The Republic of Panama, due to the Interoceanic Canal and its important ports on the Atlantic and Pacific sides, is an obligatory transit hub used by much of the global merchant fleet. This, together with the existence of two specialized Maritime Courts, make Panama one of the most effective and economical jurisdictions in which to execute maritime claims, though these may not otherwise bear any relationship with the Republic of Panama, as jurisdiction and competence in these instances is acquired by virtue of the arrest of a vessel (Forum Arresti). This is a speedy process and can be carried out 24 hours a day, 365 days of the year.
The competence of the Maritime Courts of the Republic of Panama is regulated under Article 19 del Code of Maritime Procedure, which is transcribed as follows:
“Maritime Courts shall have exclusive jurisdiction to hear cases arising from acts of maritime trade, transport, traffic, taking place within the territory of the Republic of Panama, in its territorial seas, in the navigable waters of its rivers and lakes, and in those of the Panama Canal. These cases shall include claims arising from acts executed or which should be executed from, towards or through the Republic of Panama. Claims involving the Panama Canal Authority shall adhere to the provisions of its Organic Law.
Maritime Courts shall also have exclusive jurisdiction to hear actions arising from acts mentioned in the preceding paragraph which take place outside of the previously mentioned territory, in the following cases:
- When the pertinent actions are brought against the vessel or its owners, and the vessel is seized within the jurisdiction of the Republic of Panama as a consequence of such actions.
- When the Maritime Court has seized other assets belonging to the respondent, although such respondent may not be domiciled within the territory of the Republic of Panama.
- When the respondent finds itself within the jurisdiction of the Republic of Panama and has been personally served notice of any action filed in the Maritime Courts.
- When one of the vessels involved flies the Panamanian flag, or Panamanian substantive law is applicable by virtue of the contract or the provisions of Panamanian law itself, or the parties expressly or tacitly agree to submit to the jurisdiction of the Maritime Courts of the Republic of Panama.”
As may be ascertained from the second paragraph, section 1 of the Article transcribed above, the Maritime Court of Panama may be competent to hear maritime cases by the mere fact of the vessel’s seizure (“Forum Arresti”), even in those cases in which there is no other link to Panamanian jurisdiction. This latter issue is what makes Panamanian maritime jurisdiction supremely interesting for those with pending contractual or non-contractual (tort) claims against vessels engaged in maritime trade and which, for de facto or de jure reasons, are unable to bring suit against or seize said vessels in their own jurisdiction.
Process of Ship Arrest (or seizure of other assets)
The Law states that the Maritime Court shall be accessible 24 hours a day and 365 days a year for the purpose of filing lawsuits, requests for seizure, lifting of seizure and other proceedings, which, if not filed, would cause serious damage to the parties. There are currently two specialized Maritime Courts which handle such claims.
The seizure may have one of the following three aims:
- To prevent any judicial proceedings, already in place, from having an illusory effect.
- To confer jurisdiction on the Maritime Courts of Panama.
- To physically seize assets subject to seizure in order to enforce maritime liens.
The application for seizure shall be filed together with the lawsuit, and it shall contain any information in the claimant’s property concerning the vessel or asset to be seized.
Circumstantial or prima facie evidence of the existence of the obligation which is the subject-matter of the claim must be filed together with the application for seizure, such as: invoices, contracts, protests or any other evidentiary documents. Given the urgent nature of the cautionary measure of seizure, fax or simple copies may be submitted as prima facie evidence at this stage of the proceedings without requiring authentication or other formality.
The lawsuit and application for seizure shall be submitted together with a bond of one thousand U.S. dollars (US$.1,000.00) to cover any damages caused by the seizure, in the case of suits filed according paragraph 1 of the abovementioned Article 19. Furthermore, the claimant shall deposit with the Bailiff of the Maritime Court (authority which actually carries out the seizure) the sum of two thousand five hundred U.S. dollars (US $.2,500.00), as an advance on any expenses which may be incurred in the conservation and custody of the assets subject to the seizure. In addition, the Bailiff may require any additional sums of money from the plaintiff, at any time, to cover any expenses for the conservation, custody and maintenance of the seized assets.
In the majority of cases, due to the urgency of the matter, there is no time to obtain an appropriate power of attorney and/or to certify the legal capacity of the claimant or respondent. In such cases, legal counsel may act as unofficial representative by depositing a bond which can range from one hundred U.S. dollars (US$. 100.00) to three thousand U.S. dollars (US$. 3,000.00), according to the monetary value of the claim, and if legal capacity is not certified, an additional bond ranging from fifty U.S. dollars (US$. 50.00) to one thousand U.S. dollars (US$. 1,500.00), according to the monetary value of the claim.
Enforcement of the Seizure:
If the seizure is admitted it shall be immediately ordered, without holding a hearing with the respondent. Once ordered, the procedure shall be the following:
- The Bailiff shall go to the place in which the assets are located and shall serve notice of the order to seize to the person in charge with the custody thereof.
- In the case of a vessel, its cargo or both, the order shall be posted in the command station.
- In the case of cargo not located on board the vessel, the order shall be posted thereon. The entire procedure can be carried out within hours, in the absence of any special problem.
- The Panama Canal shipping traffic department shall be notified in order to prevent the transit of the Seized Vessel, if applicable.
Assets which can be subject to seizure:
In addition to vessels, the following assets may also be subject to seizure: cargo, freight, bunkers, and real estate property belonging to the respondents, as well as any asset which is subject to seizure.
The existence and validity of a prior seizure shall not preclude any other seizure from being ordered against the same vessel or asset, provided such seizure is ordered to enforce a maritime lien.
Lifting of the Seizure:
Once the seizure has taken place, it may be lifted in the following cases:
- If the respondent provides security therefor.
- Upon application by the plaintiff to the Judge or Court Clerk.
- At the request of the bailiff in the presence of the claimant, if the latter has not complied with the request of the Bailiff concerning the provision of additional funds for the Custody and Preservation of the seized asset.
- Court order.
Security to be provided for Lifting of the Seizure:
For the purposes of paragraph one of the foregoing point, such security shall consist of:
- Certified or Cashiers’ Checks drawn against Banks holding a general license to operate in the Republic of Panama.
- Guarantee bonds issued by authorized companies in the Republic of Panama.
- Any other guarantee agreed by the parties.
Appeal against an enforcement order:
The Law and its rules pertaining to seizures provide the owner of the vessel or the seized asset or anyone administering the same with the remedy of appeal against an enforcement order as a speedy remedy, solely in the event of the occurrence of one of the following circumstances:
- Seizure of an asset which does not belong to the respondent.
- Violation of a prior and express agreement to refrain from seizure.
- Enforcement of an Extinguished or Non-Existent Maritime Lien.
Anyone appealing against an enforcement order shall provide credible evidence that the seizure is inadmissible. Once the appeal is admitted, the Court shall compel the plaintiff to appear at an enforcement hearing upon the expiry of the time allowed by law. During the hearing, the sequestrator shall prove that the seizure is admissible; otherwise, the Court, at the same hearing, shall order the lifting thereof.