COLLECTION OF MARITIME DEBTS OF SHIP SUPPLIERS, SHIP AGENTS, SHIPYARDS AT THE PANAMA CANAL AGAINST PANAMANIAN REGISTERED VESSELS

 The scope of this article is to provide the guidelines as to how maritime related debts for services and/or supplies could be collected at the Panama Canal. 

I.- WHY PANAMA AND THE PANAMA CANAL?

Panama and the Panama Canal are brand names to the world’s maritime community. The Panama Canal handles approximately 13,404 transits every year approximately. Thousands of vessels call Panamanian ports during transshipment, bunkering, repairs or regional trade,  not necessarily going  through the Panama Canal. The non-Canal port calls are estimated at 15,000 calls per year among major port operators PPC, MIT, CCT, PSA.

The Panamanian vessel registry is world ranked #1 by vessel count. There are over 8,773 active vessels registered in Panama, which represent 16% of the entire global merchant fleet. Panamanian vessels are present in 1,920 ports in 170 countries. Over 5,000 mortgage encumbrances registered against Panamanian registered vessels are now increasing monthly. There are thousands of Panamanian registered shipping companies.  

There are approximately 60 plus banks holding international licenses  operating at the Panamanian Banking Center with deposits over 115.3 billion dollars.  The Colon Free Zone, located at the Port of Cristobal handles cargo for over 1.73 million metric tons per year with recorded imports of 19.7 billion dollars in 2023 and reexport in the vicinity of 13.3 billion dollars.  Panama Ports Company (PPC) operated by Hutchinson Ports manages two major ports in Balboa (Pacific) and Cristobal (Atlantic) handles cargo in an estimated amount of 3.9 million TEU per year. PPC has been at the center of a legal dispute amidst the Supreme Court of Panama annulling the concession in January 2026.

The maritime disputes, either involving vessels present at the Panama Canal or registered in Panama, are subject to the jurisdiction of the Maritime Courts of Panama, a specialized tribunal handling exclusively admiralty and maritime cases, including collection of maritime debt, at a place where it counts.

Panama has a flexible system of maritime jurisdiction whereby all vessels going through the Panama Canal, calling Panamanian ports, or registered in Panama are subject to the jurisdiction of the court for maritime related claims for supplies or any kind related debts, incurred anywhere in the world.

In Panama, the Maritime Court of Panama has jurisdiction over all vessels transiting the Panama Canal, over all vessels calling Panamanian ports, over all vessels registered in Panama, and over all companies registered in Panama, regardless of where the claim originated, or where the supplies or service was done.  

The Maritime Court of Panama, which is available 24 hours per day, 365 days per year, has the power to arrest any vessel transiting the Panama Canal, or present at any Panamanian port, as well as the power to enforce claims, or judgments, against Panamanian registered vessels and companies.

As a result of the Panama Canal Treaty of 1977 and the laws implementing the Treaty in 1979, the Republic of Panama created the Maritime Court of Panama in March, 1982.  This tribunal has exclusive jurisdiction to hear all matters related to acts of maritime commerce, such as supplying a vessel of all items and/or services required, commonly known as necessaries, including agencies services, bunkering, repairs and shipyard debts, regardless of the place where the services were rendered or the place where supplies were furnished.

II.- JURISDICTION

The Maritime Court of Panama is empowered to arrest any vessel within the jurisdiction of the Republic of Panama, including the Ports of Balboa and Cristobal, Pacific and Atlantic entry to the Panama Canal, respectively, by law Panama adopted 200 miles of territorial sea.  

The jurisdiction of the Court works regardless of the flag the vessel flies, or the country of registry.  Article 19 of the Panamanian Maritime Code provides the court with jurisdiction for cases arising anywhere in the world, if the vessel involved is present of the Canal, or “other property” belonging to the defendant, not domiciled in Panama, is seized within the jurisdiction of the Court. 

The jurisdiction of the Court is contained in Article 19 of the Code of Maritime Procedure, which reads as follows:

Article 19. Maritime Courts shall have exclusive jurisdiction over cases arising from acts related to commerce, transport and maritime traffic occurring within the territory of the Republic of Panama, in its territorial sea, in the navigable waters of its rivers, lakes, and in the waters of the Panama Canal. These cases include claims arising from acts executed or to be executed from, to or through the Republic of Panama. Claims involving the Panama Canal Authority are subject to the provisions of its Organic Law. 

Maritime Courts shall also have exclusive jurisdiction over actions arising from the acts mentioned in the previous paragraph, but occurring out of the referred territorial scope, in the following instances:

1. When the respective actions are filed against the vessel or its owners and as consequence thereof the vessel is arrested within the jurisdiction of the Republic of Panama.
2. When the Maritime Court has attached other assets of the defendant, although the defendant is not domiciled within the territory of the Republic of Panama.
3. When the defendant has been personally served with notice of any of the actions filed at the Maritime Courts while he is within the jurisdiction of the Republic of Panama. 
4. When the vessel or one of the vessels involved is a Panamanian – flagged vessel, or when Panamanian substantive law becomes applicable under the contract or the provisions of Panamanian law; or when the parties, either expressly or tacitly, submit themselves to the jurisdiction of the Panamanian Maritime Court. 

