Litigation 2019 Second Edition

Last Updated December 05, 2019

Panama

Law and Practice

Author



FABREGA MOLINO has provided advice and legal services to many of the world’s biggest companies, with an excellence established by the efficiency and quality of its services. The firm has 22 lawyers, 102 employees and acts for a significant number of clients including multinational corporations and institutions, shipowners and agents, international law firms, family businesses, high-net-worth individuals, major international groups, holding companies, banks and financial institutions as well as aviation and pharmaceutical companies. The firm represents clients in commercial and investment arbitrations concerning a wide range of industries. The firm is widely recognised by leading publications and professional organisations and its lawyers are members of the most pre-eminent international associations. The firm’s dispute resolution lawyers are fully trained and they are recognised as leaders in international arbitration.

In Panama the legal system is based on civil law. In principle, the process is primarily written. Some few are conducted orally. However, there are specialised jurisdictions, such as maritime, where the proceeding is oral.

Our court system is not federal. Panama is a Unitary Republic. The court system is composed of the Supreme Court, Superior Courts (Appellate Courts), Circuit Courts and Municipal Courts. There are also Labour Courts, Criminal Courts, Family and Youth Courts and arbitration. These are called special jurisdictions.

Generally, proceedings are not open to the public in Panama. The Judicial Code states that files may only be examined by the parties, attorneys and their assistants, expert witnesses, the bailiff, law students, and persons duly authorised by the judge or clerk. Certain proceedings or information may be considered confidential due to reasons of morality, or if minors or infants are involved.

In order to appear in court, legal representatives must be licensed attorneys. The practice of law is only allowed for Panamanian citizens, so foreign attorneys cannot act as legal representatives in Court. The license is granted by the Supreme Court.

Litigation funding is not regulated in Panama. Nevertheless, this kind of persons is not a party in the proceeding. The relationship of the third party is only with the party to whom they lend the money.

Since third-party funding is not regulated in Panama, there are no limits for types of lawsuits available for this kind of funding.

Since third-party funding is not regulated in Panama, we think that there are no limits for the availability of this kind of funding for plaintiff or defendant.

Since third-party funding is no regulated in Panama, there is not a minimum and maximum amount a third-party funder will fund.

Since third-party funding is not regulated in Panama, the costs a third-party funder will consider funding is a matter of agreement between the third party and the party they would fund.

Contingency fees are permitted in our jurisdiction. It is regulated by the law that rules the legal profession in Panama, Law number 9 of 1984.

Since third-party funding is not regulated in Panama, there are no limits by when a party to the litigation should obtain third-party funding. 

In Panama there are no rules imposed on the parties in relation to pre-action conduct. In fact, there is no such thing like pre-action conduct.

There are several types of statutes of limitations that may apply to civil actions. The statute of limitation for personal civil actions is seven years. In rem action statute of limitation is 15 years. On personal property is six years.

According to our legal system, the jurisdictional requirements for a defendant to be sued is to have legal capacity to hold rights and acquire obligations and the defendant could be a person or a legal entity. In cases involving under age or disable persons, the defendant must be represented by a guardian or curator at litem.

The general rule is that any civil proceeding could not start ex officio. To initiate a lawsuit in Panama, the plaintiff must be represented by a licensed attorney. He must file a document (lawsuit) which must have the following information:

  • name and last names of the parties;
  • type of process written at the top of the document;
  • indication of the court;
  • name and last name of the plaintiff and the defendant;
  • their ID numbers;
  • full address;
  • clarification if it is a natural person or an entity; and
  • description of the general information of the parties that will be involved in the process.

The document must also contain the claim of cause of action, a description of the facts in which the claim is supported and the legal grounds of the lawsuit. It is permitted to amend the lawsuit just once, before the time allowed for producing evidence.

The service of procedures in Panama must be personal. If the defendant’s domicile is unknown, the plaintiff must state that, which is understood to be under oath. If that is the case, the service will be carried out by publication. Service is a responsibility of the court but the plaintiff must help. If a party outside the jurisdiction has been sued, service must be done by a rogatory letter. If publication is made and the defendant does not appear before court, the judge will appoint a public counsellor so the process can continue. The public counsellor fees must be paid by the claimant with the possibility to obtain refunds.

