PANAMA AND THE ONGOING “CHINESE PORTS” DISPUTE

PANAMA AND THE ONGOING “CHINESE PORTS” DISPUTE

With much of the shipping world’s attention focused on developments in the Middle East, one could be forgiven for not being aware of the continuing dispute that has been rumbling on ever since then President-elect Trump began complaining in December 2024 of supposed Chinese influence on operations of the Panama Canal.

Although the Panamanian government, led by a generally pro-American president, rejected Trump’s claims, in March 2025, Hong Kong-based C K Hutchison Holdings Limited announced a proposed deal whereby a consortium led by US investment firm BlackRock would acquire the two container ports which appeared to be the main focus of Trump’s concerns.  These two ports, one at either end of the Canal (although, it must be emphasised, not part of the Canal, and both only operated by a Hutchison subsidiary, while remaining Panamanian property) were among a total of 43 worldwide that were involved. 

The original concession for the two ports had seen the Cabinet Council approve the concession by means of a 1997 Law, allowing the company to operate container, bulk, ro-ro, passenger and general cargo terminals on both coasts of the country. 

Subsequently, the agreement has been modified on three occasions, and in June 2021, the government had extended the concession for a further 25 years.  What the new owners would acquire, if successful, would be the rights to the remaining 22 years of operation.

At the time of the announcement from Hutchison, it was noted that any transfer or assignment of the lease of the two ports required approval by the cabinet in Panama, and might require a new contract.  Furthermore, the operations of the subsidiary operating the ports, Panama Ports Company (PPC) – in which the Panamanian government holds a 10% shareholding – were also the subject of what was described as an in-depth audit by the country’s Comptroller, and a private lawsuit had been lodged with its Supreme Court claiming that the contract with Hutchison was unconstitutional.

This latter point was important as, if the Court ruled that the contract was unconstitutional, that would make it null and void, undermining any interest in the ports on the part of Hutchison, and any plans to include them in the overall deal involving the other ports.  In November 2023, the Court had ruled that an agreement, and a law, involving a giant copper mine had been unconstitutional and, as a result, the mining operation (estimated to be worth up to 5% of the country’s GDP) had been closed down.

Another complication which arose was the fact that the sale of the concessions would not only require clearance in Panama, but also (as part of the larger deal) by the authorities in Hong Kong – and it soon became clear that the Chinese authorities were not entirely happy with the proposed deal, that mainland Chinese authorities might also have to approve it, and that it “can no longer be considered purely commercial in nature“.[1]

The plan had been for Hutchison to sign the new agreement with the consortium in April 2025, but this was then delayed, after it was announced that China’s market regulator said it would carry out an anti-trust review on the Panama port deal.

However, it was also in April 2025 that the Comptroller announced the results of the audit commenced in January.  It was claimed that breaches of the contract had been uncovered, and a shortfall of some $300 million was owed to Panama.  It was also announced that the Comptroller was to file criminal complaints against company officials, as well as against others responsible for the renewal of the concession in 2021.  It was alleged that auditors could only verify $690 million of the investment of $1 billion required for that renewal.

Both the former Comptroller (under the previous administration 2019-24) and PPC disagreed with these findings.[2]  PPC said that it has paid the state $668 million, a sum said to be far in excess of the contributions of any other port operator in the country.[3]

It was perhaps unsurprising that, later that month, the chairman and CEO of BlackRock warned that the whole Hutchison deal could face nine more months of regulatory review.[4]

During the summer of 2025 there were reports of discussions in China, as the consortium sought to find a solution that would satisfy both Chinese officials and the US administration.  It was reported that the Chinese shipping giant Cosco Shipping Corporation was in talks to join the consortium.  However, the South China Morning Post warned that the whole deal could fail unless major changes were made, to satisfy both Chinese and Panamanian authorities’ requirements.  However, in August, Hutchison said that it considered that the deal had a “reasonable” chance to be finalised,[5] although it said that the sale would be delayed until 2026 due to “high geopolitical uncertainty“; and PPC said that, despite everything, it still wanted to work with Panama to resolve the situation.[6]

Meanwhile, the 145-day period allowed for agreement on terms expired in July.  That month, Panama’s the Attorney General had confirmed that the investigation of PPC was being handled by the Anti-Corruption Prosecutor’s Office.  The Comptroller also announced a further pair of lawsuits, one alleging the contract with Hutchison was unconstitutional, and the other for nullity of it and the underlying Law.  In essence, the lawsuits were claiming that, as with the earlier one, that by granting the concession, the state had privileged private interest over public interest.

