Taking action

SHIPPING is one of the most important industries in Panama. The Panama Canal, the terminal ports of Balboa, Cristobal and Manzanillo, the expanding multimodal activities and the ship registry are all factors that are shaping Panama as an important maritime nation. Panama is also home to one of the most important merchant fleets in the world, with thousands of ships registered in Panama and flying the Panamanian flag in all corners of the world.

When legal situations arise concerning a Panamanian-registered vessel or its owners or operators, Panama maritime law, both substantive and procedural, will certainly be considered at some point. Lawyers and clients can often find themselves looking for possible measures to pressure and pursue debtors.

The following injunctions (or precautionary measures as denominated by Panama legislation) are available under Panama maritime procedural law.

Injunctions for in rem claims

There are many instances where a vessel or a shipowning company may incur debts which are painful for creditors or their lawyers to recover. There is also the additional pressure for the latter party that most marine- related credits in Panama maintain a time bar of a year. Such is the case when a supplier has been left hanging with a credit against a vessel with a route where no reliable court may be found to enforce the lien.

The Panama Maritime Procedural Law 8 of 1982 contemplates the possibility to request injunctions against those Panamanian-flagged vessels not transiting Panamanian waters in Article 168(4). The injunction, when admitted by the Panama Maritime Court, will essentially consist, in the recording at the Panama Public Registry, of an annotation to the vessel's property title informing that there is a pending claim and order of arrest before the Panama Maritime Court.

This injunction remedy is contemplated for maritime liens exclusively. It is a prerequisite that a claim against a Panama-registered vessel must be presented before the court. The effect of the annotation is limited to give notice of the legal action. It does not imply arrest, which can only be executed if the vessel is within the jurisdiction of the maritime court.

If and when the vessel is physically arrested in Panama, an annotation by order of the court will be available whereby the vessel is put out of commerce for the time the vessel remains arrested or until it is judicially sold.

These injunctions essentially serve various purposes, especially when the vessel cannot be physically arrested:

  1. It may keep alive, without prescription, a claim against a vessel before the termination of the one-year time bar. Consequently, this permits pursuit of payment satisfaction beyond the statute of limitations.
  2. It serves to give notice to other present or future creditors that the vessel has pending claims - for example, by the mere existence of the injunction, potential buyers or financing institutions may preclude themselves from doing business with the vessel or shipowner.
  3. No transactions dated prior to the date of the claim and its annotation at the public registry will be recorded under Article 168(4)

Injunctions available for in personam claims

In personam claims are those claims where the creditor may not pursue his claim against the vessel directly, but against the owners, charterers, operators, etc, including any maritime commerce claim which may not necessarily involve a ship.

Panama Maritime Procedural Law Article 203 may allow injunctive relief to in personam plaintiffs. Article 203, as per its drafting (based on Article 558 of the Civil Procedure Code), is very broad in its interpretation and applications. In purpose and definition, Article 203 can be compared to those established for Mareva injunctions in English law.

Fundamentally, Article 203 provides the possibility that a plaintiff may request a precautionary measure (protective, preservative or stoppage) which may guarantee and secure, until the end of the litigation, the outcome of a judgement. These measures may translate, for example, into an injunction to stop movement of assets.

The necessary prerequisites to obtain such relief, or precautionary measure, from the court are:

  1. The previous initiation of a claim before the Panama Maritime Court
  2. Prima facie proof of the possible dissipation of assets
  3. 3. Possible existence of property located or registered in the Republic of Panama
  4. To comply with a security bond for damages.

In principle, this injunctive relief, once approved by the court, may serve the same purposes as those available for in rem claims. Both injunctions have the characteristic that, when requested, the court must consider and decide the claimant's request ex parte.

It is also worth mentioning that, for in personam claims litigation, the claimant must continue pursuing the summoning of the defendant, particularly if the domicile of the defendant is not established in Panama and regardless of whether the injunction has been effected.

It is important to consider that, because of its drafting origins and existing interpretation and application in civil courts (via Article 558 of the Civil Procedure Code), Article 203 is subject to more uses in litigation other than the specific targeted assets of a defendant.