If the defendant does not respond to a lawsuit after been served, the judge must take this conduct as a conclusive presumption and appoint a public counsel so the procedure may continue.

In Panama, class actions are only permitted on Consumer Protection Procedures and in environmental matters, but not in civil actions.

Legally speaking, there are no requirements to provide clients with an estimated cost of potential litigation at the outset. However, there is an official fee rate issued by “Colegio Nacional de Abogados de Panamá” and approved by the Supreme Court.

In Panama, it is possible to make an ex parte motion requesting a freezing order against the defendant in order to ensure the outcome of the process. A bond must be posted prior to execution of the order. The amount of the bond will depend on judge discretion and in connection with the quantum of the claim.

No early judgment applications exist. However, the defendant may accept all or some of the plaintiff’s arguments.

In our civil legal proceedings, there are some motions that could qualify as a dispositive and could be submitted as an ancillary proceeding. That is the case of the motion of res judicata, motion of settlement or procedural statute limitations.

In Panama, a party not appointed as a plaintiff or defendant may intervene by proving the existence of a relationship with one of the parties, in a way that, if a party loses, the sentence may affect the third party. A party which is neither plaintiff nor defendant may intervene if the party claims in whole or in part the right or the object in suit, filing their claim against the plaintiff and defendant for the claim to be decided in the same procedure. The defendant may also summon a third party, and for then to answer for the defendant in the event they lose the case, having a legal or contractual right for doing so.

This is not applicable in Panama.

This does not apply in Panama.

This is not applicable in Panama.

There is no discovery as such in Panama. However, “assurance of evidence” exists. This assurance may be requested in the form of a pretrial discovery or an early witness testimony. The request must be filed to the judge proving a relationship, the reasons for which the assurance is required before the corresponding stage for evidence. The assurance of evidence is carried out by the Court. There is no expense control mechanism. In this kind of judicial action, it is a requirement post a bond with a cap of one thousand dollar. Discovery is permitted in the maritime jurisdiction as well as in consumer protection, antitrust and unfair competition proceedings.

It is possible to discover evidence from a third party not named as a plaintiff or defendant. This is carried out by an exhibitory action that is similar to a pre-trial discovery. It requires posting of a bond as calculated by the judge. The person requesting the action must point out on which documents the action shall be carried out and must determine the specific points of the information which must be obtained. 

See 5.2 Discovery and Third Parties.

The alternative to discovery mechanisms is, as we mentioned above, the assurance of evidence. This is explained in 5.1 Discovery and Civil Cases.

In Panama legal privilege is recognised, but is not binding for lawyers. In the Ethics Code adopted by the Panama Bar Association, Article 13 recognises the concept of legal privilege. Article 912 of the Judicial Code states it is not mandatory for the attorney to declare in trial about information received from clients and the advice given to clients.

Once an order is issued, the party subject to the discovery must disclose the documents. The party that refuses to disclose a document could be convicted in contempt.

In Panama, there is no remedies such as Injunctive Relief. What we have are precautionary measures such a seizure or attachment of goods, liens, etc.

See 4.1 Interim Applications/Motions.

The precautionary measures are, usually, ex parte.

As pointed out in 4.1 Interim Applications/Motions, the bond that is mandatory to post in order to obtain a precautionary measure, is likely to cover liability for damages arisen from the execution of the measure. But in case of claims for damages derivate from precautionary measures, the claimant could claim for the total amount of the damage.

The precautionary measures regarding injunctive relief are territorial.

This is not applicable in Panama.

The request of a precautionary measure must always be followed by a lawsuit. If no lawsuit is submitted, the claim could be dropped.

In Panama, the process is conducted mostly in written form. However, there are a few processes conducted orally. For instance, annulment of acts taken by shareholders against the articles of incorporation and/or the law. The lawsuit and its response are submitted in written form, but the evidence is submitted, witnesses are examined and the closing arguments are all part of the hearing.

