The Panamanian legal system is based on civil law tradition. In general terms, it follows an adversarial model, with the exception of family matters, in which the system is openly inquisitorial. The judicial process is conducted through both written submissions and oral arguments. In October 2025, a comprehensive reform of the civil procedure came into effect, giving greater prominence to oral proceedings, in contrast to the previously predominantly written system.

The structure of Panama’s court system varies across different subject matter jurisdictions, but it generally follows a three-tier model, with trial courts at the bottom, appellate courts in the middle and the Supreme Court at the top. Since Panama has a centrist government, all courts are national, not federal, but some of them, such as the trial courts, only have jurisdiction over a specific area. As a general rule, courts are organised by subject matter jurisdiction, including shipping, civil and criminal courts, to name a few.

Court filings and proceedings are open to the public. Files in the Panamanian judicial system are public, unless they contain confidential information or information restricted by law due to protect the privacy of one of the parties.

Legal practitioners who appear in Panama’s courts must have a licence to practise issued by the Supreme Court of Justice. The licence is mainly granted to individuals who are Panamanian citizens and have a law degree. Regarding rights of audience, attorneys must have a power of attorney from their clients that authorises them to appear in court on behalf of their clients. Foreign lawyers cannot conduct cases in Panamanian courts, since the Supreme Court can only grant a licence to practise to Panamanian citizens.

Panama does not have a regulatory framework that governs third-party litigation funding. There are no restrictions on litigation funding.

Since Panama does not have a regulatory framework governing third-party litigation funding, any type of lawsuit is available for third-party funding.

Since Panama does not have a regulatory framework that governs third-party litigation funding, third-party funding is available for both the plaintiff and the defendant.

Since Panama does not have a regulatory framework that governs third-party litigation funding, there is no minimum nor maximum amount a third-party funder will fund.

Since Panama does not have a regulatory framework that governs third-party litigation funding, a third-party funder may consider funding all, some or none of the costs of a case. In Panama, costs are fixed by the court in their final ruling and they must be paid by the losing party to the winning party.

Contingency fees are permitted in Panama. In this regard, the Panama Supreme Court approves the minimum legal fees set by the Panama Bar Association; as a general rule no lawyer may charge less than the minimum legal fees approved by the Supreme Court. Contingency fees are based on the amount of the claim; for example, if the claim is between USD100,001 and USD500,000, the minimum contingency fee is of 15% of the amount recovered and cannot exceed 50%.

Since Panama does not have a regulatory framework regime that governs third-party litigation funding, there are no time limits for when a party to the litigation should obtain third-party funding.

Panamanian law does not allow courts to impose any rules on the parties in relation to pre-action conduct. There are no requirements on the potential defendant(s) to respond to a pre-action letter.

There are statutes of limitations that apply to civil suits and statutes of limitations that apply to commercial suits. In civil suits, the statute of limitations for extracontractual liability is one year; for contractual liability, it is seven years. In commercial suits, the statute of limitations is five years. There are special cases, but these are the general rules. The statute of limitations begins to run when the obligation becomes enforceable.

There are no particular jurisdictional requirements for a defendant to be subject to suit in Panama. Any individual, legal person or government office may be sued, and this rule applies across all.

As a general rule, the initial complaint that is filed to initiate a lawsuit must include:

• the name of the parties and the type of proceeding at the top of the first page of the initial complaint;
• the name of the court to which the complaint is addressed;
• name and address of the plaintiff;
• name and address of the defendant;
• the thing, declaration or fact that is claimed; if this is money, the amount must be stated;
• the facts that support the plaintiff’s claim; and
• the legal provisions on which the claim is based.

If the plaintiff wishes to do so, they may include the evidence with which they support their claim.

If the claim is related to land, the details of the property must be included in the complaint.

The plaintiff is permitted to amend the document after it has been filed only once, and before the ruling that starts the evidence stage has been notified to the parties.

In general terms, once a lawsuit is admitted by the courts, the defendant must be notified in person. The court is responsible for notifying the defendant. After that notification, all other notifications are made in the courtroom.

When the defendant is in another jurisdiction, the court must seek assistance from the executive branch to carry out the notification.

In such cases, it is necessary to verify whether there is an international treaty in force that governs notifications between the states parties.

