Panama Investment Protections
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1. INTERNATIONAL LAW INVESTMENT PROTECTION FRAMEWORK
Panama is a full member State of the ICSID Convention. The National Assembly ratified the ICSID Convention, and it was promulgated as law on January 3, 1996.[1] The Government of Panama deposited its instrument of ratification on April 8, 1996, and the ICSID Convention entered into force 30 days later on May 8, 1996, pursuant to Article 68(2).[2] The ICSID Convention has not been denounced by Panama and is still in force. The following facts are relevant with respect to notifications required under the ICSID Convention:
- Panama employs a unitary system of Government. Therefore the notifications contemplated by Articles 25(1)(3) and 70 are unnecessary for Panama.[3]
- Panama has not made any notifications with respect to Article 54(2) of the ICSID Convention. Thus, any request to execute an arbitration award issued under the ICSID Convention should be made to the corresponding court of law that ordinarily would have had jurisdiction over such case had it been tried in a domestic court of law.[4]
- Panama has not submitted any notifications to the Center with respect to Article 69 of the ICSID Convention.[5]
- The ICSID’s official website indicates that Panama has appointed four persons to be part of the Panels of Conciliators and Arbitrators (pursuant to Article 13(1) of the ICSID Convention). They are Cecilia Arosemena de González Ruiz, Eric Allexander Britton Gallardo, María Fábrega and Esteban López Moreno. All of them are appointed for a term running until January 26, 2016.
Panama has signed investment treaties with the following countries: [Argentina, Canada, Chile, Cuba, the Czech Republic, the Dominican Republic, France, Germany, Italy, the Republic of Korea, Mexico, the Netherlands, Spain, Switzerland, Taiwan, Ukraine[6], the United Kingdom of Great Britain and Northern Ireland, the United States of America, and Uruguay.
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2. INVESTMENT DISPUTES
[Examples of Panamanian investment treaty arbitrations include: one case brought under the ICSID Convention and two cases brought under specific arbitration clauses included in contracts executed by the State as opposed to under Bilateral Investment Treaties. Of these two, one was brought under the Rules of the International Chamber of Commerce and the other was brought pursuant to the UNCITRAL Rules.]
1. Nations Energy, Inc. and Others v. Republic of Panama (ICSID Case No. ARB/06/19)
[In] one case brought against the Republic of Panama under the ICSID Convention[, t]he principal claimant is Nations Energy, Inc. an investor in an electrical generation project.[7] The Tribunal held a hearing on the merits in April 2010 an the Tribunal issued its award in November 2010.[8]
2. Refinería Panamá Case
Other than ICSID-related disputes, Panama has seen its fair share of arbitration, though most have been brought under specific arbitration clauses included in contracts executed by the State as opposed to under Bilateral Investment Treaties. One such arbitration is the claim brought by Refinería Panamá, S.A. (“Refinería”) against the Republic of Panama under the Rules of the International Chamber of Commerce.[9] Refinería was a subsidiary of Chevron Corporation, and claimed that the State breached a contract signed in 1992 when it passed a law in 1998 eliminating protection tariffs on imported energy generation. The Government filed a counterclaim against Refinería arguing that it was Refinería that had breached its obligations under the contract, and also claimed environmental damages. However, the parties reached a settlement in 2002 before the parties went to a hearing.[10]
3. Parienti Case
The Parienti case is another relevant arbitration case brought under the France-Panama Bilateral Investment Treaty (“BIT’).[11] This case was challenged via a nullification process in Panama and the Supreme Court issued a decision nullifying the award.[12] Throughout the arbitration proceeding, Parienti (a citizen of France) claimed that he had made an equity investment in a Panamanian corporation (“sociedad anónima”) called De Lesseps Holding Corporation, which in turn had a 49% stake in Terminal Nacional de Transporte Terrestre de Pasajeros para la Provincia de Colón, S.A. (“Terminal”). Parienti claimed that the State had granted Terminal a contract to construct and operate a mass transit bus terminal in the Province of Colon, located on the Caribbean coast of Panama. Parienti alleged that he had suffered damages when the State unilaterally terminated the contract, and he sought protection under the France-Panama BIT.[13] The treaty required that disputes be submitted to arbitration pursuant to the UNCITRAL Rules.[14] In this particular case, the arbitration was submitted to the Conflict Solution Center of the Panamanian Chamber of Construction (“Cescon”). The award, through a decision rendered ex aequo et bono, found in favor of Parienti and ordered the State to pay damages.[15]
