Hong Kong’s CK Hutchison Holdings said Wednesday its subsidiary started arbitration proceedings against Panama after that country’s Supreme Court ruled a concession for the subsidiary to operate Panama Canal ports was unconstitutional.
Hutchison said it strongly disagreed with last week’s ruling, and China warned Panama would pay “a heavy price” if it persisted. Panama’s president has moved to assure the public that the ports would operate without interruption after the ruling, which advanced a U.S. aim to block any influence by China over the canal linking the Atlantic and Pacific oceans.
Hutchison’s subsidiary, Panama Ports Company, began arbitration proceedings Tuesday under the rules of the Paris-based International Chamber of Commerce, the company said in a statement.
The rules are overseen by the chamber’s International Court of Arbitration, an independent body, and it’s unclear what the impact of the proceedings would be. The Panamanian president’s office and commerce ministry did not immediately respond to requests for comment late Tuesday local time.
The ruling draws ire from China
The court ruling has drawn backlash from China, and the tensions may complicate Hutchison’s plan to sell its port assets in dozens of countries to a group that includes the U.S. investment firm BlackRock Inc.
The planned sale has already been caught up in tensions between Beijing and Washington. U.S. President Donald Trump, who has alleged that China interferes with the canal, initially welcomed that plan. However, it apparently angered Beijing and drew a review by Chinese anti-monopoly authorities.
On Tuesday night, Beijing’s office overseeing Hong Kong affairs criticized the Panama court ruling as legally groundless and ridiculous, saying the ruling reflected that Panamanian authorities were bowing down to hegemonic powers. It did not specify the countries but pointed to politicians from some countries who had said they were “encouraged” by the ruling, in an apparent veiled reference to U.S. Secretary of State Marco Rubio.
In a statement shared on social media platform WeChat, the office said that China will never bow to hegemonism and has sufficient means and tools, as well as capability, to uphold justice in the international economic and trade order.
“Panama’s authorities should recognize the situation and correct their course,” it said. “If they persist in their own way and refuse to see reason, they will pay a heavy price both politically and economically!”
A company caught in U.S.-China tensions
The Hutchison subsidiary has operated ports at both ends of the Panama Canal since 1997. The awkward position Hutchison found itself in highlights the challenges Hong Kong business elites face in navigating Beijing’s expectations of national loyalty, especially during U.S-China tension. CK Hutchison is owned by the family of Hong Kong’s richest man, Li Ka-shing.
The company said last July that it was considering seeking a Chinese investor to join as a significant member of the consortium under its sale plan, a move that some interpreted as way to please Beijing, but CK Hutchison hasn’t said more since.
The consortium also includes BlackRock subsidiary Global Infrastructure Partners and Terminal Investment Limited, which is chaired by Italian shipping scion Diego Aponte, whose family reportedly has a longstanding relationship with Li’s.
Last May, Hutchinson co-managing director, Dominic Lai told shareholders that Terminal Investment was the main investor.
Panama’s government has maintained it has full control over the canal and that the operation of the ports by Hutchison does not mean Chinese control of it. But Rubio made clear that the U.S. viewed the operation of the ports as a national security issue.
