China and Hutchison Condemn “Illegal Takeover” of Port Terminals
The Hong Kong Government and CK Hutchison condemned the actions of the Government of Panama, saying they would seek legal recourse after Panama took possession of the terminals in Balboa and Cristobal and signed new operating contracts with Maersk and Mediterranean Shipping Company (MSC). Hutchison confirmed that its subsidiary, the Panama Ports Company, has ceased operations.
Hutchison asserts that the representatives of Panama “made direct physical entry into the terminals,” saying they “arrived without invitation.” It further asserts that representatives of the Panama Ports Company were locked out of the terminals. Media reports in Panama said employees were told they could not speak with the Panama Ports Company, or they could be arrested. The government said it would guarantee full employment for the existing workers.
The actions came shortly after the Supreme Court of Panama published its final decision ruling the laws that established the concession and the 2021 extension were unconstitutional. The Government of Panama also signed rules freezing all the movable equipment and giving it and its representative the right to use the equipment to maintain the operations.
Container operations at both the port of Balboa and Cristobal were suspended pending the transition. The Panama Maritime Authority is overseeing the operations and said the suspension was temporary while new systems were implemented. It notes that bulk operations were continuing.
The Comptroller General of Panama moved quickly to sign new contracts with Maersk’s AMP Terminals to operate the Port of Balboa on the Panama side of the Panama Canal. A separate contract was signed with MSC’s Terminal Investments Limited (TIL) for the operations at Cristobal on the Atlantic side of the canal. The Comptroller said the actions were fundamental to strengthening the national port system, the country’s competitiveness as a regional logistics hub, and the generation of employment and investment.
The decision to separate the operations into two companies lays the groundwork for continued competition with the plan to award two separate long-term concessions. Panama previously stated that the operations would be separated with two operators in the future. They noted the two agreements also provide for two different operating models and that Panama would be following the operations as it works to define the long-term tender for the operations.
Each company has an 18-month contract, and it includes fixed payments for the management, operation, and maintenance of the terminals. AMP will be paying approximately $25.6 million, while TIL will pay approximately $16 million. The new contracts exclude the land, for which the government expects an additional $20 million annually in concession fees. Panama projects it will receive $100 million for the temporary operation of the terminals.
The Hong Kong Government issued a statement saying its executive “condemns this blatant act,” lodging a “strong protest” against the forced takeover of the two ports. It asserted that Panama’s actions “ignored the facts and violated contractual good faith.” It says the government's forced takeover “severely damaged the Hong Kong company’s legitimate rights and interests and undermined the spirit of the contracts.”
Hutchison is calling it the “culmination of a campaign by the Pamana State,” and that the actions were unlawful. The company said it would continue to consult its legal advisors regarding the ruling and forceful takeover, as well as the “purported termination.” It said it is reviewing all available recourse, including additional national and international legal proceedings against Panama and “third parties colluding” with Panama.
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AMP issued an update on Tuesday, the day after the takeover, saying it had initiated a “stabilization phase” at the Balboa terminal. With the Panama Maritime Authority, it said they would be inventorying the containers in the terminal as well as the equipment, including cranes and technology systems. It said there would be a technical evaluation and a review of the cargo condition, with special attention to perishable goods.
The company said a new terminal operating system was being deployed. AMP reports operations will be “progressively reactivated” with the least possible disruption.