Panamanian president José Raúl Mulino has accused CK Hutchison subsidiary Panama Ports Company of lying over the country’s handling of arbitration proceedings, deepening a bitter dispute that has stripped the Hong Kong conglomerate of its long-held grip on two of the canal’s most strategic terminals.

Mulino fired back Thursday after PPC claimed Panama had failed to respond to its arbitration request before the March 13 deadline set by the International Chamber of Commerce in Paris, where the company filed its case in February following the seizure of the Balboa and Cristobal terminals. The company is seeking at least $2bn in damages.

Mulino dismissed the accusations as shameful and a lie. He said Panama had received notification only two days before the deadline and had requested an extension – standard practice in such proceedings. “We have appointed international lawyers who are going to defend us, and defend us well, in that process,” he told reporters.

Panama’s Maritime Authority backed that account, saying the country had fully complied with arbitration rules and would continue to exercise its rights in the proceeding.

The dispute has its roots in a January Supreme Court ruling that PPC’s concession – held since 1997 – was unconstitutional, granting excessive privileges and tax exemptions. A government audit found the arrangement cost the state around $1.2bn in lost revenues. Upon taking temporary control of Balboa and Cristobal in February, authorities said they found the ports in significant deterioration, falling short of international standards.

APM Terminals, a Maersk unit, now operates Balboa, while Terminal Investment Limited, part of MSC, runs Cristobal. Panama says it plans new long-term tenders once the transition period concludes.

The Paris arbitration is expected to take years to resolve.

Behind closed doors, authorities in Beijing have been taking action all action in response to Panama’s decision to revoke PPC’s licence. 

Officials from MSC and Maersk were hauled into Beijing’s Ministry of Transport this month, and all Panamanian-flagged ships suddenly face greater scrutiny when calling at the People’s Republic while China’s state-run shipping giant COSCO has ceased all calls at Balboa and Cristobal.