8 GROUNDS TO ARREST A VESSEL IN PANAMA

PART I  INTRODUCTION & FRAMEWORK

A.  Why Panama?

Panama is not merely a flag-of-convenience registry. It is one of the most strategically powerful maritime jurisdictions on the planet. Over 14,000 vessels transit the Panama Canal annually. Any one of them — regardless of flag, nationality of owner, or location where the underlying claim arose — can be arrested in Panamanian waters. Most operators and their lawyers know the grounds on which that arrest can happen. There are eight.

This article maps all eight arrest grounds under Panama’s Code of Maritime Procedure, grounded in primary statute and case law, and drawn from two foundational practitioner sources: the author’s own CMI paper on Panama Canal maritime jurisdiction, and the Shiparrested.com chapter authored by Francisco Carreira-Pitti of Carreira Pitti PC.

B.  Historical Foundation

•  Until March 1982: the U.S. Federal District Court for the Canal Zone held admiralty jurisdiction at the Panama Canal.

•  Law 8 of March 30, 1982: Panama created the First Maritime Court — a specialized tribunal whose judges are statutorily required to possess maritime law expertise.

•  2001: Second Maritime Court established as a direct consequence of growing maritime litigation volume.

•  Law 12 of 2009: landmark amendment fashioned after U.S. Supplemental Rules for Admiralty and Maritime Claims. Introduced oral trials, formal discovery, mixed in rem/in personam claims, and the modern arrest framework.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com (“The Maritime Code of Panama created by Law 12 of 2009, fashioned after the U.S. Supplemental Rules…”)

C.  The Overarching Rule: Forum Arresti

All ships present in Panama are subject to the jurisdiction of the Maritime Courts of Panama. Regardless of the flag, or the place where the claim arose, whether inside or outside Panama, the Maritime Courts will exercise its jurisdiction. This is referred to as forum arresti. — Francisco Carreira-Pitti, Shiparrested.com

This is the bedrock principle from which all eight arrest grounds flow. Panama does not require that the underlying dispute have any prior connection to Panama. Physical presence in Panamanian waters is sufficient to trigger the Court’s jurisdiction. What then determines the applicable law, and the validity of the claim, is a separate but equally critical analysis.

D.  The Institutional Architecture

•  Two specialized Maritime Courts of first instance with nationwide jurisdiction.

•  One Maritime Court of Appeals with nationwide jurisdiction.

•  Courts are open 24 hours a day, 365 days a year — critical for Canal transit arrests.

•  Governing statute: Law 8 of 1982 (as amended by Law 11 of 1986 and Law 12 of 2009), known as the Code of Maritime Procedure.

E.  Road Map

The article will analyze each of the eight jurisdictional grounds provided by the Code of Maritime Procedure, structured as follows for each ground:

•  Statutory basis — the precise article(s) invoked

•  Operational mechanics — how the arrest is executed in practice

•  Evidentiary and bond requirements

•  Supporting case law where available

•  Strategic considerations for claimants and respondents

•  Common fact patterns in Panama Canal litigation

PART II  THE EIGHT GROUNDS OF ARREST

Ground 1:  A Maritime Case Arising Within the Territory of Panama

Statutory Basis

•  Article 19, Code of Maritime Procedure (Law 8 / 1982, as amended Law 12 / 2009) which states: “The Maritime Courts shall have exclusive competence in cases arising out of acts related to commerce, transport and maritime traffic, occurring within the territory of the Republic of Panama, in its territorial seas, the navigable waters of its rivers and lakes, and in the waters of the Panama Canal.”

•  Remy Carreira-Franceschi CMI Paper: “A maritime case occurring within the territory of Panama.”

Operative Standard: What is “Maritime”?

The Law 12 of 2009 reform introduced a critical definitional shift. A case is “maritime” if it arises from “causes that emerge from acts regarding maritime commerce, transport or traffic.” The genesis of the activity — not the physical location of the vessel — determines whether the maritime courts have subject matter jurisdiction.

