Panama's Supreme Court has annulled contracts allowing a Hong Kong-based company to operate container ports on the Panama Canal.
The ruling comes a year after US President Donald Trump claimed China was operating the Panama Canal - the main shipping link between the Atlantic and Pacific oceans - in his inaugural speech.
CK Hutchison Holding, through subsidiary Panama Ports Company (PPC), has operated two of the five ports since the 1990s. It had previously agreed to sell them to a group led by a US investment firm under a wider deal.
The court found that laws allowing the firm to operate the ports were unconstitutional, but PPC said the ruling lacks legal basis.
Trump has made repeated claims that the central American canal is under Chinese control.
During his address last January, he stated: China is operating the Panama Canal and we didn't give it to China. We gave it to Panama and we're taking it back.
The following month, US Secretary of State Marco Rubio demanded that Panama make immediate changes to what he described as the influence and control of China over the canal.
Panama has previously rejected the US government claims, asserting that the canal is and will remain in its hands.
There is no public evidence to suggest that China exercises control over the canal, although Chinese companies have a significant presence there.
CK Hutchison, founded by Hong Kong billionaire Li Ka-shing, is not owned by the Chinese government.
Beijing's tighter political control over Hong Kong in recent years has changed how the company is perceived internationally.
Against a backdrop of rivalry between the US and China over global trade routes, the ruling is seen as a victory for Washington.
In a statement, Panama's Supreme Court declared that after extensive deliberation, it found laws underpinning the concession contract with PPC at the ports of Balbao and Cristobal to be unconstitutional.
PPC announced that the ruling jeopardizes the well-being and stability of thousands of Panamanian families dependent on port activity.
PPC has invested more than $1.8bn in infrastructure and technology since it began operating the ports in 1997.
On Friday, Chinese foreign ministry spokesperson Guo Jiakun indicated that the country would take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.
Hong Kong's government also rejected the ruling on Panama ports.
The court's decision could disrupt plans by CK Hutchison to sell its interests in ports globally to a consortium led by US investment firm BlackRock and shipping group MSC under a $22.8bn deal.
Trump had previously praised this sale as it would place key assets under majority US ownership, while the Chinese government criticized it for not being in the national interest.
Markets reacted quickly to the court decision, with CK Hutchison's shares falling 4.6% in Hong Kong, pushing down the Hang Seng Index by more than 2%. This reflects the company's influence in the market and rising investor concerns about political risk.
Up to 14,000 ships use the Panama Canal each year, handling about 5% of global maritime trade volume.
From October 2023 to September 2024, China accounted for 21.4% of the cargo volume transiting the canal, making it the second-largest user after the US.
