Arbitration in Panama

The tradition:

Panama has a long tradition in arbitration beginning in 1917 when the Panamanian Procedure Code was enacted and contained provisions regulating arbitration procedures.  Later in 1984 the aforementioned Code was derogated and a new one adopted which included very modern provisions in connection with arbitration.  Nevertheless, the practice of arbitration was limited to a reduced number of lawyers and businessmen; thus a vast number of people could not appreciate at the time the benefits of the institution. 

The development of the legislation:

In 1999 a profound revision of the legislation on arbitration was made which ended up in the derogation of the chapter of the Procedure Code related to arbitration and the adoption of an entire new law, more or less in accordance with the UNCITRAL model of law.  At the same time the Panamanian Chamber of Commerce and Industry initiated a vigorous campaign to promote arbitration as a modern means of solving discrepancies between parties bound by a contract or by any other legal relationship, including claims from and against the Central Government, State Agencies and Autonomous Institutions.  This promotion fell on fertile soil due to the fact that procedures before the Civil Courts were and are subject to delays caused by the enormous number of cases that these courts have to decide and the fact that in an arbitration procedure the parties are free to choose their own judges, and normally the parties in dispute appoint arbitrators who are lawyers or have experience and expertise in the field or knowledge on the matters at hand.

International Conventions ratified by Panama:

It is important to note years before the enactment of the Arbitration Law Panama had ratified three important international conventions related to arbitration, that is, the New York Convention of 1958, the Panama Convention of 1975 and the Convention on Acknowledgement and Execution of Foreign Arbitral Awards of 1983.

The impulse to arbitration: 

The first step the Panamanian Chamber of Commerce and Industry took to give an impulse to arbitration in Panama was to lobby before the Executive and the Legislative Branches of the Government of Panama to adopt the new arbitration law (Decree Law 5 of 1999) and the second was establishing a Center for Dispute Resolution (known as Centro de Conciliación y Arbitraje de la Cámara de Comercio e Industria de Panamá); this Center adopted a set of regulations to govern the procedures it administers.  In parallel, the Panamanian Construction Chamber (known as CAPAC) followed the same path; thus there are presently in Panama at least two very reputable institutions vigorously promoting arbitration in Panama with tremendous success amongst lawyers and businessmen.  Both dispute resolution centers have been approved by the Panamanian Government and are authorized to administer arbitration procedures.  Their list of arbitrators includes the most prestigious lawyers of Panama.

Several years ago the Panamanian Chamber of Commerce and Industry took the initiative to create in Panama a chapter of the International Court of Arbitration which was approved and is operating under the auspices of ICC.

Types of arbitration procedures:

Depending on whether arbitration procedures are administered or not by any one of the Centers for Arbitration they are called institutional or ad-hoc, the latter being those where arbitrators are appointed by the arbitration agreement with the exclusion or involvement of any third party or Court of Justice.  The arbitrators may be specifically instructed to render the award in accordance with the law but if they have no specific instructions by the parties then as per the provisions of the Law they decide based on equity.

Domestic and foreign commercial awards:

The Panamanian legislation classifies arbitral awards between domestic and international commercial the latter being those which procedures have taken place outside of Panama, including when taking place in Panama with at least one party being foreign and matter in question being commercial by nature.  The difference between both is that when dealing with a foreign commercial award the parties may waive the action for annulment.  The granting of an annulment of an international commercial arbitration award is very rare as the causes for same are limited.

Exequatur and execution of awards: 

Foreign arbitral awards need to be examined by the Supreme Court of Justice of Panama to give the exequatur prior to authorize their execution.  The Civil Circuit Courts are the ones empowered to execute awards regardless of whether these are domestic or foreign.

Panama as an international arbitration center:

Panama is considered a very interesting country which provides many opportunities to business owners.  Firstly the important trade route due to the Canal which is being expanded and modernized, the Colon Free Zone and the development of the new Panama Pacific Special Zone. Also the country is seen as an international financial center with an economy which is growing at the expected rate of 6.5% this year.  Panama is also an important place for international services with arbitration law which is modern and part of the three major international conventions on arbitration.   The country is becoming an international center for arbitration for which it is more than prepared.

Galindo, Arias & López is a full-service law firm that, since 1968, has been providing legal counsel and specialized representation to clients with national and international interests.  The firm provides practical and effective solutions to legal and commercial challenges, particularly in corporate law, mergers and acquisitions, energy, telecommunications, intellectual property, arbitration, litigation and immigration, among others. 

We are proud to serve the needs of our clients with a distinguished team of over 125 employees, including 12 partners and more than 30 associated attorneys.  Tomas Herrera is a partner of the firm since 1972.  He specializes in Civil and Commercial Law with an emphasis on banking, insurance and reinsurance, corporate law and arbitration.  Mr. Herrera can be contacted on + 507 303 0303or by email at gala@gala.com.pa