Panama’s comptroller general asked its Supreme Court to review the government’s contract extension with CK Hutchison Holdings local ports unit, potentially throwing a new wrench into the conglomerate’s controversial deal to sell its global terminals business.

Panamanian official Anel Flores said he asked the court to find unconstitutional a 2021 extension for Panama Ports Co.’s contract to operate two ports along the Panama Canal and declare it null and void. 

“The contract was bad, one-sided and abusive, against the interests of the country,” he told a briefing in Panama City, adding that the ports belong to the country and should not be negotiated over by others.

Panama Ports and CK Hutchison didn’t respond to requests for comment. 

The development risks further complicating a transaction that’s become a high-profile tussle between the U.S. and China. CK Hutchison shares fell 2.2% in Hong Kong trading on July 31, dropping the most in over a month.

“Panama’s legal challenge to CK Hutchison’s port concession could introduce material uncertainty and elevates the risk of delays, potentially derailing the deal or triggering a renegotiation at a lower valuation,” Bloomberg Intelligence analyst Denise Wong said. 

Sensitive Deal

The Panama terminals are at the center of the geopolitically delicate deal for the 43 ports owned by Hong Kong tycoon Li Ka-shing’s CK Hutchison. A buyer consortium backed by BlackRock is seeking to acquire the business, with the American asset manager taking control of Panama Ports.

“What is Panama’s business is that the ports are ours, they belong to the republic of Panama,” Flores told the briefing. “I don’t think it’s right that, at other latitudes, other people are negotiating the future using property that belongs to Panama.”

Still, some analysts assessed that Panama’s objection would not be a major roadblock for CK Hutchison’s deal, given that other ports in the country are operated by foreign entities. 

The development “appears a small-ish road bump to completing the global terminal deal,” said David Blennerhassett, an analyst at Quiddity Advisors.

“There are three remaining Panamanian ports, all operated by foreigners, none of which has raised the ire of the comptroller,” he said, “implying there exist benchmark contracts that can be struck for these two ports.”

Flores said in April that an audit by his office found that Panama Ports had failed to get proper approvals for its contract extension.

Tax breaks under the contract have also cost the Central American nation $1.3 billion, as a series of tax-exempt shell companies operating on Panama Ports’s grounds helped the firm lower the share of profits it paid the government, he told a press conference at the time.

Outside of Panama, CK Hutchison and the buyer consortium have been trying to find a solution for the transaction to move forward. While the deal has been hailed by President Donald Trump as returning the canal to American influence, it’s been furiously opposed by Beijing, which considers BlackRock a proxy for American influence. China has also separately cautioned that antitrust reviews shouldn’t be bypassed, so as to prevent an agreement from being rushed into.

“The complexity shows exactly how ports have become assets with larger geopolitical risks and why CK Hutchison wants to reduce its related business,” said Gary Ng, senior economist at Natixis SA in Hong Kong. 

CK Hutchison said this week that it may invite an unnamed “major strategic investor” from China to join the consortium, a move that’s aimed at appeasing China. State-owned China Cosco Shipping Corp. has been negotiating a powerful role for itself as a condition to join the group, Bloomberg News reported.