Contributed By LOVILL
Panama has multiple public registries in which interested parties can search for assets prior to instituting enforcement proceedings.
Real Estate and Ship Registries:
Real estate and vehicles registered as company property, can be found in the Public Registry of Panama (Registro Público de Panamá). In addition, all ships and maritime vessels – such as cargo ships, cruise ships, tankers or pleasure vessels – are registered with the Panama Maritime Authority.
All trademarks, patents, utility models, industrial designs and trade names can be found in the registries of the General Directorate for the Registry of Industrial Property (DIGERPI).
Non-asset Public Registries
Although they do not directly identify the existence of assets, the following public registries help to determine if companies are active and engage in commercial activity.
Another means of seeing if a company is active and operating a business is to search for its operation notice (aviso de operación), which can be found at panamaemprende.gob.pa. In the aviso de operación, one can find information such as the company’s domicile, commercial name and the type of commercial activity it performs in Panama.
Contracts with the state
Through the panamacompra.gob.pa portal, one can research if a particular company has ongoing business with the State or state-owned enterprises, serving as evidence that the company is solvent or has sources of income.
it is possible to determine if a creditor has been sued before by searching in the judicial registry (registro único de entrada), this might be useful information if a debtor has a number of other debt or judicial proceedings.
Freezing orders are available in the form of a secuestro, which can be filed in local courts. The secuestro is an ex parte proceeding and it requires a bond from the creditor in an amount fixed by the judge (usually 25-40% of the amount to be seized). The existence of freezing orders is not publicly available information.
The asset disclosure order, or its direct equivalent, does not exist under Panamanian law. However, if the creditor holds an enforceable title and the debt is due, the creditor may initiate an enforcement proceeding (proceso ejecutivo) in local courts. The judge, once the enforceable title is reviewed, can order the embargo of movable and immovable assets in accordance with Articles 1648 and 1649 of the Judicial Code.
Under Panamanian law, a judgment resolves claims and/or their exceptions in ordinary and expedited (sumarios) proceedings, and the exceptions filed in enforcement proceedings, regardless of the instance in which they are dictated and those that decide on appeals such as cassation (recurso de casación) and review (recurso de revisión).
The final judgment deciding the claims raised in contentious proceedings has the effect of res judicata. Those that decide on issues susceptible to modification in a subsequent proceeding (eg, interim or provisional judgments) do not have the effect of res judicata.
Declaratory Judgments (de mera declaración)are judgments issued with the sole purpose of declaring the existence of a right.
If the defendant cannot be properly notified at the domicile provided by the plaintiff, the plaintiff has no knowledge as to the domicile of the defendant, or the defendant decides not to participate in the proceeding after proper service, the judge can continue the proceeding until the issuance of a judgment in default of representation. Nonetheless, the defendant retains the right to annul the proceeding on due process grounds, if it is still ongoing, or to annul the judgment in a separate proceeding.
Interim orders are not considered judgments given that they are susceptible to modification, this is the reason why the decision is issued in the form of an auto. The types of interim measures available are:
In accordance with the Judicial Code, all final judgments must be complied with, and their enforcement can be demanded by the prevailing party. The fact that the opposing party has initiated annulment proceedings will not prevent a judge from enforcing a domestic judgment.
If the final judgment orders a party to pay sums of money, perform an act or give up something, and the judge doesn’t specifically establish a time limit, the losing party must comply with the order in the following six days after the judgment produces res judicata effects.
If the six-day time limit is not complied with by the losing party, the prevailing party may in the same proceeding denounce assets to be attached by the judge in an embargo and later sold at an auction under the judge’s direction. The embargo of assets will be ordered ex parte and the debtor will not be notified until the assets have been attached.
If the enforcement is not requested in the year following the date on which the judgment produced res judicata effects, the creditor will have to file a separate enforcement proceeding in local courts.
In cases of insolvency, Law No 12 of 2016 (the Insolvency Law) applies. The Insolvency Law considers cases of reorganisation or liquidation of the debtor company.
In cases of reorganisation, once the request is filed and the judge issues a resolution opening the proceeding, a period of bankruptcy financial protection is instituted (protección financiera concursal). This period, protects the debtor from enforcement proceedings, restitution of assets or eviction, it prohibits creditors from unilaterally terminating their contracts and collection guarantees, and the debtor cannot be prohibited from contracting with state entities.
