The recent ruling by the Supreme Court of Panama to declare the concession agreement with the Panama Ports Company “unconstitutional” marked a profound departure from established norms of international commercial law. This decision does not merely represent a domestic judicial reversal but rather signals a disturbing erosion of the sanctity of contract within the global business landscape.
By voiding a legal framework that has underpinned operations at the Balboa and Cristobal terminals for nearly three decades, the court has prioritized political expediency over legal certainty. The implications of this move extend far beyond the immediate financial loss to the operator, a subsidiary of Hong Kong-based CK Hutchison Holdings. It destabilizes the foundational trust required for cross-border cooperation between Panama and its partners. It suggests that the spirit of contract is now subordinate to shifting diplomatic pressures in Panama, raising concerns about future stability and certainty for international investors and trade partners.
A forensic analysis of the timeline reveals a significant jurisprudential incoherence in the court’s decision. The concession has operated with transparency under Panamanian law since the late 1990s and was renewed by the state as recently as 2021. To assert that this longstanding partnership is void ab initio violates the doctrine of estoppel. This legal principle prevents a party from asserting something inconsistent with a claim made or implied by their prior actions. By renewing the contract, the Panamanian state effectively validated the company’s operational history. The sudden discovery of “unconstitutionality” after 28 years of continuous service suggests that the legal reasoning is being retrofitted to achieve a predetermined termination rather than arising from a genuine discovery of invalidity.
The specific justifications cited by the court and the comptroller general, including allegations of unpaid dues and the existence of so-called ghost concessions, require a nuanced examination. While these accusations of financial irregularities and unauthorized subletting are serious, they typically fall within the realm of administrative noncompliance rather than constitutional illegality. In standard international commercial practice, the remedy for such breaches, if proven, is the imposition of fines, the requirement of restitution, or a specific period for cure and correction. The leap from alleging operational errors to declaring the entire legal framework of the concession unconstitutional is disproportionate and lacks precedent in stable regulatory environments.
The Monroe Doctrine, often viewed as an antiquated relic, finds new life in this context, not as a direct imperial order but as a prevailing wind that guides local decision-making. The judiciary appears to have been swayed by this convergence of executive will and foreign policy alignment
This judicial overreach conflates performance issues with constitutional legitimacy. By escalating administrative disputes into a constitutional crisis, the Panamanian judiciary effectively bypasses standard arbitration mechanisms that are designed to resolve commercial disagreements impartially. This maneuver strips the foreign investor of the procedural protections usually afforded in such disputes. It replaces the precise tools of regulatory enforcement with the blunt instrument of annulment. If the “irregularities” were as systemic as the audit now claims, the regulatory bodies charged with oversight during previous administrations, were either grossly negligent or tacitly complicit, further complicating the state’s moral standing in seeking to annul the agreement retroactively.
Beyond the immediate legal arguments, the geopolitical dimension of this ruling cannot be ignored. It is instructive to consider how this ruling could set a precedent that affects future international trade agreements, signaling a shift toward greater unpredictability and potential renegotiation risks in Panama, the region, and even globally.
This alignment of interests allows the current administration in Panama City to utilize anti-corruption rhetoric as a cover for what is essentially the expropriation of developed infrastructure. The Monroe Doctrine, often viewed as an antiquated relic, finds new life in this context, not as a direct imperial order but as a prevailing wind that guides local decision-making. The judiciary appears to have been swayed by this convergence of executive will and foreign policy alignment. Consequently, the verdict serves the immediate political climate rather than the law’s long-term stability. This creates a hostile environment in which legal certainty is sacrificed for short-term political expediency.
The ramifications of this court decision introduce a complex new reality for multinational corporations operating in legally unstable jurisdictions. The case demonstrates that strict adherence to the letter of the law and the fulfilment of contractual investment obligations are no longer sufficient shields against asset seizure. This development is likely to significantly damage Panama’s reputation as a stable investment destination, undermining trust among global investors and increasing perceived risks.
For global investors, particularly those from the Global South, this introduces an unquantifiable risk factor. Enterprises must now navigate a landscape wherein contracts and legal arguments are secondary to political expediency and machinations. The assumption that a valid contract protects an asset from state reclamation is now demonstrably false in jurisdictions susceptible to external pressures.
As a consequence of this court ruling, investors will view the Panamanian market with extreme caution, recognizing that their assets are safe only so long as they do not annoy the United States or are not in conflict with the immediate needs of the local administration. This erosion of trust underscores the vulnerability of legal certainty in Panama. The nullification of this port contract is a victory for political maneuvering over the rule of law. A nation that cannot uphold the spirit of contract is a nation that has forfeited its standing in the modern economic order. The lesson for the international business community is stark. It reveals that, in the emerging era featuring rampant geopolitical strategies, the sanctity of commercial agreements is increasingly fragile. A legal system that allows the state to profit from decades of foreign investment, only to declare the underlying mechanism illegal when it becomes politically expedient, has abandoned the rule of law for the rule of convenience. The cost of this uncertainty will be borne not just by the specific enterprise involved but by the global trading system.
The author is a solicitor, a Guangdong-Hong Kong-Macao Greater Bay Area lawyer, and a China-appointed attesting officer.
The views do not necessarily reflect those of China Daily.
