APM Terminals to Operate Ports During Transition
Thursday last week, Panama’s Supreme Court of Justice declared the contract between CK Hutchison’s Panama Ports Company S.A. (PPC) and the State of Panama unconstitutional, annulling the decades long concession.
PPC, a subsidiary of the Hong Kong-based consortium CK Hutchison holds the concession to manage the ports of Balboa (Pacific) and Cristóbal (Atlantic), granted in the late 90s and extended automatically in 2021. The two ports, the 2nd & 5th largest ports on the Panama Canal in container traffic, together move almost 40% of containers handled by all ports in the Panama Canal (6 container ports).
The Supreme Court’s ruling follows on lawsuits filed by the Comptroller General of the Republic in July last year, alleging unconstitutionality and requesting the annulment of the concession. The lawsuits were based on the findings of an audit which according to the Comptroller revealed practices detrimental to Panama’s national interests, among which an estimated $1.2 billion loss for the Panamanian State.
Next Steps
🔷 Panama’s President Mulino said in public statement that Panama Ports will continue operating without changes until the ruling is “executive”.
🔷 After that, a transition period will begin, during which APM Terminals Panama, a subsidiary of the A.P. Moller – Maersk and new owner of the Panama Canal Railway, will temporarily assume operation of the two ports to prevent disruption of regional and global trade.
🔷 During the transition period, the Panamanian government will prepare & launch two tenders (one for each port) to grant new concessions for the terminals.
Background
Meanwhile, Panama Ports Company (PPC) stated that the Court’s Decision lacks legal basis and officially announced in a statement last Tuesday that it initiated international arbitration proceedings against the Republic of Panama.
The Court’s decision comes against the backdrop of geopolitical power game between the U.S. & China. Earlier last year, Hutchison announced the sale of 43 ports worldwide to a consortium of the U.S. firm BlackRock & Swiss MSC’s daughter company Terminal Investment Limited (Til). This sale included Panama Ports (Balboa and Cristóbal). The sale was blocked by China which since then has been pushing to include Cosco Shipping in the transaction, while the French shipping company CMA CGM has also expressed interest.
The U.S. is the largest customer of the Panama Canal, as origin and destination, with almost 70% of cargo (long tonnes), followed by China with 18.3%.