Cases of liquidation of a debtor’s company occur when payment of an enforceable title is due, the company has three or more enforcement proceedings filed against it and there are not enough assets for full payment of the debt, or the debtor closes its business without naming a principal with the means to fulfil its obligations of payment. A liquidator is named in representation of the creditors and is duly empowered to dispose of the debtor's assets and use the proceeds to pay the credits recognised in the insolvency proceeding. The creditors with real guarantees (garantías reales) will be able to continue their actions relating to goods encumbered with a mortgage, antichresis or pledge.
To date, Panama has not passed a law that particularly addresses cases of insolvency or enforcement proceedings that result from the COVID-19 pandemic.
The costs and time involved in enforcing a judgment will depend on factors such as:
In addition to legal fees, the creditors must consider the costs that it may be necessary to incur, such as expert accountants' fees or the fees of the liquidator in insolvency cases. In civil cases, as a general principle, the losing party must pay the costs of the prevailing party.
Once a judgment for enforcement is obtained, the plaintiff may proceed to list the defendant’s assets as summarised in 1.1 Identifying Assets in the Jurisdiction.
Enforcement proceedings in civil litigation are adversarial in nature. Once the lawsuit is filed by the plaintiff/creditor, the court notifies the defendant/debtor, who will be able to challenge claims and appeal judicial decisions. Accordingly, at the enforcement proceeding of a domestic judgment the defendant/debtor can raise defences on appeal such as improper service, due process violations or an error in deciding on the merits.
Pursuant to Article 1640 of the Judicial Code, the order of enforcement can be appealed, but the debtor cannot seek a stay of enforcement. However, the court of first instance cannot issue a resolution of judicial auction until the appeal is resolved.
Domestic judgments deemed unenforceable are those that do not comply with the characteristics set forth in 2.1 Types of Domestic Judgment and do not yet produce res judicata effects. If ordinary avenues of appeal have not yet been time-barred and can be actioned by the debtor, then a domestic judgment cannot be enforced.
Panama does not possess a register of domestic judgments. The judicial branch has a database at http://bd.organojudicial.gob.pa/registro.html, in which judicial decisions from the Supreme Court of Justice are available, however, this is not an exhaustive registry of all judgments.
Furthermore, the Supreme Court releases a monthly registry with the decisions issued in that month.
Panama recognises and enforces foreign judgments in accordance with domestic law, bilateral and multilateral conventions and investment treaties, and the principle of reciprocity between states.
If there is no treaty between Panama and the state in which the judgment has been issued, it may be enforced in Panama, except in cases where that state does not recognise and enforce judgments issued by the Panamanian courts (principle of reciprocity).
The following pieces of legislation, treaties and decisions seek to regulate, inter alia, (i) jurisdictional issues, (ii) choice of law questions and (iii) recognition and enforcement of foreign judgments:
Panama is a party to multiple treaties many of which can be found on the web-page of the Ministry of Foreign Relations of Panama.
There is a variation in the approach to enforcement for hereditary proceedings conducted in a foreign court.
Ordinarily, judgments issued by foreign courts that have produced res judicata effects may be enforced in Panama in accordance with the applicable treaty or convention. The proceeding to be followed is outlined in 3.4 Process of Enforcing Foreign Judgments.
For hereditary proceedings, the Fourth Chamber of the Supreme Court has established that this type of decision is not required to go through the exequatur proceeding. The declaration of heirs (auto de declaratoria de herederos) is understood as a legal title that must be weighed by a Panamanian judge in accordance with the provisions of Article 1523 of the Judicial Code. Indeed, the final resolution issued in a foreign hereditary proceeding is not considered under Panamanian law as a judgment; accordingly, the heirs cannot directly request the assets without undergoing a hereditary proceeding before local courts in Panama, where any national or foreigner can be considered heir to the mass of assets subject to the universal succession proceeding established in the Judicial Code.
Panama's Code of International Private Law of 2015 further supports the Supreme Court’s case law and concludes, in its Article 52, that even when a succession proceeding has been conducted in a foreign court, it is still necessary to initiate a succession proceeding in Panama so a judge can award assets located within the boundaries of the state.
Subject to special treaties, no judgment issued in a foreign country may be enforced in Panama, if it does not meet the following requirements:
Subject to special treaties, the enforcement proceeding of a foreign judgment must be conducted pursuant to exequatur provisions of the Judicial Code, the Code of International Private Law and judicial decisions. The creditor's application must be filed directly with the Fourth Chamber of the Supreme Court of Justice (Fourth Chamber), which has exclusive jurisdiction to decide on the recognition and enforcement of foreign judgments.
