Hong Kong-based conglomerate CK Hutchison Holdings has commenced international arbitration proceedings against the Republic of Panama after the country’s Supreme Court ruled that a long-standing concession contract for two key Panama Canal ports was unconstitutional, triggering a major commercial and diplomatic dispute.

The arbitration was filed by the company’s unit, Panama Ports Company (PPC), under the rules of the International Chamber of Commerce, seeking to challenge the court’s decision and argue that Panama breached its contractual obligations and caused significant damages.

The move comes after the Panamanian court’s ruling, which concluded that the concession agreements granting CPC exclusive operational rights at the Cristóbal and Balboa terminals violated constitutional norms, ending nearly three decades of continuous operations by the subsidiary.

Panama’s president moved swiftly to reassure citizens and global markets that port operations at either end of the canal would continue without interruption, with interim arrangements under government oversight pending a new concession process.

CK Hutchison, majority-owned by the family of billionaire Li Ka-shing, said it strongly disagrees with the judgment and will pursue all available legal remedies, including potential further domestic and international litigation, to protect its rights and seek compensation.

The arbitration action may take years to resolve and, while it cannot directly overturn Panama’s top-court decision, could lead to a binding determination on whether Panama’s actions breached bilateral and contractual protections under international law.

The dispute has exacerbated geopolitical tensions, drawing a sharp rebuke from China’s Hong Kong and Macau Affairs Office, which condemned the ruling as damaging to foreign investor confidence, and coming amid broader U.S. strategic efforts to limit Chinese economic influence in critical infrastructure in the Western Hemisphere.

The controversy also clouds CK Hutchison’s ongoing planned sale of its global port portfolio, valued at around $23 billion and featuring a consortium including U.S. capital management firms and global partners, as uncertainties over the Panama assets weigh on negotiations and valuations.

The arbitration case underscores the complex interplay between sovereign judicial decisions, international investment protections and strategic geopolitical considerations surrounding the Panama Canal — a vital artery for global maritime trade that handles a significant share of world shipping traffic.