PANAMA: An Introduction to Dispute Resolution
The Panamanian Justice Administration System is structured, primarily, based on the constitutional and legal provisions, the latter contained in the Judicial Code, and other procedural regulations that have been developed over time, as specific needs have arisen.
In this sense, from the exclusively judicial point of view, the Administration of Justice in Panama is in the hands of the Supreme Court of Justice, the Superior Courts of Justice, Circuit Courts, Municipal Courts, and Sectional Courts, all of which must prevail the principle of judicial independence.
The highest Panamanian court is the Supreme Court of Justice, made up of four specialised Chambers, namely: First Civil Chamber, Second Criminal Chamber, Third Administrative and Labour Chamber and Fourth General Business Chamber. The first three are made up of three magistrates each, and the Fourth Chamber by the presiding magistrates of the first three.
The Supreme Court of Justice is renewed periodically in accordance with previously established constitutional rules. In this sense, Ariadne García, for the Second Chamber, recently joined as magistrate of the Supreme Court of Justice of Panama. With this designation, the Supreme Court of Justice remains integrated mainly by women, six in total.
Another relevant aspect to highlight is that the Plenum of the Supreme Court of Justice has been promoting the discussion before the National Assembly of the Bill containing the Civil Procedure Code, which emerged from within the court itself. The Civil Procedure Code is intended to modernise the civil jurisdiction, whose development has been subject to harsh criticism due to judicial delay and serious questions about the impartiality of certain decisions that are adopted in said jurisdiction. Moreover, the National Assembly recently approved in third debate the Bill 635 which modifies and adds articles to the Judicial Code related to the judicial sale of movable and immovable property. Currently, the Bill 365 awaits its enactment by the President of the Republic.
Furthermore, it is a fact that because of the COVID-19 pandemic, the Judicial Branch, which had lagged in the implementation of virtual media and digitisation in the management and action of the courts, was committed to developing a digital platform that allows users to access files without having to go to the courts of justice. Besides, there is no doubt about the relevance that a complete implementation of the virtualisation of the administration of justice will have for the judges, litigants and, in general, for the citizenry. However, after a year of its implementation the system has been widely criticised for the delay in the digitisation process, the limited access of files to the public and problems related to the timely serving of notice.
Likewise, because of the COVID-19 pandemic, the country's economy was strongly affected by the harsh quarantines and isolation periods ordered by the Executive Branch to contain the spread of the disease. This situation caused the closure of many companies that could not resist the impact of the sanitary measures on the country's economy. Today there is a certain improvement in the economic situation. The country has overcome this health crisis; nonetheless, the truth is that in this framework, Law 12 of 19 May 2016, which establishes the Insolvency Proceedings Regime, was passed with the intention of helping companies to reorganise easily in times of crisis and get the creditors paid, but in practice the law did not achieve the function that was expected from it.
The regulation itself contemplates two types of insolvency process: the Bankruptcy Reorganisation Process and the Bankruptcy Liquidation Process, with the purpose of protecting credit and creditors to guarantee the recovery and conservation of the efficiency of companies, as operating economic units and employment-generating sources; or through a prompt and orderly judicial liquidation of the efficient company. Notwithstanding the good intentions of this law, the lack of budget allocation for the creation of specialised courts became its main limitation. The ordinary civil courts currently process some insolvency proceedings under this law. As a result, through Law 212 of 29 April 2021, Panama adopted a regulation that established a special regime for reconciled reorganisation processes carried out due to the national emergency because of the COVID-19 pandemic. Nevertheless, Law 212 did not solve the legal issues arising from the bankrupt companies as expected. For instance, there is a notorious case concerning a chain of convenience stores, that Law 212 was applied to, but creditors could not recover even a fraction of their credit.
Currently in Panama there are private arbitration, conciliation and mediation centres that have developed their regulations for conciliation to be verified within the conciliated reorganisation processes, and it is known that there are cases of this nature in the conciliation phase, administered by those centres.
It is equally important to mention that in Panama the arbitral jurisdiction has been elevated to constitutional status. Besides, since 2013 we have the Law 131 that regulates national and international commercial arbitration with a growing interest in resolution of conflicts, due to the presumption that in the arbitration processes the problems that overshadow the ordinary civil jurisdiction will not arise.
Accordingly with Law 131, the users of the arbitration system are able to appeal for annulment proceeds against arbitration decisions, under the jurisdiction of the Fourth Chamber of the Supreme Court of Justice. Nowadays, when an appeal is presented it faces all the ailments of the judicial system, thereby it is hoped that in the future such resource can be handled at least as quickly as the arbitration processes, so this framework preserves its main advantage. Unfortunately, efforts aimed in that direction have not been realised yet.
It should also be noted the Maritime Jurisdiction of Panama was formed by two Maritime Courts and the Maritime Courts of Appeals with 100 plus years’ history of maritime dispute resolution since the Panama Canal was established in 1914. The courts have become an internationally recognised forum to file maritime claims and arrest vessels resulting from any maritime transaction due to its privileged geographic position. In sum, the Panamanian justice system aspires to become more dynamic, in tune with technological advances and with the needs that these times demand.