Panama seizes control of strategic ports from Hong Kong’s Hutchison
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Panama’s decision to assume control of the Balboa and Cristóbal container terminals marks a structural rupture in the governance of infrastructure that underpins roughly 5% of global maritime trade and about 40% of US container traffic.
The measure, executed following a Supreme Court ruling that declared unconstitutional the concession held by a subsidiary of Hong Kong-based CK Hutchison Holdings, has triggered legal threats, diplomatic protests and operational disruption, while opening a broader debate over legal certainty in one of the world’s most strategic logistics corridors.
The legal trigger was a January ruling by Panama’s Supreme Court annulling the concession contract under which Panama Ports Company had operated the Pacific terminal at Balboa and the Atlantic terminal at Cristóbal since 1997. Publication of the ruling in the official gazette on February 23 rendered the decision final.
Within hours, the Panama Maritime Authority occupied the facilities under Executive Decree No. 23 of February 23 2026, invoking “urgent social interest” grounds to ensure continuity of service. The decree authorised temporary occupation of movable assets, including cranes, vehicles, software and information systems, while explicitly stating that no transfer of ownership was implied.
President José Raúl Mulino framed the measure as an administrative tool rather than expropriation. In a televised address cited by multiple outlets, he insisted that the state was merely using assets to guarantee uninterrupted operations until their value could be determined for subsequent actions. The distinction is constitutionally relevant: expropriation entails permanent transfer of title and compensation; temporary occupation maintains ownership while the state assumes operational control.
Despite official assurances, the transition exposed immediate operational fragilities. The Panama Maritime Authority disabled internet systems at both ports to allow incoming operators to install their own software platforms and to mitigate cyber risks. As a consequence, the terminals were unable to operate at full capacity on February 24.
At Balboa, export and empty containers resumed reception between 07:00 and 22:00, but import containers were not being delivered. Refrigerated cargo remained connected to power supplies under monitoring to protect perishable goods. At Cristóbal, gates were temporarily closed, halting container ingress and egress.
Government officials, including Canal Affairs Minister José Ramón Icaza, argued that vessel movements had not been materially affected. He noted that two ships had departed Balboa prior to publication of the ruling and that Cristóbal faced an eleven-day window without scheduled container berthing.
Nonetheless, exporters reported difficulty retrieving empty containers, and industry representatives warned that even short-term frictions could affect routes dedicated exclusively to Balboa, particularly for perishables.
To prevent paralysis, the Cabinet authorised transitional concessions worth $41.9mn. The Comptroller General endorsed Contract No. A-2002-26 with APMT Panamá, S.A. for $26.1mn to operate Balboa, and Contract No. A-2003-26 with TIL Panamá, S.A. for $15.8mn to manage Cristóbal, both for up to eighteen months.
APMT Panamá is affiliated with A.P. Moller - Maersk, while TIL Panamá is linked to Mediterranean Shipping Company. Under the published terms, operators will pay a fixed annual canon of $7.5mn plus variable payments after deducting recoverable costs, alongside fees of 13.20 dollars per container movement and 6.60 dollars per vehicle discharged outside containers.
The Ministry of Economy and Finance projects that, over eighteen months, state revenues could reach up to $100mn, several times higher than returns generated under the annulled concession. Officials cite a Comptroller’s audit indicating that over 29 years the state received $483mn, allegedly resulting in foregone revenues of $853mn.
Conversely, the company has initiated arbitration exceeding $1.5bn, a figure the minister characterised as detached from financial reality. Legal representation is being assembled, with notification deadlines in early March and proceedings potentially lasting years.
From the corporate perspective, the events constitute unlawful termination. Panama Ports Company stated that authorities entered the terminals and assumed administrative and operational control without coordination. CK Hutchison Holdings described the takeover as illegal and warned of risks to operational safety.
Reuters reported that employees were threatened with criminal prosecution should they refuse to vacate facilities and were instructed not to contact the parent company. The conglomerate signalled possible recourse under investment protection treaties and before the International Chamber of Commerce, and it has not excluded action against third parties, including APM Terminals.
The dispute has acquired overt geopolitical dimensions. US President Donald Trump has repeatedly alleged Chinese influence over canal-adjacent infrastructure and threatened to “take back” the canal upon returning to office. Panama has consistently denied any Chinese control. Following the court ruling, Hong Kong authorities lodged a “stern protest”, while China’s Foreign Ministry spokesperson Mao Ning declared that Beijing would firmly defend the legitimate rights and interests of its enterprises.
Bloomberg reported earlier this month that Chinese authorities had asked state-owned firms to suspend new project talks with Panama and consider alternative shipping routes, as well as intensifying customs inspections on certain Panamanian goods.
Finance Minister Felipe Chapman stated on February 25 that Panama had received no official Chinese reaction and that Chinese participation in foreign direct investment and banking deposits remained relatively low compared with investors from the Americas and Europe.
Domestic political scrutiny has paralleled international reaction. Former president Martín Torrijos criticised what he termed an “unnecessary geopolitical dispute” and questioned the transparency of the transition, even while acknowledging that the outgoing concessionaire had not been an effective partner. He warned that terminating concessions without clear explanation could set precedents affecting institutional credibility.
Labour considerations are similarly central: more than 1,200 workers are directly employed at the two terminals. Authorities reported over 526 employer substitutions at Balboa and more than 326 at Cristóbal within 24 hours, with agreements reached with two of four unions. Legislator Eduardo Gaitán argued that if transitional operators do not assume accrued benefits, the state must compel the former concessionaire to settle outstanding entitlements.
Sectoral analysts emphasise reputational risk. Jorge Barnett of Georgia Tech Panamá underlined that the country’s logistics brand rests on uninterrupted service, while business leaders stressed that a port operating below 100% capacity erodes confidence irrespective of legal justifications. Angel Sánchez Chiapeto of the National Logistics Business Council warned that “a ship at berth generates no freight”, highlighting the cost of even temporary inefficiencies.
In aggregate, the episode intertwines constitutional adjudication, emergency administrative action, commercial renegotiation and great-power rivalry. Panama seeks to demonstrate that judicial independence and executive enforcement can coexist with operational continuity. Whether the combination of temporary occupation, enhanced fiscal returns and international arbitration will consolidate or weaken legal certainty depends on the state’s ability to sustain uninterrupted service while defending its position in protracted legal forums.
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