Hong Kong’s CK Hutchison Holdings Limited said on Wednesday its Panama Ports Company S.A. (PPC) unit has started arbitration proceedings against Panama after the country’s Supreme Court of Justice ruled against PPC, a member of Hutchison Ports and operator of the Balboa and Cristóbal port terminals, declaring the concession granted to Panama Ports Company to operate the ports at the Panama Canal “unconstitutional.”
PPC has commenced arbitration against Panama on February 3 pursuant to the applicable concession contract and the rules of arbitration of the International Chamber of Commerce.
CK Hutchison said in a statement that the arbitration is based on the concession contract and legal framework that have been enshrined over almost three decades as a “contract-law,” providing legal certainty and long-term respect for the applicable legal and contractual framework.
Following last week’s decision by Panama’s Supreme Court of Justice regarding the Balboa (Pacific) and Cristobal (Atlantic) terminals, the Panamanian State has activated a technical operational transition plan aimed at ensuring the continuity of port activities at the ports of Cristóbal (Atlantic) and Balboa (Pacific).
On Friday, the APM Terminals -part of A.P.Moller-Maersk- confirmed its willingness to assume the temporary operation of both terminals.
According to APM Terminals, this can only take place once Panama’s Supreme Court of Justice ruling becomes final and binding.
The court ruling has not yet been published or become effective.
Panama Ports Company, which runs the two port terminals under the concession contract since the 1990s, said on Wednesday that the Panamanian State declared and broadly deployed steps to take over the operations of PPC after the judicial press release.
“With various references to the unpublished court ruling, the steps taken by the State have included unexpected site visits and instructions that PPC, a private company, provide unrestricted access to physical, commercial, and intellectual property and information, as well as to employees, on the basis that the State is “systematizing and executing” a port transition “plan” through “coordinated actions” of State authorities,” the company’s statement reads.
PPC claims that Panama has breached the applicable contract and law. In a statement, the company said PPC would seek “extensive damages” based on an assessment of relevant financial data, subject to prompt resolution, and such other requests for relief as may prove necessary.
It is unclear how long the arbitration proceedings could take, given the political sensitivities involving the U.S. and China and the complexity of the deal.
Chinese foreign ministry spokesperson Lin Jian said on Monday that China will firmly protect the legitimate and lawful rights and interests of Chinese companies, when asked to comment on the statement by Danish shipping group Maersk that it is willing to assume temporary management of the two port terminals in Panama operated by CK Hutchison, following Panama’s Supreme Court ruling that CK Hutchison’s concession is “unconstitutional.”
Lin emphasized at a routine press conference on Monday that “we’ve made clear China’s position on relevant ports in Panama.”
