Panama demonstrates an openness to bilateral investment treaties as part of its policy of attracting and protecting foreign investment. It is currently a party to multiple bilateral investment treaties that are in force, as well as other agreements containing investment provisions.

Panama maintains an open-minded investment policy, supported by an extensive network of bilateral investment treaties (BITs) and free trade agreements that include investor–state dispute settlement mechanisms.

Panama is a party to the major international arbitration conventions, including the following:

• Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 1958);
• Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention); and
• Inter-American Convention on International Commercial Arbitration (Panama Convention, 1975).

Investor–state arbitration has become an increasingly relevant method of resolving investment disputes in Panama, particularly in recent years. Nevertheless, investors do not invariably resort to arbitration and may also use domestic courts, contractual dispute resolution mechanisms, and other available avenues, depending on the nature of the dispute and the applicable legal framework.

The growing relevance of investor–state arbitration is particularly evident in disputes involving investments protected by bilateral investment treaties or free trade agreements containing Investor–State Dispute Settlement (ISDS) provisions. Panama has been involved as the respondent State in 27 known ISDS cases. Recent proceedings include First Quantum Minerals Ltd v Republic of Panama, initiated under the Canada–Panama Free Trade Agreement, and Juan Carlos Argüello and Ernesto Argüello v Republic of Panama, initiated under the United States–Panama Trade Promotion Agreement.

In Panama, mining and energy – particularly hydroelectric power – have accounted for a significant share of investor–state arbitration activity, largely due to the capital-intensive nature of these sectors and their high level of government regulation.

In the mining sector, disputes have primarily involved the cancellation, renewal or maintenance of mining concessions, including cases concerning the Cerro Chorcha, Molejón and Cerro Quema projects.

In the energy sector, disputes have included claims involving hydroelectric power concessions, transmission infrastructure and compensation, such as Enel Fortuna SA v Republic of Panama and Transglobal Green Energy LLC v Republic of Panama.

Banesco Holding Latinoamérica, SA and Banesco (Panamá), SA v Republic of Panama

Facts

Banesco alleged that various Panamanian entities had acted arbitrarily, discriminatorily and without transparency, and had violated its due process rights in connection with the enforcement or threatened enforcement of certain bonds issued by Banesco to guarantee the performance of public works contracts.

Banesco sought compensation in excess of USD13.5 million, while reserving the right to increase the amount claimed in the event of further enforcement of the bonds.

Main legal principles at issue

The following principles were at issue in the case:

• fair and equitable treatment (FET);
• prohibition of arbitrariness and abuse of state power;
• due process and access to justice;
• legal certainty and respect for domestic law;
• prohibition against impairing investments; and
• commercial risk and international state responsibility.

Outcome of the proceedings

In its 5 May 2026 award, the tribunal concluded that the Republic of Panama had not breached its obligations under the applicable treaty and dismissed Banesco’s claims. The tribunal found that the Panamanian authorities had not acted arbitrarily or with the intention of harming Banesco. It also found that Banesco had access to domestic legal remedies and had exercised them, including before the Supreme Court of Justice. The tribunal ordered Banesco to pay Panama USD900,000 in legal fees and costs. The Republic of Panama was represented by LALIVE.

Sacyr, SA v Republic of Panama

Facts

In 2018, Sacyr, SA, a member of the Unidos por el Canal Consortium (GUPC), initiated an investment arbitration against the Republic of Panama under the Investment Treaty between Spain and Panama. Sacyr sought approximately USD2.3627 billion in damages, alleging that actions by the Panama Canal Authority (ACP) during the tender process and execution of the Third Set of Locks project had breached Panama’s obligations under the Treaty.

Main legal principles at issue

The following principles were at issue in the case:

• attribution to the state and exercise of sovereign authority;
• fair and equitable treatment (FET);
• transparency and disclosure of information;
• technical risks and contractor responsibility;
• contractual claims versus treaty claims; and
• burden of proof.

Outcome of the proceedings

In its 31 October 2025 award, the tribunal dismissed Sacyr’s claims. The tribunal concluded that Sacyr had failed to establish the alleged treaty violations and that the actions of the ACP challenged by Sacyr could not be attributed to Panama as acts carried out in the exercise of sovereign authority. The tribunal further stated that, even if the claims had not been dismissed on the merits, they would have been considered inadmissible because they were based on the contract rather than the treaty. The tribunal ordered Sacyr to pay the Republic of Panama USD6,391,831.66 in arbitration costs, including legal fees and expenses incurred in the proceedings.