📌  Source: Carreira-Franceschi CMI Paper, CMI (2018): “A cause is the claim itself… If these facts that give rise to the claim emerge from acts related to maritime commerce, the case is maritime.”

Outline Points

•  Territorial scope: includes Panama’s full maritime spaces under the Law of the Sea Convention (Montego Bay Convention, signed Brussels 1982, ratified by Panama).

•  The “through Panama” extension: causes arising from acts that are executed or should be executed from, to, or through Panama — even if no physical act occurred in Panama, the jurisdictional hook is the maritime route.

•  Example: A charter party for carriage “through” the Panama Canal, a crew contract for Panamanian crew — each capable of founding jurisdiction under this ground.

•  Key unresolved question: The breadth of the “through Panama” prong is yet to be fully tested in the courts — a litigation opportunity discussed in the CMI paper.

📌  Source: Carreira-Franceschi CMI Paper: “The breath of this article is yet to be tested in Courts.”

STRATEGIC NOTE FOR CLAIMANTS Ground 1 is the broadest and most expansive basis for Panama jurisdiction. It is the one most likely to be litigated by defendants challenging jurisdiction. Claimants should plead this ground carefully with specific factual allegations linking the claim to a maritime act occurring within or through Panama.

Ground 2:  Arrest to Establish Jurisdiction — Maritime Case Arising Outside Panama with Vessel or Assets Arrested in Jurisdictional Waters

Statutory Basis

•  Article 19 (1) (2) and Article 166 (2), Code of Maritime Procedure which states The Maritime Courts shall also have exclusive competence with respect to claims arising out of acts mentioned in the previous paragraph, but occurring outside the scope mentioned in the preceding paragraph, in the following instances:

1. When the Maritime Court has seized other goods belonging to the defendant, even though such defendant is not domiciled within the territory of the Republic of Panama.

2. When the Maritime Court has seized other goods belonging to the defendant, even though such defendant is not domiciled within the territory of the Republic of Panama.

•  This is the classical forum arresti ground — Panama’s most frequently invoked arrest mechanism for international claims.

The Two-Tier Formula

For claims arising outside Panama, the law provides a conjunctive test:

•  The case must be “maritime” in nature (as defined under Ground 1); AND

•  The action must be directed at the vessel (in rem) or its owner (in personam); AND the arrest of property of the defendant must be sought — which may include vessels, bank accounts, shares, or any other conceivable property.

📌  Source: Carreira-Franceschi CMI Paper: “The filing of the claim together with the petition for the arrest of property owned by the defendant will enable the Court to hear a case even if the facts… occurred beyond the jurisdictional borders of Panama.”

The Canal Advantage

This ground is the cornerstone of Panama’s global maritime litigation value proposition. A cargo claim arising from a voyage between the U.S. West Coast and South America’s East Coast — fully outside Panama — can be litigated in Panama simply by arresting the vessel as it transits the Canal. The vessel has an average 36–48 hour waiting period at the Canal regardless, substantially reducing the risk of wrongful arrest damages even if the claim fails.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com (“consideration should be given to the fact that all vessels transiting the Panama Canal have an average waiting period of about 36-48 hours…”)

Bond Requirement

•  Counter-security for this type of arrest: USD 1,000 (nominal).

•  Standard of proof: high, to offset the low bond. Full prima facie evidence of the underlying claim required.

•  Article 168: USD 2,500 must also be deposited with the Marshal for custody and conservation expenses.

📌  Source: Article 168, Law 8 / Law 12 of 2009; Francisco Carreira-Pitti, Shiparrested.com

Illustrative Case Pattern — Cargo Claim Example

Cargo damaged on a voyage from West Coast U.S. to East Coast South America. Vessel scheduled for Canal transit. Claimant files complaint and arrest petition in Panama. Upon vessel’s entry into Panamanian waters, Marshal executes arrest. Panama Maritime Court acquires jurisdiction over the entire claim.

📌  Source: Carreira-Franceschi CMI Paper: hypothetical cargo damage example demonstrating jurisdiction via Article 166(2) arrest.