The applicant may request the enforcement of a foreign judgment where:
The following documents are required:
The Fourth Chamber will give notice to the debtor party and the Office of the Attorney General of Panama (or Public Prosecutor's Office) of the application and allow a time limit of five days so any opposition to the exequatur may be filed. If an opposition is filed and the Fourth Chamber must act in fact-finding capacity, it will allow an evidence phase and a phase of final written submissions, before issuing a decision on the enforcement of the foreign judgment.
The foreign judgment must comply with the requirements outlined in 3.3 Categories of Foreign Judgments Not Enforced.
If the Fourth Chamber declares that the foreign judgment must be recognised and enforced, it will request the court with proper jurisdiction to proceed with the enforcement.
The costs and time taken to enforce a foreign judgment will depend on whether the proceeding is opposed by either the debtor or the Office of the Attorney General, due to either factual or public policy arguments. The fact that the exequatur proceeding of a foreign judgment is solely reviewed by the Fourth Chamber of the Supreme Court allows a quicker and less expensive proceeding than a domestic enforcement proceeding that may involve multiple appeal mechanisms.
Another factor to consider is how easy it will be to locate the debtor’s assets and attach them for enforcement of the debt. Finally, it is important to note that, after the exequatur proceeding is finalised in the Fourth Chamber of the Supreme Court, the actual enforcement will be handled by a separate competent local court.
The Judicial Code and the Code of International Private Law set forth the options available to challenge enforcement of a foreign judgment. As outlined in 3.3 Categories of Foreign Judgments Not Enforced and 3.4 Process of Enforcing Foreign Judgments, the possibility of appeal in the original jurisdiction, due process violations such as invalid service, a lack of reciprocity from the state in which the judgment was made, exclusive jurisdiction for Panamanian courts, and violations to Panamanian public policy may all be grounds for successfully challenging the enforcement of a foreign judgment.
A challenge under public policy grounds, is indeed an "unruly horse" that has caused wide debate as to its scope and application. A violation to Panamanian public policy (orden publico panameño), established under Article 156 of the Code of International Private Law and Article 1421 of the Judicial Code, as grounds for challenging a foreign judgment, has been interpreted in judicial decisions as a breach to a set of imperative rules that cannot be discarded or superseded by party autonomy.
Until 31 December 2013, domestic and international arbitration in Panama was regulated by Decree Law No 5 of 8 July 1999 (Decree Law 5), which established the legal regime for arbitration (both domestic and international), conciliation and mediation. Decree Law 5 was inspired by the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law) and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). In some of its articles, Decree Law 5 textually incorporated parts of the Model Law and the New York Convention, such as those provisions that regulate the scope of arbitration, the rules applicable to the validity of the arbitration agreement, the determination of the laws applicable to the merits of the dispute, as well as the recognition and enforcement of foreign arbitration awards.
On 31 December 2013, Law No 131 (Panama's Arbitration Law), which governs domestic and international arbitration in Panama, came into force, effectively replacing Decree Law 5. Panama’s Arbitration Law took effect the day after its promulgation; however, as provided in Article 75, unless otherwise agreed, proceedings that were already underway before constituted arbitral tribunals shall be governed by Decree Law 5.
Furthermore, the Code of International Private Law includes a chapter for recognition and enforcement of foreign judgments and awards.
Arbitration also enjoys constitutional protection under Panamanian Law. Since the 2004 reform of the Political Constitution of Panama, the state has recognised the jurisdiction of arbitral tribunals, provided that the administration of justice carried out by the arbitral forum is in accordance with the law, and establishes that arbitral tribunals may hear and decide for themselves over their own competence.
In 1983, the Republic of Panama ratified the New York Convention. Panama is also a party to the Convention on Settlement of Investment Disputes between States and Nationals of Other States since 1996 and the Inter-American Convention on International Commercial Arbitration of 1975, commonly known as the "Panama Convention".
Finally, in the wake of the COVID-19 pandemic, Panama's two main arbitral institutions, the Centro de Arbitraje y Conciliación de Panamá (CeCAP)” and the Centro de Solución de Conflictos (CESCON), have increased efforts to promote virtual hearings and seek digital solutions to ensure continuity of ongoing arbitration proceedings. However, for the enforcement of arbitral awards in local courts, although the Supreme Court of Justice is promoting the use of virtual hearings, it is yet to be determined if Panama’s judicial system has the ability to quickly modernise and adapt to the remote-working climate.
Variation in approaches to enforcing arbitral awards will depend on whether it is a foreign or local arbitral award.