If the defendant does not respond to a lawsuit, the plaintiff may request that the court appoints an attorney for the defendant in absentia so that the case may continue.

Panama permits representative or collective actions, including class actions, but only in matters relating to consumer protection and related fields.

There are no requirements to provide clients with a cost estimate of the potential litigation at the outset. The Supreme Court of Justice approves a tariff that includes the minimum legal fees lawyers in Panama must charge.

Precautionary measures in civil proceedings are admissible provided that there is prima facie evidence, duly proven interest, and a threat or violation of a right.

It is also necessary to post a bond to guarantee any damages that may be caused by the precautionary measure.

The new legislation in force since October 2026 establishes greater requirements for ordering precautionary measures than the previous legislation.

Typically, the precautionary measures provided for in civil legislation are:

• seizure;
• provisional suspension of activities;
• preventive annotation of the claim on assets subject to registration; and
• conservative measures in general.

A party may apply for early judgment on some or all of the issues in dispute, or for the other party’s case to be struck out before trial or substantive hearing of the claim if the defendant claims any of the following defences: res judicata, abandonment of suit, and existence of a settlement. These defences must be decided by the court before its final judgment. If the defendant wishes to claim any of these defences, they must do so through an incidental motion once they have been notified of the complaint. Once the incidental motion has been filed, the court must decide if it accepts or rejects the incidental motion, providing the request complies with the legal formalities.

If the incidental motion is accepted, the other party has five-days to respond. If there is evidence to be reviewed by the court regarding the incidental motion, the court will schedule a preliminary hearing, during which the evidence will be examined and the appropriate decision will be made.

An additional exception that can be debated before the trial was added to the new code of civil procedure, namely the exception of extinctive prescription, which is subject to the same procedure described above.

The new legal system aims to ensure that these motions are decided at the preliminary hearing, unlike under the previous system, where it could take months to reach a decision.

There are no dispositive motions that are commonly made before trial in Panama.

Interested parties who are not named as plaintiffs or defendants may join a legal proceeding as third parties. This can be done by filing their own claim or simply by collaborating with one of the litigating parties.

If the third party is collaborating with one of the parties, they may intervene by means of a simple brief setting out the facts and legal grounds on which they rely.

If the third party is seeking the subject matter of the dispute, they must file a brief that meets all the requirements of any complaint, which will be forwarded to the established litigating parties.

A defendant cannot apply for an order that the plaintiff/claimant must pay a sum of money as security for the defendant’s costs.

The costs of interim applications/motions are divided into two categories: costs and expenses. These are expenses of the case and are always paid by the losing party to the winning party, unless the judge considers that the losing party acted in good faith throughout the proceedings, which must be expressly stated in the decision.

It is very difficult to provide details of the timeframe for a court to deal with an application/motion since, in practice, each court has different timeframes for dealing with an application/motion; ie, some courts take longer than others. A party cannot request that the application/motion be dealt with on an urgent basis.

However, the new civil procedure law establishes time limits with legal consequences for non-compliance by the judge hearing the case.

For example, civil proceedings are limited to one year from the date of notification of the admission of the claim.

For the second instance, a maximum period of six months is established, counted from the date the file is assigned to the presiding judge.

With the new civil procedure legislation, discovery is permitted, which does not require the intervention of a judge in its practice. However, it does require the existence of ongoing legal proceedings.

National legislation only allows discovery between the litigating parties. It is not regulated for third parties outside the dispute.

The new procedural legislation allows the disclosure of information and the provision of documents, data, or items in the possession of the opposing party to be requested by the following means:

• sworn statements;
• written interrogatories;
• provision and exhibition of documents or other objects;
• permission to enter properties for the purpose of conducting inspections;
• physical and mental examinations; and
• requests for admission of facts and recognition of items or documents related to the subject matter of the proceedings.

The Panamanian legal system provides for discovery. However, until the new legislation came into force, a mechanism for securing evidence was used, which allowed for the disclosure of documents, pre-trial testimony, reports, party statements, etc. This was done by submitting a request to the judge, demonstrating the existence of a possible lawsuit and a justified concern that the evidence could eventually disappear or become difficult to obtain later.