Panama generally respects and complies with arbitral awards and has not adopted a policy of systematically challenging or resisting their enforcement. Its Investment Arbitration Office within the Ministry of Economy and Finance actively protects the State’s interests, including through the procedural mechanisms available under the ICSID Convention in post-award proceedings. To date, Panama has not sought the annulment of an arbitral award.

Panama has signed 25 bilateral investment treaties, of which 18 remain in force, concentrated in Europe (UK, France, Germany, Switzerland, Spain, Netherlands, Czech Republic, Italy, Finland, Sweden, Ukraine) and the Americas (Canada, USA, Argentina, Chile, Cuba, Dominican Republic, Uruguay), alongside key multilateral instruments such as the ICSID Convention. Earlier treaties with Taiwan (2004) and South Korea (2021) have since been terminated, and BITs with the UAE (2018) and Qatar (2010) remain signed but not yet in force. Panama’s policy emphasis has shifted towards embedding investment protections in comprehensive free trade agreements rather than negotiating standalone BITs.

Panama does not maintain an official model bilateral investment treaty text, opting instead to negotiate its investment agreements on a bilateral basis using flexible structures largely aligned with international practice and OECD standards. Despite the absence of a standardised model text, these treaties consistently incorporate fundamental substantive protections such as:

• fair and equitable treatment;
• full protection and security;
• national treatment;
• most-favoured-nation treatment;
• guarantees against unlawful expropriation without prompt and adequate compensation; and
• the free transfer of funds.

Panama also routinely provides direct access to international investor–state dispute settlement (ISDS) under ICSID or UNCITRAL arbitration rules.

Panama is a party to numerous Free Trade Agreements (FTAs) featuring robust investment chapters, including key agreements with the United States under the Trade Promotion Agreement, Canada, Singapore, South Korea, the European Union via the Central America Association Agreement, and several Latin American nations. These investment chapters provide foreign investors with comprehensive substantive rights that parallel or enhance traditional bilateral investment treaties, as well as binding investor–state dispute settlement (ISDS) mechanisms allowing qualified investors to submit claims directly against the host state through international arbitral institutions such as ICSID or UNCITRAL following mandatory cooling-off periods.

Panama does not issue official commentaries, administrative guidelines or dynamic interpretative notes regarding the application of its investment treaties, as treaty terms are interpreted in accordance with standard rules of public international law and the Vienna Convention on the Law of Treaties. Once ratified by the National Assembly and published in the Official Gazette as national law, the statutory text and its legislative history serve as the primary interpretative references, with joint exchanges of notes between contracting states occurring only rarely to address specific technical clarifications during the ratification process.

Panama maintains a national investment law, Law No 54 of 1998 on the Legal Stability of Investments, which grants qualifying investors (minimum investment of USD2 million in eligible sectors) a ten-year guarantee of legal, national tax, customs and labour regime stability, with municipal tax stability revisable every five years. Disputes go through mandatory conciliation before the Conciliation and Arbitration Center of Panama, after which the investor may choose between resolution by the competent authority or arbitration under the Center’s rules, with binding awards. Law No 54 operates as a self-standing domestic guarantee, independent of and complementary to investment treaties, so an investor can rely on both simultaneously – though only the treaty regime typically affords access to international arbitration such as ICSID or UNCITRAL.

Direct arbitration clauses in contracts between foreign investors and the Panamanian State or state-owned entities are common in public concessions, energy and major infrastructure projects, as domestic arbitration and public procurement laws explicitly authorise administrative bodies to submit disputes to arbitration upon obtaining necessary administrative approvals. Unlike investment treaties – which offer broad public international law remedies for state actions regardless of contractual privity – contractual arbitration clauses strictly govern specific obligations under the contract, limiting claims to contractual breaches and typically designating commercial arbitral institutions rather than treaty-based forums like ICSID. Notably, Panama’s Public-Private Partnership Law (Law No 93 of 19 September 2019, the “Ley APP”) expressly enshrines the availability of arbitration for PPP contract disputes: Chapter XIV of the law allows parties to submit controversies directly to an arbitral tribunal, including where a party disagrees with the findings of the Technical Panel established under the law, with such arbitrations to be conducted under Panamanian law and in Spanish, though the parties remain free to negotiate the applicable arbitral procedure within the contract.

