Panama City, Panama – A heated maritime dispute has intensified between Panama and CK Hutchison subsidiary Panama Ports Company (PPC), with President José Raúl Mulino directly accusing the Hong Kong conglomerate of “lying” regarding ongoing arbitration proceedings. This escalating conflict has already seen Hutchison lose its long-standing control over two of the Panama Canal’s most strategically vital terminals: Balboa and Cristobal.

President Mulino’s strong remarks came Thursday, directly countering PPC’s assertion that Panama had failed to respond to its arbitration request by the March 13 deadline set by the International Chamber of Commerce (ICC) in Paris. PPC initiated the case in February, seeking at least $2 billion in damages following the government’s seizure of the Balboa and Cristobal terminals.

Mulino vehemently dismissed PPC’s accusations as “shameful and a lie.” He clarified that Panama had received notification only two days before the deadline and had promptly requested an extension – a standard and accepted practice in such complex international proceedings. “We have appointed international lawyers who are going to defend us, and defend us well, in that process,” he assured reporters.

Further solidifying the government’s stance, Panama’s Maritime Authority publicly supported Mulino’s account. They affirmed that the country had fully complied with all arbitration rules and would continue to exercise its rights throughout the proceedings.

The genesis of this significant maritime dispute traces back to a pivotal January Supreme Court ruling. This ruling declared PPC’s concession, which had been in effect since 1997, unconstitutional. The court found that the agreement granted PPC excessive privileges and tax exemptions, leading to substantial financial losses for the state. A subsequent government audit estimated these arrangements cost Panama approximately $1.2 billion in lost revenues. Upon taking temporary control of Balboa and Cristobal in February, authorities reported finding the ports in a state of significant deterioration, falling short of international operational standards.

Currently, APM Terminals, a unit of Maersk, has taken over operations at Balboa, while Terminal Investment Limited (TIL), part of MSC, is managing Cristobal. Panama has announced plans for new long-term tenders for these critical port facilities once the current transition period concludes.

The Paris arbitration is anticipated to be a protracted process, potentially taking years to resolve. However, the ripple effects of Panama’s decision to revoke PPC’s licence are already being felt on a global scale, particularly from Beijing. Behind closed doors, Chinese authorities have reportedly taken several retaliatory actions, impacting global shipping and trade relations:

  • Officials from major shipping lines MSC and Maersk were summoned to Beijing’s Ministry of Transport this month.
  • All Panamanian-flagged ships are now facing increased scrutiny when calling at ports in the People’s Republic of China.
  • COSCO, China’s state-run shipping giant, has ceased all calls at both Balboa and Cristobal.

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