PANAMA CITY – In a significant development, Panama’s Supreme Court has declared the concession held by a subsidiary of CK Hutchison Holdings, a Hong Kong-based conglomerate, to operate ports at both ends of the Panama Canal as unconstitutional. This decision aligns with U.S. efforts to curb Chinese influence over this strategically crucial waterway.

The court’s ruling came on the heels of an audit conducted by Panama’s comptroller, which flagged irregularities in the 25-year extension of the concession that was granted in 2021.

Blocking Chinese influence over the Panama Canal was a strategic priority for the Trump administration within the region. Panama was notably the first international destination for then-U.S. Secretary of State Marco Rubio during his tenure, underscoring the importance placed on this issue.

While both Panama’s government and the canal authority have consistently insisted that China holds no sway over the canal’s operations, Rubio underscored the U.S. perspective, emphasizing the operational control of the ports as a national security concern. Former President Donald Trump even suggested that Panama should return control of the canal to the United States.

The Supreme Court’s brief announcement did not specify future plans for the management of the ports, leaving the next steps uncertain.

CK Hutchison Holdings announced a deal last year to sell its majority stake in the Panamanian ports and others around the world to an international consortium that included BlackRock Inc. But the deal appeared to stall over objections by the Chinese government.

In parallel, Panama’s comptroller audited the concession to the Panama Ports Company, which had held the contract to operate the ports since 1997. The concession was renewed in 2021 for 25 years, during the prior Panamanian administration.

Comptroller Anel Flores said the audit found payments that were not made, accounting errors and the apparent existence of a “ghost” concessions operating within the ports since 2015. The company denied those allegations.

The audit determined that the irregularities had cost the government about $300 million since the concession was extended and an estimated $1.2 billion during the original 25-year contract.

Flores also said the extension was granted without the required endorsement of his office.

On July 30, the comptroller challenged the Panama Ports Company’s contract to operate the ports before the Supreme Court.