CK Hutchison Holdings Ltd, the Hong Kong conglomerate built by billionaire Li Ka-shing, filed international arbitration proceedings against Panama on August 20, seeking more than $1.5bn in damages for what it calls the "destruction" of its investments in two ports on the Panama Canal. The claim, lodged under an investment protection treaty, is CK Hutchison's own case rather than that of its local unit, and it lands on top of an existing $2bn arbitration already under way, taking the group's total legal exposure north of $3.5bn.

The company said Panama breached the treaty through a string of measures taken across 2025 and 2026 that ended with the termination of its concession to run the Balboa terminal on the Pacific side of the canal and the Cristobal terminal on the Atlantic side, and with the state taking direct control of both. CK Hutchison's board said it "strongly disagrees" with Panama's actions and warned shareholders and prospective investors to "act with caution" while the case proceeds—unusually blunt language for a blue-chip Hong Kong issuer addressing its own market.

The timeline behind the claim is now well established. On January 29, Panama's Supreme Court ruled that the concession held by CK Hutchison unit Panama Ports Company (PPC), renewed for 25 years only a few years earlier, was unconstitutional. CK Hutchison filed a formal treaty dispute notice on February 4. Rather than negotiate, Panama moved to seize the Balboa and Cristobal terminals outright between February 23 and 24, 2026, confiscating equipment, property, and proprietary data under a "temporary" state occupation order from President Jose Raul Mulino that six months on shows no sign of ending.

Investors, for now, are unbothered. CK Hutchison shares rose as much as 2.4% in Hong Kong on the day of the filing and are up 32% for the year, helped along by the Li family's broader push to sell assets and restructure the group. The company told analysts at its August 13 interim results that the Panama expropriation had cost the ports division around HKD496mn (roughly $63mn) in lost first-half EBITDA. This is a dent large enough to notice, but small next to the division's overall performance, where ports EBITDA still rose 4% in reported currency group-wide and 10% excluding Panama. Group chief financial officer Kwan Cheung told the same call that no writedown on the Panama business is currently needed, a statement of confidence in the arbitration that Panama would do well not to underestimate.

Two claims, one target: the mechanics of the legal assault

CK Hutchison has gone to great lengths to keep its new $1.5bn treaty claim distinct from PPC's earlier $2bn contractual arbitration over "unlawful state expropriation" of its assets. That distinction matters because treaty arbitration and contract arbitration run on different legal tracks, with different tribunals, different burdens of proof, and different odds of success; running both in parallel maximises CK Hutchison's chances of recovering something even if one route stalls.

There is a third front as well. PPC separately launched arbitration in London in April against Denmark's A.P. Moller-Maersk. The operational context makes the suit clear: following the state seizure, Panama handed interim operational contracts at Balboa to Maersk's APM Terminals and Cristobal to Mediterranean Shipping Company's Terminal Investment Limited (TiL). PPC accuses Maersk of actively aligning itself with the Panamanian state and helping install new operators at the terminals PPC once ran. Maersk has said it does not believe it is liable and will contest the claim in the appropriate forum, a carefully neutral line from a company that would rather not be dragged deeper into a dispute between a sovereign state and a rival operator.

Precedent offers Panama little comfort. Investor-state disputes over major port concessions typically drag on for years, and initial claims are usually whittled down through tribunal rulings, negotiation, or an eventual settlement on softer terms, notes Denise Wong, an analyst at Bloomberg Intelligence. Winston Ma, an adjunct law professor at New York University, reads CK Hutchison's litigation the same way: less a bid to actually collect the full $3.5bn than a legal hammer to force Panama back to the negotiating table, with a commercial settlement the most probable long-term outcome.

Washington's canal obsession comes with a bill it will not pay

The dispute exists because the White House decided it should. Donald Trump used his January 2025 inauguration speech to claim, without much basis in the terms of the 1977 neutrality treaty that actually governs the waterway, that China effectively ran the Panama Canal and that the US had been cheated in handing it over. Two private container terminals operated under a legally granted concession are not the canal, and the neutrality treaty already guarantees the US expedited passage and the right to defend the waterway if its neutrality is threatened. Conflating a commercial lease with sovereign control was a useful rhetorical device, not an accurate description of the facts.