Prior to the enforcement of a foreign arbitral award, the award must be subjected to the exequatur proceeding in the Fourth Chamber of the Supreme Court of Justice. Once the foreign award is recognised and declared enforceable in Panama by the Fourth Chamber, the party seeking enforcement may request that lower courts enforce the award. This varies from the approach followed for domestic awards were the exequatur proceeding is not required.
In spite of the procedural variations, as a New York Convention and UNCITRAL Model Law jurisdiction, Panama is considered to be a pro-arbitration jurisdiction regardless of whether the award is domestic or foreign.
Domestic or foreign awards will ordinarily not be enforced if their subject matter is not arbitrable. Non-arbitrable subject matter includes issues of:
Non-enforcement will also apply to awards whose enforcement would be contrary to Panamanian law.
Although there is a strong pro arbitration policy, the arbitration system in Panama is fundamentally contractual, which means that legal theories which extend the effects of arbitral awards to parties who are non-signatories of the arbitration agreement (eg, group of companies, alter egos or agencies) may not be enforced.
Pursuant to Article 69 of Panama’s Arbitration Law, any domestic arbitral award will be subject to enforcement by a competent civil circuit judge, using the procedure established for final judicial decisions in the Judicial Code. The original award or an authentic copy must be attached to the application requesting enforcement. The enforcement judge will serve to the other party the application with its attached documents, for a period of fifteen days. The other party may oppose the requested enforcement, alleging only the pendency of the annulment of the award, and providing the writ of the appeal or authentic copy of the annulment judgment.
There is no requirement for recognition prior to enforcement.
“International arbitral awards”, as referred in Panama’s Arbitration Law, will be recognised and enforced in Panama in accordance with the following instruments:
Unless the parties’ have agreed otherwise, the applicable treaty shall be the most favourable to the party requesting recognition and enforcement of an international award. If there is no applicable treaty or instrument, the award can be enforced provided that the country in which the award was rendered provides reciprocity with the enforcement of awards made in Panama.
The awards rendered in international arbitrations whose seat of arbitration is the Republic of Panama will not be subject to the recognition procedure and may be enforced directly if necessary.
An international arbitral award, regardless of the country in which it was issued, will be recognised as binding, upon presentation of a written application to the Fourth Chamber of the Supreme Court of Justice, together with the original award or authenticated copy (exequatur proceeding). If the award is not written in the Spanish language, it must be presented with a proper translation by an authorised public translator.
As per the requirements established in the Judicial Code, the applicant in the exequatur proceeding may request the enforcement of a foreign award where:
The following documents must be enclosed with the application:
Once the application is received, the Fourth Chamber will give notice to the debtor party and the Office of the Attorney General of Panama (or Public Prosecutor's Office) of the application and allow a time limit of five days so any opposition to the exequatur may be filed. If an opposition is filed and the Fourth Chamber must act in a fact-finding capacity, it will allow an evidence phase and a phase of final written submissions, before issuing a decision on the enforcement of the foreign award. Under no circumstance however can the Fourth Chamber review the merits of the foreign award, it may only review the limited grounds set forth in 4.6 Challenging Enforcement of Arbitral Awards.
Panama’s Arbitration Law does not provide for a time limit applicable to the commencement of an exequatur proceeding of a foreign award. Nonetheless, judicial decisions have established a seven-year statute of limitation for civil obligations and five years for commercial obligations.
The costs and time taken to enforce a foreign award will depend on whether the proceeding is opposed by either the debtor or the Office of the Attorney General for either factual or public policy reasons, the Attorney General will generally oppose it if the award violates Panamanian law. The fact that the exequatur proceeding of a foreign award is solely reviewed by the Fourth Chamber of the Supreme Court allows a quicker and less expensive proceeding.
Another factor to consider is how easy it will be to locate the debtor’s assets and attach them for enforcement of the debt. Finally, it is important to consider that after the exequatur proceeding is finalised in the Fourth Chamber of the Supreme Court, the actual enforcement will be handled by a competent local court, which means that the party might have to invest in an additional proceeding to obtain enforcement.
Reasons for refusal of recognition or enforcement are established in Article 72 of Panama’s Arbitration Law, which establishes that the recognition or enforcement of a foreign arbitral award may only be denied, regardless of the country in which it was issued, in the cases and for the causes that are exhaustively indicated below:
There is no appeal mechanism in Panama for arbitral awards. The only recourse available against awards issues in arbitration proceedings seated in Panama is through a set-aside proceeding which is also reviewed exclusively by the Fourth Chamber of the Supreme Court.
Finally, as outlined in 4.4 Process of Enforcing Arbitral Awards, there are time limitations that the parties must be aware of, and which may be the source of a challenge in an exequatur proceeding.