Originally from World Arbitration And Mediation Review (WAMR)

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ARBITRATION IN PANAMA

By Leonardo Bonadies Mora∗

I. INTRODUCTION
The Republic of Panama always has been attractive to foreign investors.
Its geographic location, international banking center, flexible corporate
regime, and the canal are what make it interesting to foreign and domestic
investors. The recently approved expansion of the Panama Canal enhances
investors’ need for alternative dispute resolution mechanisms to resolve
controversies that may arise from their business activities without the
complications, costs, and delays that are prevalent in civil courts of justice.
The Panamanian Arbitration Law, Decree No. 5 of July 8, 1999 (Decree
No. 5) initially encountered obstacles to its implementation and some of its
articles were declared unconstitutional due to conflicts with the 1972
Constitution of Panama. The Constitution contained rigid provisions that
made it impossible to implement the model arbitration law in Panama. In
response to that conflict, in 2004, the Government of Panama amended the
Constitution.
These amendments have brought about significant changes in the law.
Among the changes is that pertaining to the arbitrability of disputes arising
from contracts with governmental or government-controlled entities.
According to amended Article 200, §4 of the Constitution, the President and
the Ministers of the State (the Cabinet Council) are now able to decide
jointly on which transactions involving the Panamanian Government can be
submitted to arbitration. Their decision is subject to approval of the
Attorney General. The approval of the Attorney General, however, is not
necessary when the arbitrations arise from private contracts entered into by
the State. This exception for economic transactions of the State eliminates a
great deal of bureaucracy for investors who frequently deal with the
Government of Panama. For cases involving a State contract not containing
an arbitration clause, the approval of the Cabinet Council and a favorable
opinion from the Attorney General are required before the parties can
proceed to arbitration. The rule offers flexibility for cases in which the State