The Supreme Court of Panama ruled on Thursday that two decades-long contracts awarded to Panama Ports Company (PPC), a subsidiary of Hong Kong-based Hutchison Port Holdings, to operate two ports in the Panama Canal were unconstitutional.
The ruling annuls the terms of the contract originally granted to Panama Ports in 1997 and its 2021 renewal. Both controversial contracts stood at the center of a debate initiated by President Donald Trump in December 2025 over China’s alleged growing influence and control of the Panama Canal.
Panama and PPC signed a 25-year lease contract in 1997 for the development and administration of two ports at opposite ends of the Panama Canal located in the provinces of Balboa and Cristóbal. As per the terms of the original deal, the lease had been automatically renewed for an additional 25-year period in 2021.
International outlets have described the 1997 contracts as an “example” of China’s presence in the Panama Canal. In 2020, the Chinese communist regime ended the “One Country, Two Systems” policy that prevented Beijing from imposing communist laws in the country through a “national security” law intended to suppress democratic protests.
Following the 2021 renewal, the two contracts found themselves embroiled in an ongoing controversy that took a new turn last year, when Panama’s Attorney General Luis Carlos Gómez determined in February that the two contracts were “unconstitutional” and, after an extensive review, found that they contained numerous violations of Panama’s rights and provided PPC with “disproportionate rights” over the management of the two ports. Gómez at the time suggested to the nation’s top court that it ruled both contracts as unconstitutional based on his office’s findings.
Months later, in April, Comptroller General of Panama Anel Flores started a criminal complaint process against PPC, accusing the company of breaching the terms of the contracts and causing roughly $1.2 billion in financial damages to the country. Flores presented a lawsuit against the contracts on July 2025.
The Panamanian Supreme Court, in a statement published late on Thursday night, announced that, after an extensive deliberation, it declared the two contracts and their subsequent renewal as unconstitutional.
“These challenged laws and acts are related to the Concession Agreement between the State and Panama Ports Company, S.A., for the development, construction, operation, administration, and management of the container, Ro-Ro, passenger, bulk cargo, and general cargo port terminals in the ports of Balboa and Cristóbal,” the statement read in part.
Panamanian President José Raúl Mulino referred to the ruling in a roughly seven-minute long address on Friday morning. Mulino said that his government had established a contingency plan since last year to evaluate the consequences of the possible outcomes of the case at the Supreme Court if the top court ruled in favor or against the contracts. Mulino explained that, until the ruling becomes final, PPC will continue to operate without any changes, but that then a transition period will begin, culminating in a new lease under favorable terms and conditions to Panama.
Mulino asserted that there will be “no improvisation” in the process and that to such end, he appointed Panamanian Engineer Alberto Alemán Subieta to lead a technical team to oversee the “various areas of responsibility” related to PPC.
“I have also instructed the Panama Maritime Authority to meet immediately with Panama Ports to coordinate the necessary actions for the aforementioned purposes. We hope that the company, a member of Hutchinson Port and a subsidiary of the multinational conglomerate C.K. Hutchinson Holdings, with a global presence and keenly protective of its corporate reputation, will cooperate openly at this stage,” Mulino said during his address.
“The Panamanian State is the guarantor of the defense of the rights granted to the company by the Constitution and the law, and will also be the overseer of its contractual obligations until the end of the transition period to which I have referred,” he continued.
In a statement issued in response to the ruling, Panama Ports Company claimed that the ruling “lacks legal basis” and is “inconsistent” with the relevant legal framework that awarded it with the original contract in 1997. PPC also claimed that the ruling is part of an alleged “campaign” by the Panamanian government that has affected the company and its investors for over a year.
“The PPC concession was the result of a transparent international tender process. Since then, PPC has complied with its contractual and legal obligations, including audits carried out by the State, always acting with complete transparency and full willingness to cooperate,” the statement read in part.
“The new ruling, based on available information, lacks legal basis and jeopardizes not only PPC and its contract, but also the well-being and stability of thousands of Panamanian families who depend directly and indirectly on port activity, as well as the rule of law and legal certainty in the country,” the text continued. “The ruling is diametrically opposed to rulings already issued by the Supreme Court regarding contracts similar to the PPC contract.”
President Donald Trump and other members of his administration, such as Secretary of War Pete Hegseth and U.S. ambassador to Panama Kevin Cabrera, have denounced China’s malign influence in the Panama Canal and the threat it poses to regional security, with the PPC-controlled Canal ports in Balboa and Cristóbal at the center of the ongoing debate initiated by President Trump.
Last year, in March 2025, CK Hutchison Holdings and asset manager BlackRock announced that they had reached an agreement for the sale of a 90 percent stake in PPC. However, weeks later, the Chinese communist regime blocked the deal.
Asked by Bloomberg for comment on the Panamanian Supreme Court’s ruling and if the ruling effects the ongoing negotiations for the deal, Chinese Foreign Ministry spokesman Guo Jiakun said in a Friday press conference that “China will take all measures necessary to firmly protect the legitimate and lawful rights and interests of Chinese companies.”
In a follow-up question, Guo stated that he does not have information on whether China is also looking at opportunities to build new ports in the Panama Canal.
Christian K. Caruzo is a Venezuelan writer and documents life under socialism. You can follow him on Twitter here.
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