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Panama raids CK Hutchison ( CKHUF ) unit amid US-China trade

tensions

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Company says raid undermines due process, legal security

for

investors

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Panama's President Mulino downplays potential Chinese

response

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Mulino says 'China needs Panama - a lot'

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Top court ruled CK Hutchison's ( CKHUF ) port contracts

unconstitutional

By Emily Green and Elida Moreno

PANAMA CITY, Feb 27 (Reuters) - Panamanian authorities

searched the local ports unit of Hong Kong conglomerate CK

Hutchison ( CKHUF ), 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 ( CKHUF ) 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 ( CKHUF ) 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 ( CKHUF ) 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 ( CKHUF ) 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 ( BLK ) 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 ( CKHUF ) 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.