Thus jurisdiction can be exercised when:

1. The vessel involved is present at the Panama Canal, and the action is directed against the vessel, owners or operator.
2. The Maritime Court seizes “other property” belonging to the defendant not domiciled in Panama.
3. The defendant is within the jurisdiction of the Maritime Court. (normally applied to Panamanian registered vessels or companies).
4. The vessel involved flies the flag of Panama or, 
5. Panamanian Law applies to the claim.

It is reasonable to conclude that the Maritime Court of Panama and Panamanian procedural law is equipped to handle any maritime claim as long as any of the conditions listed occurs. 

III.- PROCEDURAL HIGHLIGHTS

The Republic of Panama adopted modern and flexible rules of procedure in creating the Maritime Court of Panama back in March 1982. The procedural system follows, among others, the United States Rules of Civil Procedure. The result is that DISCOVERY, a well known procedural device in the Federal Rules of Civil Procedure in the United States, is recognized and applicable in Panama. As such, depositions, production of documents, interrogatories, and requests for admissions, are tools available in litigating maritime collection cases maritime collection cases in Panama.

Since many cases do require foreign law to be applied as a matter of substantive law, the court constantly adjudicates disputes by applying foreign law, jurisprudence and precedents. It should be noted that it is the responsibility of maritime law practitioners to prove argue foreign law and file evidence of the statutes, treaties, treatises, journals and case law commonly  analyzed by foreign law experts.  

It is worth noticing that the Judge has the power to investigate the status of foreign law on his own, and very often does so. The court has become, since its creation, a truly international court of justice in admiralty matters, just by being in a place where so many vessels go through every year, and being in a country with so many vessels registered, and by having flexible basis of jurisdiction and by adopting modern procedural rules. This has created an obligation, well understood, by maritime law practitioners as to the importance of the decisions and rulings of this truly international maritime tribunal.

The Panamanian effort to handle the maritime jurisdiction at the Panama Canal, has resulted in creating a Maritime Court with very distinctive characteristics:

1. It is a specialized court handling only maritime cases.
2. The Judge is required to have a maritime law degree.
3. The Court adopted the discovery rules similar to the U.S. Federal System, including oral trials.
4. Cases are litigated in US dollars.
5. All vessels transiting the Panama Canal are subject to the jurisdiction of the court as well as all vessels registered in Panama, including Panamanian owners.
6. There is only one appeal to the Maritime Court of Appeals, shortening the time it takes to decide a case.
7. Panama has adopted a very clear provision to solve issues of conflict of laws, thereby permitting the application of foreign substantive law. In supplier’s cases, the law of the place where the service was rendered, as a first choice, then the law of the flag of the vessel, as an alternative.
8. Applying flexible rules of procedure, and foreign law to the underlying claim, wherever is so required, the court has developed considerable experience in applying foreign substantive law to cases.

In its years of existence, the Maritime Court of Panama has been involved in the arrest of hundreds of vessels, regardless of the flag they fly, as long as they are present at the Canal.  The Maritime Court permits the filing of actions for almost every conceivable maritime claim such as collections of debts, maritime liens cargo and insurance claims, charterparty litigation, applying Panamanian procedural law to the arrest itself, requiring the filing of a complaint with the petition for arrest of the vessel involved and applying foreign substantive law to the claim, where such application is warranted, according to the application of Panamanian conflicts of laws provisions.

By statute the Maritime Court of Panama has jurisdiction over any vessel present in Panamanian waters.  The Ports of Cristobal and Balboa (Atlantic and Pacific side of the Canal) are within the jurisdiction of the Court. The Court’s jurisdiction is extensive to all ports within the Republic of Panama and to vessels calling any port for supplies, bunkers or any other necessary and not necessarily transiting the Panama Canal, as well as to those vessels registered in Panama.

Once the petition to arrest, the complaint and prima facie evidence is filed, the Court decrees the arrest of the vessel, notifying Panama Canal or Panamanian Authorities.  The Court serves all pleadings upon the Master of the vessel.  In all maritime actions in Panama, either against the vessel or owners or operators, service of process is done upon the Master of the vessel involved.

The arrest of the vessel, either involving owners or operators or not, requires an initial deposit of USD $7,500.00 to cover damages and arrest expenses. Additional funds could be required depending upon the tonnage of the vessel and the length of the stay, and the place where the vessel is kept, whether anchorage or dock. All funds deposited are fully chargeable against the defendant, and taxed as cost and expenses of the action, therefore, fully recoverable after a judgement during the liquidation proceeding effectuated by the Court clerk.  

Panamanian law requires a POWER OF ATTORNEY to act on behalf of any party to the action.  In addition, proof of the corporate existence of the party, if it is a corporation, a showing of the nomination of a legal representative granting authority of the person executing the POA. These documents must be notarized and legalized by Panamanian Consul, if there is one available, or by the Consul of any country. 