CASE LAW REFERENCE Luz Marina Reyes v. Diamond Camellia, S.A. & Mitsui O.S.K. Lines (2000) — Panama Court held that a company incorporated in Panama but not domiciled there was not “present” in Panama, upholding an Article 166(2) arrest to establish jurisdiction. Fundamental case on the distinction between corporate registration and legal domicile for jurisdictional purposes.

Ground 3:  Personal Service on Defendant Within Panama

Statutory Basis

•  Article 19 (3), Code of Maritime Procedure which states The Maritime Courts shall also have exclusive competence with respect to claims arising out of acts mentioned in the previous paragraph, but occurring outside the scope mentioned in the preceding paragraph, in the following instances:

3. When the defendant is within the jurisdiction of the Republic of Panama and has been personally notified of any actions filed in the Maritime Courts.

•  The Courts may exercise jurisdiction when the defendant can be personally served with process in Panama.

Requirements

•  For natural persons: physical presence required, personal notification mandatory.

•  For corporations: the company must be “present” in Panama — meaning its principal place of business is established in Panama. Mere registration in the Public Registry is insufficient.

📌  Source: Carreira-Franceschi CMI Paper: “The corporation is ‘present’ in Panama if its principal place of business is established in the country and not merely if the company is registered in the Public Registry of Panama.”

The Domicile Problem: A Warning for Panama-Registered Vessels

Panama is the world’s largest ship registry. Tens of thousands of vessels are registered here. But registration alone does not make the owning company “present” in Panama for purposes of personal jurisdiction under Ground 3. This is a critical distinction that creditors and their lawyers frequently misunderstand.

📌  Source: Luz Marina Reyes v. Diamond Camellia, S.A. & Mitsui O.S.K. Lines (2000): “The Court held that the company was not ‘present’ in Panama solely because it was incorporated in Panama because Panama was not its principal place of business.”

Important Procedural Note on “Special Appearances”

Panama does recognize “special appearances” to challenge jurisdiction without submitting to it. Under the Code of Maritime Procedure, any act by defendant or counsel — including filing a power of attorney or any petition — is treated as the defendant being notified of the claim and submitting to jurisdiction unless jurisdiction is challenged before filing answer to complaint.

STRATEGIC NOTE FOR DEFENDANTS Any procedural step taken in Panama by or on behalf of a defendant constitutes full submission to Panama jurisdiction unless jurisdiction is challenge. No challenge to jurisdiction waives right to question jurisdiction. There is no mechanism to challenge jurisdiction while simultaneously contesting on the merits. Defendants must decide early whether to engage or default — and both paths have consequences.

Ground 4:  Seamen’s Negligence Claims

Statutory Basis

•  Article 19 (4) and Article 21, Code of Maritime Procedure which states:

4. When the ship or one of the ships involved is Panamanian-flagged, or Panamanian substantive law is applicable by virtue of the contract or the provisions of Panamanian law itself, or the parties expressly or tacitly submit to the jurisdiction of the Maritime Courts of the Republic of Panama.

Article 21. As established in the Political Constitution, actions arising from the provisions of the labor legislation of the Republic of Panama fall under the exclusive jurisdiction of the Panamanian Labor Courts. However, civil actions arising to claim compensation for damages or losses within the framework of the scenarios contemplated in Article 19 shall fall under the jurisdiction of the Maritime Courts when they occur as

•  Law Decree 8 of 1998 (Seaman Labor Law) — read conjunctively with the Code of Maritime Procedure.

Bifurcated Jurisdiction Framework

Panama applies a critical division between two categories of seaman claims — a distinction that determines which court hears the case:

•  Maritime Labor Courts: wage collection, vacations, pensions, any form of salary. Contractual disputes between seaman and employer.

•  Maritime Courts: fault-based tort claims — negligence causing damages between a seaman and his employer. Only the Maritime Courts hear negligence claims.

📌  Source: Carreira-Franceschi CMI Paper: “Fault based tort cases may only be filed in the Maritime Courts of Panama.”