Panama recognises the concept of legal privilege. The law states that all lawyers are under the obligation to keep the secrets and confidences of their clients. This duty does not expire and extends to the lawyer's employees; it may only be lifted with the client’s consent or if the client brings a claim against the lawyer and the lawyer needs to disclose certain information to protect themselves. There is no distinction between external and in-house counsel.

There are no other rules that allow a party to not disclose a document.

Precautionary measures may be requested whenever there is a well-founded fear that the claim may prove illusory or unenforceable. In order to obtain such measures, it is necessary to prove a legitimate interest and the existence of a threat or violation of that interest.

The judge must take into account the appearance of good law and the risk that a delay in the final decision could cause irreparable damage to the applicant.

The typical precautionary measures in the new civil procedure are:

• seizure of assets;
• provisional suspension of activities;
• preventive annotation of the claim; and
• conservative measures, in general.

Under the current legislation, the seizure of assets requires verification of the general conditions of all precautionary measures: (i) danger in delay, (ii) appearance of good law, and (iii) security to cover possible damages. The current legislation sets specific amounts for security, unlike the previous legislation.

The same standards apply to provisional suspension as to other precautionary measures.

It is difficult to determine how quickly injunctive relief can be obtained, even if the circumstances are urgent, because some courts work faster than others. There are no arrangements for out-of-hours judges or similar. Injunctive relief can be requested and granted before the complaint is filed.

However, current legislation stipulates that the request for seizure of assets must be decided within a maximum of three days from its submission to the competent court.

Injunctive relief may be obtained on an ex parte basis, as a general rule.

The applicant can be held liable for damages suffered by the respondent if the respondent successfully discharges the injunction, and the applicant is required to provide security for such potential damages. This is applicable to ex parte injunctions. 

Injunctive relief cannot be granted against worldwide assets of the respondent, only assets located in Panama.

Injunctive relief cannot be obtained against third parties.

If a respondent fails to comply with the terms of an injunction, the court may find the respondent in contempt of court, which can result in their imprisonment for up to six months. Alternatively, the judge may fine the person, based on their assets. In addition, the person may be held liable for damages for failure to comply.

Until the legal reform came into effect in October 2025, civil proceedings were primarily conducted in writing. However, the reform promotes oral proceedings. Although the complaint and response are submitted in writing, the parties are subject to preliminary and final hearings, where they must present evidence and submit their motions orally.

The judge may decide the case orally or in writing.

Since October 2025, civil proceedings have essentially consisted of two hearings. The first is called the “preliminary hearing,” in which the subject matter of the dispute is defined, the disputed facts are established, evidence is admitted, and exceptions to prior and special rulings are decided.

Subsequently, the “final” hearing is held, during which evidence is presented, such as witness and expert examinations, documents and other previously ordered materials. The parties then present their closing arguments and the judge issues their ruling, which may take place immediately or within a maximum of 20 days.

Jury trials are not available in civil cases.

The Panamanian system stipulates that evidence must be relevant to the subject matter of the proceedings; only evidence that is irrelevant to the facts in dispute, legally ineffective, or unlawful is inadmissible. Evidence obtained in violation of due process is null and void.

Expert testimony is permitted at trial. The parties may introduce expert testimony, and the court itself may seek expert testimony or guidance.

In principle, hearings of the judiciary are public, but the parties may request that they be held in private when there is a risk to their image or privacy or, in general, for reasons of public order.

In view of the transition from a written to an oral process, the judge is expected to play a more active role in directing and driving the judicial process. For example, the judge has the power to encourage the parties to resolve their differences through ADR methods.

In oral proceedings, the judge decides on the subject matter of the debate, the disputed facts, and the evidence admitted. The judge also sets the date for the final hearing, at which the evidence is presented and the merits of the case are decided. During questioning, the judge may ask questions to the witnesses and summarily rule on objections raised by the parties.

It is difficult to determine general timeframes for proceedings from commencement of claim through to trial, and the typical duration of trials, for commercial disputes, because some courts work faster than others.

However, the new civil procedure law establishes time limits with legal consequences for non-compliance by the judge hearing the case.

For example, civil proceedings are limited to one year from the date of notification of the admission of the claim.