An oral process in Panama may take place, as well as all other instances of management hearings.

No juries are required in civil cases.

Admission of Evidence is ruled by Judicial Code. There are three principles or critera that govern the admission of evidence:

  • the evidence must be relevant;
  • the evidence must be legal; and
  • the evidence must be filed on the proper time. 

In Panama, it is permitted that the parties may introduce expert testimony. The court itself appoint an expert witness, but their expenses must be covered by the party who request that kind of evidence.

In civil cases, hearings are not open to the public.

In Panamanian oral processes, the judge manages the hearing. Incidental claims may be solved by judge during the hearing. The final judgment will be reserved to a later date.

The general timeframe for a proceeding could be around five years and, in some cases, even more.

In Panama settlement could be judicial or extrajudicial. If it is judicial, court approval is required. Parties involved in the settlement must be authorised to settle. Generally, the authorisation is contained in the power of attorney. In order to execute a settlement agreement, the attorney must have express authorisation from the party they are representing. 

The settlement of a lawsuit can not necessarily remain confidential, unless parties request it to be so.

In Panama, the approval of the settlement becomes a sentence with the effect of a final judgment (res judicata). In this case, this final judgment is considered an enforceable tittle.

By the way of a new process, the settlement agreement could be set aside if the parties, or at least one of them, where not authorised to settle.

There is no a form of award available to a successful litigant, per se. Judgment could include legal costs but, in principle, are granted to the successful party. However, it is very common that litigators agree with the client to collect costs as a way of legal fees.

In civil cases, there are no punitive damages. The maximum or minimum of damages are subject to what is demonstrated in trial. There is an exception in antitrust matters. In these cases, the law states, as punishment, the trippling of the value of damages.

In Panama, there is no pre-judgment. However, it is possible to include interest in the amount of the claim, accumulated at the time of filing. Likewise, after the judgment, the liquidation of the interest accrued may be requested until the obligation is fulfilled.

The mechanism in Panama for executing a national sentence is regulated in the Judicial Code. It is understood that any final judgment is, for all purposes, an Executive title and if the defeated party does not comply with the sentence within the term provided by law (six days), the expired party may initiate the same process, a sentence execution phase and requesting the seizure of assets, however, in these cases, there are no request of bond filings.

The execution of sentences issued abroad is done through a procedure before one of the Chambers of the Supreme Court of Justice (General Business Chamber IV), through the exequatur process.

In our Civil Judicial System, the appeal is the instance by which the hierarchical superior of the court that adopted a decision revises the pronouncement. The Superior Court is the court of appeals par excellence. However, the circuit courts may be the tribunals of appeals of the decisions issued by the municipal courts.

In our procedural system, the general rule is that every sentence, understood as the decision that ends the process, is appealable. In addition, interlocutory decisions issued by the court in the course of the process will be appealable, but limited to those listed in the Judicial Code. Generally, the appeal is announced and sustained before the court of first instance, which then examines whether or not to grant the appeal. If granted, the file is sent to the Superior Court to make the appeal. As a general rule, the appeal is granted in suspensive effect. However, the Superior Court has the power to take control of granting.

Once the corresponding resolution has been notified, the appellant has a period of two business days to announce the appeal if the decision is an order. If the decision is made to appeal a judgment, the deadline to announce the appeal is three business days. Once the appeal is announced, the appellant has a period of five business days to support the appeal. Supporting the appeal means that the reasons why the original decision to be revoked must be stated, and a written motion or request must be filed by an appellant.

According to the Panamanian legislation, the court of appeals must only rule on the unfavourable to the appellant and cannot amend or revoke an appealable decision on the behest of a party that is not subject to the appeal, unless modifications are necessary to make changes on points intimately related to the favourable part. Nor can the Court of Appeals admit new claims, except in the case of claims of interest, subsequent accruals, survivors' damages and losses, leases or new instalments of the obligation.

This is not applicable in Panama.