Practical Significance

A seaman injured aboard a Panama-flagged vessel due to the employer’s negligence has a direct route to Panama’s Maritime Courts, regardless of where the injury occurred. This ground is regularly invoked by seafarers’ attorneys seeking the most favorable jurisdiction.

•  Arrest mechanism: A vessel can be arrested in Panamanian waters to establish jurisdiction and security for the seaman’s negligence claim.

•  Jurisdiction extends to Panama-flagged vessels globally by virtue of Ground 5 (flag jurisdiction), potentially giving Panama courts jurisdiction over incidents occurring anywhere in the world.

INTERSECTION WITH GROUND 5 Ground 4 (seaman negligence) and Ground 5 (Panama flag) frequently operate together. An injured Filipino seafarer aboard a Panama-flagged vessel damaged in the Pacific Ocean can file a negligence claim in Panama’s Maritime Courts by virtue of both grounds simultaneously.

Ground 5:  Panama-Flagged Vessel — Flag Jurisdiction

Statutory Basis

•  Article 19 (4), Code of Maritime Procedure which states:

4. When the ship or one of the ships involved is Panamanian-flagged, or Panamanian substantive law is applicable by virtue of the contract or the provisions of Panamanian law itself, or the parties expressly or tacitly submit to the jurisdiction of the Maritime Courts of the Republic of Panama.

•  Law of the Sea Convention (Montego Bay Convention 1982) — incorporated into Panamanian law.

The Territoriality Fiction

Under international law, a vessel flying the flag of a nation is deemed to be that nation’s territory. A Panama-flagged vessel in Tokyo harbor is, for legal purposes, in Panama. This principle — long established in the law of the sea and codified in Panama’s Maritime Procedure Code — gives Panama’s Maritime Courts worldwide reach over any vessel flying the Panamanian flag.

📌  Source: Carreira-Franceschi CMI Paper: “Under a legal fiction (akin to the same principle of territoriality used for aircrafts and embassies) a vessel flying a Panamanian flag is considered Panamanian territory.”

Why This Ground Has Global Significance

Panama operates the world’s largest ship registry by both number of vessels and gross tonnage. At any given moment, thousands of Panama-flagged vessels are sailing the world’s oceans. Ground 5 means that a claim against any of these vessels — wherever the incident occurred — can ultimately be litigated in Panama.

•  Practical use: a claimant with a maritime lien against a Panama-flagged vessel can file an action in Panama, obtain a Registry annotation (see Ground 8), and arrest the vessel upon its next appearance in Panamanian waters.

•  This ground applies even if the vessel has not yet arrived in Panama and may not arrive soon.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com; Pardini & Asociados, “Panama Maritime Injunctions”

Ground 6:  Choice of Law — Panamanian Law Applicable by Contract or by Operation of Law

Statutory Basis

•  Article 19 (4), Code of Maritime Procedure which states:

4. When the ship or one of the ships involved is Panamanian-flagged, or Panamanian substantive law is applicable by virtue of the contract or the provisions of Panamanian law itself, or the parties expressly or tacitly submit to the jurisdiction of the Maritime Courts of the Republic of Pana

•  Article 566, Code of Maritime Procedure (comprehensive choice-of-law provision) contains a list of maritime claims and the respective substantive law to apply to each case filed before the Courts of Panama. The judge is bound to apply procedural rule of law to establish the law which will determine the rights and obligations of the parties in the claim. Choice of law clauses are upheld.

Two Pathways to Ground 6 Jurisdiction

•  Contractual: The parties’ contract designates Panamanian law as the applicable law. Panama respects freely negotiated choice-of-law clauses in maritime contracts.

•  Statutory: Panamanian law becomes applicable by virtue of Panama’s own conflict-of-law rules (Article 566) even in the absence of contractual designation. Judges are empowered and required to investigate and apply the laws of other countries when applicable.

