Lawsuit was brought before court in 2025 as US threatened to seize control of strategic waterway – Trump’s first step under plan to reassert hegemony over Western hemisphere.

Panama’s Supreme Court has ruled that the contracts under which a Chinese company operates ports on the Panama Canal are unconstitutional.

The decision regarding the facilities run by Hong Kong-based CK Hutchison was announced late on Thursday. It comes one year after United States President Donald Trump threatened to seize control of the crucial passageway, claiming it was effectively under Chinese control and therefore a security threat.

The court ruled that the laws and acts underpinning the concession contracts between the state and the Panama Ports Company (PPC) for the development, construction, operation and management of the two port terminals violated the country’s constitution.

The CK Hutchison subsidiary has held the contracts, which allow it to operate the container ports of Balboa on the Pacific side of the Panama Canal and Cristobal on the Atlantic side, since the 1990s.

The arrangement was automatically renewed in 2021, handing PPC a licence for another 25 years.

However, as he returned to the White House at the start of 2025, Trump was quick to push Panama to curb Chinese influence and boost US control of the strategic canal, which the US built but handed to Panama in 1999. The waterway carries an estimated 5 percent of global maritime trade.

The lawsuit to cancel PPC’s contracts was brought before the Panamanian court last year, based on allegations that the contracts were based on unconstitutional laws and that the Hong Kong company was not paying proper taxes.

An audit of the firm was also launched and found accounting errors and other irregularities that have reportedly cost Panama about $300m since the concession was extended, and an estimated $1.2bn during the original 25-year contract.

The ruling could force Panama to restructure the legal framework needed to hold port operations contracts and potentially require new tenders to operate the terminals.

PPC has denied all allegations and was also swift to reject the court’s decision.

“The new ruling … lacks legal basis and jeopardizes not only PPC and its contract, but also the well-being and stability of thousands of Panamanian families who depend directly and indirectly on port activity,” the company said in a statement.

China was also quick to comment. A foreign ministry spokesman said: “The Chinese side will take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.”

After Trump issued his threat last year to take control of the canal, CK Hutchison announced a proposed sale of dozens of ports worldwide, including the Panamanian terminals, to a consortium led by US investment company BlackRock, a deal valued at nearly $23bn.

However, the deal appeared to stall due to objections from the Chinese government.

Trump’s bullish approach to Panama has been repeated regarding several other nations, including Venezuela and Greenland.

Threats of economic and military action have been issued, and the Trump administration has openly declared that it demands hegemony over the Americas.

“American dominance in the Western Hemisphere will never be questioned again,” Trump declared after US troops attacked Venezuela and kidnapped its president earlier this year.