Hong Kong's CK Hutchison announced on Wednesday that its Panama Ports Company has begun international arbitration proceedings against Panama, after the country’s top court annulled their licences to run two Panama?Canal port. This case could take many years to resolve.

Panama's Supreme Court ruled last week that the contracts violated Panama constitution by giving exclusive privileges to the company and tax exemptions.

Analysts said that it is not clear how long arbitration proceedings will last, but given the political sensitivities between the U.S., China, and the complexity, they could go on for several years.

This is an example that international trade, geopolitics, and law are increasingly interconnected, said Jason Karas. He is a specialist in international disputes and the managing partner of Karas So LLP, which works with Mishcon De Reya.

The company's $23 billion plan to sell their port businesses and its decision to seek arbitration and to move for arbitration has been further questioned by the decision to seek arbitral proceedings.

"The board strongly opposes the determination and corresponding action in Panama," CK Hutchison stated in a Hong Kong Stock Exchange statement.

The group is continuing to consult its legal counsel, and reserves the right to pursue any additional legal actions at national and international levels.

The Panamanian Government did not respond immediately to a comment request.

Ja?Ian Chong is an associate professor of Political Science at the National University of Singapore. He said that international arbitration proceedings take about a year and that it's up to the state whether they honour the arbitral decision.

"Panama could ignore CK Hutchison. I think CK Hutch knows that. He said that the company probably wants to show shareholders that it is doing everything legally possible.

He added that the conglomerate might also want to show?Beijing's and Hong Kong's governments that it is doing everything?it can in order to "avoid fault" during tensions between China and the U.S.

CK Hutchison shares rose 2% in early trading on Wednesday, while Hang Seng Index fell 0.4%.

Court ruling deemed'shameful and pathetic'

China warned Panama on Tuesday that it would pay "heavy" prices for a court ruling, which the country called "absurd", "shameful" and "pathetic".

BlackRock and Mediterranean Shipping Company are leading a bid of $23 billion to buy out CK Hutchison 43 ports across 23 countries. BlackRock and MSC didn't immediately respond to our request for comment.

After Beijing had criticized the deal, in July the conglomerate announced that it was in discussions to include a "Chinese major strategic investor" into the consortium.

Sources say that the Chinese investor was COSCO. It wanted a majority stake while others preferred a minority shareholding. This became a sticking-point in the talks.

The future of the deal is unclear due to the court ruling, but some analysts believe that a transaction could be completed without including the two Panama Canal Ports in the portfolio.

The deal could continue with the other ports. "The deal may continue with the remaining ports," Winston Ma, adjunct professor at New York University School of Law, said.

He said that CK?Hutchison can use the arbitration process in order to obtain damages and compensation if the contracts are annulled.

The deal has opened up a new front of contention between the United States and China as they fight for control over the most important trade routes in the world.

CK Hutchison Balboa & Cristobal Ports are strategic assets for the Panama Canal. The canal is the main seaborne trade route to the United States. Balboa lies at the Pacific entrance of the canal, while Cristobal is located at the Atlantic.

Some U.S. legislators welcomed the Panamanian court's decision as a "win" for America. Donald Trump, the president who originally celebrated the proposed sale of ports for $23 billion, now calls on the U.S. government to "retake" the Panama Canal from Chinese influence.

APM Terminals Panama (a subsidiary of Maersk) said Friday that it would be willing to temporarily operate the Balboa Terminal and Cristobal Terminal to avoid any negative impact on regional or global trade. Reporting by Clare Jim in Hong Kong, Kane Wu and Roushni Nai in Bengaluru. Writing by Scott Murdoch. Editing by Neil Fullick Stephen Coates Sonali Paul

(source: Reuters)