📌  Source: Carreira-Franceschi CMI Paper: “Panamanian law is respectful of choice of law clauses contained in maritime contracts… Article 566 of the Code of Maritime Procedure includes a comprehensive choice of law article in order to assist the judge in determining the applicable law to a claim in absence of an agreed one.”

Strategic Use: Drafting Contracts

A Panama-law choice-of-law clause in a maritime contract does more than select the governing substantive law. It simultaneously creates a basis for Panama’s Maritime Courts to exercise jurisdiction under Ground 6. For parties who wish to litigate in Panama, or who want the Canal-transit arrest option available to them, this is a powerful drafting tool.

DRAFTING RECOMMENDATION For cargo contracts, charter parties, and maritime services agreements where one or both parties may want Panama as a litigation forum, inclusion of a Panama-law choice-of-law clause (not merely a Panama jurisdiction clause) activates Ground 6 independently of any other connection to Panama.

Ground 7:  Enforcement of Foreign Judgments — Exequatur

Statutory Basis

•  Article 197, Code of Maritime Procedure states: The execution and lifting of seizures directed against ships, their fuel, cargo on board or freight, decreed by a court that is not competent to hear cases arising from the exercise of maritime commerce and traffic, shall be the exclusive competence of the Maritime Courts.

•  Exequatur process before the Fourth Chamber of General Affairs, Supreme Court of Panama is regulated by Article 1420 of the Judicial Code which states that: The request for a declaration as to whether or not a judgment of a foreign court should be enforced shall be submitted to the Supreme Court of Justice, unless, according to the respective treaties, another court should hear the matter. The Court shall notify the party that must comply with the judgment and the Attorney General of the Nation, granting each of them a period of five days. If all parties agree that the judgment should be enforced, the Court shall so order.

If the parties do not agree and there are facts to be proven, the Court shall grant a period of three days to submit evidence and fifteen days to present it, without prejudice to granting an extraordinary period for presenting evidence abroad. Once this period has expired, the Court shall hear the parties, successively granting each a period of three days, after which it shall decide whether or not the judgment should be enforced.

If the Court declares that the judgment should be enforced, its enforcement shall be requested before the competent court. The authenticity and validity of judgments issued in a foreign country are established in accordance with Article 877.

What Exequatur Provides

Panama’s Maritime Courts will recognize and enforce foreign maritime judgments, arbitral awards, and interlocutory decisions — including cautionary measures ordered by foreign courts — through a process called exequatur. This is Panama’s expression of international comity: the voluntary recognition of other nations’ judicial decisions.

📌  Source: Carreira-Franceschi CMI Paper: “An ‘exequatur’ is a process by which the Supreme Court recognizes the validity of a foreign judgment and authorizes the enforcement of its effects within its jurisdiction.”

How It Works in Practice

•  Step 1: Petition for exequatur filed with the Fourth Chamber of the Supreme Court.

•  Step 2: While the petition is pending, an authenticated copy of the foreign judgment suffices to seek cautionary measures — including vessel arrest — from the Maritime Courts.

•  Step 3: Once the Supreme Court grants exequatur, the Maritime Court becomes fully competent to enforce the judgment and execute against assets.

Requirements for Recognition

•  The obligation must be legal in the Republic of Panama.

•  The copy of the judgment must be notarized and legalized by a Panamanian Consul, or apostilled.

•  No requirement of reciprocity — Panama does not demand that the foreign state reciprocally recognize Panamanian judgments as a condition of enforcement.

CRITICAL STRATEGIC POINT A claimant who has already obtained a judgment or arbitral award in London, New York, or Singapore does not need to re-litigate the merits in Panama. They can use the exequatur procedure to arrest a vessel transiting the Canal as security for enforcement. This is often the fastest route to recovery for judgment creditors whose debtor owns Panama-transiting vessels.

Ground 8:  Limitation of Liability Proceedings

Statutory Basis

•  Article Article 576, Code of Maritime Procedure which states: Article 576. Shipowners and salvors, as defined below, may limit liability arising from the claims listed in Section 2 of this Chapter, by availing themselves of the provisions of this Title.

