Conducting litigation in Panama

An extract from Lexology

This Q&A covers the procedures and practical considerations of litigation in Panama, including limitation issues, case management, submission of evidence and available remedies.

Authors: Khatiya Asvat and Joaquin De Obarrio

Litigation

Court system

What is the structure of the civil court system?

At the first level are the municipal courts with jurisdiction on matters not exceeding US$5,000 and certain case-specific matters (for example, eviction proceedings). The municipal courts have jurisdiction over a municipality. Appeals against decisions of the municipal courts are heard by the circuit courts, where three circuit judges act as appellate court, one of them serving as main appellate judge.

Next are the circuit courts with jurisdiction on matters exceeding US$5,001 and certain case-specific matters (for example, oral proceedings related to challenges against resolutions of corporations and claims involving land). The circuit courts have jurisdiction over a province, except for the province of Panama, where three groups of circuit courts hold jurisdiction over a series of municipalities.

The provinces are distributed in what is known as judicial districts. For civil matters, the Republic of Panama has four judicial districts headed by a Superior Court: the First Judicial District, formed by the provinces of Panama, Colon, Darien, San Blas and Panama Oeste; the Second Judicial District, formed by the provinces of Coclé and Veraguas; the Third Judicial District, formed by the provinces of Chiriquí and Bocas del Toro; and the Fourth Judicial District, formed by the provinces of Los Santos and Herrera. Appeals against decisions of the circuit courts are heard by the Superior Courts or courts of appeals of the relevant province’s judicial district.

The Superior Courts or courts of appeals generally serve as appellate courts for appeals against decisions of the circuit courts, as well as first instance courts for constitutional challenges against actions of public officials with jurisdiction over a province, and other matters. The Superior Court is composed of five magistrates for the First Judicial District and three magistrates for the other judicial districts. The magistrates act as an appellate court consisting of three magistrates, each alternating as the main magistrate on different cases, pursuant to case distribution rules.

Challenges against decisions of the Superior Courts are heard before the Civil Chamber of the Supreme Court of Justice, in particular, the writ of cassation. Three Supreme Court justices form the Civil Chamber.

Matters related to constitutional challenges are heard by the Plenary Assembly of the Supreme Court of Justice. The Supreme Court comprises nine justices overseeing four chambers, each chamber composed of three justices; namely the First Civil Chamber, the Second Chamber for criminal matters, the Third Chamber for administrative matters and labour litigation, and the Fourth Chamber for general matters.

Other special courts exist, such as the courts of commerce, composed of three (two active) circuit-level commercial courts of the first judicial circuit of Panama, and a Superior Commercial Court, part of the First Judicial District. In addition, special insolvency courts are to be incorporated into the civil court system, to eventually operate at the circuit court level, overseen by a Superior Insolvency Court, part of the First Judicial District. There are also two maritime courts with nationwide jurisdiction and a maritime court of appeals.

Judges and juries

What is the role of the judge and the jury in civil proceedings?

In civil matters, the burden of proof is borne by the plaintiff. Therefore, the judge’s role consists of verifying and analysing the evidence produced by the parties in the proceedings, and forming their own concept, based on personal knowledge and experience, the applicable law and principles, and the rules for admission of evidence. This process is known as critical analysis. When conducting this critical analysis, the judge can request the production of evidence, including the assistance of experts; however, this analysis cannot make up for or supplement deficiencies of the parties, in particular as it relates to the plaintiff’s burden of proof duties. Juries are not involved in civil proceedings. Civil proceedings are mostly of a written nature.

Limitation issues

What are the time limits for bringing civil claims?

Different time limits apply depending on the nature of the claim.

The general time limit provided by the Civil Code for the filing of a personal claim for actions that do not have a particular time limit is seven years.

The general time limit for the filing of a claim for tortious damages is one year.

Real estate claims have a 15-year time limit.

The time limit for claims to seek payment of overdue leases is five years.

Claims to seek payment of civil services rendered by lawyers, notaries, experts, custodians, interpreters, arbitrators, services provided by pharmacists, medical doctors, engineers, chemists, teachers and professors, as well as lodging and food, and the sale of provisions to non-merchants or those merchants practising in another activity, are limited to two years.

It is not permitted for the parties to agree to suspend time limits; however, individuals with the capacity to dispose of assets can waive the acquired time limit.