Notice should be taken that Panama ratified the so called “APOSTILLE” Convention, therefore, in countries members of the Convention, documents must be authenticated by the proper authority, thereby eliminating the requirement of Notary and Consul. A list of the countries members, as published by the government of Panama is as follows: Antigua, Austria, Bahamas, Belgium, Botswana, Cyprus, Fiji, Finland, France, Greece, Germany, Hungary, Israel, Japan, Lesotho, Liechtenstein, Luxemburg, Malawi, Malta, Mauricius, The Netherlands, Norway, Portugal, Seychelles, Spain, Surinam, Switzerland, Tongo, United Kingdom, United States of America, Turkey, and Yugoslavia.  

So, public or private documents from those countries will require less formalities and authentication will be accepted under the terms of the Convention, making it unnecessary to have the documents taken before the Panamanian Consul.  The Power of Attorney is normally prepared by our office upon reviewing the facts of each claim, and establishing the type of action and the defendants.  

In emergency cases, where the arrival of the vessel gives no time to prepare the documents of account, and the like are accepted by the Court, and the action could be filed without the POA and Corporate Certificate, but a cash bond (proportional to the amount in controversy) must be filed.  The bond will be returned upon filing of the POA and Corporate documents.  In non-emergency cases, we recommend contacting us for preparation and discussion of the relevant requirements.

IV.- VESSEL REGISTERED IN PANAMA, NOT PRESENT IN PANAMA.

Not all the vessels registered in Panama are present at Panamanian ports or at the Panama Canal. In such cases, Panamanian procedure has ways to protect creditors of the vessel, which do not involve the physical arrest of those vessels. 

Panamanian law permits the filing of claims and placing notices of claims/liens at the vessel’s registry to inform third parties.  

Additionally, Panamanian law permits, under the proper facts and circumstances, the issuance of injunctive relief consisting of the blocking of the registry of the vessel as a remedy. This injunction referred to as a Flag Arrest has the effect of preventing changes of ownership, or deletion of the registry whilst the action is pending.  Under the proper conditions, the Maritime Court of Panama is empowered to order any protective measures deemed reasonable or necessary.  The exercise of particular conservatory or protective remedy depends on the facts and circumstances of each case, and the evidence available.

Article 206 of the Panamanian Maritime Code, provides:

In addition to the cases provided for, a persona with reason to believe that during the time prior to a judicial recognition of his right he will suffer imminent or irreparable danger may request from the Judge the most appropriate conservatory o protective measure which will provisionally guarantee, depending on the circumstances, the effect of a judgment on the merits. The petitioner shall present his motion accompanying the preliminary evidence and, furthermore, the corresponding security for damages.

The motion shall be processed and decided pursuant to the rules of this Chapter.

The practical effect of this provision is that the Maritime Judge of Panama has full discretion in deciding the most appropriate conservatory or protective measure. There is no doubt that if the vessel involved transits the Panama Canal, the most appropriate measure is the arrest.  However, in cases involving vessels not physically present in Panama, there are remedies available in Panama to protect the interests of the claimant and secure the collection of a debt, if necessary.

Another provision worth noticing, related only to Panamanian registered vessels, for collection of debts, is article 27 of the Commercial Code of Panama, which establishes:

“Whoever for the marine traffic and for his own account, employs another’s vessel being under his direction or through someone else, will be considered, in his relation with third parties, as the owner could not be opposed to the exercise of rights by third parties as creditors of the vessel as creditors of the vessel as a consequence of the employment of the same, unless legitimacy of him is justified and bad faith on the creditor.

Although the Spanish text is not very well drafted either, where the Panamanian registered vessels are involved, Panamanian commercial law imposes an obligation upon the vessel in relation to creditors rights, regardless of who operates the vessel and the type of charter involved.  It is considered, therefore, that only where the creditor has actual knowledge or notice of the fact that he is dealing with the credit of the charterer, operator, or the like, other than the true owner, the vessel is then not subject to the provisions , otherwise the owner has no defense against the creditor’s claim.

V.- PARTICULAR FACTS ABOUT OUR PRACTICE

Our practice in the litigation of admiralty or maritime commercial disputes, and collection of debts permits the handling of claims on contingency basis, no cure no pay, as well as on straight hourly fees. Panamanian law permits legal representation on either system.  There are fees schedules approved by the Panamanian Supreme Court and the Panamanian Bar Association establishing the fees chargeable for the types of professional services performed. There are provisions to award reasonable attorney fees as part of the costs, at the discretion of the Judge.

We provide, at a reasonable communication charge, services of constantly monitoring vessel’s calls at the Canal and on Panamanian ports, as well as registration, changes of ownership, registration of mortgages and liens, and charterparties.  Detailed information is available on arrivals, status of registration, companies, and general maritime information, on short notice, we track down, free of charge, our clients, the movement of vessels and the legal status of Panamanian registered vessels, having a data base list which is constantly updated.

Should you have any questions, or require additional information, please do not hesitate in sending us your inquiry.  We welcome your comments and questions, as well as the opportunity of being of assistance in successfully collecting debts.

Contact us at office@frlplaw.com for more information.