For the second instance, a maximum period of six months is established, counted from the date the file is assigned to the presiding judge.       

In Panama, there are two types of settlement based on when the settlement takes place: judicial and extrajudicial settlement. Court approval is only required for judicial settlements. Court approval is limited to reviewing whether the matter may be settled (for example, cases regarding the civil status of a person may not be settled) and whether the parties are legally capable of doing so (for example, if the person acting on behalf of a company has the authority to do so and to settle).

The settlement of a lawsuit may remain confidential only if it is extrajudicial. Judicial settlements are public because they become part of the case file, which is public.

Settlement agreements may be enforced by the court that is hearing the main process, and the court may use different mechanisms to enforce the agreement, depending on the matter that is being enforced. For example, if a party’s bank account was frozen by an injunction, the court may order the bank to give the money to the corresponding party.

Settlement agreements cannot be set aside; they have a res judicata effect.

The forms of award available to a successful litigant depend on what the party requested in its complaint. A judge may not award something not requested in the complaint, or if the complaint claimed a specific amount of money, the court may not grant a higher amount. The losing party must also pay the expenses (for example, costs for reproducing documents) and the costs (lawyers’ fees) related to the process.

Damages include both material and moral damages. Material damage is limited to the amount proven at trial. In cases of moral damage affecting the plaintiff’s decorum, honour, reputation or standing, the judge may order the publication of an extract of the judgment.

The judge may not order the defendant to pay more than the amount requested by the plaintiff, or to do something different from what was requested by the plaintiff. Punitive damages are not available and there are no caps on maximum damages.

A successful party may collect interest based on the period before judgment is entered, if the defendant’s obligation involved paying a specific amount of money. The general interest rate is 6% in civil cases and 10% in commercial cases, unless a different rate was agreed by the parties, and is accrued from the date on which the party stopped paying.

A party may collect interest accruing after the judgment is entered.

There are no statutory limits on the award of pre-judgment interest.

For the enforcement of a domestic judgment, the winning party may request the court to seize any assets that belong to the losing party and give them to the winning party. If the losing party’s obligation involves performing an act, the judge will order the act to be done at the cost of the losing party or the court may order the losing party to pay damages. If the judgment involved not performing an act, the court may order the act to be undone and the party to pay damages.

The general procedure for enforcing a judgment from a foreign country is applied if there are no treaties that govern the matter. The general rule is that the judgment will only be enforced if judgments from Panama are enforceable in that country. The following requirements must be observed:

• the judgment must have been given as a result of a personal claim;
• the judgment cannot have been given in a process in which the complaint was not personally notified to the defendant;
• the obligation to be executed must be licit in Panama; and
• an authentic copy of the judgment must be provided to the court, with a translation if the judgment is not in Spanish.

The enforcement of a foreign judgment is carried out by the Fourth Chamber of the Supreme Court. The execution request is notified to the losing party and the Panama Attorney General, both of which have five days to respond. If the losing party challenges the execution, the Supreme Court will grant a term for the parties to present evidence as well as a term for the evidence to be examined by the court. Subsequently, a term is granted for the parties to submit their arguments. Finally, the Supreme Court decides if the judgment is to be enforced or not. If it approves the enforcement, the case is sent to a judge to carry out the enforcement procedure.

The following remedies are available to a litigant party in the Panamanian legal system:

• Reconsideration: request for the judge who issued the decision to revoke, amend, supplement or clarify their own ruling. This can only be requested against decisions that cannot be appealed.

• Appeal: request for a higher court to revoke or amend the decision of the lower court. Not all decisions are appealable.
• Challenge of fact: may be filed by a party whose attempt to appeal was rejected by the lower court (in Panama, lower courts must grant the party permission to appeal before the higher court).
• Extraordinary appeal: may be filed against judgments that have res judicata effect to remedy damages caused to the parties under very specific circumstances. This is reviewed by the Supreme Court.
• Revision: may be filed against judgments given in single-instance processes or if an appeal could not be carried out under very specific circumstances. This is reviewed by the Supreme Court.
• Consultation: certain judgments, such as those given against the state, must be reviewed by a higher court before the lower court can execute them.