In Panama there is a steady flow of foreign investment and, with it, a growing number of international claims brought against the State. Most of these proceedings have been handled before ICSID, under bilateral investment treaties and under the investment chapter of the trade agreement with the United States. A characteristic feature of the Panamanian State is that disputes tend to arise from the relationship between an investor and the State or public entities in the context of concessions, public works contracts, licences and sector-specific permits. That reality determines which protections are most frequently invoked and how claims are structured.

Fair and Equitable Treatment

Fair and equitable treatment is, by far, the most frequently invoked standard. Investors commonly allege frustration of legitimate expectations, changes to the regulatory framework applicable to a project, administrative delays, or lack of transparency in public procurement processes. Claims related to the execution of bonds tied to infrastructure contracts, to power generation projects and to large-scale works have relied primarily on this standard.

Expropriation

Claims for direct expropriation are uncommon. What is observed is the allegation of indirect expropriation or measures of equivalent effect, typically associated with the revocation or non-renewal of concessions, licences and permits, or with regulatory changes that strip economic value from an ongoing project. Disputes in the mining and energy sectors have been the most visible arena for this type of allegation.

This is also the area where the tension between investor protection and the State’s regulatory space becomes most apparent. Panama has consistently defended its authority to legislate in matters of public, environmental and social interest.

Contractual Breach Recast as a Treaty Claim

A recurring feature in cases against Panama is the attempt to elevate an essentially contractual or commercial dispute to the level of international investment law. Tribunals have shown notable caution towards this manoeuvre, especially when the underlying contract contained its own dispute resolution mechanism or when Panamanian courts had already ruled on the merits of the matter.

For the investor, the practical lesson is that not every breach by the state acting as a contracting party amounts to a treaty violation. The conduct complained of must be attributable to the state acting in the exercise of sovereign authority, and not merely as a commercial counterparty.

National Treatment and Most-Favoured-Nation Treatment

These standards appear less frequently as the principal basis of a claim. They are normally invoked as a supplementary argument – for example, when differential treatment is alleged relative to local competitors in bidding processes or in the application of sector-specific measures. The most-favoured-nation clause has also been used for procedural purposes, in attempts to import more favourable arbitration-access conditions from other treaties.

Jurisdictional Objections as a Line of Defence

Much of the Panamanian State’s defensive success has been built at the jurisdictional stage rather than on the merits. Objections have succeeded based on:

• the absence of genuine foreign ownership or control over the investment;
• corporate restructuring carried out once the dispute was already foreseeable; and
• allegations of corruption or illegality in the formation of the investment.

Anyone planning an investment in Panama should consider the corporate structure from the outset, not once a conflict has already arisen.

The parties are free to agree on the number of arbitrators, how they are appointed, the deadlines and the qualifications required. This reflects the principle of party autonomy (the parties’ freedom to decide how their arbitration will work), which is central to arbitration. The few limits that exist are there to protect basic procedural fairness and to keep a balance between the parties. Under Article 20 of Law No 131 of 2013, unless the parties agree otherwise, arbitrators may be of any nationality. Choosing the arbitrators is one of the keys to a successful arbitration.

Panamanian law is designed to stop one party from blocking the arbitration by refusing to appoint an arbitrator or by ignoring the agreed procedure. If the parties’ chosen method does not work, Article 22 of Law No 131 of 2013 provides back-up mechanisms to complete the tribunal. In these cases, either party may ask an arbitral institution, whether national or international, to make the appointment in accordance with its own rules.

In multi-party cases (where there are several claimants or several respondents) that are to be decided by three arbitrators, both Panamanian law (Articles 22 and 23 of Law No 131 of 2013) and the UNCITRAL Model Law on International Commercial Arbitration provide that, if the parties on one side cannot jointly agree on their arbitrator, the arbitral institution may appoint all members of the tribunal, including the presiding arbitrator. This solution protects the principle of equal treatment of the parties. For investors taking part in consortia with several contracting entities, it is highly advisable to include an express multi-party mechanism in the arbitration clause.

Panama’s arbitration framework restricts judicial interference in arbitral proceedings and is clearly favourable to arbitration. Ordinary courts cannot review or interfere with the arbitral tribunal’s decisions.

Article 25 of Law No 131 of 2013 follows the international model and allows two grounds for challenging an arbitrator. The first is the existence of circumstances that give rise to justifiable doubts about the arbitrator’s impartiality or independence. The second is that the arbitrator does not meet the requirements agreed by the parties: for example, in terms of profession, experience or language. A challenge must be raised as soon as the party becomes aware of the circumstances that call the appointment into question.

