REGISTRATION OF VESSELS UNDER THE PANAMANIAN FLAG AND REGISTRATION OF MORTGAGES

• GOVERNMENT AGENCIES INVOLVED

There are two government entities primarily involved in the registration of vessels under the flag of the Republic of Panama. The Panama Maritime Authority (hereon ¨PMA¨) is in charge of all administrative matters regarding vessels registered under the flag of the Republic of Panama, and the Public Registry, an agency of the Ministry of Government and Justice, is the entity responsible for coordinating all matters concerning the legal status of the vessel, namely the registration of title to vessels and mortgages thereon.

These two government entities are in turn assisted by other government authorities in coordinating their respective services. There are several consulates of the Republic of Panama scattered around the world i.e, London, New York, Hong Kong that are appointed by the PMA to expedite the process of registering a vessel under the Panamanian flag. These consulates are also entitled to act as auxiliary registrars of the Public Registry for the preliminary registration of the Public Registry for the preliminary registration of title and mortgages, thus giving creditors security in respect of vessels that are being financed. 

B.-  APPLICABLE LEGISLATION

Legal provisions which apply to the registration of vessels under the Panamanian flag are contained in various laws, cabinet and executive decrees and resolutions, as well as in the Code of Commerce and Fiscal Code. In addition the Republic of Panama has ratified several international conventions. Of primary importance are law number 8 of 1925 and law number 2 of 1980 which provide the basic guidelines for registering vessels and the functions of the PMA. In addition, law number 14 of 1980 regulates the preliminary registration of the title and mortgages.

C.- REQUIREMENTS FOR ENROLLMENT

There are no nationality requirements concerning the ownership of a vessel registered under the Panamanian flag, and the owner of a vessel may be an individual or entity, either Panamanian or foreign, residing or doing business in Panama or elsewhere.

There are also practically no minimum tonnage or age requirements, except that private yachts may only be enrolled under the flag if either their length exceeds 20 meters or if they have a gross registered tonnage of more that 50 tons. In addition, the Director General of the PMA may authorize the enrollment of a yacht not meeting the aforementioned criteria, or a yacht may be enrolled notwithstanding if it is intended that the craft will navigate within the jurisdictional waters of the Republic of Panama.

Whilst there are no age requirement, a vessel built more that 20 years before its enrollment under the Panamanian flag must undergo an inspection within six months of provisional registration. Said inspection is coordinated by the PMA.

Article 1 of Law No.8 of 1925, which still remains good and acceptable law, defines the vessels which may be registered in Panama, to include crafts intended for transportation of passengers and cargo, pontoons, dredges, floating docks, or other hulls made of wood, cement, iron or mixed materials or other objects, not describing them, which are used or could be used, may be used in maritime commerce. In practice one finds instances where mobile offshore drilling rigs and submersibles devoted to scientific research have been enrolled under the Panamanian flag.

It is possible to register a vessel which is under construction provided at least 1/3 of the total amount budgeted for the hull has already been invested.

Pursuant to Law No.11 of 1973 and Law No.83 of 1973, it is possible to have dual registration of vessels, under certain circumstance, whereby a vessel registered under the Panamanian flag will be allowed to fly another flag a special registry on account of charter party arrangements and vice versa.

• PROCEDURE FOR ENROLLMENT

All vessels with the exception of yachts may be enrolled through Consulates or directly at the PMA in Panama at the owner’s option. 

The enrollment process begins with an application for registration lodged through a local attorney. The following information is required to complete the appropriate application form:

1. Present name and former name, if any, of the vessel
2. Class of vessel, i.e., steam motor, sailing, tanker, barge, etc.
3. Name, nationality and complete address of the owner
4. Previous country of registry if applicable
5. Net, Gross and between decks tonnage
6. Principal dimensions, i.e., length, breadth and depth
7. Number of decks, masts and funnels
8. Kind and number of engines and number and diameter, as well as the name of the engine manufacturers.
9. Speed of the vessel and horsepower or wattage
10. Nature of service of traffic to be rendered by the vessel, i.e., tanker, bulk, carrier, passenger trade, refrigerated cargo, etc.
11. Name and address of the builder of the vessel, place of construction and year thereof, and material out of which hull was built.
12. Name and address of the person or corporation who will be responsible for the payment of statements for radio telegraphic services.

