Originally from American Review of International Arbitration - ARIA

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INTRODUCTION

The quest for exploring and developing Panama’s oil and gas resources has occupied private investors and the Panamanian government for many decades.  This may be related to Panama’s proximity to Venezuela and Colombia, neighboring countries with vast proven oil and gas reserves. To facilitate the process, Panama has enacted some specific laws and regulations to govern such activities.

Simultaneously with the development of its legal framework to regulate oil and gas activity, Panama has enacted laws and regulations meant to encourage arbitration as an alternative dispute resolution method.  This article examines the interplay between oil and gas activities and dispute resolution mechanisms, particularly arbitration, examining relevant laws, contracts and case law regulating each subject.

I.   DISPUTE RESOLUTION CLAUSES IN EARLY EXPLORATION CONTRACTS

In 1978, the Republic of Panama entered into a number of oil and gas exploration contracts with private companies. These contracts included dispute resolution clauses designating Panamanian courts of law as the sole forum for dispute resolution.  The contracts at issue were afforded the rank of national laws. These were signed with, among others: Carib Exploration Inc. (Law No. 40), San Blas Exploration Inc. (Law No. 41), Colon Exploration Inc. (Law No. 42), Balboa Exploration Inc. (Law No. 43) and Isthmus Exploration Inc. (Law No. 44). 

The concept of enacting what would otherwise be a standard government contract into a stand-alone law is to provide investors with an added level of legal stability. This model became quite popular in the 1990s with regard to port operations, transportation concessions and even some oil and gas-related activities, as we shall see below.