Federico Rodríguez, director of our Energy and Infrastructure Group, spoke with LexLatin about the challenges facing investments in strategic minerals and the legal protection framework for investors in Chile.
When the Supreme Court of Panama declared the Panama Ports Company (PPC) contract unconstitutional on January 29, 2026, it not only revoked a 29-year concession—it sent a signal to all of Latin America by making it clear that no strategic infrastructure asset with capital linked to China is safe from the geopolitical pressure between Washington and Beijing.
The unanimous ruling affected the ports of Balboa and Cristóbal, located at either end of the Panama Canal, through which nearly 5% of global maritime trade passes. From that point on, an unprecedented process unfolded, including the government’s takeover of the facilities, the removal of the operator, the initiation of international arbitration, and the activation of protection mechanisms provided for in bilateral investment treaties.
For firms that advise on infrastructure, project finance, energy, and dispute resolution, the outcome of this case necessitates incorporating geopolitical risk into the analysis of contractual stability, alongside traditional legal and regulatory variables.
The Origin of the Breakdown
PPC, a subsidiary of the Hong Kong-based port infrastructure conglomerate CK Hutchison Holdings, had managed the ports of Balboa and Cristóbal since 1997 under a contract that Panama’s National Assembly had elevated to the status of “contractual law.” In 2021, the concession was automatically renewed for another 25 years. Cumulative investment exceeded $1.8 billion, and the two terminals accounted for nearly 40% of container traffic through the Panama Canal.
The audit that triggered the process was submitted in August 2025 by the Comptroller General, who alleged that PPC had failed to meet its investment commitments and that the government had lost $1.3 billion in revenue. However, the January 2026 ruling determined that the contract violated constitutional provisions regarding public assets, and the government transferred temporary management to APM Terminals for Balboa and to Terminal Investment Limited for Cristóbal.
For Adolfo Caballero Castillo, founding partner of ACC Abogados (Panama), the ruling goes beyond administrative litigation and constitutes a milestone that redefines the legal certainty of project finance in the region. In his view, the court upheld the primacy of the collective interest over the contractual agreement and demonstrated that the legal framework of the concession contained four constitutional inconsistencies that could not be remedied:
1. Breach of the economic-contractual balance: an asymmetrical scheme of financial obligations was institutionalized, causing serious fiscal harm to the State—estimated at nearly one billion dollars—and violating the principle that the public interest takes precedence (Art. 50).
2. Deficiencies in fiscal oversight: the addenda and the extension lacked a timely audit process and the binding approval of the Comptroller General of the Republic, a mandatory requirement for the disposal of public assets.
3. Creation of an operational enclave: exclusive privileges were granted that neutralized the regulatory authority of the Panama Maritime Authority and the Tax Administration, contravening maritime public order (Art. 280).
4. Automatic extensions without competitive bidding: The automatic renewal mechanism, which lacked a public bidding process and a rigorous suitability assessment, violated the principles of equality before the law and free competition.
“In light of the impending international investment arbitration over alleged indirect expropriation, Panama’s position appears robust under modern standards of international law. Contemporary arbitral jurisprudence increasingly recognizes the right to regulate of sovereign states. If it is demonstrated that the investment arose from an act that was originally unconstitutional, the investor cannot invoke the doctrine of legitimate expectations, as international good faith (bona fides) does not protect rights acquired illegitimately,” he argues.
The Arbitration Front
CK Hutchison’s response was swift. On February 3, 2026, PPC initiated international arbitration under the rules of the International Chamber of Commerce (ICC), claiming at least $2 billion in damages for what it characterized as an “illegal expropriation.” Days later, the parent company expanded its notice, invoking protective mechanisms under a bilateral investment treaty.
The case came at a delicate time for the Central American country, which is already facing arbitration by First Quantum Minerals before ICSID over the closure of the Cobre Panamá mine, and in March 2026, a lawsuit was filed by Sinolam International over the revocation of an energy license. Although the circumstances differ, the three cases follow a similar pattern: the termination or annulment of contracts ultimately leads to the dispute being referred to international arbitration.