Note: Name given should be that of an authorized accounting unit in charge of payment or radio accounts, i.e., Sait, ITT or the like. Care should be exercised to provide the correct information upon completion of the application form, since additional charges will be incurred if the same is found to vary subsequent to provisional registration.

1. Vessel’s legal representative in Panama, i.e., lawyer or a firm that will represent the vessel in Panama and handle the different phases required for registration.

It is important to provide accurate information in respect of the above referred items. In particular, attention is to be given to provide correct dimensions and tonnages as any changes will result in delays and additional expenses in obtaining statutory enrollment.

At the same time that the application for registration is lodged, the interested charges and taxes and the following documents required for enrollment:

1. A power of attorney or authorization in favor of the legal representative in Panama, i.e., lawyer or firm of lawyers who is to handle the various phases involved in the enrollment process. Said power of attorney should be authenticated by a notary public and legalized by a Panamanian Consul.

1. If the vessel is newly constructed, proof of ownership thereof would consist of a Builder’s Certificate or Construction Certificate which should contain the price of construction and a description of the vessel. If the vessel has been transferred to the Panamanian flag on account of a sale, the bill of sale would constitute proof of ownership should be established by the Bill of Sale, or construction or builder’s certificate under which the owner took ownership thereof, and/or by virtue of a certificate from the previous country of registry and the corresponding certificate of deletion or cancellation of registry.Proof of ownership and formalities thereof may be in any language and subject to laws other than Panamanian Law. In any event, in case of the initial registration of a vessel under the flag, the Builder’s or Construction Certificate or Bill of Sale should contain a declaration by a notary public out of his own knowledge and not by way of deposition, that the seller was at the time of sale the legal owner of the vessel and that the person acting on its behalf was duly authorized to do so. Furthermore, the Builder’s Construction Certificate or Bill of Sale should also set out the acceptance of the sale or transfer by the buyer, or alternatively, a separate document containing the acceptance of sale or transfer can be attached to the corresponding document.

1. Official certificate or documents, duly authenticated and legalized by a Panamanian Consul, to the effect that the previous registry has been canceled or closed, or a consent to the cancellation of the same. This does not apply to newly constructed vessels.

1. A certificate of admeasurement in respect of the vessel. Said certificate should be issued by a classification agencies authorized by the Republic of Panama.

1. Technical certificates required by international conventions according to ship’s trade and tonnage, which include primarily the following:

Passenger Ship Safety Certificate

Cargo Ship Safety Construction Certificate

Cargo Ship Safety Equipment Certificate

Cargo Ship Safety Radio Telegraphy Certificate

Cargo Ship Safety Radiotelephony Certificate

International Load Line Certificate

1. Classification Certificate 

Is important to note that the referred certificate should be re-issued by the corresponding classification society, on behalf on the Republic of Panama, at the request of the vessel’s owner. In practice, copies of said certificates as per the previous registry of the vessel are acceptable for provisional registration.

Note: The above list of documents is a guide as to the document. In addition, other documents may be required by Pancon in accordance with particular administrative practices.

Once the above mentioned formalities have been accomplished, the PMA will issue, or authorize a Consul to issue a Provisional Navigation License valid for six months and a Provisional Radio License valid for three months. At this time, the interested party should make arrangements for the issuance of a crew roll list and for the issuance of certificates of competency.