The above are Civil Code-governed claims.

Note that civil proceedings also include claims governed by the Code of Commerce, where the default time limitation is five years.

Claims governed by the Code of Commerce subject to civil procedure include: claims for retail sales, claims for agents’ wages, claims for transportation contracts, broker’s liability claims and insurance claims where the time limitation is one year.

Claims related to corporations and resulting relations and liabilities between shareholders or partners, as well as with regard to the company, liability of liquidators or managers of corporations, interest due on leases when charged yearly or lesser periods, for collection of negotiable instruments, wholesale activity, financial leasing and banking facilities, have a time limitation of three years.

Pre-action behaviour

Are there any pre-action considerations the parties should take into account?

Considering the formal nature of civil proceedings, the plaintiff must verify that documents serving as evidence comply with the requirements of the governing law as well as for their admissibility (for example, signatures have been acknowledged before a notary, documents granted abroad have been legalised, documents have been signed by individuals with authority, certificates have been obtained within the legal timeline for their validity, etc).

The plaintiff can try to secure or produce evidence that may otherwise not be available during the proceedings, through pre-judicial petitions that may include witness statements, inspections of places, objects or documents with the assistance of experts, special disclosure of accounting or financial records, and reports from private or public institutions. A security deposit (in the range of US$100 to US$1,000) for damages is generally required for the order to be effected.

A plaintiff can try to secure the claim through the pre-judgment attachment of assets, such as cash in banks, movable assets, property recorded with the Public Registry, credits, inventories and others. A security bond for damages that may be caused, representing an estimated 25–40 per cent of the attachment amount or claim amount (the attachment amount cannot exceed the claim amount), is required, in the form of cash deposited with the National Bank in the relevant court’s account, insurance or bank guarantees, mortgages or public debt instruments; the amount is set by the court at its discretion. The pre-judgment attachment is an ex parte application; once the order has been effected, the plaintiff has to file the complaint within the following six days and serve the defendant with proceedings within the following three months; otherwise, the complaint may be dismissed.

Starting proceedings

How are civil proceedings commenced? How and when are the parties to the proceedings notified of their commencement? Do the courts have the capacity to handle their caseload?

Proceedings commence through the filing of a complaint. Once the complaint is admitted, the court instructs service on the defendant. The defendant is personally served through the judiciary. If the defendant is a corporation, then its legal representative would have to take service. If the defendant or its representative is not within Panamanian jurisdiction, letters rogatory have to be sent to the foreign jurisdiction through diplomatic channels. The defendant has to be provided with a copy of the complaint and order of admission, and will be required to sign the order of admission. At such moment, the term for answering the complaint shall commence. If the defendant cannot be located, an absentee party defendant shall be appointed.

The Panamanian judiciary’s caseload is significant and the allocated budget restricted, and as a result, the progression of proceedings is slow.

Timetable

What is the typical procedure and timetable for a civil claim?

The timeline for an ordinary civil claim is as follows:

• filing the complaint;

• answer to complaint: to be filed within 10 days after service of the order of admission of complaint;

• filing of evidence: takes place 15 days after the term for responding to the complaint, and has to be filed within the following five days;

• counter-evidence: has to be filed within three days after filing of evidence term;

• objections to evidence: has to be filed within three days after filing of counter-evidence term;

• taking of evidence: the court may set a calendar of up to 30 days. The order for taking of evidence may take an estimated one to two years or more;

• closing statements: filed within five days after the conclusion of the taking of evidence stage;

• decision: one to three years or more;

• appeal: to be taken three days after service, filed within the five following days; one to two years; and

• cassation: two to three years or more.

Case management

Can the parties control the procedure and the timetable?

The duty to keep the impulse or pace of the proceeding falls on the judge. However, there are mechanisms that allow the parties to control certain aspects of the procedure and its timetable: the parties can agree to stay the terms of proceedings for periods of up to three months, and they can also ask the judge to eliminate, modify or have as effected certain parts of the procedure.

Evidence – documents

Is there a duty to preserve documents and other evidence pending trial? Must parties share relevant documents (including those unhelpful to their case)?

Generally, no. Discovery is not available in civil proceedings.

Evidence – privilege

Are any documents privileged? Would advice from an in-house lawyer (whether local or foreign) also be privileged?

In principle, yes. The document would be protected by the attorney–client privilege.