“The Republic of Panama aims to attract high-quality investors—corporations and strategic partners who understand that financial returns must be strictly aligned with the development, technology transfer, and social well-being of the host nation. Investors who seek to operate transparently and in accordance with the constitutional framework will find in Panama genuine legal certainty, grounded in the rule of law and mutual benefit, rather than in unsustainable privileges before the courts,” he adds.
Chile and Exposure to Strategic Minerals
Chile does not have a port-related case like Panama’s nor an active regulatory dispute like the one in Chancay, but it does have Chinese capital concentrated in assets that the government considers strategic. Tianqi holds a stake in SQM and has litigated against the SQM-Codelco agreement; the Comptroller’s Office rejected two lithium tenders in January 2026; and China has just tightened controls on exports of critical minerals, which has created a risk for Chilean projects that depend on processing chains based in China.
Federico Rodríguez, director of Energy and Infrastructure at az, argues that the risk in Chile must be assessed based on the mineral and the stage of the cycle. For copper, the concession is established by court order, which reduces the scope for political discretion. Lithium, on the other hand, requires a Special Operating Contract (CEOL), under which the government has greater discretion regarding areas, conditions, and compensation, creating a significant risk during the access phase that disappears once the right has been granted and exercised.
“The main lesson from the Hutchison case for Chile is that legal certainty must be analyzed at three distinct stages. The first is access to the right. For copper, there is a judicial and regulated procedure; for lithium, there is greater administrative intervention and discretion. The second is the oversight of investment or the acquisition of strategic assets. In Chile, this control is primarily channeled through specialized institutions, such as the National Economic Prosecutor’s Office, via preliminary and reviewable procedures. The third stage begins once the right has been granted and the investment executed. At this stage, the contract, property rights, judicial review of administrative acts, the free competition regime, and, where applicable, international investment treaties come into play,” he explains.
When a concession is affected by political decisions or regulatory changes, Rodríguez identifies four layers of protection available to investors in Chile:
- Contractual protection. Clauses regarding changes in law, economic equilibrium, and compensation may oblige the State to restore the project’s economic viability through payments, rate adjustments, or an extension of the term. In public works concessions, disputes may be submitted to the Technical Panel and, subsequently, to the Arbitration Commission or the Court of Appeals.
- Chilean administrative and judicial law. A decision by the authority may be challenged through administrative appeals, actions for protection, public law nullity actions, claims for damages, and injunctive relief. The administration may not revoke a right already granted without acting within its authority, providing a rationale for its decision, and respecting the principles of proportionality and legitimate expectations.
- Financing contracts. Creditors typically require direct agreements, cure periods, and intervention rights before the State can terminate the main contract, thereby preventing a regulatory dispute from derailing the project or accelerating debt.
- International arbitration. The investment protection treaties signed by Chile provide protection against expropriation without compensation, discrimination, or violations of fair and equitable treatment. The primary consequence is compensation: protection is triggered when a decision is arbitrary, disproportionate, or substantially deprives the investor of their investment without adequate compensation.
For his part, Fernando Lathrop, a partner at Lathrop Mujica Herrera & Diez Abogados, emphasizes that the case reinforces the need to incorporate technical dispute resolution systems independent of the government in power—a standard already provided for in the Chilean model for mining concessions.
“In strategic areas, each Latin American country should prioritize what is most strategic. Our country, for example, demonstrates this with mining: copper is protected by a system that has enabled its development through significant, long-term investment. The Mining Code (Law 18,248) and Constitutional Organic Law No. 18,097 on Mining Concessions establish that concessions are real property rights, enforceable against the State and third parties (mining concessions are granted by court order). “This limits political or administrative discretion to revoke them without due process,” he states.
Source: LexLatin, July 3.