Thereafter, the interested party should send the power of attorney in favor of the legal representative of the vessel in Panama, proof of ownership as described above, as well as the admeasurement certificate  and certificate or document evidencing the cancellation of the previous registry to the lawyer or firm of lawyers that will complete the enrollment of the vessel under the flag of Panama. In addition, the interested party should inform the classification society that will re-issue the corresponding technical certificate and send a completed application form for Statutory Radio License in the form provided for such purpose by Consul. When the Consul issues the provisional navigation and radio licenses, the Consul will need to retain a duly authenticated and legalized copy of the various documents referred to herein.

If the vessel was built more than 20 years before the registration thereof under the flag of Panama, the interested party should contact to arrange for the inspection of the vessel. This a prerequisite for completing the enrollment of the vessel and the issuance of a Statutory Navigation License.

Once the lawyer or firm of lawyers in Panama receives the corresponding documents, various steps should be taken to complete the enrollment of the vessel under the flag, to wit:

1. Translation, protocolization and registration of the document evidencing proof of ownership at the Public Registry. 

1. Presentation of the application for the issuance of the Statutory Radio License at the PMA.

1. Presentation at the PMA of the power of attorney in favor of the legal representative of the vessel in Panama, as well as the certificate or document evidencing cancellation of the previous registry and proof of ownership as registered at the Public Registry, as well as the certificate of admeasurement mentioned before.

1. In addition, the PMA would have to be informed of the name of the classification society which surveys the vessel being registered.

Once the above mentioned steps have been appropriately completed, the PMA will issue Statutory Radio and Navigation Licenses valid for 4 years or 2 years in case of yachts.

To the extent that the provisional radio and navigation licenses expire without the vessel having been issued a statutory radio and navigation license, these may be extended for a further time upon payment of renewal charges and a fine.

• ANNUAL REQUIREMENTS

Annual taxes and charges are payable during the course of the month of January for the coming year. Whilst the same may be paid directly at the PMA, the interested party may settle the same through consulate at his convenience.

1. TRANSFER OF VESSELS ALREADY ENROLLED UNDER THE PANAMANIAN FLAG.

1. A vessel enrolled under the Panamanian flag may be transferred to another owner so long as the vessel is up to date in respect of its payments of taxes and the like to the government authorities. To the extent that any formalities are pending to obtain statutory enrollment under the previous owner, the same will have to be completed before statutory enrollment can be completed under the new ownership.

1. The process of transferring ownership begins by obtaining a certificate from the public registry showing the standing of the vessel in respect of registered encumbrances. This is normally done by the lawyer or firm of lawyers who will represent the new owner whilst the vessel is under the Panamanian flag. Thereafter, an application for the issuance of a new Provisional Navigation License valid for six months and that of a Provisional Radio license valid for three months is filed at the PMA. 

1. Upon filing for the application for the issuance of new documents, one may request that a particular consulate be authorized to issue the corresponding navigation and radio licenses, or the issuance thereof may be requested locally and thereafter sent to the interested party. The issuance of the new navigation and radio licenses will be authorized subject to payment of the corresponding charges levied by the PMA for the transfer of ownership and subject to payment of whatever outstanding sums were due under the prior ownership. 

1. Thereafter, the various phases outlined before in respect of an original enrollment would have to be completed to obtain statutory enrollment.

• MORTGAGES ON VESSEL ENROLLMENT UNDER THE PANAMANIAN FLAG.

ARTICLES 1512 to 1526 of the Code of Commerce of Panama refer specifically to Ship Mortgages granted on Panamanian flag vessels. Reference is made therein to the provisions of the Civil Code on Mortgages of Inmovables (Real Estate) and these provisions apply to the extent that they are not in contradiction with special provisions of the Code of Commerce. In addition, reference should also be made to the provision of the Civil Code concerning the Public Registry. In particular, the provisions of Commerce were amended with the passing of Law No.14 of 1980 in respect of the preliminary registration of mortgages, and further with the passing of Law No.43 of 1984.

1. General requirements

1. A ship mortgage may be granted to secure all kinds of lawful obligations, including future obligations, and obligations subject to conditions precedent.