By December 2025, sale of all the ports involved to the new consortium had seemingly reached an impasse, according to the Wall Street Journal.[7] 

Then on 30 January 2026, the Supreme Court handed down its decision, finding that the law and contract violated no less than eight Articles of the Constitution.[8]

The relevant 1997 Law was held to be unconstitutional, and hence any regulations and the contract with Hutchison were invalid too.  Understandably, PPC rejected the decision, saying that it “lacks legal basis”.  While the decision of the Supreme Court could not itself be formally appealed, PPC was able to request clarification and, in addition, could seek to obtain compensation through international arbitration – which it reportedly did in February.  In China, the Hong Kong and Macau Affairs Office criticised the ruling and said it had harmed the legitimate rights of Hong Kong companies.  Panama’s Consul-General in Panama was summoned by the Secretary for Commerce and Economic Development who expressed the government’s strong opposition to the ruling.

The response from the government in Panama was that there should be no lay-offs because of the ruling, and that the ports would continue in operation.  Separate tenders for the operation of the two ports would be drawn up.

There were rumours of a reaction on the part of China, such as targeting Panamanian exports, and re-examining of other projects.

At the end of January, it was announced that APM Terminals Panama, a subsidiary of the AP Moller-Maersk group, would temporarily assume operation of both ports.   It and TIL Panama (part of the Italian-owned giantMSC) received 18-month temporary concessions in February.[9]

Also in February, Panamanian officials assumed administrative and operational control of PPC terminals at the ports, and barred representatives of PPC from the property, and the Public Prosecutor’s Office raided the three offices of PPC, these being reportedly linked to an alleged concealment of information about the company.[10]

In March, Hutchison announced that it had intensified its legal response to the takeover of the PPC operations, and was said to be claiming $2 billion in damages in its arbitration claim under International Chamber of Commerce (ICC) rules.  In response, Panama’s President accused Hutchison of lying, when it claimed that Panama had failed to file a response to the arbitration request.

A move in March that appeared obviously linked to the developments since January saw COSCO and OOCL suspend all services to one of the two terminals formerly operated by PPC, and modified its routing to also carry out transshipment operations in Buenaventura, Colombia.[11]  This was described as being largely symbolic, signalling Chinese willingness to use economic leverage in the dispute.

Later the same month it was reported that Chinese ports had stepped up inspections of Panama-flagged vessels, detaining 28 in a single week, and of instructions being issued to intensify inspections of Panama-flagged ships.  It was further reported that this action was described as a trial before further escalation.  The South China Morning Post noted that, in the corresponding week a year earlier, only four Panama-flag vessels had been detained.  Most of the 28 vessels were held for alleged deficiencies in fire safety systems, weather integrity and pollution prevention, with around two-thirds being released after one to three days.   By 20 March, detentions had reached 42 in just two weeks, with Lloyd’s List reporting that shipowners and financiers in China were beginning to reassess exposure to the Panamanian register.

As one of the top three registries in the world, with a 14.5% market share, it is perhaps inevitable that numbers of Panama flag ships would be subject to Port State Control checks.  However, it was clear that we were seeing a targeted attempt to pressure the country.

On the other hand, COSCO had stated that it had no intention of wholly disassociating itself with Panama[12] – after all the Canal, despite attempts to provide alternatives, remains vital for Chinese shipping and exports.  Neither is Panama a country naturally hostile to China, having a large and long-established Chinese community.

Nevertheless, while it had seemed that Panama had managed to largely avoid the unwanted attentions of the Trump administration – partly by good fortune with the takeover deal being announced, and it did not seem that the action taken against PPC was directly motivated by seeking to assuage US criticism (as the deal would have seen its ownership change to one more acceptable to the US), it still finds itself in a tricky situation.  Having seemingly dodged the Trump “bullet”, it now faces equally hostile pressure from the other superpower – instead of an implied military threat, it now faces a substantial commercial one.

It remains to be seen if Chinese authorities step up “controls” of Panama-flag vessels, and/or instigate further, more direct measures to punish or influence the issue.  One question is what would be the reaction if a company with Chinese connections was one of the bidders for the new operating contracts for the two ports, and submitted the most attractive bid?  One could imagine the reaction of the current US administration if it even looked like such a bid was being actively considered, and how might the Chinese government react if it was not given a fair chance?

