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Panama has seized two ports previously operated by a Hong Kong–based company after its Supreme Court ruled the deal unconstitutional.

Some shit you should know before you dig in: Shortly after President Trump returned to office, his administration began applying pressure on Panama over claims that China was effectively “running” the Panama Canal through a Hong Kong-based operator at the Balboa and Cristobal ports. The US demanded immediate changes to curb what they described as Chinese influence over the strategic waterway. At one point, Trump publicly vowed to “take back” the canal if necessary. Panama ultimately moved forward with legal challenges to the port acquisitions by the Hong Kong-based company. In the ensuing court battle, the government argued that the sale granted to CK Hutchison’s subsidiary, Panama Ports Company (PPC), violated constitutional requirements, while the company maintained that its contract and 2021 extension were lawful and valid. In January, Panama’s Supreme Court ruled that the law approving the deal was unconstitutional, resulting in the company no longer having a legal basis to operate both ports.

What’s going on now: In a notable development, Panama’s government has formally assumed administrative and operational control of the Balboa and Cristobal terminals under a presidential decree authorizing the Panama Maritime Authority to occupy the ports for “reasons of urgent social interest.” The decree allows authorities to take possession of all movable property tied to the terminals, including cranes and computer systems, to ensure uninterrupted operations while a new concession framework is prepared. Government officials physically entered the facilities and informed Panama Ports Company (PPC) that its concession “no longer exists,” triggering the company’s immediate end of operations.

Panamanian President José Raúl Mulino has insisted the move does not amount to a seizure, describing the temporary contracts as “a legitimate tool that respects asset ownership” and stressing that port operations and jobs will not be disrupted. The government approved interim concession contracts lasting up to 18 months, during which APM Terminals, a subsidiary of A.P. Moller-Maersk, is operating the Balboa port on the Pacific side, while Terminal Investment Limited (TIL), part of Mediterranean Shipping Company (MSC), is running the Cristobal terminal on the Atlantic side. Officials say the arrangement will remain in place while the state develops a new “competitive” concession model to award in the future.

CK Hutchison has condemned the takeover, calling it “unlawful” and describing it as “the culmination of a campaign by the Panama State against PPC and the concession contract over the past year.” The company said government representatives made “direct physical entry” into the ports and that employees were threatened with criminal prosecution if they did not comply with orders to vacate. In a statement, CK Hutchison said, “The actions and instructions of the Panama State made it impossible for PPC to continue its operations,” and confirmed it is pursuing national and international legal action, including arbitration proceedings.

China has also weighed in, calling the court ruling “absurd” and “shameful,” and warned that Panama would pay a “heavy price both politically and economically” if it did not change course.