Panama AG to Supreme Court: Hutchison Port Deal Unconstitutional

Panama’s attorney general is calling on the country’s Supreme Court to declare a contract with port operator Panama Ports Company unconstitutional, in a move signaling a potential ending of the partnership.

Attorney general Luis Carlos Gómez sent the opinion in the wake of a government audit into the company, a subsidiary of Hong Kong-based CK Hutchison Holdings, in late January. Panama Ports Company has operated the country’s Balboa and Cristobal ports on both sides of the Panama Canal since 1997. The parties re-upped their deal in 2021, which with a 25-year contract extension through 2047.

Both the audits and Gómez’s call to the court have been spurred on by the wider narrative at play, in which U.S. President Donald Trump has been vocal about his concerns of Chinese influence over the Panama Canal.

Trump has falsely asserted that China operates the 50-mile trade artery, and has stated his desire to take it back under U.S. sovereignty due to his allegations. But Trump’s rhetoric is an extension of some of the concerns shared by several allies of his in Congress.

Those apprehensions are tied to Hutchison itself, which is subject to Chinese state oversight under Hong Kong’s broadly defined national security law.

To kick off February, two Panamanian attorneys filed suit challenging the Hutchison contract extension, being the original to cite that it violates Panama’s constitution. That complaint also accuses Panama Ports Company of not paying taxes and social security contributions.

According to the two lawyers, the contract would violate at least 10 articles of the Panamanian Constitution.

Gómez submitted the opinion to the court on Feb. 19 in support of the litigation. The attorney general asserts that the partnership carries a lack of justification in the public interest, is economically unbalanced toward Panama and affects competition. He also said the deal “improperly agrees to transfer exclusive rights of the Panamanian State.”

Long-term contracts with foreign actors have been ruled unconstitutional by Panama’s highest court in the past.

In November 2023, the Panama Supreme Court unanimously ruled that a 20-year contract for a Canadian business to operate a copper mine in the country was unconstitutional. That ruling came just a month after the new contract was signed. In response to weeks of public protests against that deal, Panama’s government enacted a bill to ban all new mining concessions and extensions.

This likely prevented the two parties from being able to come to a new contract.

Norman Castro and Julio Macias, the two lawyers filing the complaint against the Panama Ports Company partnership, cited the mining contract in their lawsuit.

A Bloomberg report said the Panamanian government was looking into scrapping the partnership with CK Hutchison, which would be one measure to possibly get on the good side of the Trump administration.

Several members of Panama’s government including President José Raúl Mulino, as well as the Panama Canal Authority (ACP), met with U.S. Secretary of State Marco Rubio to discuss relations between the countries, and the future of the canal.

After that meeting, Mulino confirmed that the country would not renew its participation in China’s Belt and Road Initiative, making Panama the first Latin American country to leave the foreign infrastructure investment program.

Additionally, the ACP said it planned on “optimize the transit priority” of U.S. Navy vessels through the canal. While the State Department initially claimed Panama had agreed to free transit for American warships, Mulino debunked the comments as “lies and falsehoods.” This prompted Rubio to retreat from the position, but he called it “absurd” that the U.S. would have to pay fees to transit the zone.

Aside from the U.S.-related drama, Panama also is preparing the canal against any other potential climate concerns.

The ACP’s board of directors approved plans to build a new reservoir in the Indio River watershed to help mitigate impacts from future drought conditions. Construction will begin in 2027 and is expected to cost $1.6 billion, including both the costs to build the reservoir and the investments in local communities impacted by the project.

That project should add make room for 11 to 13 more daily transits through the canal.

The Panama Canal hosts an estimated 5 percent of global trade, according to the ACP. More than 76 percent of the cargo that goes through the canal originates or is destined for the U.S.

The canal accounts for 46 percent of the total market share of containers moving from Northeast Asia to the U.S. East Coast, according to the Department of Commerce.