Under Article 26 of the same law, the parties may freely agree on the procedure for challenging arbitrators, which allows them to adopt the procedure set out in a particular set of arbitration rules. A challenge does not suspend the arbitration unless the arbitrators decide otherwise.

Before accepting the appointment, every arbitrator must disclose any circumstance that could give rise to justifiable doubts about their impartiality or independence. This duty does not end once they accept: it continues throughout the proceedings. Any new fact that arises must be disclosed to the parties without delay.

In Panama, the IBA Guidelines on Conflicts of Interest in International Arbitration (issued by the International Bar Association) are routinely used. They help arbitrators identify facts or circumstances that could raise doubts about their impartiality or independence. The Guidelines contain four non-exhaustive lists:

• the Non-Waivable Red List (serious conflicts that disqualify the arbitrator);
• the Waivable Red List (serious conflicts that the parties can expressly accept);
• the Orange List (situations that should be disclosed); and
• the Green List (situations that raise no conflict).

Together, these lists help protect the integrity and effectiveness of the arbitration, although the Guidelines are not binding and do not replace any laws or arbitration rules that apply.

Under the Panama Arbitration Act (Law No 131 of 31 December 2013), arbitral tribunals seated in Panama are expressly empowered to grant interim or preliminary relief both before and during the arbitration. Far from being a mere recommendation, this relief is binding on the parties – a key feature that makes Panama an attractive seat for both investor–state and commercial arbitration.

Panamanian courts play a supportive role in ensuring these measures are effective. Specifically, Article 42 establishes that any interim measure or preliminary order issued by a Panama-seated tribunal is recognised as binding and, unless the tribunal enforces it directly, the benefiting party can request immediate enforcement from the competent local court. Furthermore, under Article 35, local courts can grant interim measures at a party’s request before the tribunal is even constituted, without this being treated as incompatible with or a waiver of the arbitration agreement; once the tribunal is formed, the file may be referred to it. Closely modelled on the UNCITRAL Model Law, the Panamanian regime even permits Panama-seated tribunals to modify or revoke interim measures previously granted by ordinary national or foreign courts.

The scope of available relief is broad and practical. Tribunals may issue orders to:

• preserve assets or evidence;
• maintain or restore the status quo while the case is pending;
• prevent imminent harm to a party or to the arbitral process; and
• direct a party not to frustrate or undermine the purpose of relief already requested.

However, these powers are not unlimited: they remain subject to the general limits of Panamanian public policy and cannot be used to decide matters reserved exclusively for national courts, maintaining a predictable legal environment for both private investors and the state.

The role of domestic courts differs depending on the applicable arbitration regime. Under ICSID arbitration, Panamanian courts have essentially no role: Article 26 of the ICSID Convention excludes recourse to domestic remedies once the parties consent to ICSID arbitration, and the tribunal itself may recommend provisional measures under Article 47 without court involvement.

Under non-ICSID (eg, UNCITRAL) investor–state arbitration, Panama’s domestic arbitration law (Law No 131 of 2013) gives courts a supportive, rather than supervisory, function. They may:

• grant interim measures before the tribunal is constituted (Article 18);
• enforce interim measures and preliminary orders issued by the tribunal – whether seated in Panama or abroad (Articles 42–43); and
• see their own previously granted measures modified or revoked by a Panama-seated tribunal once constituted.

In all cases, courts do not review the merits of the relief granted: their function is limited to recognition, enforcement and procedural support, subject only to Panama’s public policy and non-arbitrable subject-matter limits.

Law No 131 of 2013 does not expressly empower courts or arbitral tribunals to order security for costs. Article 39 allows security to be required in connection with interim measures or preliminary orders, but not specifically to secure the costs of the arbitration. Similarly, Article 41 addresses liability for costs, damages and losses arising from such measures, but does not establish a general power to order security for costs.

Accordingly, the possibility of requiring security for costs may depend on:

• the parties’ agreement;
• the applicable institutional arbitration rules; or
• other procedural powers available to the arbitral tribunal.

Panamanian law does not prohibit third-party funding of investor–state claims. Law No 131 of 2013, which governs domestic and international arbitration in Panama, does not expressly regulate third-party funding or impose restrictions on third-party funders. Accordingly, the absence of a specific statutory framework does not prevent an investor from obtaining external financing for an investment arbitration.