Evidence – pretrial

Do parties exchange written evidence from witnesses and experts prior to trial?

No. A party can try to secure evidence prior to the commencement of proceedings.

The timeline for an ordinary civil claim is as follows:

• filing the complaint;

• answer to complaint: to be filed within 10 days after service of the order of admission of complaint;

• filing of evidence: takes place 15 days after the term for responding to the complaint, and has to be filed within the following five days;

• counter-evidence: has to be filed within three days after filing of evidence term;

• objections to evidence: has to be filed within three days after filing of counter-evidence term;

• taking of evidence: the court may set a calendar of up to 30 days. The order for taking of evidence may take an estimated one to two years or more;

• closing statements: filed within five days after the conclusion of the taking of evidence stage;

• decision: one to three years or more;

• appeal: to be taken three days after service, filed within the five following days; one to two years; and

• cassation: two to three years or more.

Evidence – trial

How is evidence presented at trial? Do witnesses and experts give oral evidence?

Generally, evidence is submitted in the form of briefs together with evidentiary documents, either at the moment the complaint is filed or answered, or during the stage of filing of evidence, counter-evidence and objections (this applies to ordinary or standard civil proceedings), or when filing or answering a motion. The briefs must contain the list of fact witnesses, the appointment of expert witnesses and the questions to be addressed by the expert witnesses. Witnesses can be interrogated and counter-interrogated by the parties, and the judge may also interrogate; expert witnesses are also interrogated on their findings and conclusions in a similar manner. The judge may order witnesses to face each other if they give contradictory answers.

Interim remedies

What interim remedies are available?

General injunctive remedies such as freezing injunctions are not available in civil proceedings.

Plaintiffs can seek pre-judgment attachment of a defendant’s assets.

Plaintiffs can also request the staying of negotiations or dealings whenever a real right (such as property) may be affected, subject to the consigning of security for damages with the court.

In connection with claims involving challenges against resolutions of a corporation, a staying order or freezing order is available provided the plaintiff files the complaint within 30 days after the document is recorded with the Public Registry or, if the document was not recorded, from the moment the plaintiff learned of its existence.

Interim remedies are available in connection with foreign proceedings when the relevant decision is presented for acknowledgment and enforcement before the Fourth Chamber of the Supreme Court of Justice.

Remedies

What substantive remedies are available?

As a general rule, in addition to the proven claimed amount, the prevailing party is entitled to interest (at a default rate of 6 per cent per annum in civil matters and 10 per cent in commercial matters), litigations costs and expenses, as well as legal fees set in accordance to the Bar tariff, which consider the type of procedure and claim amount.

Moral damages (for example, emotional or reputational loss) are available in civil claims for damages.

Punitive damages are generally not available in civil proceedings. As exceptions, treble damages are available in consumer defence or action proceedings, as well as in the special procedure of international private law conflicts before the Panamanian courts, where the parties can request the application of foreign law indemnity rules.

Enforcement

What means of enforcement are available?

If a defendant does not comply with the final order within six days after receiving service, the plaintiff can commence special enforcement proceedings and request the post-judgment attachment of the defendant’s assets.

In certain cases, the plaintiff can request that the defendant or a third party who fails to comply with or breaches an order of the judge be held in contempt. This may result in arrest and fines.

Public access

Are court hearings held in public? Are court documents available to the public?

Generally, yes. However, in oral proceedings, any of the parties may request that the hearing be held privately, for reasons of security, morality, decorum or public policy.

In addition to the parties, the case file documents are generally available to lawyers, paralegals and clerks, appointed experts and custodians, other court-appointed assistants, law students, those individuals authorised by the judge for purposes of research or education, as well as other individuals specially authorised by the judge.

Costs

Does the court have power to order costs?

Yes. As a general rule, the prevailing party is entitled to legal costs. Legal costs (or legal fees) are set by application of the Bar tariff, which generally considers the type of procedure and claim amount. In addition to legal costs, the prevailing party can seek payment of other expenses, such as expert fees, expenses for the reproduction of documents, certificates, fees charged by public institutions and other expenses related to the proceedings. The judge can adjust or eliminate the application of legal costs and only order payment of expenses if he or she considers that the losing party litigated in good faith. Good faith cannot be considered to exist, inter alia, when a defendant fails to appear before the court despite having been served with proceedings; enforcement proceedings are required to seek performance of the judgment; the defendant denies evident statements that should have been accepted as true; false documents or witnesses are submitted; no evidence is filed to substantiate the facts of the complaint or a motion; or a party abuses his or her litigation rights.

