Panama on Monday took control of two ports at the Atlantic and Pacific entrances of the Panama Canal after a Supreme Court ruling voided the concession of their Hong Kong-based operator, a move Washington officials said was “in line with President Donald Trump’s drive to curb Chinese influence” over the strategic waterway.
A decree published in the official gazette authorises the Panama Maritime Authority to occupy and run the ports of Balboa and Cristobal for “reasons of urgent social interest”, and to take possession of movable assets needed to keep them operating, including cranes, vehicles, computer systems and software.
The action followed the formal publication of the court’s January decision declaring unconstitutional the law approving the concession held by Panama Ports Company, a subsidiary of Hong Kong conglomerate CK Hutchison. Under Panamanian law, the ruling became final once it appeared in the gazette, clearing the way for immediate state intervention.
Alberto Aleman Zubieta, who heads the technical team overseeing the transition, said the Panama Maritime Authority (AMP) had taken possession of both ports by decree to ensure uninterrupted operations once the ruling became final upon publication.
“Two separate contracts are being presented to the Board of Directors of the AMP, one for the Port of Balboa and one for the Port of Cristobal, instead of a single contract for both ports,” he told a press conference.
Panama’s President Jose Raul Mulino had previously said that until the decision became final, there would be continuity with the current operator, followed by a transition period leading to a new concession under terms favourable to Panama. On Monday, officials said port activities would continue as the state assumed control.
Trump administration happy with Panama Canal ports decision
The decision was welcomed in Washington. A senior administration official told the South China Morning Post that the administration congratulated Panama for taking steps to assert its sovereignty and said the action aligned with Trump’s vision for the canal.
The official said the president had “made clear that Chinese control of the Panama Canal was unacceptable, violated the US Panama treaty and jeopardised US national and economic security”.
“The United States must be pre-eminent in the western hemisphere as a condition of our security and prosperity – a condition that allows us to assert ourselves confidently where and when we need to in the region,” they said.
“The terms of our alliances and the terms upon which we provide any kind of aid must be contingent on winding down adversarial outside influence – from control of military installations, ports, and key infrastructure to the purchase of strategic assets broadly defined,” the official added.
The dispute over the terminals has been building for months and has drawn in Washington and Beijing, turning a domestic legal battle into a test case in the broader strategic rivalry between the world’s two largest economies.
Balboa and Cristobal sit at opposite ends of the canal, which carries about five per cent of global maritime trade and is a vital artery for US commercial and naval traffic. The Panama Ports Company has operated the facilities since 1997 under a 25-year concession renewed in 2021.
In July, Panama’s comptroller general filed lawsuits before the Supreme Court seeking to annul the renewal, alleging constitutional breaches and financial irregularities, including claims that the operator had failed to meet certain payment obligations.
The company rejected the allegations and called for respect for legal certainty.
The full bench of the Supreme Court then struck down the law approving the concession last month, while also invalidating amendments and an extension linked to the original contract. The ruling cannot be appealed within Panama.
US officials and Republican lawmakers welcomed that decision, with US Secretary of State Marco Rubio saying he was encouraged by the court’s ruling and warning that if a company answerable to Beijing controlled ports at both ends of the canal, it could effectively shut down the waterway during a conflict, describing such a scenario as a direct threat to US interests.
Members of Congress also framed the judgment as proof that sustained pressure from Washington was yielding results in the hemisphere.
Beijing accuses Panama of ‘undermining the rule of law’
Beijing and Hong Kong authorities, on the other hand, criticised the decision, accusing Panama of “undermining the rule of law and harming investor confidence”. In a commentary, Hong Kong officials said the concession had been in force for nearly three decades and warned of political and economic consequences.
But President Mulino pushed back against foreign criticism and defended the judiciary as independent. He said the government’s focus now is safeguarding jobs and maintaining port operations, which he describes as central to Panama’s economy.
“Panama is a state governed by the rule of law and respects the decisions of the Judicial Branch, which is independent from the Central Government. The Foreign Ministry will issue a statement on this matter and will adopt the corresponding decisions,” he wrote on X earlier this month.
CK Hutchison-controlled Panama Ports Company said it had invested more than US$1.8 billion in infrastructure and technology over nearly 30 years and initiated international arbitration proceedings against the Republic of Panama under International Chamber of Commerce rules, arguing that the state had breached the concession agreement.
The dispute also intersected with a separate attempt by CK Hutchison to sell more than 40 ports worldwide in a multibillion-dollar deal with a consortium led by BlackRock and Mediterranean Shipping Company.
Chinese regulators signalled they would scrutinise the transaction, and reports indicated Beijing sought a greater role for state-owned shipping giant Cosco in any arrangement involving the Panama terminals. -- SOUTH CHINA MORNING POST
