Row over termination of Panamanian port concessions escalates

The row over the Panamanian Government’s decision to annul the port operation contracts enjoyed by CK Hutchison Holdings’ Panama Ports Company (PPC) at Balboa and Cristobal, strategically located either end of the Panama Canal, continues. Press reports say that the Chinese government has entered the fray, asking Chinese companies to freeze all investment projects in Panama.

Meanwhile, PPC itself last week advised that it had commenced arbitration against the Republic of Panama pursuant to the applicable concession contract and the Rules of Arbitration of the International Chamber of Commerce. 

The commencement of arbitration by PPC follows “a campaign by the Panamanian State specifically targeting PPC and its concession contract spanning a year,” stated the PPC. This has been been marked by “a range of abrupt actions by the Panamanian State culminating in grave and imminent further damage to PPC, while similar port sector contracts have not been targeted,” it added.

The arbitration also follows “extensive efforts by PPC spanning a year to consult and avoid disputes,” the company continued. “While diligently carrying out port operations and cooperating with the Panamanian State in many ways, PPC also has consistently advised through diverse communications its concerns regarding the State campaign as it has unfolded and sought clarity and consultations to avoid the necessity of arbitration, to no avail.  Instead, over the past year, since the start of the present year, and even through recent days, the Panamanian State routinely disregarded communications, efforts to consult, and requests for clarity.”

PPC says the arbitration is based on the concession contract and legal framework that have been enshrined over almost three decades as a “contract-law,” providing legal certainty and long-term respect for the applicable legal and contractual framework.   The Republic of Panama has breached the applicable Contract and law, it sates.

PPC is seeking extensive damages based on an assessment of relevant financial data, subject to prompt resolution, and such other requests for relief as may prove necessary.  PPC and its investors continue to permanently reserve all rights.

As a backdrop to the arbitration, and in addition to the other aspects of its campaign, over the past year, the Panamanian State choose to reverse its longstanding positions regarding the legal and contractual framework, breached its obligations under the contract, and commenced, pursued, and/or supported legal proceedings aimed at destroying the concession contract, which it says “was the result of a transparent international bidding process.”