Panama Supreme Court Declares Port Contracts Unconstitutional
On Thursday, Panama’s Supreme Court announced that a 20-year contract given to Panama Ports Company (PPC), a subsidiary of Hutchison Port Holdings based in Hong Kong, to operate two ports along the Panama Canal is unconstitutional.
The ruling voids the original terms of the contract that was awarded to the Port of Panama back in 1997 and its renewal in 2021. This decision comes amid ongoing discussions sparked by former President Donald Trump in December 2025 regarding China’s alleged influence over the Panama Canal.
In 1997, Panama and PPC entered into a 25-year lease for the development and management of two ports located at Balboa and Cristobal, which were envisioned to automatically renew in 2021 for an additional 25 years.
The 1997 agreement has been criticized in foreign media as a prime example of problematic contracts. This scrutiny increased after the Chinese government shifted its stance on its “one country, two systems” policy in 2020, allowing for the enforcement of communist laws ostensibly aimed at suppressing democratic protests.
After the contracts were renewed in 2021, their legality came into question. In February 2026, Panama’s Attorney General, Luis Carlos Gomez, ruled that they were unconstitutional after reviewing numerous violations that appeared to give PPC excessive control over the ports. Gomez recommended that the Supreme Court consider the contracts unconstitutional.
A few months later, Panama’s Comptroller General, Anel Flores, launched criminal proceedings against PPC for allegedly violating the contract and causing around $1.2 billion in economic damage, leading to a lawsuit filed by Flores in July 2025.
Following extensive deliberation, Panama’s Supreme Court confirmed late Thursday that both contracts and their renewals were indeed unconstitutional. They stated that the laws concerning the concession agreement between the state and PPC were troubling, particularly related to the operation and management of the ports.
In response to the ruling, Panama’s President, José Raúl Mulino, delivered a speech on Friday morning. He noted that the government had been developing a contingency plan in anticipation of the ruling and clarified that PPC would continue its operations as usual until further steps are determined. He mentioned that a transition period will eventually lead to a new lease agreement on more favorable terms.
Mulino stated that there was careful planning involved, appointing engineer Alberto Alemán Zubieta to oversee critical aspects related to PPC. He also called for immediate collaboration between the Panama Maritime Authority and the Ports of Panama to align on necessary actions going forward.
In reaction to the ruling, PPC asserted that it lacked a solid legal foundation and was not consistent with the laws that originally enabled the contract in 1997. The company claimed that it had adhered to its contractual obligations, including audits, and argued that the decision threatens the well-being of many Panamanian families reliant on port activities.
The ongoing concerns about China’s influence have drawn criticism from figures like Donald Trump and U.S. officials, who regard it as a regional security threat. The PPC-managed canal ports are at the forefront of this issue, which has been a point of contention for some time.
Amid these developments, a significant deal was reportedly in the works in March 2025, where CK Hutchison Holdings and BlackRock planned to sell 90% of their stake in PPC, a deal that was subsequently blocked by the Chinese government.
Bloomberg asked the Chinese Foreign Ministry about the potential impact of the Supreme Court’s ruling on ongoing negotiations related to agreements, to which spokesperson Guo Jiakun responded that China would take all necessary measures to protect the rights of Chinese enterprises. However, he declined to confirm whether China was considering building a new port in the Panama Canal.