Does arguably the world’s biggest shipping register really want to fall out with the world’s largest maritime fleet owner?  The shipping industry in Panama, in all its forms, makes a huge contribution to the country’s GDP, perhaps 25%, with further investment and expansion underway to benefit the Canal, add new ports and pipelines, and improve transhipment and other logistic services.  It does not need a fight with one of its biggest clients and users.

Ray Todd

Panama City

Republic of Panama

23 March 2026

[1]  According to an associate professor of journalism at Hong Kong Baptist University, quoted by the New York Times in March 2025.

[2]  https://www.prensa.com/politica/dos-contralores-dos-versiones-opiniones-opuestas-sobre-la-auditoria-al-contrato-de-ppc/

[3]  https://newsroompanama.com/2025/04/09/panama-ports-defends-its-concession-with-the-state-and-assures-that-it-has-paid-668-million/

[4]  https://www.prensa.com/economia/ceo-de-blackrock-estima-que-cierre-de-acuerdo-para-la-compra-de-puertos-en-panama-se-prolongara-nueve-meses/

[5]  https://www.seatrade-maritime.com/ports-logistics/ck-hutchison-says-reasonable-chance-ports-deal-will-be-concluded

[6]  https://www.seatrade-maritime.com/ports-logistics/hutchison-claims-positive-impact-to-panama-economy-with-port-concessions

[7]  https://www.msn.com/en-us/money/companies/china-now-demands-controlling-stake-for-cosco-in-panama-ports-deal-report/ar-AA1Swih3

[8]  https://www.laestrella.com.pa/panama/politica/corte-contrato-de-panama-ports-es-lesivo-al-interes-publico-LO19538030

[9]  https://www.prensa.com/unidad-investigativa/panama-recibio-160-millones-en-dividendos-por-su-participacion-accionaria-en-ppc/

[10]  https://apnews.com/article/panama-canal-ports-hutchison-court-43e8617da0f5e5c268e1502332b2735b

[11]  https://www.lloydslist.com/LL1156577/Cosco-suspends-Balboa-port-calls-amid-escalating-Panama-dispute The decision was communicated on 10 March by COSCO Shipping Lines (Panama) Inc through a notice addressed to its customers

[12]  Incidentally, in 2016, a COSCO ship had been the first to use the enlarged locks when the Canal was expanded.

PANAMA IN WORLD WAR 2 – MARTINIQUE

A bit of a tangent, but with a Panama connection – both because the US worried over it as it could be seen as one of those islands screening the approach to the Canal (there was some resentment against the US in Martinique at the time, due to rumours that it had tried to buy the island from France, as it had bought the Virgin Islands from Denmark), and that the Striking Force formed and trained in Panama was earmarked for invasion, should that be necessary.

In any case, a fascinating story, with far more detail than I have managed – about the refugees to and from the island, the resistance and the smuggling, and how the Vichy regime behaved.

MARTINIQUEDownload

PANAMA IN WORLD WAR 2 – THE CONTE BIANCAMANO – ITALIAN LINER SEIZED IN PANAMA TO BECOME A US TROOP TRANSPORT

The Conte Biancamano was a 23,225-ton liner that set out from Italy in 1940 on a Genoa-Naples-Panama-Valparaiso-Panama-Genoa voyage, but ended the trip unexpectedly in the Canal Zone, was detained, then seized, saw its passengers and crew interned, and the ship went the US Navy as a troopship for the rest of the war.

THE CONTE BIANCAMANODownload

BACKGROUNDER FOLLOWING THE PANAMA SUPREME COURT DECISION RE THE PANAMA PORTS COMPANY

BACKGROUNDER FOLLOWING THE PANAMA SUPREME COURT DECISION RE THE PANAMA PORTS COMPANY

On 30 January 2026, it was announced that, on 29 January, Panama’s Supreme Court of Justice had declared the Panama Ports Company SA (PPC) contracts to operate container ports in Panama as unconstitutional.  In fact, what was declared unconstitutional was Law No.5 of 16 January 1997 and other regulations related to the concession granted for operation of the ports.[1]

In July 2025, the Comptroller had filed a lawsuit, following an audit of the company – the aim of which was said to determine whether the company was complying with its concession agreements, including adequate reporting of income, payments and contributions to the state.[2]  This the Court had enjoined with an earlier lawsuit filed in February 2025 by two Panamanian lawyers.[3] The Comptroller requested that the Court annul the concession contract signed between Panama and PPC in 1997.

