The Supreme Court of Panama says a contract held by a Hong Kong company to operate ports at the Panama Canal failed to “serve the public interest and social welfare", in its decision on Thursday voiding the contracts. While the court announced the decision on Thursday, it had not released the ruling explaining its rationale.

The decision was obtained by local television station TVN, and a court official confirmed its veracity.

The Foreign Ministry in Beijing has said the ruling lacks legal basis, adding that "the Chinese side will resolutely safeguard the legitimate rights and interests of Chinese companies". The Hong Kong government also says it is against the ruling.

Panama Ports Company, a subsidiary of Hong-Kong-based CK Hutchison, has held contracts since the 1990s to operate container terminals at the canal's Pacific and Atlantic entrances.

The court said the contract violated Panama's constitution because it gave the company exclusive privileges and tax exemptions unavailable to other competitors, lacked environmental impact assessments and required the government to seek the company's approval before granting future concessions.

APM Terminals, a subsidiary of Danish shipping group Maersk, has said it is willing to assume temporary management of Panama's Balboa and Cristobal terminals. (RTHK/Reuters)