CK Hutchison Initiates Arbitration Against Panama Over Canal Ports Ruling

Hong Kong’s CK Hutchison Holdings announced Wednesday that its subsidiary has begun arbitration proceedings against Panama, following a contentious Supreme Court ruling that declared the company’s concession to operate Panama Canal ports unconstitutional.

The legal challenge marks the latest development in an increasingly tense dispute with significant geopolitical implications, as the company strongly disagrees with last week’s court decision. China has already warned that Panama would pay “a heavy price” if it persists with actions that threaten Chinese business interests in the region.

Panama has sought to reassure stakeholders that the two strategic ports located at each end of the canal would continue operating without disruption despite the ruling. The Panama Canal serves as a critical passage for global trade, connecting the Atlantic and Pacific oceans through one of the world’s most important maritime chokepoints.

Some analysts view the court’s decision as a win for the United States, aligning with the Trump administration’s stated goal of limiting Chinese influence over the strategically vital waterway. Former President Trump had previously claimed China was “running the Panama Canal” and vowed to “take back” the waterway.

Panama Ports Company, the CK Hutchison subsidiary that operates the facilities, initiated the arbitration proceedings Tuesday under International Chamber of Commerce rules. The timeline and potential impact of these proceedings remain unclear, as international arbitration in such complex cases can often extend over several years.

The Panama ports dispute has broader implications for CK Hutchison’s planned $23 billion sale of its global port operations. The deal, first announced in March 2023, involves selling 43 ports worldwide to a consortium of buyers that includes U.S. investment firm BlackRock. The transaction has faced delays due to the Panama court case and heightened geopolitical tensions between Washington and Beijing.

Legal experts suggest CK Hutchison’s arbitration strategy may be designed to buy time while exploring alternatives for its broader port portfolio. Yueming Yan, a law professor at the Chinese University of Hong Kong, noted that arbitration hearings may be held in Paris or New York, with proceedings potentially extending over several years.

“While not overturning domestic court decisions, the tribunal’s ruling would be binding and address whether the Panamanian government breached its obligations and owes compensation,” Yan explained. However, she cautioned that enforcement of any ruling favorable to CK Hutchison could face challenges within Panama’s legal system.

Albert So, chairman of the Hong Kong Mediation and Arbitration Center, suggested that if CK Hutchison prevails, it could result in substantial compensation, given that the concession was renewed in 2021 for 25 years. Alternatively, it might restore certain operational rights at the ports.

Panama President José Raúl Mulino responded forcefully to Beijing’s criticisms on Wednesday, stating that he “energetically rejected” China’s statements. “Panama is a country of laws and respects the decisions of the judiciary, which is independent of the central government,” Mulino wrote on social media platform X.

The disputed concessions have operated under CK Hutchison’s control since 1997. The company is ultimately controlled by the family of Li Ka-shing, Hong Kong’s richest man. The Panama Canal itself, built by the United States in the early 20th century, remained under American control until 1999, when it was transferred to Panama’s government.

In its statement, Panama Ports Company claimed the Panamanian government had “routinely disregarded” communications and clarification requests. The company also alleged that despite the court ruling not yet being effective, Panamanian authorities have conducted unexpected site visits and demanded unrestricted access to the company’s physical assets, commercial information, and intellectual property.

Industry observers note that while the Panama situation remains contentious, it is unlikely to impede discussions related to CK Hutchison’s other global port operations, which include facilities across Europe, Asia, Australia, the Americas, the Middle East, and Africa.

As the dispute unfolds, both sides appear to be hardening their positions in what has become not just a legal disagreement but a flashpoint in the broader contest for influence between China and the United States in Latin America.