1. The owner of a vessel that has been provisionally registered under the Panamanian flag may constitute a mortgage on the vessel even though  title thereto has not been registered at the Public Registry in Panama. Upon registration of title at said Registry, the interested party should cause the mortgage to be registered at the Public Registry of it to be effective against third parties.  However, a mortgage may be preliminarily registered through Pancon or in Panama upon either preliminary registration of title through Pancon or in Panama or registration thereof at the Public Registry. Such preliminary registration will produce full legal effects for six months therefrom, and thus, be effective against third parties, from the date of preliminary registration. Thereafter, the mortgage should be filed for registration at the Public Registry in Panama within the said six months period and upon registration thereof it will operate retroactively to the date of preliminary registration.

1. The ship mortgage contract may be constituted in any language and should be in writing whether in private or authentic form, or may be constituted in accordance with the laws of the place of execution. For purposes of its final registration at the Public Registry Office, The document would have to be translated into Spanish and protocolized through a Notary Public in Panama. In any event, a ship mortgage must contain the following requirements:

Requirements

1. The name and domicile of the party granting the mortgage and of the mortgagee.

1. The fixed or maximum amount secured. The mortgage is deemed to secure, in addition to the principal, all of the interest accrued, the court costs, collection expenses, the amount arising from fluctuations of currency or of other means of payment and all other sums agreed upon for any other reason in the mortgage contract.

It is presumed, both between the parties and with respect to third persons, unless there is evidence to the contrary, that the sums owed, be it in concept of principal, interests or other sums secured by the mortgage, are those expressed in the complaint.

1. The dates of payment of principal and interests, or the manner to determine such dates, unless the mortgage is executed to secure obligations due on demand, future obligations or obligations subject to a condition precedent.

1. To the extent applicable, the parties must determine in the mortgage contract the interest rate agreed upon or the manner to calculate the same. Among others, the rate may be stipulated with reference to a rate existing in a determined market or a rate to selected borrowers in any market. The rate may be stipulated by reference to the rate existing at the time of execution of the contract, or in accordance with the fluctuations which it may undergo within the term of the contract. The sums secured by a ship mortgage shall not be subject to a maximum interest rate to these credits when the mortgage is granted upon vessels of interior service.

1. Name, number of her navigation license, radio call letters, if applicable and registered dimensions and tonnages. If the vessel is under construction, the circumstances required by law.

1. In case several vessels are mortgaged to secure a single credit, the amount or part of the mortgage for which each vessel is liable may be stated. If said statements have not been made, the creditor can collect the totality of the sum guaranteed from any of the vessels or from all of them.

1. Mortgages may now be executed by private document in any language both in Panama and abroad. Previously, a mortgage would have been to executed in Public Instrument form  in Spanish if execution was to take place in Panama, or before a government official abroad or alternatively, in accordance with the laws of the place of execution if executed outside of Panama.

1. Documents which may also be preliminarily registered include bills of sale, mortgages, and discharges as well assignments, amendments and discharges of mortgages regardless of whether a new mortgage is being preliminarily registered as well.

1. Preliminary registration of the above-named documents can now take place in Panama directly through attorneys in Panama, and the same can take place upon execution of the corresponding document in private form and in any language in Panama. Basically, parties can designate attorneys-in-fact to execute a given document or alternatively send the executed document, and through the preparation of an extract with a Notary Public, the corresponding document can be filed for preliminary registration at the Public Registry.

1. Whilst the mortgage deed should reflect the maximum amount of principal secured, the law provides that the mortgage will also cover interests, costs, collection expenses, increments resulting from currency fluctuations and other sums agreed to in the corresponding document.

1. Several of the provisions were introduced to clarify matters which would appear to have been resolved by commercial practice, but over which there were differences of opinions among the lawyers in Panama.

1. A mortgage may be constituted to secure future obligations or those subject to condition precedent without the need of marginal annotations or amendments, i.e., revolving credit facilities, options to convert to a different currency.