In our legal system, there is no hearing in appellate proceedings.

As a general rule, the party that is defeated in the process will always be ordered to pay the costs of the process, unless, in the pronouncement, the judge warns that the convicted person has acted in good faith.

There are several factors that are considered when ordering the payment of costs. Such factors are:

  • work invested by the litigant or his agent in the process;
  • for work in law;
  • the expenses caused by certain diligence practices within the process (expert fees, for example); and
  • the value of the certifications or copies that are required as evidence in the process.

There is no interest awarded on costs.

ADR is, nowadays, well promoted in our country.

Arbitration is an example of ADR recognised in the Constitution of The Republic of Panama. Also, there is a special law regarding arbitration, both domestic and international. Nevertheless, arbitration is not mandatory and there are no sanctions for unreasonably refusing ADR.

There are two well organised institutions in Panama offering and promoting ADR. One is called CECAP (Centro de Conciliación y Arbitraje de Panamá) attached to the Chamber of Commerce, Industries and Agriculture of Panama, and the other is the Arbitration Centre of the Panamanian Chamber of Construction.

The Panamanian arbitration statute is Law 131 of 2013, and regulates national and international arbitration in Panama. This law contains important regulations related to national arbitration and the international arbitration agreement, the constitution of arbitral tribunals, definition of arbitration in law and arbitration in equity. It establishes what causes may be subject to arbitration, the rules directing an arbitration process, behaviour of the arbitrators, how to issue an award, what the grounds for annulment of the awards are and how arbitration awards are executed in Panama. Law 131 follows the UNCITRAL Model Law. 

The causes that are not freely available to the parties cannot be solved by arbitration in Panama. Also, matter subject to public policy are not allowed to be brought before arbitration panel.

Circumstances in which an arbitration award may be challenged in Panama include:

  • that one of the parties to the arbitration agreement has not been affected by any legal disability;
  • that a party has not been duly notified of the appointment of an arbitrator or arbitration proceedings and has not been able to assert its rights;
  • that the award refers to a dispute not provided for in the arbitration agreement.
  • that the appointment of the arbitral tribunal or the procedure has not been adjusted to the agreement between the parties.
  • that it has been decided on issues not subject to arbitration; and
  • that the international award is contrary to the international public order and in the case of domestic arbitration, which is contrary to the Panamanian public order.

The execution of a national arbitration award is carried out before the circuit judges of Panama, with the procedure similar to that of judicial judgment. Application must be submitted to the judge attaching a copy of the award. The judge orders the other party to be informed for a period of 15 days. The only defence that may be exercised by the executed party is to allege the pendency of the appeal for annulment of the award by providing a copy of the letter by means of which they filed the annulment or authentic copy of the sentence of annulment.

For foreign awards, the procedure is carried out before the Fourth Chamber of the Supreme Court of Justice. For this procedure, the New York Convention of 1958, the Inter-American Convention on International Commercial Arbitration of Panama of 1975, or any other treaty on recognition and enforcement of arbitral awards that the Panamanian State has ratified will be used. Unless the parties have agreed something different, the most favourable to the executing party will be used.

FABREGA MOLINO

BMW Plaza, 9th Floor, 50 St.
P.O. Box: 0816-00744
Panama
Rep. of Panama

+507 301 6600

+507 301 6606

fmm@fmm.com.pa www.fmm.com.pa
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Law and Practice

Author



FABREGA MOLINO has provided advice and legal services to many of the world’s biggest companies, with an excellence established by the efficiency and quality of its services. The firm has 22 lawyers, 102 employees and acts for a significant number of clients including multinational corporations and institutions, shipowners and agents, international law firms, family businesses, high-net-worth individuals, major international groups, holding companies, banks and financial institutions as well as aviation and pharmaceutical companies. The firm represents clients in commercial and investment arbitrations concerning a wide range of industries. The firm is widely recognised by leading publications and professional organisations and its lawyers are members of the most pre-eminent international associations. The firm’s dispute resolution lawyers are fully trained and they are recognised as leaders in international arbitration.

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