Litigation 2023 Comparisons

The Panamanian legal system is based on civil law, as an inheritance of its past history as part of Colombia and Spain. As a general rule, the legal system follows an inquisitorial model, except in the criminal jurisdiction in which recent changes to the system introduced the adversarial model. In addition, the legal process is generally conducted through written submissions, with the exception of the criminal process, which is conducted with both written submissions and oral argument.

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. There are no procedures for protecting court filings and proceedings from public disclosure. There are no proceedings or information that is kept confidential in certain circumstances.

Legal practitioners who appear in Panama’s courts must have a licence to practise issued by the Supreme Court of Justice, which is granted mainly on the person being a Panamanian citizen and having 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 our courts, since the Supreme Court can only grant a licence to practise to Panamanian citizens.

Panama does not have a regime that regulates litigation funding by a third-party funder. There are no restrictions on litigation funding.

Since Panama does not have a regime that regulates litigation funding by a third-party funder, any type of lawsuit is available for third-party funding.

Since Panama does not have a regime that regulates litigation funding by a third-party funder, third-party funding is available for both the plaintiff and the defendant.

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

Since Panama does not have a regime that regulates litigation funding by a third-party funder, 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 area, the Panama Supreme Court approves the minimum legal fees set by the Panama Bar Association, and as a general rule no lawyer may charge less than the minimum legal fees approved by the Supreme Court. In the case of contingency fees, these are based on the amount of the claim; for example, if the claim is between USD100,001.00 and USD500,000.00, the minimum contingency fee is of 15% of the amount recovered, and cannot be higher than 50%.

Since Panama does not have a regime that regulates litigation funding by a third-party funder, 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, seven years. In commercial suits, the statute of limitations is five years. There are special cases, but these are the general rules. A limitation period is triggered as soon as the act that gives rise to the claim occurs.

There are no particular jurisdictional requirements for a defendant to be subject to suit in Panama. Specifically, any individual, legal person or government office may be sued. This does not differ between courts, since this is the general rule applicable to all proceedings.

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

• The name of the parties with 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.
• The legal provisions on which the claim is based.
• If the plaintiff wishes to do so, they may include the evidence in 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.

The general rule is that the defendant is personally notified of the decision that accepts the complaint. Once the initial complaint has been filed, the court must decide if the complaint includes the formal requirements set by law. If this is decided in the plaintiff’s favour, the court system informs the defendant that they have been sued. A party may be sued outside the jurisdiction, and the general rule is that the court requests the assistance of a court in that jurisdiction to inform the defendant.

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, only in matters regarding 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.

In civil cases, it is possible to make the following interim application/motions.

• Asset freezing: it is possible to request a freeze of the defendant’s assets before the complaint is filed or after it has been filed, during any stage of the process, in order to prevent the defendant from transferring their assets. Such a freeze forces the defendant to give control over their assets to a depositary appointed by the court. If the plaintiff wins the case, the assets are auctioned and the assets themselves or the money paid for the assets is given to the plaintiff. If the asset consists of bank accounts, the money in the accounts is paid to the plaintiff.
• Suspension: it is possible to request a suspension before the complaint is filed or after it has been filed, with the purpose of having the court order the defendant to suspend any transaction, negotiation, innovation, etc related to the plaintiff’s claim that might affect their right, only in actions in rem (those cases regarding a specific piece of property).
• Injunction: they may be requested by the plaintiff before the complaint is filed or after it has been filed, with the purpose of having the court order something specific to the defendant so as not to affect the plaintiff’s alleged claim (for example, suspend a board of directors so that they are unable to take decisions).

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, and may only file it once they have been notified of the complaint. Once the incidental has been filed, the court must decide if it accepts or rejects deciding on the incidental, if the request complies with the legal formalities. If the incidental is accepted, the other party has a three-day term to answer. If there is evidence to be reviewed by the court regarding the incidental, the court must give a term for such review to occur. Finally, the judge decides on the incidental. Depending on their complexity, incidentals may take many months to be decided by the court.

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

Interested parties not named as plaintiff/claimant or defendant may not join a lawsuit. 

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 in two: costs and expenses. These are expenses of the case and are always paid by the losing party to the winning party.

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; in other words, some courts take more time than others. A party cannot request that the application/motion be dealt with on an urgent basis.

In Panama, discovery does not allow a party to request that the other party produces documents. Having said that, the term is used to refer to the evidentiary stage of a trial.

Since discovery in Panama does not allow a party to request that another party produces documents, and the term is used to refer to the evidentiary stage of a trial, this is not applicable.

The general approach to discovery in Panama is based on the initiative of the parties and the control/administration of the court. There are no specific documents that the parties must disclose, but there are detailed rules governing each discovery mechanism described previously. For example, the inspection of property requires the presence of two witnesses. Fishing expeditions are prohibited.

This is not applicable in Panama.

