The dispute between CK Hutchison and Panama, which centres on the terminals at either end of the Panama Canal, has taken a new turn. The group accuses the state of waging an “attack campaign”.
In February, the Panamanian government seized the two terminals, Balboa and Cristóbal, which are situated at the respective entrances to the Panama Canal. This move had been preceded by a dispute over their sale to a consortium led by Blackrock and MSC, which had been scuppered by several parties. The company maintains its view that the Panamanian government has breached an investment protection agreement, and has described the action as a “state-led campaign of aggression”.
To seek compensation for its loss, CK Hutchison has now initiated international arbitration proceedings. The company is demanding more than $1.5 billion from the Panamanian government as compensation for the loss of its investments in both terminals. This new arbitration is separate from the arbitration proceedings already underway by CK Hutchison’s subsidiary, Panama Ports Company (PPC), which is claiming over $2 billion for alleged breaches of contract relating to the takeover. CK Hutchison stated in a letter that the new case is intended to protect the company’s rights as an investor.
The planned sale of the two terminals was part of a larger deal between CK Hutchison and the Blackrock-MSC consortium, under which the company intended to sell the majority of its global port holdings. The transaction comprised 43 ports and nearly 200 berths across 23 countries. The value had been put at $22.8 billion.
However, the deal quickly turned into a proxy war over one of the world’s most important waterways: the US on one side, China on the other. US President Trump had criticised the Chinese government’s alleged influence over the Panama Canal: CK Hutchison is based in Hong Kong and had been operating the terminals for nearly 30 years. China, for its part, feared that a sale to the consortium would allow the US to gain influence over the Canal, and involved the state-owned shipping company Cosco in the negotiations, amongst others.
Meanwhile, Panama challenged PPC’s existing concession, citing irregularities and lost government revenue. After the country’s Supreme Court declared the concession null and void, the state took control of the terminals in February. Since then, Balboa has been temporarily controlled by APM Terminals (Maersk), whilst Terminal Investment Limited (MSC) has taken over operations at Cristóbal.