It worked regardless. Panama's Supreme Court ruling in January, coming so soon after months of American pressure on the Mulino government, was read across the region as a political outcome dressed in judicial language, and Beijing's Hong Kong and Macao Affairs Office called it exactly that: "unfounded, unreasonable and absurd," pointing out that the concession had stood for almost 30 years without complaint.

The awkward part for Washington is that it now bears none of the financial consequences of a fight it did much to start. Panama is the one facing $3.5bn and rising in arbitration exposure, on top of whatever it eventually pays Maersk-linked claims or a negotiated settlement with CK Hutchison. The Panama Canal handles around 40% of all US container traffic and roughly 5% of global trade, a scale that explains why Washington cares, but treating the canal as a chess piece in a great-power contest, rather than as the infrastructure of a sovereign, treaty-bound third country, was always a reckless way to pursue a legitimate American interest in canal neutrality. Panama, not the United States, will pay for the shortcut.

Beijing plays the same game, and weaponises the high seas

China's conduct here undercuts its own outrage. Having condemned Panama's treatment of a private Hong Kong company as an affront to legal norms, Beijing spent the past year and a half using its own regulatory machinery to block a purely commercial transaction: CK Hutchison's planned $22.8bn sale of 43 ports in 23 countries to a consortium led by US asset manager BlackRock and MSC's TiL, a deal set to net CK Hutchison over $19bn in cash. China's State Administration for Market Regulation opened an antitrust review within days of the March 2025 announcement, a review that conveniently doubled as a mechanism for Beijing to insist that state-owned China Cosco Shipping Corp, and later China Merchants Group as a financing partner, be given a controlling rather than minority stake in the buying group.

When Panama moved forward with the terminal seizures anyway, Beijing took its retaliatory strategy directly to the open ocean. Starting in March 2026, Chinese maritime and port authorities launched an aggressive, highly targeted campaign of "safety inspections" directed specifically against commercial vessels flying the Panamanian flag. Detentions of Panama-flagged ships in Chinese ports spiked dramatically from a historical average of roughly 21 per month to 93 in March and 140 in May, accounting for more than 80% of all foreign vessel detentions in China during that span.

This maritime pressure effectively weaponised Panama's ship registry, the second-largest flag of convenience in the world, triggering panic among international shipowners and an immediate exodus of nearly 500 vessels reflagging to alternative registries to avoid costly delays in Chinese waters. Beijing only dialled back the inspection pressure in July after forcing Panama City to open bilateral maritime negotiations focused on protecting its fleet.

Panama's government picked a fight it cannot afford to lose

None of this excuses Panama City. The Mulino government had a concession contract renewed only a few years ago, running for close to three decades without dispute, and rather than negotiate a renegotiation of terms under sustained American pressure, it let the Supreme Court void the agreement on constitutional grounds that arrived with suspiciously convenient timing, then followed up by physically seizing the terminals and confiscating company data before any tribunal had ruled on the treaty question CK Hutchison had already raised. Seizing first and litigating later is a pattern that has turned other port-concession disputes into decade-long liabilities elsewhere, and Panama has now walked a similar path with its eyes open.

The government's selective firmness is also hard to square. Panama did reclaim land from a Chinese company last year after it failed to build a promised port on the site, a legitimate use of concession-enforcement powers against a company that had not delivered. Balboa and Cristobal were different: operating terminals, under a valid, long-standing agreement, seized not for breach of contract but because a foreign government objected to who held the lease. That distinction is likely to matter a great deal to an arbitral tribunal weighing whether Panama's actions amounted to a legitimate regulatory measure or an uncompensated expropriation.

Panamanian taxpayers are the ones who will eventually cover whatever a tribunal or a settlement ultimately awards. On the numbers now on the table, that liability already exceeds $3.5bn and is still growing. The small Central American nation became a flashpoint of diplomatic friction between Washington and Beijing in 2026, but attention was never going to be the same thing as a favourable outcome, and it is Panama, not the United States or China, that will be presented with the invoice.