After the award was issued, the Republic of Panama sought an order of nullity before the Fourth Chamber of the Supreme Court of Justice on the following grounds: (i) the arbitration procedure was not conducted pursuant to the rules agreed by the parties; (ii) the Republic of Panama, as a party to the arbitration procedure, was never properly notified of the initiation of such arbitration; (iii) the award included matters that were not the subject of the dispute; and (iv) the dispute was over public utility services, which are excluded from arbitration.[16] The Fourth Chamber of the Supreme Court rendered the award null. One of the most relevant aspects of the decision was that the arbitration tribunal had in fact used a mix of UNCITRAL and Cescon rules.[17]
Another key aspect of the decision was that the Court found that, since the arbitration proceeding had been brought against the Land Transit and Transportation Authority and the Republic of Panama, the Republic of Panama had to be notified of the initiation of the procedure separately from the Land Transit and Transportation Authority. In the Court’s view, the Republic of Panama was a separate defendant in the case, subject to its own defense and appointment of arbitrators, and only the Land Transit and Transportation Authority had been able to take part in these activities during the arbitration procedures.[18]
Finally, in reaching its decision, the Court stated that, pursuant to the Constitutional limitations on arbitrations involving the State (as discussed above in this Chapter), the Land Transit and Transportation Authority, as a public and government-run agency, could not bind the State to an arbitration procedure without obtaining the consent of the President’s Cabinet and the State’s Attorney General.[19] Apparently, the Land Transit and Transportation Authority had neglected to seek the consent or authority to arbitrate as mandated by the Constitution. . . . This constitutional requirement has since been eliminated.
[1] See Law No. 13 of 1996, Acuerdos en Materia de Inversión Suscritos por la Repú blica de Panamá, p. 5, available at http://www.mici.gob.pa/imagenes/pdf/acuerdos_en_materia_de_inversion_03_marzo_2011.pdf.
[2] See List of Contracting States and Other Signatories of the Convention, ICSID Doc. No. 3, dated May 5, 2011, available at http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocument&language=English.
[3] Under Article 25, parties must consent in writing to submit the dispute to the Centre for Settlement of Investment Disputes, and “[c]onsent by a constituent subdivision or agency of a Contracting State shall require the approval of that State unless that State notifies the Centre that no such approval is required.” Under Article 70, the “[ICSID] Convention shall apply to all territories for whose international relations a Contracting State is responsible, except those which are excluded by such State by written notice to the depositary of this Convention either at the time of ratification, acceptance or approval or subsequently.” Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 4 I.L.M. 524 (18 Mar. 1965) (“ICSID Convention”).
[4] Panamanian Judicial Code, Art. 1420.
[5] See Notifications Concerning Classes of Disputes Considered Suitable or Unsuitable for Submission to the Centre, ICSID Doc. No. 8/D, available at http://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDDocRH&actionVal=ShowDocument&Measures=True&language=English.
[6] The Panama-Ukraine BIT is still pending ratification from Ukraine.
[7] Nations Energy, Inc and others v. Republic of Panama, ICSID Case No. ARB/06/19, Award dated November 24, 2010.
[8] Nations Energy, Inc and others v. Republic of Panama, ICSID Case No. ARB/06/19, Award dated November 24, 2010.
[9] These Rules had been incorporated in the Contract executed between the State and Refinería on 1992 making reference to the US – Panama Bilateral Investment Treaty.
[10] See Transaction and Termination Agreement [Convenio de Transacción y Terminación] published in Panama’s Official Gazette No. 24586 of July 2, 2002.
[11] Laurent Jean-Marc Parienti contra la Autoridad de Tránsito y Transporte Terrestre (A.T.T.T.) y el Estado Panameño, UNCITRAL, Award dated 27 Jan. 2005 (“Parienti”).
[12] Fourth Chamber of the Supreme Court of Justice, “Motion filed by the Republic of Panama to render null the award issued on January 27, 2005 within the arbitration proceeding submitted by Laurent Jean-Mark Parienti against the Land Transit and Transportation Authority and the Republic of Panama” [Solicitud presentada por la República de Panamá para que se declare nulo el laudo arbitral emitido el 27 de enero de 2005 dentro del proceso de arbitraje instaurado por Laurent Jean-Mark Parienti en contra de la Autoridad de Tránsito y Transporte Terrestre y la República de Panamá](September 20, 2006).
[13] See generally Parienti.
[14] See Convenio Entre el Gobierno de la República de Panamá y el Gobierno de La Republica Francesca Sobre el Trato y La Protección de las Inversiones (“France - Panama BIT”), Art. 8.
[15] See generally Parienti.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
