Panamanian President José Raúl Mulino dismissed accusations Thursday that his government failed to meet its obligations in an arbitration case brought by Panama Ports Company, a subsidiary of Hong Kong-based CK Hutchison. Mulino described the claims as shameful and a lie.
The dispute involves the ports of Balboa on the Pacific side and Cristobal on the Atlantic side. Panama Ports Company had managed them since 1997 under a concession contract that Panama’s Supreme Court ruled unconstitutional in January. The court found the contract granted excessive privileges and tax exemptions that violated the constitution. Panama published the decision in its official gazette in February, which allowed the government to take control.
Panama Ports Company filed the claim with the International Chamber of Commerce in Paris in February. The company announced this month that it is seeking at least $2 billion in damages.
In a statement issued Monday, Panama Ports Company said the government provided no response to its challenge before the March 13 deadline set by the arbitration body. The company said Panama cited lack of hired lawyers, unfamiliarity with the dispute and the need for more time to prepare a plan.
Mulino rejected that account in comments to reporters. Panama received notification only two days before the deadline and requested an extension, which is common in such proceedings, he said. “We have appointed international lawyers who are going to defend us, and defend us well, in that process,” Mulino added.
The Panama Maritime Authority said in a statement that the country has fully complied with the rules of the arbitration process. It will continue to exercise its rights and defenses in the proceeding. The authority took temporary control of the ports in late February. It assigned interim operation of Balboa to APM Terminals, a unit of Maersk, and Cristobal to Terminal Investment Limited, part of Mediterranean Shipping Company.
Upon takeover, the authority found the ports in significant deterioration. Conditions fell short of best practices and international standards required for such facilities, officials said. The authority accused Panama Ports Company of refusing to cooperate during the transition and hiding information.
Panama’s comptroller general had challenged the concession. An audit determined the arrangement cost the state about $1.2 billion in lost revenues due to irregularities, insufficient payments and tax exemptions. The annulment drew international attention because of the ports’ location at the entrances to the Panama Canal. U.S. President Donald Trump had threatened to retake control of the waterway, built and opened by the United States in 1914, citing concerns over Chinese influence through Hutchison.
Panama says operations at the ports continue normally under the temporary operators. The government plans to launch new tenders for long-term management once the transition period ends. The arbitration case in Paris is expected to take years to resolve. Panama has said it will present its full defense with international legal support.
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