Panama as Center for International Arbitration in Latin America
by By Orlando Tejeira V., Attorney, Morgan & Morgan, London office
Motivated by the desire to optimize all matters concerning arbitration and to adapt our previous legislation to the principles set by the United Nations Commission of International Trade Law (UNCITRAL), the Panamanian National Assembly enacted the Law No. 131 of 31st December 2013 on National and International Commercial Arbitration (the “Arbitration Act”). A summary thereof follows.
This Act applies to arbitrations, both national and international, with seat within Panamanian territory.
National and International Arbitration
The arbitration shall be international when one or more of the parties to an arbitration agreement are domiciled in different states or when either the seat of arbitration or the places where the obligations are to be fulfilled are not in the domicile of the parties.
The arbitration shall be national when none of the above takes place and when the arbitral tribunal is established within Panamanian territory.
This written agreement binds the parties to comply with it and prevents one of the parties to submit the claim to a judicial process before submitting it to arbitration.
Appointment of Arbitrators
The parties are free to agree the number of arbitrators, provided that is odd. In the absence of an agreement, there will be only one arbitrator. If one of the parties is a State or a State entity, there will be three arbitrators.
Unless otherwise agreed by the parties at the request of one of them, the arbitral tribunal may order any temporary measure, during the process and prior to the issuance of the final arbitration award, in order to maintain the status quo between the parties throughout the process.
Conduct of Arbitral Proceedings
The parties are free to i) agree the procedure to be followed by the arbitral tribunal in conducting the proceedings; ii) determine the seat of arbitration; and iii) agree on the language or languages to be used in the arbitral proceedings.
In the absence of an agreement, the arbitral tribunal shall i) conduct proceedings in the manner it considers appropriate; ii) determine the seat of arbitration considering the circumstances of the case and the best interest of the parties; and iii) determine the language or languages to be used in the proceedings.
In international arbitrations, an award must be issued and notified to the parties within the time limit set by them, the applicable arbitral rules or by the arbitral tribunal.
In national arbitrations, unless otherwise agreed by the parties, the deadline for issuing the final award shall not exceed a period of two months from the closing arguments presented by the parties.
Challenge of the Arbitration Award
The arbitration award can only be challenged i) if the award is contrary to international public policy; ii) by unlawfulness of the arbitration agreement; iii) by the lack of notification of the appointment of an arbitrator; iv) if the award deals with a dispute not contemplated in the arbitration agreement; v) if the arbitrators decide on matters not subject to arbitration; vi) if the appointment of the tribunal or the arbitral procedure was not in accordance with the agreement between the parties.
Enforcement of the Arbitration Award
In Panamanian courts, the award should be enforced in the Civil Courts in accordance with the procedure established in the Procedural Code.
In International courts, the award should be enforced according to the procedure established by i) the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; ii) the Inter-American Convention on International Commercial Arbitration; or iii) any other treaty on recognition and enforcement of arbitral awards ratified by the Panamanian government.
Arbitration agreements prior to the date of enactment of this Arbitration Act are subject to the provisions thereof, unless otherwise agreed by the parties.
This Arbitration Act aims to adjust the Panamanian legislation to the international norms and standards in this field, in order for Panama to compete in the race to become the center for International Arbitration in Latin America.
Furthermore, Panama’s status as an International Financial Center, along with its connectivity and development in logistics and infrastructure, contribute to the promotion and exposure of the country as an international and regional center for the resolution of arbitral disputes.