Commentary: From Panama to Darwin, Investors Need a New Legal Playbook

1. In January 2024, the Supreme Court of Panama declared the concession contracts for two ports operated by CK Hutchison Holdings unconstitutional, leading Maersk to temporarily manage both ends of the Panama Canal. This action was not a straightforward commercial default or standard administrative expropriation but rather a complex intersection of public administration and commercial dispute, where constitutional review was used as justification. The ruling highlights host country intervention in foreign-operated franchises under the pretext of legal scrutiny. [para. 1]

2. Around the same time, the Port of Darwin in Australia became a focal point when Prime Minister Anthony Albanese stated his government’s intent to ensure the port, leased for 99 years by China’s Landbridge Group for A$506 million ($370 million), returns to Australian control. This came despite previous assessments confirming no national security risk, indicating that the lease is now threatened by political repossession, reflecting a broader trend of political influence reshaping the legal framework governing foreign investments. [para. 2]

3. Both Panama and Australia cases underscore how governments use differing legal tools—constitutional interpretation in Panama and the concept of “national interest” in Australia—to expand the role of public interest and assert sovereignty over commercial agreements. This trend signals to international investors, particularly Chinese companies, that non-commercial risks have now become legal realities, as political power can override seemingly robust contractual protections. [para. 3][para. 4][para. 5]

4. International investment law allows states to adjust policies to serve public interest but limits such powers by principles like proportionality and the protection of legitimate investor expectations. Overturning contracts on public interest grounds without compensation or procedural safeguards may constitute “indirect expropriation” or breach of “Fair and Equitable Treatment” standards. The weakening of legal objectivity occurs when “security” or “sovereignty” dominate contract interpretation, resulting in unstable investment environments. [para. 6][para. 7]

5. Temporary arrangements, such as Maersk’s management in Panama, could be interpreted as de facto expropriation by international arbitration courts if they deprive the original owners of continued revenue. Similarly, policy reviews in Darwin could amount to a “legalized economic exit” for investors even without formal expropriation, highlighting new forms of risk when political interests override contractual terms. [para. 8]

6. In this context, legal practitioners recommend a multilayered defense for foreign investors. First, engaging in domestic legal procedures, even if they only delay execution, can be important for building a record of procedural injustice. Second, considering the structure of international legal protections—such as Bilateral Investment Treaties (BITs) and investor qualification—is crucial before disputes arise. Third, leveraging internal corporate rights, such as joint-venture agreements, offers alternative channels for legal relief. [para. 9][para. 10][para. 11][para. 12][para. 13][para. 14]

7. The events in Panama and Darwin demonstrate a shift from isolated legal cases to structural uncertainty in geopolitical business. Thorough due diligence before investment—covering political and legal risks, compliance during operations, and coordinated legal action after disputes—is essential for companies operating globally. Hong Kong's common law framework and global enforceability offer Chinese investors a neutral, reliable legal platform for dispute resolution. [para. 15][para. 16][para. 17][para. 18][para. 19][para. 20]

8. The International Organisation for Mediation, founded in 2025, introduces an alternative to adversarial arbitration, providing enforceable mediation outcomes and creating a flexible buffer between politics and commerce. Chinese companies are encouraged to utilize Hong Kong’s system not out of dependence but as an extension of global legal capacity, reinforcing their institutional confidence amidst geopolitical tensions. [para. 21][para. 22][para. 23]

9. Globalization has evolved into a long-term contest over legal order, where the stability and protectiveness of the institutional legal environment are paramount. The success of Chinese companies abroad increasingly depends on their ability to build institutional trust and legal certainty, using law both as a shield and a strategic asset. As legal risk becomes more about institutional competence than mere contractual text, law and rule-of-law thinking are now integral to China’s competitive strategy in global markets. Legal certainty becomes a form of institutional strength and a prerequisite for sustained engagement in uncertain times. [para. 24][para. 25][para. 26]