San Francisco Frontiers - CK Hutchison begins arbitration against Panama over annulled canal contract

Panama's Supreme Court last week invalidated Hutchison's contract following repeated threats from President Donald Trump that the United States would seek to reclaim the waterway he said was effectively being controlled by China.

The court's ruling declared the contract "unconstitutional" and found it had "a disproportionate bias in favor of the company" without "any justification" and to the "detriment of the State's treasury."

The company's subsidiary Panama Ports Company (PPC) said in a press release it has begun arbitration "after a campaign by the Panamanian state specifically against PPC and its concession contract, throughout a year marked by a series of abrupt actions by the Panamanian state, culminating in serious damages."

The statement did not specify the amount of money being sought through arbitration.

Since 1997, Hutchison had managed the ports of Cristobal on the interoceanic canal's Atlantic side and Balboa on the Pacific side.

The concession was extended for 25 years in 2021.

After the ruling, the Panamanian government tapped Danish company Maersk to temporarily take over management of the port terminals until a new concession is awarded.

- 'Legitimate and lawful' -

Washington welcomed the court's decision, but Beijing said it would take measures to "protect the legitimate and lawful rights" of Chinese companies.

The canal, which handles about 40 percent of US container traffic and five percent of world trade, was built by the United States, which operated it for a century before ceding control to Panama in 1999.

The annulment of the PPC contract was requested last year by the office of the comptroller -- an autonomous body that examines how government money is spent.

It argued the concession was "unconstitutional" and said Hutchison had failed to pay the Panamanian state $1.2 billion due.

The PPC argues it is the only port operator in which the Panamanian state is a shareholder and says it has paid the government $59 million over the past three years.

Panama has always denied Chinese control over the 50-mile waterway, which connects the Atlantic and Pacific oceans and is used mainly by the United States and China.

Panamanian President Jose Raul Mulino, who had called the CK Hutchison contract "extortionate," last week said the canal will continue operating "without disruption."

The ruling came amid Hutchison's stalled effort to sell the ports, which it announced in March, to transfer its stake in the Panamanian terminals to a group of companies led by the US firm BlackRock, as part of a package valued at $22.8 billion.

That deal was initially seen as favorable in Washington, but interests cooled after China warned the agreement could harm its global interests and urged parties to proceed with "caution" or face legal consequences.

N.Flores--SFF