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Panama's Supreme Court has annulled key port contracts held by CK Hutchison's subsidiary, creating uncertainty over the ownership of operations at the Panama Canal and affecting the conglomerate's planned USD 23 billion global port sale. The court ruled that the concession agreements were unconstitutional, challenging nearly three decades of PPC's operations and USD 1.8 billion investment. China and Hong Kong criticized the decision, while analysts expect short-term stock weakness for CK Hutchison. The ruling may force Panama to revise its port operation laws and consider new tenders or arbitration.
Panama's Supreme Court has annulled key port contracts held by a subsidiary of Hong Kong-based CK Hutchison, casting uncertainty over the future ownership of operations at the Panama Canal and potentially complicating the conglomerate's plans to sell some terminals. Advertisement
Panama Ports Company (PPC), a CK Hutchison subsidiary, has managed container terminals at the canal's Pacific and Atlantic entrances since the 1990s, separate from the canal's waterway operations. The Supreme Court ruling challenges the legal framework that had allowed PPC to operate the terminals, which could impact CK Hutchison's planned USD 23 billion sale of dozens of ports worldwide, including the Panamanian terminals, to a consortium led by BlackRock and Mediterranean Shipping Company (MSC).
PPC stated it had not been formally notified of the decision but considers it inconsistent with the laws that allowed its operations. The company highlighted that nearly three decades of investments, totaling USD 1.8 billion in infrastructure and technology, are at stake. PPC emphasized that it reserves all rights, including pursuing legal remedies at both national and international levels. The firm also warned that the ruling affects thousands of Panamanian families who depend directly and indirectly on port activity, as well as the country's legal certainty.
China reacted strongly, with foreign ministry spokesperson Guo Jiakun noting that the country will take all necessary measures to protect the rights and interests of Chinese enterprises. The Hong Kong government expressed firm disapproval, stating it opposes any foreign government using coercive or unreasonable measures that harm Hong Kong companies' legitimate business interests.
Following the ruling, CK Hutchison's Hong Kong-listed shares fell 4.6%, while the Hang Seng Index declined 2.1%. Analysts suggested that the company could face short-term stock weakness until it re-evaluates its sale strategy, which may be delayed depending on how the firm addresses the court's decision.
The Supreme Court concluded that the laws underpinning the concession contract between the state and PPC for the development, construction, operation, and management of the Balboa and Cristobal terminals were unconstitutional. The decision comes amid growing U.S.-China rivalry over global trade routes. Washington has supported the proposed sale, viewing the transfer of these assets under majority U.S. ownership as a strategic win, while China had opposed the deal, reportedly pushing for state-owned shipping company COSCO to secure a controlling stake.
CK Hutchison had awaited the court's ruling after the Panamanian attorney general deemed the contracts unconstitutional. Critics also argued that the extended contracts were disadvantageous to Panama. The ruling may prompt the country to revise the legal framework governing port operations and potentially conduct new tenders for terminal management. Ensuring uninterrupted operations is vital for shipping lines that rely on Panama as a major transshipment hub.
Previously, Panamanian President Jose Raul Mulino had suggested that public-private partnerships could manage the two ports if the contracts with CK Hutchison were invalidated. Analysts also indicate that Panama Ports may pursue arbitration following the ruling.
Source Reuters
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