Panama officials search CK Hutchison's local office as tensions rise

By Emily Green and Elida Moreno

PANAMA CITY, Feb 27 (Reuters) - Panamanian authorities searched the local ports unit of Hong Kong conglomerate CK Hutchison, the subsidiary said on Friday, escalating a rift over control of two key ports near the globally strategic Panama Canal.

The search, carried out on Thursday, comes amid a growing U.S.-China rivalry over global trade routes that has deepened tensions between Washington and Beijing. It has also embroiled CK Hutchison's Panama Ports Company, which recently lost its contracts to operate two terminals on either end of the canal, which carries about 5% of global maritime trade. 

In a statement on Friday, PPC said the Panamanian state "acted in disregard for the rule of law, as shown by the latest steps to invade and take the property of PPC carried out yesterday by the State," adding the company and investors reserve all applicable rights related to the issue. 

Panamanian government officials did not immediately reply to a request for comment.

PPC ALLEGES ILLEGAL TAKEOVER

Panama's government last month annulled the deals that gave the company control of the two canal ports following a court ruling deeming the contracts unconstitutional. 

On Friday, PPC said it has repeatedly objected to what it calls the illegal takeover of its ports and the seizure of company property, including confidential and legally protected information. 

According to the company, authorities ignored requests for safeguards to protect sensitive corporate data and on Thursday entered a private storage site without notice and removed materials tied to ongoing legal cases. The company said this demonstrated "that the State has undermined due process as part of its takeover.

"The Republic of Panama has demonstrated over the past year, and particularly during the past week, that foreign investors cannot rely on the legal or contractual framework of the Panamanian State," PPC said. 

Reuters reported the search on Thursday after a person familiar with the operation confirmed it. The source declined to be identified because the information had not been made public.

The source said the raid on PPC did not relate to the government decision to annul the deals that gave the company control of the Balboa and Cristobal ports.

"This is an independent investigation carried out exclusively by the Public Ministry of Panama in the exercise of its legal powers," the Panamanian government said in a statement on Thursday, without naming which company was targeted.

Before the raid, Panama's President Jose Raul Mulino said he did not know what Beijing might do after CK Hutchison lost the ports.

"If you want my personal opinion, nothing is going to happen," he told a weekly press conference. 

The Hong Kong conglomerate had acted with "arrogance" and without transparency, he said. 

"That company did whatever it wanted in Panama for decades, since it came to this country."

China also relied heavily on Panama, Mulino added. 

"China needs Panama - a lot, a lot. Everything those people produce goes through the canal ... All the gas that reaches them goes through the Panama Canal. Maybe they need us more than we need them."

Panama's foreign ministry had conveyed its position to China's ambassador.

CK Hutchison has repeatedly said it sees the contract cancellation as unlawful and is considering legal action. The company said this week Panamanian authorities had threatened its employees with criminal prosecution if they refused to leave the two canal ports. 

China's Foreign Ministry said on Friday that Beijing's position concerning the ports in Panama was "unequivocal" and it would "resolutely safeguard the interests of its enterprises." 

The Hong Kong government did not respond to a request for comment.

CK Hutchison's shares closed down 0.6% in Hong Kong on Friday.

PANAMA PORTS SAGA RUMBLES ON 

The Hong Kong company had agreed to a $23 billion sale of dozens of ports worldwide, including the Panamanian terminals, to a consortium led by BlackRock and Mediterranean Shipping Company.

The deal has been criticized by Beijing but welcomed by U.S. President Donald Trump, who had declared he wanted to "reclaim" the Panama Canal to reduce Chinese influence over the canal's key assets.

The Balboa and Cristobal ports at the center of the dispute will now be operated temporarily by Maersk and MSC, Panama's government said this week.

Panamanian media first reported the raid at the local CK Hutchison office on Thursday. Television station TVN showed images of about a dozen people, some wearing vests emblazoned with the initials of Panama's investigative police, in an underground parking lot that the station said was in the affluent Albrook area of Panama City. The images showed some cardboard boxes being loaded into the back of a police truck.

(Reporting by Emily Green in Mexico City and Elida Moreno in Panama City ; Additional reporting by Clare Jim in Hong Kong and Joe Cash in Beijing. Writing by Daina Beth Solomon, Scott Murdoch; Editing by Neil Fullick, Stephen Coates, Tomasz Janowski, Rod Nickel)