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 employees of the lawyer, and may only be lifted with the client’s authorisation, or if the client claims against the lawyer and the lawyer needs to reveal 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.

Injunctive relief may be awarded in the following cases:

• Asset freezing: a simple request by the claimant is sufficient. Once the judge accepts the request, the claimant must secure the possible damages that may be caused to the defendant because of the freeze. This security may be given in cash, a bond issued by an insurance company, or a mortgage.
• Suspension: only available in actions in rem (those cases regarding a specific piece of property), and a simple request by the claimant is sufficient. Once the judge accepts the request, the claimant must secure the possible damages that may be caused to the defendant because of the suspension. This security may be given in cash, a bond issued by an insurance company, or a mortgage.
• Injunction: the claimant may request an injunction, but the court will only grant it if it believes there is a presumption of sufficient legal basis and a risk of imminent and irreparable damage. The claimant must also secure the possible damages that may be caused to the defendant because of the injunction. This security may be given in cash, a bond issued by an insurance company, or a mortgage.

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.

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 later 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 includes the arrest of the person who refuses to comply, which may not last more than six months. The judge may, instead of an arrest, fine the person, considering the person’s assets. In addition, the person may be liable for damages for failing to comply.

Civil trials in Panama are primarily conducted in writing through issuance of a final judgment. Hearings are only required for witness/expert examination.

This is not applicable in Panama.

Jury trials are not available in civil cases.

The system requires that the evidence be licit, pertinent and timely.

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

Hearings and transcripts of hearings are not open to the public.

Since the legal process in Panama does not involve hearings/trial and/or other instances of oral argument, this is not applicable.

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.

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 if the matter may be settled (for example, cases regarding the civil status of a person may not be settled) and if the parties that settled are legally capable of doing so (for example, if the person that acted on behalf of a company has the power to do so and to settle).

The settlement of a lawsuit may remain confidential only if it is extrajudicial. If it is judicial, it is public, because it will become a 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 superior amount. The losing party must also pay the expenses (for example, costs for copies of documents) and the costs (lawyers' fees) of the process.

Damages include both material and moral damages. Material damage is limited to the amount proved in trial. If there is moral damage that affected the plaintiff in its decorum, honour, reputation or consideration, the judge may order the publication of an extract of the judgment.

The judge may not order the defendant to pay more than what was 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 rules limiting maximum damages.

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

A party may collect interest accruing after judgment is entered.

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

For the enforcement of a domestic judgment, the winning party may request the court to forfeit any assets that belong to the losing party and give them to the winning party. If the losing party’s obligation consists of doing something, 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 consisted of not doing something, 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 there. 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.

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 complaint requesting execution is notified to the losing party and the Panama Attorney General, which have five days to answer the complaint. If the losing party opposes the execution, the Supreme Court will grant a term for the parties to adduce evidence and a term for the evidence to be taken by the court. After this is done, a term is granted for the parties to provide their allegations. Finally, the Supreme Court decides if the sentence is executed or not. If it approves the enforcement, the case is sent to a judge for the enforcement procedure.

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

• Reconsideration: for the judge that granted the decision to revoke, reform, add or clarify its own resolution. This can only be requested against decisions that cannot be appealed.
• Appeal: for a higher court to revoke or reform the decision of the lower court. Not all decisions are appealable.
• Challenge of fact: may be filed by a party that tried to appeal but 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 consulted with the higher court before the lower court may execute them.

An appeal to a higher court may be granted only to the party that believes itself to be harmed by the decision. Said party must announce its appeal in three days. After announcing its appeal, the party has five days to sustain its appeal. The appeal to a higher court is granted by the court that granted the judgment, but the higher court decides on the appeal.

The procedure for taking an appeal is limited to the appealing party announcing its appeal three days after being notified of the judgment, and sustaining it five days after announcing it. The counterparty has the right to oppose the appeal.

The appeal court may only consider those issues appealed by the 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 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 reform 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.

There are no mechanisms for challenging the amount of the costs to be paid. These are established by the court at the end of a trial.

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

• the work invested by the lawyer;
• the expenses caused by certain acts, such as expert witness fees; and
• the value of the certificates and copies adduced as evidence.

The costs that correspond to lawyers' fees are considered 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 alternative dispute resolution – 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, with a very 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 highly 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, and recognition and enforcement is decided by the Supreme Court based on the 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 was under some sort of incapacity, or if the agreement is not valid under its 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.
• 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 rest of the parties must be notified and are given a 15-day term to answer. The Court must decide in the 60 days following the answers. In practice, the process takes much longer.

There are no proposals for dispute resolution reform.

Currently, COVID-19 does not have an impact on the operation of the courts and court hearings. The government has not passed permanent legislation or issued permanent orders suspending the operation of limitation periods, but temporary measures were taken when the courts were closed because of COVID-19. This is no longer the case.