Panama Ports Company (PPC), subsidiary of CK Hutchison Holdings, the Hong Kong-based multinational conglomerate, released a statement saying it had initiated international arbitration proceedings against the Republic of Panama. The legal process comes in direct response to a ruling by Panama’s Supreme Court of Justice, which on January 29, 2026, unanimously declared the long-term concession held by the group’s subsidiary, Panama Ports Company (PPC), to be unconstitutional by targeting the contract-law which enabled it. The move by the Panamanian state, perceived by the investor as a targeted campaign of lawfare, has triggered a battle with profound implications for the country’s reputation as a stable investment destination, its strategic position in global trade, and its delicate balancing act between major world powers.

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Indirect Expropriation?

Even as the full legal rationale remain unpublished, the President of Panama, José Raúl Mulino, spoke out on a televised message on the ruling of the Supreme Court of Justice that declares unconstitutional the contract between the Panamanian State and Panama Ports Company for the operation of the ports of Balboa and Cristóbal. The dispute is inextricably entangled in the fierce geopolitical competition between the United States and China. The U.S. Ambassador to Panama, Kevin Cabrera, celebratedthe Supreme Court’s ruling, calling it a “historic” affirmation of the rule of law, sovereignty, and transparency that would strengthen Panama’s investment climate and national security. But now Panama finds itself precariously positioned between its largest trade partner, the US and its second-largest China, with the potential for economic reprisals from Beijing. There he stated that APM Terminals Panama, a subsidiary of Denmark’s A.P. Moller-Maersk group would temporarily assume control of the ports while a new concession was structured.

PPC’s arbitration filing responds to a year-long, targeted campaign by the Panamanian state against its specific concession. This campaign involved a series of abrupt state actions that caused PPC severe and imminent harm thus the company believes this is selective treatment, as similar port sector contracts were not subjected to the same actions. State authorities then proceeded to visit PPC facilities, issuing unexpected instructions and requesting broad access to physical installations, commercial information, intellectual property, and personnel.

The core of the conflict lies in the 1997 concession, ratified as a “contract-law“ by the Panamanian National Assembly, granting PPC a 25-year lease to operate the critical ports of Balboa and Cristóbal at the Pacific and Atlantic entrances to the Panama Canal. The port concessions were automatically renewed for another 25-year term in 2021 after nearly three decades, so the arrangement was treated as providing long-term legal stability, with PPC investing over $1.8 billion in infrastructure, technology, and workforce development. The ports in question handle approximately 40% of the canal’s container traffic in global maritime logistics. However, the concession has long been a point of contention for some Panamanian officials who view it as a symbol of China’s expanding influence over a vital chokepoint in world trade. Given CK Hutchison is a Hong Kong enterprise, the US under Trump’s Donroe Doctrine seek to create a remnant empire where the US controls the way states in the western hemisphere manage their territories and do business within capitalism, de facto turning them into vassals of a “Fortress America” technocratic apparatus.

For CK Hutchison and PPC, this sequence of events constitutes a classic case of “lawfare”—the use of legal systems and judicial rulings as instruments of political or economic warfare to achieve strategic ends, in this case the US insistence on having control over Panama when Trump 2.0 took power. In its official communication, PPC asserted that the Supreme Court’s action was the culmination of a year-long state campaign “specifically directed against” the company, causing grave damages and imminent additional risks. The company emphasizes that it sought to avoid legal conflict through consultations and communications with various state entities, all while maintaining port operations and cooperating with authorities. These efforts, it claims, were met with unfavorable responses and dismissed requests for clarification. With its foundational contract-law voided and the state moving to physically assume operations, PPC activated the arbitration clause within its concession agreement. For more context check out my prior articles on the matter.

Panama’s legal position is vulnerable because the court’s approach bypassed standard administrative review, creating a perception of political targeting that will be central to the arbitration case on ‘fair and equitable treatment. The Panamanian Supreme Court’s misuse of the constitutional framework risks sending a negative message to international investors, as they are unlikely to want to invest in Panama after seeing that long-term contracts, expertly reviewed by both government and company, can be suddenly declared unconstitutional, leaving their investments in limbo.

In any case, the Supreme Court of Justice should not have declared neither the mining project nor the port concessions as unconstitutional. The Supreme Court’s choice to nullify the concessions via constitutional fiat, rather than allowing alleged contractual or financial breaches to be adjudicated through the specialized Administrative Litigation Chamber, represents a critical error. This approach magnifies the perception of political motivation over procedural rigor, a flaw that will be heavily exploited in the forthcoming arbitration to demonstrate a denial of ‘fair and equitable treatment.’”

The arbitration process now sets in motion a lengthy, costly, and highly scrutinized international legal battle. PPC will seek substantial compensation, calculated not only on the book value of its investments but also on lost future profits for the remainder of the concession term, damages for collateral business impacts, and potential remedies for what it may argue constitutes an indirect expropriation. Analysts suggest the claim could range between $2.4 billion to over $3.6 billion, based on multiples of the initial investment. For Panama, an adverse arbitral award would be binding and enforceable under the New York Convention, meaning PPC could seek to attach Panamanian state assets abroad if the award is not voluntarily paid.

The central allegation from the investor’s perspective is a catastrophic breach of legitimate expectations and legal security. The state, as a signatory to the contract, is now effectively arguing that the agreement it itself proposed, negotiated, and ratified was unconstitutional for its entire 30-year duration. This creates a dangerous precedent of retroactive legal instability that could chill future public-private partnerships, which Panama critically needs for infrastructure development given its high debt levels. The fact that this marks the second major concession — following the 2023 unconstitutional ruling against First Quantum Minerals’ Minera Panama copper mine — to be annulled in such a manner amplifies the perceived systemic risk. While a court can annul a legal instrument, it does not erase the underlying obligations of the state towards an investor who acted in good faith and sunk billions into the country based on that state’s own representations. The abruptness of the transition, planned before the ruling was firm, the president moving on to create a transition before the ruling was even published, the singling out of PPC, — as no other companies in similar contracts have not been targeted — further weakens Panama’s position in arbitration, as it can be portrayed as evidence of a premeditated, politically-driven action rather than a purely judicial one.

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Miguel Santos García is a Puerto Rican writer and political analyst who mainly writes about the geopolitics of neocolonial conflicts and Hybrid Wars within the 4th Industrial Revolution, the ongoing New Cold War and the transition towards multipolarity. Visit his blog here. 

He is a Research Associate of the Centre for Research on Globalization (CRG). 

Featured image: HK 中環 Central zh:皇后大道中 Queen’s Road Central in October 2021 (CC BY-SA 4.0)

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