•  Limitation of liability in Panama functions as both a type of proceeding and a substantive defense.

The Dual Nature of Limitation

Limitation of liability in Panama is unique because it can be both an offensive and defensive tool:

•  As a proceeding: A shipowner proactively files a limitation proceeding in Panama, which has the effect of (i) selecting Panama as the exclusive forum for all claims arising from the incident; and (ii) enjoining all claims, domestic and international, channeling them into the single Panama proceeding. The law establishes a system drawing on special drawing rights to set the amount of the limitation bond in respect of the tonnage of the vessel. Panama has adopted the LLMC Convention of 1976, but not the protocol which expanded the limitation limits.

•  As a defense: Limitation can be asserted as a defense in existing proceedings before Panama’s Maritime Courts.

📌  Source: Carreira-Franceschi CMI Paper: “A ship owner may initiate a limitation of liability proceeding in Panama which would have the effect of taking upon the jurisdiction of the Panamanian Court as well as enjoining all claims, domestic and abroad.”

Procedure and Fund Requirements

•  Filing a limitation proceeding is not an admission of liability — a critical protection that encourages timely filing.

•  The Court determines the amount of the limitation fund.

•  The shipowner must post a bond in an amount set by the Court.

•  Bond is not required in cases of willful misconduct, recklessness, or situations where the owner had knowledge that the act or omission would cause damage.

📌  Source: Carreira-Franceschi CMI Paper: “Once the interested party files for a limitation proceeding, the Court will determine the amount of the limitation fund and will order the posting of the bond in the absence of willful misconduct…”

Interested Parties Entitled to File

•  Owner of the vessel

•  Charterer

•  Naval solicitor (managing agent)

•  Operator of a sea-going vessel

Strategic Value for Shipowners

For a shipowner facing multiple simultaneous claims from a single incident — a collision, an explosion, a wreck — Panama’s limitation proceeding offers the possibility of concentrating all litigation in a single, familiar jurisdiction, with a defined fund, and with injunctions halting proceedings in multiple foreign courts. This is a powerful defensive tool that is underutilized by shipowners who do not realize Panama’s courts are available to them proactively.

THE CANAL ADVANTAGE — AGAIN Because so many vessels pass through Panama, a limitation proceeding filed immediately after an incident has a high probability of being able to arrest or attach the vessel (or sister ships) as they transit the Canal, establishing Panama’s exclusive jurisdiction over the limitation fund before claimants can file in multiple jurisdictions.

PART III  SPECIAL ARREST MECHANISMS

Beyond the eight core jurisdictional grounds, Panama’s Code of Maritime Procedure contains three specialized arrest mechanisms that interact with the grounds above. These mechanisms deserve separate treatment because they each carry distinct procedural requirements and strategic implications.

A.  Article 166(1) — Preventive Arrest to Protect Against Dissipation of Assets

•  Purpose: Prevents the defendant from disposing, transferring, encumbering, or dissipating assets before judgment.

•  Requirement: Defendant’s property must be present within Panama.

•  Bond: 20–30% of the amount claimed — the highest counter-security requirement of all three arrest types.

•  Evidentiary standard: Relaxed — claimant need not prove the full underlying claim, only demonstrate risk of dissipation.

•  Available against: any property of the defendant, including vessels, cargo, bunkers, bank accounts, and shares.

📌  Source: Article 166(1), Law 8/2009; Francisco Carreira-Pitti, Shiparrested.com; ICLG Shipping Panama 2025–2026

B.  Article 166(2) — Arrest to Establish Jurisdiction over Foreign Defendant (Forum Arresti)

•  Purpose: Brings within Panama’s jurisdiction a defendant who is not present in Panama — the core Canal-transit arrest.

•  Bond: USD 1,000 nominal.

•  Evidentiary standard: High — full prima facie case required due to the low bond.

•  Effect: Arrest itself serves process on the defendant. Filing of complaint is simultaneous with the arrest petition.

•  Note: Arrest and complaint are inseparable in Panama — unlike some jurisdictions where arrest precedes the substantive filing.

