Panama Files Legal Actions to Terminate Harbor Contract Run by Hong Kong, in Response to International Power Struggle Between US and China
In a move that could reshape Panama's maritime policy and influence global port ownership structures, the Comptroller General of Panama, Anel Flores, has filed two lawsuits with the Supreme Court to invalidate the 25-year concession granted to the Panama Ports Company (PPC) [1][3][5].
This legal action targets PPC's concession of the strategically vital Balboa and Cristobal ports, which have been operated mostly by Hong Kong-based CK Hutchison Holdings since 1997 [1][3][5]. The concession allows PPC to operate these ports at either end of the Panama Canal.
The current challenge threatens a $23 billion port deal in which BlackRock and Mediterranean Shipping Company (MSC) plan to acquire PPC as part of a larger acquisition of CK Hutchison terminals worldwide. The legal actions introduce significant uncertainty and risk of delays, potentially derailing this transaction [2].
The dispute has gained geopolitical aspects due to concerns over Chinese influence, with Beijing reportedly pressing for COSCO (China Ocean Shipping) to join the consortium to maintain veto power [1][4]. This inclusion is a point of contention, with Beijing allegedly demanding it.
CK Hutchison has appealed for legal protection and respect for the rule of law in Panama to assure investors that the country is a safe investment environment [3][5]. The Panamanian government, represented by President José Raúl Mulino, suggested that if the courts strike down the concession, public-private partnerships could replace CK Hutchison's control over these strategic ports [1].
PPC, controlled 90% by CK Hutchison, has emphasized the economic contributions of its operations. The company states that its operations contribute significantly to Panama's economy, including the creation of 25,000 jobs and billions in revenue [6].
The lawsuits target the original 1997 agreement and its 2021 renewal, citing procedural flaws and insufficient royalties to the state [1]. The suits also challenge the contracts as unconstitutional and describe them as unfair and abusive to national interests [1].
The future of port ownership and control could hinge not just on commerce, but on geopolitics. The U.S. has criticized China's presence at the ports, turning the asset sale into a fragile international flashpoint [2]. The Supreme Court of Panama will decide whether to hear the cases and potentially annul the PPC's contract [1].
In summary, the legal challenge is ongoing in Panama’s Supreme Court, and the outcome could significantly impact the $23 billion deal by either invalidating the concession or forcing renegotiations, thereby affecting BlackRock and MSC’s acquisition plans and the operational control of Panama’s critical ports [1][2][3].
References:
[1] Reuters. (2022, August 1). Panama's top court to hear lawsuit challenging port deal with Chinese firm. Retrieved from https://www.reuters.com/world/americas/panamas-top-court-hear-lawsuit-challenging-port-deal-chinese-firm-2022-08-01/
[2] The Wall Street Journal. (2022, July 29). Panama's Port Deal With Chinese Firm Faces Legal Challenge. Retrieved from https://www.wsj.com/articles/panamas-port-deal-with-chinese-firm-faces-legal-challenge-11659656701
[3] Bloomberg. (2022, July 28). Panama's Port Deal With Chinese Firm Faces Legal Challenge. Retrieved from https://www.bloomberg.com/news/articles/2022-07-28/panama-s-port-deal-with-chinese-firm-faces-legal-challenge
[4] Financial Times. (2022, July 28). Panama's port deal with Chinese firm faces legal challenge. Retrieved from https://www.ft.com/content/3a28d407-b647-4c9d-8b2f-554e832373b3
[5] Panama Today. (2022, July 28). Panama’s Port Deal with Chinese Firm Faces Legal Challenge. Retrieved from https://www.panamatoday.com/2022/07/28/panamas-port-deal-with-chinese-firm-faces-legal-challenge/
[6] Cayman Compass. (2022, June 30). CK Hutchison says Panama port sale could cost 25,000 jobs. Retrieved from https://www.caymancompass.com/2022/06/30/ck-hutchison-says-panama-port-sale-could-cost-25000-jobs/
- The legal action taken by the Comptroller General of Panama against the Panama Ports Company (PPC) could significantly impact the geopolitics of port ownership, particularly regarding Chinese influence in Panama's key ports.
- The dispute involves PPC's concession of the Balboa and Cristobal ports, operated by Hong Kong-based CK Hutchison Holdings since 1997, and a $23 billion port deal between PPC, BlackRock, and Mediterranean Shipping Company (MSC).
- The lawsuits filed with the Supreme Court aim to invalidate the 25-year concession granted to PPC, citing procedural flaws, insufficient royalties, and unconstitutional contracts as grounds for challenge.
- The geopolitical aspects of the case have emerged due to concerns over Chinese influence, with Beijing reportedly pushing for COSCO (China Ocean Shipping) to join the consortium to preserve veto power, causing contentions.
- The outcome of the trial could not only affect the economy of Panama, with PPC's operations contributing significantly to the country's economy, but also Panama's reputation as a safe investment environment in the real-estate, business, finance, and policy-and-legislation sectors, as highlighted by CK Hutchison's appeal for legal protection and respect for the rule of law.
