama disclosed a court ruling from late January in its official gazette on Monday, along with an executive order issued by the president. The court ruling revoked the crucial port contracts held by CK Hutchison’s Panama Ports Company (PPC).
In a statement, CK Hutchison described Panama’s cancellation of contracts for the Balboa and Cristobal ports, along with issuing temporary permits to Maersk and Mediterranean Shipping Company (MSC), as “illegal.” CK Hutchison is considering domestic and international legal actions against Panama.
The ruling comes at a time of escalating competition between the United States and China on global trade routes, marking a victory for Washington. President Trump has been working to curb Beijing’s influence over the Panama Canal.
Beijing opposes CK Hutchison’s sale of the two ports in Panama to a U.S.-led consortium and has the power of veto. Meanwhile, there is skepticism within the Panamanian political and social spheres regarding CK Hutchison’s relationship with Beijing.
The Panama Canal connects the Atlantic and Pacific Oceans, saving ships from a detour around South America, shortening the voyage by about 13,000 kilometers, and reducing travel time and fuel costs by up to 18 days. Approximately 5% of global maritime trade passes through this critical strategic waterway, with the United States being its largest user.
In addition to its commercial value, the canal allows for rapid movement of U.S. Navy ships and military supplies between the two oceans in times of conflict. Controlling the canal during war or conflicts ensures the stability of supply chains.
CK Hutchison’s statement revealed that Panamanian authorities entered the Balboa and Cristobal ports on Monday, evicting the company’s staff. The employees were informed that the company’s port concessions no longer existed, operations had to cease, and they were instructed to leave without communicating with the company, following government directives to avoid potential criminal prosecution.
Furthermore, the statement reiterated the illegality of the Panama Supreme Court’s ruling, the executive order issued by the president, the revocation of CK Hutchison’s Panama Ports Company concession, and the forced takeover of the docks.
The company stated that it is consulting legal counsel and considering domestic and international legal actions against Panama and third parties.
On February 4th, following the ruling, CK Hutchison declared that its Panama Ports Company had initiated international arbitration against the Panamanian government over the revocation of operating permits at the two ports in the Panama Canal. However, Panamanian Finance Minister Felipe Chapman mentioned in an interview before the ruling was disclosed that “Panama has a high success rate in arbitration. It is crucial for the rule of law in commercial activities.”
On Tuesday, CK Hutchison’s Hong Kong-listed stocks fell by 1.9%, mirroring a 1.9% decline in the Hang Seng Index.
Albero Aleman Zubieta, head of the Panamanian technical team overseeing the transition, announced after the official issuance of the presidential decree that they had taken control of the Balboa and Cristobal ports to ensure uninterrupted port operations. The government approved two interim port concession contracts, with APM Terminals Panama operating the Balboa port and TIL Panama, a local subsidiary of MSC, operating the Cristobal port, each having a maximum duration of 18 months.
This move could impact CK Hutchison’s planned $23 billion deal to sell dozens of ports globally (including the two ports in Panama) to a consortium led by BlackRock and MSC.
The Panamanian President’s office did not immediately respond to requests for comments on CK Hutchison’s statement outside office hours.
Maersk and Mediterranean Shipping Company have not yet commented on the issue.