The plaintiff is not obligated to provide security for the defendant’s costs.

Funding arrangements

Are ‘no win, no fee’ agreements, or other types of contingency or conditional fee arrangements between lawyers and their clients, available to parties? May parties bring proceedings using third-party funding? If so, may the third party take a share of any proceeds of the claim? May a party to litigation share its risk with a third party?

This is a matter of private agreement between counsel and client. The above arrangements, although not customary in our system, should in principle be available.

Insurance

Is insurance available to cover all or part of a party’s legal costs?

Not applicable.

Class action

May litigants with similar claims bring a form of collective redress? In what circumstances is this permitted?

Yes. Class actions exist in connection with consumer protection claims. In addition, the Judicial Code has a special chapter on international private law conflict procedure, which allows the judge to group or consolidate actions whenever a great number of plaintiffs or defendants exist.

Appeal

On what grounds and in what circumstances can the parties appeal? Is there a right of further appeal?

Appeal is generally available against decisions or orders of the first instance judge. Generally, the appellant has three days after receiving service of the decision or judgment (two days if dealing with an order) to appeal against the adverse judgment. The brief of appeal has to be filed before the first instance judge within five days, and the opposing party has the following five days to lodge its brief opposition. The first instance judge shall review the brief to confirm that appeal is available against the decision and that the appeal has been timely filed; in that case, the case file is sent to the Superior Court. The appellant can also request the taking of evidence in special circumstances, as part of the appeals procedure.

The extraordinary writ of cassation before the Civil Chamber of the Supreme Court of Justice is available in special circumstances, against appellate court decisions. The writ of cassation deals with special and specific matters of procedure, application of the law and evaluation of evidence.

Foreign judgments

What procedures exist for recognition and enforcement of foreign judgments?

Generally, a final foreign judgment will be recognised and enforced in the courts of Panama without retrial of the originating action by instituting exequatur proceedings before the Fourth Chamber of the Supreme Court of Justice of Panama.

For a writ of exequatur to be obtained from the Fourth Chamber of the Supreme Court of Justice, the following is required:

• The existence of a treaty or, in its absence, reciprocity. The principle of reciprocity provides that the country that issued the judgment would, in similar circumstances, recognise a final and conclusive judgment of the courts of Panama. Reciprocity is presumed to exist; therefore, if the opposing party (and exceptionally, the Prosecution Office of the Attorney General) considers reciprocity is lacking, then such party must provide evidence within the course of exequatur proceedings.

• A judgment issued because of an action in personam. Actions in personam are the opposite of ‘real’ actions (ie, real estate property situated in Panama).

• Demonstrating the judgment was rendered after personal service has been effected on the defendant. When analysing the exequatur petition, the Fourth Chamber of the Supreme Court of Justice will look for confirmation on proper personal service of process effected on the defendant. The purpose of this requirement is to verify that the defendant had the opportunity to submit a defence against the claim, and that therefore, the principles of contradiction or bilateralism and due process were observed.

• That the cause of action upon which the judgment was based is lawful and does not contravene the public policy of Panama.

• Providing authentic copies of the documents evidencing the judgment, according to the law of the relevant foreign court and have been duly legalised by a Consul of Panama or pursuant to the 1961 Hague Convention on the legalisation of documents.

• Providing translations of the copy of the final judgment (and complementary evidence) by a licensed translator in Panama.

• The judgment must be final and definitive, meaning that no other remedies (ie, appeals or other challenges) are available against the judgment.

Once the writ of exequatur has been obtained from the Fourth Chamber of the Supreme Court of Justice, the plaintiff will have to commence special executory proceedings before the civil courts to seek collection of the owed amounts.

Foreign proceedings

Are there any procedures for obtaining oral or documentary evidence for use in civil proceedings in other jurisdictions?

Foreign courts can request legal assistance to the Panamanian judiciary through letters rogatory, either through means of treaties or conventions, or following principles of international comity. The petitions are channelled through the Fourth Chamber of the Supreme Court of Justice, which will review the application and, if granted, shall instruct the competent courts to take or instruct the production of the required evidence.