In April 2025, announcing the results of the audit, the Comptroller said that that he found breaches of the contract with the State by PPC for more than $300 million; he accused the Panama Maritime Authority (AMP) of “distorting” figures, and announced that he would file criminal complaints against company officials, as well as against the directors responsible for the renewal of the concession, which had been due to expire in April 2025.  He also claimed that auditors could only verify $690 million of the investment of $1 billion required for said automatic renewal of the concession in 2021.

In February 2025, Panama’s Attorney General had given his opinion that the contracts between PPC and the state were unconstitutional.  He had argued that the Government in 1997 had improperly agreed to transfer the rights of the state, and that the contract affected public welfare and interest, thereby affecting free competition and demand.[4]  Among other claims he made, he alleged that PPC had used “concessionaires” to carry out container transport services, and that Panama had not received a percentage of the profits of these companies.  On top of that, despite the fact that the volume of containers (measured in TEU) increased, the company’s reported profit, at least on paper, had remained practically the same.[5]

PPC contested the Court’s decision, saying that the ruling “lacks legal basis”.  It also argued that the decision was contrary to previous Supreme Court precedents on contracts of a similar nature.  It pointed out that, in 28 years of operation, more than $1.8 billion had been invested in infrastructure, technology and “human development”.  This, it said, was far more than other port operators in Panama, had led to thousands of direct and indirect jobs being created, and helped Panama become a world class logistics and port hub.[6] While the decision of the Supreme Court cannot be formally appealed, PPC can request clarification, and the ruling has yet to be published officially, which could delay any changes.

Alternatively, Hutchison might be able to seek international arbitration.[7]

The ports were at Balboa at the Pacific end of the Canal and Cristóbal at the Caribbean/Atlantic end.

PPC is a subsidiary of Hong Kong-based C K Hutchison.  In March 2025, Hutchison had reported that it had reached agreement in principle to sell the management of a total of 43 ports around the world, including the two PPC ports, to new owners, a consortium led by US investment firm, BlackRock.  This in turn had followed criticism of what was seen as “Chinese ownership” of the ports at either end of the Canal by President-elect Trump, which he repeated following his inauguration.[8]

What was seen initially as a done deal soon hit delays, with the Chinese Government referring to regulatory checks on the proposed sale.[9]  In August 2025, the chairman of Hutchison said that the sale would be delayed until 2026 due to “high geopolitical uncertainty“.  China had apparently been pushing to have China-based Cosco Shipping join the consortium buying the ports, and separately the French shipping company CMA CGM had also shown interest in the Panamanian concessions.

The immediate response from the Government to the Supreme Court decision came on 30 January and was that there would be no layoffs, and no immediate changes.  President Mulino referred to the interest shown in operating the ports by APM Terminals Panama, a subsidiary of the AP Moller-Maersk group.  In 2025, APM Terminals had acquired the concession to operate the trans-isthmus railway through acquisition of the Panama Canal Railway Company (PCRC)[10] which, in February 2023, had been granted a 25-year extension to the concession, i.e. to 2048.

President Mulino said that, in the short term, there should be no immediate change for the ports, with a period of continuity for the current operator.[11] After this, a new contest for the concessions would be held.

The reaction from China was that it would “take all necessary measures” to safeguard the legitimate rights and interests of its companies, according to the state-run Xinhua news agency.  This was in reporting remarks by a spokesman of the Ministry of Foreign Affairs at a press conference in Beijing.[12] The Hong Kong Government was also reported to strongly disapprove of the ruling and rejected it.  It said that it strongly opposed the use of “coercive, repressive or other unreasonable means in international economic and trade relations to seriously harm the legitimate business interests of Hong Kong enterprises”.[13]

In the US, the Wall Street Journal on 30 January described the Court’s decision as a victory of President Trump.