📌  Source: Carreira-Franceschi CMI Paper, Article 166(2) and Article 499 of the Code of Maritime Procedure

C.  Article 166(3) — Arrest to Enforce Maritime Liens (In Rem)

•  Purpose: Physical seizure of a vessel, cargo, or freight to enforce a privileged maritime lien or statutory right in rem.

•  Bond: USD 1,000 nominal.

•  Applicable law test: The maritime lien must exist under the law applicable to the claim — Panama’s conflict-of-law rules govern. Panama will recognize foreign maritime liens even if those liens cannot be enforced in rem in the lien’s country of origin.

•  Sister ship arrests: Available where Panamanian law or applicable foreign law permits. Under Panamanian law, sister ship arrest in an in personam claim is permitted where vessels are owned by the same company.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com: “Panama will recognize foreign maritime liens, even if those liens cannot be enforced via an in rem action in their own country.”

D.  Article 206 — Administrative Arrest / Registry Annotation

•  Purpose: Blocks the Panama Public Registry from recording any sale or encumbrance of a Panama-flagged vessel — the arrest without physical presence.

•  Key feature: Can be used against Panama-registered vessels located anywhere in the world, without waiting for the vessel to enter Panamanian waters.

•  Effect: Any certification of the vessel’s Registry entry will show the pending claim and arrest order, giving notice to all potential buyers and creditors.

•  Evidentiary standard: “Immediate and irreparable harm” must be shown.

•  Bond: USD 10,000 to USD 50,000 at Court’s discretion.

•  Critical limitation: Does not constitute a physical arrest, although the term ‘flag arrest‘ was coined by the industry. Only becomes a arrest if the vessel later enters Panamanian jurisdiction.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com; Carreira-Franceschi CMI Paper, Article 206

TIME BAR STRATEGY The Article 206 annotation serves a critical time-bar function independent of the arrest. Filing an in rem action and obtaining a Registry annotation interrupts the one-year statute of limitations under Panama’s Code of Commerce (Article 1649-A), preserving the claimant’s rights even before the vessel arrives in Panama. This is a tool frequently overlooked by international co-counsel.

PART IV  PRACTICAL & COMPARATIVE ANALYSIS

A.  Comparing the Three Core Arrest Mechanisms: A Decision Matrix

A practitioner choosing between the three arrest routes under Article 166 must weigh four variables: purpose, bond cost, evidentiary threshold, and defendant’s connection to Panama.

Article	166(1) — Preventive	166(2) — Forum Arresti	166(3) — In Rem Lien	206 — Registry
Bond	20–30% of claim	USD 1,000	USD 1,000	USD 10–50k
Evidence	Relaxed	High	High	Irreparable harm
Def. Present	Required	Not needed	Not needed	Not needed
Vessel in PAN	Required	Required	Required	Not required
Best Use	Prevent dissipation	Canal transit arrest	Lien enforcement	Registry block

B.  Wrongful Arrest — Panama’s Provisions and the Canal Limitation

Panama recognizes wrongful arrest liability in three circumstances under Article 187. Anyone who, through error, fault, negligence, or bad faith, seizes property that does not belong to the defendant or in contravention of a prior and express agreement between the parties not to seize it, or who requests a seizure for the enforcement of a privileged maritime claim or a claim in rem that is extinguished or nonexistent, shall be liable for the damages caused, as well as for the payment of the expenses and costs arising from such action. The determination of the plaintiff’s liability and the amount of damages caused to the aggrieved party shall be within the jurisdiction of the court that ordered the seizure, which shall rule in accordance with the evidence presented in the corresponding proceedings.

•  Where property not belonging to the defendant is attached.

•  Where a maritime lien is non-existent or time-barred.

•  Where the parties have agreed in writing to submit disputes to a different forum.

