Panama Ports Company (PPC), the Panama unit of Hong Kong-based CK Hutchison, has initiated arbitration proceedings in London against A.P. Moller - Maersk after a contentious change in operators at two major terminals flanking the Panama Canal.
In its filing, PPC alleges Maersk violated their long-term contract by aligning with the Panamanian government to remove PPC from management of the Balboa port and to install a Maersk-affiliated operator. PPC said in a statement that, "Contrary to the contract, Maersk undermined the agreement and aligned itself with the Republic of Panama in connection with its state-led campaign against PPC and a scheme to replace it through a takeover that installed new port operators."
The arbitration is separate from PPC’s parallel legal efforts against the Panamanian government, the company added, saying the claim against Maersk is being pursued "without prejudice" to its attempts "to hold Panama accountable for its anti-contractual and anti-investment conduct." PPC specified the forum for the dispute will be London.
The dispute traces back to a decision by Panama’s Supreme Court in late January that invalidated the legal framework underpinning the 1997 concession that had granted PPC the rights to operate the Pacific-facing Balboa terminal and the Atlantic Cristobal terminal on either side of the canal. By the following month, Panama had awarded temporary contracts to subsidiaries of Maersk and the Mediterranean Shipping Company, or MSC, to operate Balboa and Cristobal respectively.
PPC said the actions by Maersk and the government breached the long-term contractual arrangements governing its role at the two strategic terminals. The change in operators also complicated CK Hutchison’s planned $23 billion sale of a majority stake in its global ports business to a consortium led by BlackRock and MSC.
The court ruling came after what the article described as extended pressure from the Trump administration - which said it wants to "take over" the Panama Canal - aimed at reducing what it described as Chinese influence over the key waterway that handles about 5% of global maritime trade. Beijing has denounced what it called U.S. "bullying tactics" and urged foreign governments to uphold a fair trade environment.
PPC said its claim against Maersk will proceed in London and stressed this action is distinct from its ongoing measures against Panama. "The arbitration is separate from and without prejudice to PPC’s ongoing efforts to hold Panama accountable for its anti-contractual and anti-investment conduct," the company stated.
Neither Maersk nor the Panamanian government immediately responded to requests for comment.
Key points
- PPC has filed arbitration in London, alleging Maersk breached a long-term contract by supporting Panama’s removal of PPC from Balboa and installing a Maersk-affiliated operator.
- Panama’s Supreme Court invalidated the legal framework for PPC’s 1997 concession in late January; temporary operator contracts were awarded to Maersk and MSC the following month.
- The dispute has implications for CK Hutchison’s planned $23 billion sale of a majority stake in its global ports unit to a consortium led by BlackRock and MSC.
Risks and uncertainties
- Ongoing legal and arbitration processes create uncertainty for port operations and potential financial outcomes related to CK Hutchison’s planned divestment - affecting ports and shipping sectors.
- Government actions and court rulings in Panama could have further operational or contractual impacts on terminal operators and investors in port infrastructure.
- Geopolitical tensions cited in the dispute may complicate commercial arrangements and investor sentiment in sectors tied to maritime trade.