An appeal to a higher court may be granted only to the party that believes it has been harmed by the decision. That party must file and substantiate its appeal within five days. The appeal to a higher court is granted by the court that issued the judgment, but the higher court decides on the appeal.

The party that considers itself aggrieved by the decision may announce its appeal orally at the time of notification and must then substantiate it within five days. Alternatively, it may announce and substantiate the appeal within five days of notification of the decision it seeks to challenge.

After the appeal is substantiated, the other party also has five days to file its opposition to the appeal.

The appeal court may only consider those issues raised by the appealing party, which may be of law or fact. If both parties appealed, the court may decide on all issues related to the case. There will be a review of the first-instance decision, but new points that were not explored at first instance may not be taken at an appeal.

The court may not aggravate the appellant’s position.

After hearing an appeal, the appellate court may revoke, confirm or amend the first-instance decision.

As a general rule, the losing party is responsible for paying the expenses and costs of litigation. Expenses include payment to witnesses for their assistance to, for example, inspections of property; expert witness fees and depository fees in the case of injunctions (secuestros). Costs are limited to attorneys’ fees and specific expenses, such as the cost of official certificates.

The allocation of costs may be subject to review or appeal.

When awarding costs, the court must consider the following factors:

• the work carried out by the lawyer;
• the expenses incurred by certain acts, such as expert witness fees;
• the value of the certificates and copies presented as evidence; and
• the costs that correspond to lawyers’ fees, which are calculated based on the minimum legal fees approved by the Supreme Court.

Interest is awarded on costs. If it is a civil case, the general interest rate is 6%; if it is a commercial case, the rate is 10%.

Panama has a very friendly attitude towards ADR – including mediation. The most popular ADR methods in Panama are mediation, conciliation and arbitration, all of them being regulated. Without a doubt, arbitration stands out, supported by a user-friendly law based on the UNCITRAL Model Law and a distinguished community of arbitration practitioners.

ADR is not compulsory and does not form part of court procedures. However, civil judges, when accepting that the initial complaint fulfils the formal requirements set by the law, must inform the parties that mediation carried out by the Judicial Branch is available.

Institutions offering and promoting ADR are well-organised and consistently regulated by law. They are monitored by the Ministry of Government.

Law 131 of 2013 regulates national and international commercial arbitration in Panama. It is based on the UNCITRAL Model Law and was created with the specific purpose of promoting Panama as an international arbitration centre.

The recognition and enforcement of arbitral awards depends on whether they were issued as a result of national or international arbitration. If the arbitration was national, enforcement is requested at a civil court and no challenges may be filed by the losing party. If the arbitration was international, Panama is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), and recognition and enforcement is decided by the Supreme Court based on the New York Convention and local law, which is directly based on the Convention.

Subject matters that may not be freely decided by the parties cannot be referred to arbitration in Panama. For example, family law matters may not be referred to arbitration. In addition, those matters that violate public order cannot be referred to arbitration.

Parties can challenge an arbitral award before the Supreme Court by means of an annulment proceeding. An arbitral award may only be annulled in the following circumstances:

• if one of the parties to the arbitration agreement lacked capacity, or if the agreement is not valid under the law;
• if the defendant was not notified of the constitution of the arbitral tribunal;
• the award decided on a matter not covered by the arbitration agreement;
• the designation of the arbitral tribunal did not respect the arbitration agreement;
• the arbitrators decided on matters that cannot be referred to arbitration; and
• the award is contrary to public order.

For the enforcement of domestic arbitration awards, a simple request to a civil judge is sufficient, and no challenges may be filed by the losing party, with the exception of annulment.

Foreign arbitration awards are enforced pursuant to the New York Convention by the Supreme Court. According to the law, a request must be filed by the party requesting the execution, and the other parties are notified and given a 15-day term to respond. The Court must decide in the 60 days following the response. However, in practice, the process can take much longer.

For several years, the Judiciary has been working on a reform of civil procedure that promotes oral proceedings, the concentration of acts, and immediacy as elements to improve the State's response times in resolving conflicts between individuals, whether civil or commercial.

The initiative was implemented through Law 402 of 2023, which came into force in October 2025.

The entire country is eagerly awaiting the results of this legal initiative and its effective implementation.

The main area of growth in commercial disputes is the shortening of response times for dispute resolution.