Panama files lawsuits against owner of ports at centre of US-China struggle | Panama canal

Panama’s comptroller general has lodged two cases with the country’s supreme court against the owners of two ports at the centre of a geopolitical struggle between the US and China, in a move likely to be seen as a victory for Donald Trump in his attempt to rid the Panama canal of Chinese influence.

The decision follows a failed attempt to sell the ports to a consortium headed by the US investment fund BlackRock and Swiss shipping firm MSC.

The two ports, at each end of the Panama Canal, were originally awarded to the Hong Kong-based firm CK Hutchison in 1997. They entered the geopolitical spotlight on 20 January when Trump used his inauguration speech to vow he would “take back” the canal from supposed Chinese influence. The very same day, Anel Flores, the comptroller general, announced he would begin an audit of the ports’ owner, Panama Ports Company, in which CK Hutchison holds a 90% stake.

In March, BlackRock, the world’s biggest asset management company, announced it was working with MSC to acquire Panama Ports Company and 41 other ports in CK Hutchison’s global portfolio.

The parties to the deal agreed a deadline of 27 July to finalize details of the acquisition.

But the sale of these strategic assets did not go down well in Beijing. On 28 March China’s anti-trust regulator said it would review the deal “to protect fair competition in the market and safeguard the public interest”.

Earlier this month the Wall Street Journal reported that the Chinese government had threatened to block the deal unless Cosco, a local shipping giant, was included as a veto-holding member of the takeover consortium.

On Wednesday, Flores said that Panama Ports’ contract was “unfair” and “abusive”. He claimed that the company had not paid sufficient royalties to the government and that its 25-year extension, signed in 2023, was made without the necessary authorizations. One case lodged with the supreme court seeks to nullify the contract, the other seeks to declare it unconstitutional.

In response to media speculation that Cosco would be included in the deal he said: “It doesn’t seem correct that in other [parts of the world] there are people negotiating the future of assets that belong to us, the Panamanians.”

Panama’s president, José Raúl Mulino, said on Thursday, that he supported Flores’s decision – which he claimed had nothing to do with the ongoing struggle over the ports’ ownership.

However, the timing of the announcement is convenient for the US-backed consortium. Should the court cases prove successful, the contracts for port operations would have to be re-tendered and, with Panama having exited China’s Belt and Road Initiative in April, it would seem likely the successful bid will come from a US firm or an ally country.

Nullifying the PPC contract and re-tendering the operation of the ports would allow Panama to potentially redesign the contract terms to be more beneficial to the state. However, the country could also find itself exposed to litigation from CK Hutchison which could potentially argue it is tantamount to a politically motivated expropriation.