Panama has officially transferred control of port operations at both the Balboa and Cristobal terminals to shipping giants A.P. Moller-Maersk and Mediterranean Shipping Co. (MSC) following a Supreme Court ruling that invalidated key contracts held by a subsidiary of CK Hutchison.
The Panamanian government published the ruling in its official gazette on Monday, formally assuming control of the port facilities – including cranes, vehicles, computer systems, and software – with the aim of ensuring uninterrupted operations while a new concession is awarded within the next 18 months. APM Terminals, a unit of Maersk, will operate the Balboa port on the Pacific side, and MSC’s port operating subsidiary, Terminal Investment, will run the Cristobal port on the Atlantic side.
The move marks a significant escalation in a dispute that has become a geopolitical flashpoint, drawing in the United States and China. The court’s decision deemed the concessions granted to Panama Port Company (PPC), a subsidiary of CK Hutchison, unconstitutional after more than two decades.
Shares of CK Hutchison fell 0.9% at the open on Tuesday, despite having climbed over 20% so far this year. In a statement released to CNBC, CK Hutchison said PPC had ceased all operations at both terminals on Monday, characterizing the executive decree as “unlawful.” The Hong Kong conglomerate stated it would continue to consult with legal advisors regarding the ruling and the takeover.
The simmering dispute stems from concerns raised by the U.S. Regarding China’s influence over the strategically vital Panama Canal. Last year, then-President Donald Trump alleged, without providing evidence, that China was effectively “running” the canal. This prompted CK Hutchison to pursue a $23 billion deal with a BlackRock-led consortium to sell its non-Chinese port assets.
However, Beijing swiftly intervened, describing the proposed sale as “kowtowing” to American pressure and effectively stalling the transaction. China has since reportedly directed state firms to halt talks over new projects in Panama and has advised shipping companies to consider alternative routes, according to a recent Bloomberg report.
CK Hutchison initiated arbitration proceedings against Panama last month following the initial court ruling. On February 12th, the company warned that any attempts by Maersk or its subsidiary to operate the ports without its agreement would likely result in legal action.
The Panamanian court’s ruling has been widely viewed as a victory for the U.S., which has prioritized blocking China’s expanding influence over the global trade artery. The Panama Canal handles approximately 40 percent of U.S. Container traffic and five percent of world trade.
Maersk and MSC did not respond to requests for comment from CNBC by the time of publication.