There are no recent decisions of the Panamanian courts specifically addressing third-party funding. However, the issue was considered in 2025 in Petaquilla Minerals Ltd v Republic of Panama (ICSID Case No ARB/24/12). In that case, the tribunal considered the disclosure of information about the third-party funder, particularly its identity and control structure, for purposes of checking potential conflicts of interest.

Panamanian law does not establish a general requirement or common practice requiring disclosure of third-party funding arrangements. Where the 2022 ICSID Arbitration Rules apply, however, Rule 14 requires disclosure of the identity and control structure of the funder, primarily to facilitate conflict-of-interest checks. In Petaquilla Minerals Ltd v Republic of Panama (ICSID Case No ARB/24/12), the tribunal held that the existence of third-party funding, by itself, does not justify an order for security for costs under Rule 53, and rejected Panama’s application after considering the circumstances of the case, including the absence of an imminent risk of non-payment and the existence of after-the-event insurance.

In the bilateral investment treaties (BITs) to which Panama is a party, the procedural requirements that must be satisfied prior to commencing investor–state arbitration depend on the specific provisions of the applicable treaty. Generally, Panama’s BITs provide for an obligation to seek an amicable settlement of the dispute before resorting to international arbitration. This normally entails submitting written notice of the dispute and a period of consultations or negotiations between the investor and the State.

Likewise, other BITs entered by Panama establish specific periods during which the parties must attempt to reach an amicable settlement before the investor may commence arbitration. These periods generally operate as waiting or “cooling-off” periods.

Additional requirements also vary depending on the treaty. Some BITs establish time limits for submitting a claim, determine the available arbitral forums, and may set forth rules concerning recourse to domestic courts or the investor’s choice between different proceedings.

Accordingly, to determine the procedural requirements applicable to a claim against Panama, it is necessary to examine the specific BIT invoked by the investor. The requirements that may apply include:

• written notice of the dispute;
• consultations and negotiations;
• the expiration of the waiting period established in the treaty;
• compliance with the applicable time limits for submitting the claim; and
• depending on the treaty, the choice between domestic courts and international arbitration or the waiver of certain parallel proceedings.

The parties should consider confidentiality and transparency as complementary principles, rather than mutually exclusive ones.

Investor–state arbitration often involves public interests, public funds or the exercise of sovereign regulatory powers, which justifies a greater degree of transparency than would normally be required in purely commercial arbitration. At the same time, transparency should not prevail over legitimate needs to protect the following:

• confidential commercial information,;
• personal data;
• information protected by legal professional privilege;
• settlement negotiations; or
• information affecting national security.

Arbitral tribunals operating under Panamanian law enjoy broad authority to grant diverse legal and equitable remedies, including monetary compensation, interest, specific performance and injunctive relief, provided such remedies align with the relief sought by the parties and public policy considerations. Under the Panamanian Civil Code (Articles 991 and 1985) and general principles of civil law, monetary damages are restorative rather than punitive, meaning tribunals cannot award punitive, exemplary or trebled damages, as civil liability in Panama is strictly limited to making the injured party whole by covering actual loss (daño emergente) and lost profits (lucro cesante).

Additionally, tribunals may grant declaratory awards, orders for contract rectification, or interim measures and preliminary orders under Law No 131 of 2013 (the Panamanian Arbitration Law, Articles 35 and 42), provided these measures respect the boundaries of mandatory domestic public policy (orden público) and do not infringe upon non-arbitrable matters reserved exclusively to national courts. On interim relief specifically, Law No 131 allows arbitral tribunals to grant precautionary measures (medidas cautelares) both before and during the arbitral proceedings. Such measures are recognised as binding and are enforced by the competent Panamanian courts upon request, and a tribunal seated in Panama may even modify or revoke precautionary measures previously granted by ordinary courts, whether domestic or foreign, reflecting the strong judicial support for arbitration under this framework.

Panamanian arbitral tribunals and economic experts routinely employ internationally recognised valuation methodologies to quantify damages, selecting the appropriate approach based on the nature of the project, the stage of business operations and the availability of reliable financial data. Panamanian law does not prescribe a mandatory valuation methodology, so tribunals typically follow the standards applied in international arbitral practice. For going concerns and established commercial enterprises with proven track records, the discounted cash flow (DCF) method is the predominant approach used to evaluate future lost profits, provided the projections are backed by historical performance and not deemed speculative under Panamanian evidentiary standards. In cases involving early-stage ventures, interrupted infrastructure projects or assets lacking a sufficient operating history, tribunals typically favour cost-based approaches – such as sunk costs or invested capital – or market-based approaches utilising comparable transactions and fair market value assessments to ensure that awarded quantum remains grounded in concrete, verifiable financial metrics.

