On Jan 29, the Supreme Court of Panama announced that the concession contract that allowed Panama Port Co, a subsidiary of Hong Kong-based CK Hutchison Holdings, to operate two ports at both ends of the Panama Canal was “unconstitutional” and subsequently annulled the contract. The Panamanian government immediately reclaimed control over the two ports, Balboa and Cristobal, and arranged for APM Terminals, a subsidiary of the Maersk Group, to act as their “temporary manager”.

Panama Port Co had operated the two ports since 1997 under the contract, which was renewed in 2021 for another 25 years.

After 28 years of smooth implementation, the contract was suddenly declared as “unconstitutional” and thus “invalid”.

The court ruling has raised a critical question: If there is any fault of constitutional significance on the part of the operator, why hadn’t Panama’s judicial authorities taken any remedial action over a long period of nearly three decades until Washington voiced its desire to gain control of the Panama Canal? In light of the current geopolitical climate, the court ruling appears to be a capitulation to US political pressure, which is self-destructive.

Panama Ports Co has invested 1.7 billion balboas cumulatively ($1.7 billion) in the ports, far exceeding the original contract’s investment requirement of 1.05 billion balboas, creating thousands of direct and indirect jobs and helping to establish Panama as a globally recognized logistics hub that benefits the country.

Hong Kong entrepreneurs facing US bullying must stand resolutely with their nation, fighting courageously to protect their dignity and assets, knowing that the nation will continue to support Hong Kong businesses and protect their legitimate rights and interests

In response to Panama’s breach of contract, CK Hutchison Holdings issued a statement of protest and indicated plans to seek arbitration based on applicable concession agreements and international arbitration rules. However, the reality is that given Panama’s submissive stance toward US geopolitical interests, adherence to arbitration rulings is uncertain, leaving CK Hutchison Holdings with limited leverage.

This episode reinforces the notion that business can never be entirely divorced from politics; capital has national affiliations. It is essential for businesspeople to align their own interests with those of their motherland to ensure their safety. Hong Kong entrepreneurs facing US bullying must stand resolutely with their nation, fighting courageously to protect their dignity and assets, knowing that the nation will continue to support Hong Kong businesses and protect their legitimate rights and interests.

China’s Foreign Ministry responded by stating that Panama’s decision lacked legal basis and violated the legal framework of the relevant concession and promising to safeguard the legitimate rights and interests of Chinese firms.

Should Panama persist in reneging on its contractual obligations, it could face severe political and economic consequences.

The author is a member of the Legislative Council and the UN Association of China.

The views do not necessarily reflect those of China Daily.