<div id="readability-page-1">Hong Kong’s CK Hutchison could find it hard to secure compensation from Panamanian authorities over their decision to nullify its port operation, legal experts have said, noting that the arbitral tribunal it engaged lacks enforcement power and the issuance of damages may depend on the country’s own courts. The conglomerate, led by Hong Kong tycoon Li Ka-shing’s family, said on Wednesday that its subsidiary, the Panama Ports Company (PPC), commenced arbitration against Panamanian authorities a day earlier. The move was in response to a judgment of the country’s top court that declared PPC’s concession to operate two Panama Canal ports was “unconstitutional”. CK Hutchison said the decision to start arbitration was based on the applicable concession contract and the Rules of Arbitration of the International Chamber of Commerce (ICC). Legal academics and experts in Hong Kong highlighted enforcement challenges, as the ICC International Court of Arbitration’s role was to administer the arbitration proceedings, adding that it did not possess independent enforcement powers. “Enforcement of an arbitral award is a matter for national courts,” said international commercial arbitration expert Yan Yueming, an assistant dean at the Chinese University of Hong Kong’s law faculty. She stated that PPC was seeking Panamanian courts to enforce reparations if authorities there failed to comply with an arbitral award, under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which Panama is a contracting state. Yan added that PPC could pursue enforcement in other jurisdictions where Panama had assets, provided those jurisdictions were signatories to the convention. But lawmaker Thomas So Shiu-tsung, chairman of the eBRAM International Online Dispute Resolution Centre, pointed to potential obstacles under the convention, which allows enforcement to be refused if an award contravenes the country’s public policy. “Because enforcement typically has to go through the local courts, the Panamanian court would argue that it already declared the [operation was] unconstitutional and now you come back to the same court and demand compensation,” So said. “The court may not enforce it.” The country’s Supreme Court of Justice last week stripped PPC of its concession to operate the Balboa and Cristobal terminals at either end of the Panama Canal. PPC was initially allowed to operate the two ports until 2047, after the 25-year concession was renewed in 2021. So added that seeking other jurisdictions to enforce the results of an arbitration could be against the principle of “state immunity”, which protects sovereign states and their properties, and could preclude the issuance of any award to PPC.  Other hurdles also remained for PPC, including a burden of proof, the lawmaker said. So added that PPC needed to demonstrate Panama had breached the concession contract for its operation of the ports before the tribunal. “Panamanian authorities can defend themselves and argue that even though a concession contract is signed, it cannot contravene local laws,” the lawmaker said. “And it is later realised that some matters were not permitted under Panamanian law, which we call ‘force majeure’.” According to the ICC Rules of Arbitration, respondents should submit an answer, which includes their comments as to the nature and circumstances of the dispute and response to the relief sought, within 30 days from receipt of an arbitration request. It remains unclear whether Panama will participate in the arbitration. Yan said proceedings could continue even if a respondent declined to submit an answer or chose not to participate, according to the rules. She said that any arbitration institution, upon receiving a notice from a claimant, would first determine if there was room for a valid arbitration agreement. “Arbitration agreement establishes ‘jurisdiction’. If prima facie jurisdiction exists, the institution proceeds even if the respondent says nothing,” Yan said. It would therefore be possible for PPC to receive the award even if Panamanian authorities refuse to participate in the arbitration, she said. In the Wednesday statement, PPC said the arbitration was based on the concession contract and legal framework that had been enshrined over nearly three decades as a “contract law”. “The Republic of Panama has breached the applicable contract and law,” the company said. “PPC seeks extensive damages based on an assessment of relevant financial data, subject to prompt resolution, and such other requests for relief as may prove necessary. PPC and its investors continue to permanently reserve all rights.” Professor Shahla Ali, director of the University of Hong Kong’s arbitration and dispute resolution master’s programme, noted the success rate for commercial arbitration cases where investors brought claims against states was between 30 and 50 per cent. Ali added that even if the arbitration proceeded in the absence of Panamanian authorities, the presiding institution would ensure that the non-participating party remained informed and provided multiple opportunities to participate. The United States government has repeatedly vowed to “take back” control of the strategic waterway since Donald Trump returned to the presidency in January 2025. In February last year, Panama withdrew from China’s Belt and Road Initiative. The top Panamanian court’s ruling also follows an audit launched last month by the country’s comptroller general, who claimed that the concession generated US$3.78 billion for the operator between 1997 and 2023, while the country received only US$236 million. PPC rejected these findings, asserting that it had invested more than US$1.8 billion in infrastructure and complied with contractual obligations.</div>

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<p>Hong Kong's CK Hutchison faces challenges in securing compensation from Panama after its port operation was declared unconstitutional. The Panama Ports Company (PPC) has initiated arbitration against Panamanian authorities, but legal experts warn that enforcement of any award may depend on local courts, which may refuse to comply. The ICC's role is limited to administering proceedings without enforcement power. PPC must prove that Panama breached the concession contract, and potential obstacles include state immunity and local laws. The success rate for such arbitration cases is between 30-50%.</p>

CK Hutchison set for hard fight to secure Panama port deal compensation: experts