Hong Kong port operator contract violated Panama constitution, court rules

By Elida Moreno

PANAMA CITY, Jan 30 (Reuters) – A contract held by a Hong Kong company to operate ports at the Panama Canal violated the Panama constitution and did not serve the public interest, the country’s Supreme Court said in a Thursday decision that voided a deal made in the 1990s. 

The court issued its decision on Thursday, but it did not formally release its ruling or explain its rationale. Local television station TVN first reported on the decision, which has been reviewed by Reuters and confirmed by a court official. 

The ruling gave Washington a victory amid the intensifying U.S.-China rivalry over global trade routes and President Donald Trump’s efforts to exert dominance in Latin America. 

The court said in its decision that the contract held by Panama Ports Company, a subsidiary of Hong Kong’s CK Hutchison, violated Panama’s constitution by giving the company exclusive privileges and tax exemptions. The contract also lacked a requirement for environmental impact assessments and said the government had to seek Panama Ports’ approval before granting other concessions, the court said. 

“Disproportionate rights and prerogatives are granted to PPC, creating conditions that effectively eliminate competition and result in a monopoly in practice, even though no monopoly is formally declared,” the nine-member court said in a unanimous decision. 

“Furthermore, it places in private hands decisions that should be in the public interest … prioritizing private interests over the general welfare of society.” 

The decision could complicate CK Hutchison’s proposed $23 billion sale of dozens of ports worldwide – including the Panamanian terminals – to a consortium led by BlackRock and Mediterranean Shipping Company. 

Trump had championed the proposed sale – particularly of Panama Ports’ assets – as a victory because it put operations at the canal under a majority U.S. ownership. But China opposed the sale and threatened to block the deal. 

After the ruling, China’s foreign ministry said it would take “all necessary measures” to defend the rights and interests of Chinese enterprises, and Hong Kong’s government criticized what it described as coercive interference by foreign governments in international trade relations. 

(Reporting by Elida Moreno; Additional reporting by Natalia Siniawski and Kylie Madry; Editing by Emily Green and Tom Hogue)