In international arbitration, the parties may seek to recover interest on the following:

• the amounts awarded;
• lawyers’ and experts’ fees;
• the institution’s administrative costs;
• the arbitrators’ fees;
• travel expenses; and
• any other costs or fees generated by the arbitral tribunal.

Practice in arbitrations involving Panama leans strongly towards the principle that “costs follow the event”, meaning the losing party pays. Tribunals have ordered the losing party to bear a significant part or all of the winning party’s legal fees and arbitration costs. This pattern has been seen both in cases dismissed for lack of jurisdiction and in cases decided on the merits. Under the UNCITRAL Arbitration Rules, the costs of the arbitration are borne by the losing party unless the tribunal decides otherwise.

Assessing the risk of having to pay costs should be part of the financial analysis behind any decision to bring or defend a claim.

Duty to Mitigate Losses

In Bridgestone v Panama, the tribunal held that the claimant could not recover losses that it could have mitigated by exercising an available contractual right.

Recognition and Enforcement of International Arbitral Awards

International arbitral awards are recognised and enforced in Panama in accordance with the New York Convention, the Inter-American Convention on International Commercial Arbitration, or any other applicable treaty ratified by Panama. Unless the parties agree otherwise, the applicable treaty is the one most favourable to the party seeking recognition and enforcement. Awards rendered in international arbitrations seated in Panama do not require a separate recognition procedure and may be enforced directly.

Effect of Annulment at the Seat

Under Article 72 of Law No 131 of 2013, recognition or enforcement of a foreign arbitral award may be refused, at the request of the party against whom the award is invoked, where that party proves that the award has been set aside or suspended by a court of the country in which, or under the law of which, the award was made. If an application to set aside or suspend the award is still pending before such court, the Panamanian court may adjourn its decision on recognition or enforcement and, at the request of the party seeking enforcement, may order the opposing party to provide appropriate security.

Pending Annulment or Suspension Proceedings

Under Article 72 of Law No 131 of 2013, where annulment or suspension proceedings are pending before the courts at the seat of arbitration, the Panamanian court may, if it considers it appropriate, postpone its decision on recognition or enforcement until those proceedings are resolved. The court may also require the party seeking recognition or enforcement to provide appropriate security. The postponement is therefore discretionary rather than automatic.

Sovereign Immunity

Under Article 4 of Law No 131 of 2013, a state or state-controlled entity involved in an international arbitration may not invoke the prerogatives of its domestic law to avoid its obligations under the arbitration agreement. However, Law No 131 does not specifically address sovereign immunity at the enforcement stage.

Enforcement Against State or State Entities

Law No 131 of 2013 does not contain specific rules governing sovereign immunity at the enforcement stage. Therefore, the extent to which a state or state entity may successfully invoke sovereign immunity against the enforcement of an arbitral award is not specifically addressed under Panama’s Arbitration Law.

Recognition and Enforcement of Arbitration Awards

Panamanian courts generally adopt a pro-enforcement approach towards the recognition and enforcement of foreign arbitral awards. The grounds for refusing recognition and enforcement are interpreted restrictively, and courts apply the principle of maximum effectiveness, under which they should apply the treaty that allows the award to be enforced.

Public Policy Standard

With respect to public policy, the Supreme Court has held that the applicable standard is Panama’s international public policy. Accordingly, matters that should have been raised in set-aside proceedings at the seat of arbitration do not, in themselves, constitute grounds for refusing enforcement on public policy grounds.

Sovereign Immunity and Enforcement Against State Assets

Panamanian courts recognise both sovereign immunity from jurisdiction and immunity from execution. In respect of state assets, the Supreme Court has held that enforcement measures generally cannot be taken against the assets of a foreign state without its consent. However, enforcement may be available where the state has expressly consented, including through an arbitration agreement, or where the relevant assets are used for non-sovereign or commercial purposes. Panamanian case law has also required that the assets be of a private nature and that enforcement does not affect the sovereignty of the foreign state.

In a decision of 28 December 2011, the Supreme Court considered, in the context of a challenge to an arbitral award, an argument that the arbitrator had applied the doctrine of piercing the corporate veil and that such application was contrary to Panamanian public policy. The Court rejected the challenge, finding that the arguments raised did not amount to a violation of Panamanian public policy, and ultimately denied the application to set aside the award.