To provide some useful background, there are actually five container terminals on the Canal route, the other three are owned and controlled by a Taiwanese, a US, and a Singapore company – with the US company having the largest of the five.[14]  Given its history vis a vis the US occupation of the Canal Zone as effectively a sort of US colony from 1903 to 1999, Panamanian law does not allow that the ports (nor the railway, for that matter) can be owned by anyone other than the Government.  Hence what companies wishing to operate such facilities have are concessions.  The ACP does not have responsibility over such port concessions or port operators, concessions are granted by the government.  However, the ports, though outside the Canal itself, are located in what might be seen as Canal waters, which the ACP controls, and ACP pilots must lead vessels from the ports in, out or through the Canal.

Finally, PPC began operations in Panama in 1997, under the aforementioned Law No.5,[15] seemingly without any complaints at the time.[16] Its Balboa terminal handled more than 2.3 million TEU in 2024, whereas Cristóbal, the smallest of the country’s container ports, handled just under 1.4 million TEU in 2024.

Ray Todd

Panama City

Republic of Panama

30 January 2026

[1]  This was the outcome of two lawsuits identified as files 119313-2025 and 17547-2025. 

[2]  Launched in January 2025, this was said to have revealed as much as $1.3 billion having been lost government revenue.

[3]  https://www.prensa.com/judiciales/corte-suprema-de-justicia-declara-inconstitucional-contrato-entre-el-estado-y-ppc/

[4]  https://newsroompanama.com/2025/02/26/attorney-general-gomez-considers-contract-with-panama-ports-unconstitutional/

[5]  https://www.prensa.com/economia/contralor-flores-estado-dejo-de-ganar-1200-millones-por-contratos-con-ppc/

It has to be said that the former Comptroller and PPC both disagreed with the findings.

https://www.prensa.com/politica/estas-son-dos-empresas-senaladas-por-el-contralor-como-responsables-de-las-perdidas-millonarias-en-ppc/

[6]  https://www.laestrella.com.pa/economia/panama-ports-company-rechaza-fallo-de-la-corte-suprema-y-evalua-acciones-legales-DM19511156

[7]  This happened after the Supreme Court ruled in 2023 that the contract for a huge copper mine was also constitutional.  The Canadian mining company (and others) sought compensation under the investor-state dispute settlement (ISDS) arrangements.  In 2024, a UK law firm noted that Chinese investors had resorted to ISDS mechanisms to address grievances related to their overseas investments.

[8]  “China is operating the Panama Canal, and we didn’t give it to China”, he had said in his inaugural address.  Obviously, China was in no way “operating” the Canal – the ports are not even a part of the Canal, but lie outside the Canal, albeit at either end of it.  The Panama Canal Authority (ACP) was set up to run the Canal, and the country’s Constitution and national law guarantees its independence of the government – as it is, in essence, a neutral international waterway, this would emphasise its neutral status, while also serves to safeguard the Canal from any undue political interference or corruption in Panama.

[9]  Both from the Hong Kong authorities, and from the Ministry of Commerce, the State Administration of Foreign Exchange, and other regulatory bodies in China, it was reported.

https://www.laestrella.com.pa/mundo/venta-de-puertos-en-panama-enfrenta-obstaculos-legales-y-regulatorios-en-hong-kong-dice-new-york-times-JA11221383

[10]  The former owners of PCRC had been Canadian Pacific Kansas City Limited (CPKC) and the Lanco Group/Mi-Jack of the US.

[11]  https://www.laestrella.com.pa/panama/nacional/mulino-sobre-panama-ports-company-no-habra-improvisacion-ni-despidos-MM19512086

[12]  https://www.laestrella.com.pa/mundo/china-advierte-que-tomara-medidas-tras-fallo-de-la-corte-suprema-sobre-panama-ports-BM19511404

[13]  https://news.rthk.hk/rthk/en/component/k2/1842060-20260130.htm

[14]  US multinational SSA Marine operates the Port of Manzanillo in Colón, which handled more than 2.7 million TEU containers in 2024.  It has the greatest amount of container movement in the country.

[15]  This allowed the company to operate container, bulk, ro-ro, passenger and general cargo terminals on both coasts of the country.  Subsequently, it has been amended on three occasions through laws approved by the National Assembly and sanctioned by the Executive

[16]  Of course, the UK handed Hong Kong, where PPC’s parent was based, to China in July 1997 but, at the time, Hong Kong was expected to operate as a “Special Administrative Region” under the so-called “one country, two system” principle.  China discarded this principle in 2020, making the distinction between Hong Kong and the Mainland largely moot.