Recently, the Supreme Court of Panama, disregarding both the facts and the law, ruled the operation contract for two Panama Canal ports held by a Hong Kong-based enterprise invalid on the unfounded grounds that it was “unconstitutional”. This ruling not only negated the nearly three-decade-long lawful operation and compliant performance of the contract by the enterprise but also constituted a flagrant trampling of the spirit of the contract and the principle of the rule of law, which underpin a fair business environment, and are widely recognized by the international community.
The Panama move, which is legally defective and rationally absurd, was also a blatant breach of faith. The hegemonic coercion and external political manipulation behind it are both shameful and lamentable, as some media outlets poignantly pointed out. The Chinese central government and the Hong Kong Special Administrative Region government have expressed firm opposition; and Hong Kong society has rightly voiced its strong condemnation.
The said port concession contract is a commercial agreement reached on the basis of equality through rigorous legal procedures. It has been smoothly implemented for nearly 30 years with huge investment.
Panama’s own audit and regulatory authorities had confirmed before and after the contract’s renewal that the enterprise had substantially complied with the contract terms and fulfilled its contractual obligations. In other words, the ports involved had operated in total conformity with the contractual agreement and local laws and regulations, with no breach of contract or illegality whatsoever on the part of the operator.
However, Panama’s Supreme Court, without any fundamental change in legal provisions or any factual basis of illegality, issued an “unconstitutional” ruling out of thin air, declaring the lawfully renewed contract invalid. The move is a peremptory denial of the legal validity of the existing contract and a forcible deprivation of the port operator’s legally acquired concession right.
The sanctity of contract, the stability of law, and the credibility of the Panamanian government were shattered overnight by this ruling. If a nation’s highest judicial body can so casually nullify a lawful contract that has been recognized by successive governments and legislatures and enforced over a long period, then any concession right or contractual entitlement granted through lawful procedures in that country would be in a state of extreme instability, potentially rendered worthless at any moment because of political shifts or external pressure.
The ruling by Panama’s Supreme Court seriously undermines the principles of fairness, justice, and nondiscrimination in international economic and trade relations and poses a direct challenge to the rules-based international trade and investment system
This undoubtedly deals a fatal blow to the cornerstone of international commercial activity — the spirit of contract — and sends a dangerous signal to global investors about the unpredictability of the country’s judiciary and the utter lack of business safeguards. Such shortsighted behavior of “breaching faith and discarding contracts” at will harms not only the interests of individual enterprises but, more critically, Panama’s own long-term national credibility, investment attractiveness, and economic development foundation.
A review of the context of this incident reveals that the ruling by Panama’s Supreme Court is by no means an independent judicial determination, but rather a lamentable product of geopolitical maneuvering and hegemonic coercion. Certain countries have persistently sought to bring these ports under their control, treating them as an asset in their geopolitical strategy, which is driven by a Cold War mentality.
As a sovereign state, Panama should have adhered to an independent foreign policy, defended its judicial sovereignty and national interests, and developed cooperative relations with all countries on an equal basis. To the disappointment of the international society, the Panamanian authorities failed to withstand external pressure and coercion in this case, and its judicial institution regrettably became a tool to cooperate with hegemonic strategies.
This submission to hegemonic intimidation has severely tarnished the independence and credibility of Panama’s judicial institution, turning it into a laughingstock in the international community.
The ruling by Panama’s Supreme Court seriously undermines the principles of fairness, justice, and nondiscrimination in international economic and trade relations and poses a direct challenge to the rules-based international trade and investment system.
Such actions that politicize commercial issues and instrumentalize judicial matters set a pernicious precedent. They signal to the world that, under the influence of external pressure, a country’s laws and contracts can be overridden at any time, and the legitimate rights and interests of foreign enterprises cannot receive fair judicial protection. They will inevitably and severely dampen the confidence of international investors, especially those from developing countries, in similar market environments, prompting investors to reassess the risks and safety of their investments, potentially leading to shrinking investment, hindered technological exchange, and impaired economic development momentum.
Panama’s port contract breach will no doubt appease certain external forces in the short term. However, in the long run, it will lose the trust of the international community, valuable sources of investment, and opportunities for sustainable development.
The author is a law professor, director of the Chinese Association of Hong Kong and Macao Studies, and president of the Association for the Promotion of Rule of Law, Education and Technologies.
The views do not necessarily reflect those of China Daily.