However, the wrongful arrest exposure in Panama is materially limited by the Canal’s operational reality. Every vessel transiting the Panama Canal already waits 36–48 hours regardless of any legal process. A wrongful arrest during this waiting period creates minimal additional demurrage exposure — a fact that makes Panama arrests particularly attractive to claimants.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com: “any possible claim for wrongful arrest damages is limited since the vessel has a waiting period at the Canal, regardless of the arrest.”

C.  No International Convention — and Why That Helps Claimants

Panama has not ratified the 1952 or 1999 Arrest Conventions. This is not a gap — it is a deliberate feature. The Code of Maritime Procedure creates a more flexible and claimant-friendly regime than either Convention would provide. Panama will, however, enforce Convention-based maritime liens where the law of the flag or the applicable law is that of a Convention signatory state.

📌  Source: Francisco Carreira-Pitti, Shiparrested.com: “Panama has not ratified any of the International Conventions related to Ship Arrests. However where the applicable law… is that of a country which has ratified any Convention the Maritime Courts of Panama will enforce it.”

PART V  CONCLUSION & AUTHOR’S PERSPECTIVE

A.  Summary of the Eight Grounds

Panama’s Code of Maritime Procedure offers eight distinct grounds on which a vessel can be arrested, each serving a different procedural purpose and arising in different factual contexts:

•  Ground 1: Claim arising within Panama — subject matter jurisdiction based on maritime commerce nexus.

•  Ground 2: Forum arresti — arrest in Panama of a vessel or assets to establish jurisdiction over foreign claims.

•  Ground 3: Personal service in Panama — jurisdiction by physical presence or effective domicile.

•  Ground 4: Seaman negligence — fault-based maritime labor claims directly before the Maritime Courts.

•  Ground 5: Panama flag — worldwide jurisdictional reach over the world’s largest ship registry.

•  Ground 6: Choice of law — Panama-law contracts or conflict-of-law rules as the jurisdictional hook.

•  Ground 7: Exequatur — enforcement of foreign judgments and arbitral awards through the Supreme Court.

•  Ground 8: Limitation of liability — the shipowner’s proactive tool to consolidate all claims in Panama.

B.  The Author’s Comment — Panama as a Jurisdiction of Opportunity

Practitioners who understand only one or two of these grounds are leaving powerful tools on the table — or failing to defend against them. Panama’s Maritime Courts are not merely a port of convenience for flag-of-convenience vessels. They are an active, sophisticated, 24/7/365 jurisdiction with century-deep admiralty roots, a procedural code fashioned after the most advanced admiralty rules in the world, and a geographic position that gives them reach over every major shipping lane on earth.

Whether you represent a cargo claimant, a P&I Club, a shipowner facing multiple suits, or international co-counsel who needs Panama correspondent advice at midnight before a vessel transits the Canal, understanding these eight grounds is not optional. It is the baseline.

C.  Suggested Further Reading & Sources Used in This Article

•  Remy Francisco Carreira-Franceschi, “The Jurisdiction of the Maritime Courts at the Panama Canal” — Comité Maritime International (CMI), 2018. comitemaritime.org

•  Francisco Carreira-Pitti, “Ship Arrest in Panama” — Shiparrested.com Network Publication. shiparrested.com

•  Law 8 of March 30, 1982 (as amended by Law 12 of 2009) — Code of Maritime Procedure of the Republic of Panama.

•  ICLG Shipping Laws and Regulations: Panama, 2025–2026. iclg.com

•  Legal 500 Panama Shipping Guide. legal500.com

•  Carmelina Gentile v. Inversiones Naviera Condesa de Los Mares, C.A. (1995) — Panama Court of Appeals.

•  Luz Marina Reyes v. Diamond Camellia, S.A. & Mitsui O.S.K. Lines (2000) — Panama Maritime Court.

About the Author: Remy Francisco Carreira-Franceschi is a maritime litigation attorney and Managing Partner at Franceschi LP in Panama City. With over 25 Years of practice before Panama’s Maritime Courts, he is the author of the CMI-published paper on Panama Canal maritime jurisdiction and a member of the CMI Cybersecurity Committee. He can be reached at remy.carreira@frlplaw.com.