HONG KONG (AP) — Hong Kong’s CK Hutchison Holdings said Wednesday its subsidiary has started arbitration proceedings against Panama, after that country's Supreme Court ruled a concession for the subsidiary to operate Panama Canal ports was unconstitutional.

The company said it strongly disagreed with last week's ruling, and China warned Panama would pay “a heavy price" if it persisted. Panama has said the two ports at each end of the canal — a critical passage for global trade that links the Atlantic and Pacific oceans — would operate without interruption after the ruling, which was seen by some as a win for the U.S. President Donald Trump administration's goal of blocking Chinese influence over the canal.

Panama Ports Company, the subsidiary under CK Hutchison that operates the ports, began arbitration proceedings Tuesday under the rules of the International Chamber of Commerce. It's unclear what the impact of the proceedings would be and how long they could take.

The two Panama ports are part of a $23 billion sale of CK Hutchison's 43 global ports to a consortium of buyers including U.S. investment firm BlackRock. The deal, which was first announced last March, has been delayed by complications surrounding the Panama court case as well as elevated geopolitical tensions between Washington and Beijing.

A process that may take years

Analysts believe the Hong Kong conglomerate is likely to buy time with legal proceedings, such as the latest arbitration move, while looking for alternatives for the broader port deal.

Yueming Yan, a Chinese University of Hong Kong law professor, said if an arbitral tribunal is constituted, future hearings may be held outside Paris or New York, although the agreement specified the arbitration board should be in New York. The timing is difficult to predict, but arbitration involving investment-related concession contracts may extend over several years.

While not overturning domestic court decisions, the tribunal's ruling would be binding and address whether the Panamanian government breached its obligations and owes compensation. But a result favoring CK Hutchison could raise questions over its recognition or enforcement, she said.

"The approach that domestic courts in Panama may take in any recognition or enforcement proceedings cannot be assessed with certainty at this stage,” she said.

Albert So, chairman of Hong Kong Mediation and Arbitration Center, said if CK Hutchison wins, this may result in compensation — since the concession was just renewed in 2021 for 25 years — or it could possibly restore parts of the firm's rights in operating the ports.

If Panama wins and the concession is confirmed unconstitutional, it could raise further questions over the company's past operations over almost three decades, he said.

Robbert van Trooijen, founder of Panama-based consultancy Inception Partners, said there is little CK Hutchison can do to directly override Panama’s Supreme Court ruling as it is the country's highest court.

Ruling draws Chinese backlash

Panama's court ruling has been drawing strong backlash from China.

The $23 billion port deal was first announced in March last year, not long after Trump alleged China of “running the Panama Canal” and vowed to “take back” the canal. With the U.S. company BlackRock listed as part of the consortium of buyers of CK Hutchison's ports — including the pair of ports in Panama — some interpreted the deal as a victory for the Trump administration.

The planned sale, however, had drawn China's ire early on, with Beijing saying last year its antitrust regulator would initiate a review of the deal. The parties involved in the deal have since been looking for ways to move forward the sale, including plans of adding a Chinese investor into the consortium.

Panama's court decision last week added further uncertainties. On Tuesday, Beijing's office overseeing Hong Kong affairs criticized the ruling, saying it showed that Panamanian authorities were bowing down to “hegemonic powers.” It did not specify but pointed to politicians from some countries who had said they were “encouraged” by the ruling, in an apparent reference to U.S. Secretary of State Marco Rubio.

“Panama’s authorities should recognize the situation and correct their course," it said. “If they persist in their own way and refuse to see reason, they will pay a heavy price both politically and economically!”

China Foreign Ministry spokesperson Lin Jian doubled down Wednesday, saying China will “firmly protect the legitimate and lawful rights and interests” of Chinese companies.

“Who is seeking to monopolize the (Panama) canal? And who is undermining international laws in the name of the rule of law? That’s quite clear in the international community,” Lin said at a daily news conference in Beijing.

Panama hits back at Beijing's criticism

Panama President José Raúl Mulino responded Wednesday, saying that he “energetically rejected” Beijing's statement.

“Panama is country of laws and respects the decisions of the judiciary, which is independent of the central government,” he wrote on X.

Panama Ports Company, the CK Hutchison subsidiary operating the two Panama ports, said in a separate statement Wednesday that the arbitration followed its efforts to consult and avoid disputes, while alleging that the Panamanian state had “routinely disregarded” communications and clarification requests. The company said it seeks damages based on data and necessary relief and reiterated its invitation to Panama for clarity and consultations.

The company said that while the court ruling has yet to become effective, the state conducted unexpected site visits and instructed it to provide unrestricted access to physical, commercial and intellectual property, information and employees.

Company is caught in US-China tensions

Apart from its two ports in Panama, CK Hutchison's planned sale of its 41 other global ports also include those in Europe, Asia, Australia, the Americas, the Middle East and Africa.

The latest Panama situation has not — and is not likely to — impede discussions relative to the other ports, said a person with knowledge of the deal, who spoke on condition of anonymity because they were not authorized to discuss the matter with the media.

While BlackRock is part of the consortium of buyers, under initial deal terms, Switzerland-based port operator Terminal Investment Limited — chaired by Italian shipping scion Diego Aponte and controlled by the Mediterranean Shipping Company — is set to be the majority owner of all ports outside Panama. BlackRock's subsidiary, Global Infrastructure Partners, would take a controlling stake in the two Panama ports.

Panama Ports Company, which is controlled by the family of Hong Kong’s richest man Li Ka-shing, has operated the ports at both ends of the Panama Canal since 1997. The canal itself was built by the U.S. in the early 20th century, which it then operated for decades before handing over control to Panama's government in 1999.

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Associated Press journalist Alma Solís in Panama City contributed to this report.

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