Panama Assumes Control of Important Canal Ports After Court Invalidates Contracts Tied to China

Panama Government Takes Over Major Canal Ports

The government of Panama announced on Monday that it has assumed control of two significant ports along the Panama Canal. This action follows a ruling by the Supreme Court that invalidated contracts with Chinese companies related to the ports.

In late January, the Supreme Court declared two contracts between Panama and the Panama Port Company (PCC), which is linked to Hutchison Port Holdings of Hong Kong, as unconstitutional. These agreements, originally established in 1997 and renewed in 2021, gave PCC oversight of the Balboa and Cristobal ports, crucial points responsible for handling about 40 percent of the Canal’s traffic.

The decision to cancel these contracts and manage the ports emerged from a wider discussion initiated by former President Donald Trump in December 2024 concerning China’s growing presence in the Panama Canal region.

The court’s ruling followed a detailed investigation by Panama’s Attorney General and Comptroller General, which highlighted several breaches of the contract and mismanagement by PCC, leading to significant financial losses for Panama, estimated at around $1.2 billion.

With the ruling coming into effect, the Panamanian government can now begin negotiating new management for its key ports. Shortly after the announcement, President José Raúl Mulino enacted an executive order to temporarily occupy all movable assets in these ports, including cranes and software, citing urgent social interests.

In a public address, Mulino clarified that this action does not amount to seizing the ports but rather an effort to ensure their operational continuity until a new management agreement is reached. “The Panama Maritime Authority has taken control of these facilities to protect national interests,” he stated, noting the strategic nature of these ports for the economy and global trade.

He also mentioned that two contracts have been approved for the temporary management of the ports — APM Terminals (part of Maersk) will oversee Balboa Port, while TIL Panama (linked to Mediterranean Shipping Company) will manage Cristobal Port.

Mulino emphasized that the transitions would safeguard the employment of over 7,000 workers and ensure that services continue at the ports. He assured that customers would be able to operate as usual at the Panamanian ports.

Looking ahead, he announced plans for a competitive process to establish new port concessions, adding that this would be done transparently and with a focus on Panama’s vital interests over foreign ones.

Both APM Terminals and TIL Panama are set to manage the ports temporarily, reportedly for the next 18 months, and will pay the Panamanian government approximately $41.9 million for operating rights. The arrangements also stipulate that APM Terminals prioritize hiring local workers and focus on training programs in port operations.

In response to the takeover, CK Hutchison Port Holdings claimed that Panamanian authorities threatened its employees with legal action if they did not vacate the ports. The company regards the government’s decision to award control to Maersk and MSC as “unlawful” and is contemplating legal action against Panama.

The ruling has drawn ire from the Chinese Communist Party, which promptly suspended all projects in Panama following the court’s decision. In early February, President Mulino responded to China’s pressure, emphasizing that Panama’s judiciary operates independently from the government, contrasting it with the controlled legal environment in China.