PANAMA Law and Practice Contributed by: Rafael Rivera, Javier José Vallarino, Juan Vallarino, Karen Y. Tejeira and Carolina Lino, BDO Legal Panama
1. Legal System 1.1 Legal System and Judicial Order
However, certain regulated sectors do require spe - cific approvals or licences, including financial ser - vices, banking and insurance, public utilities such as telecommunications, electricity and broadcasting. If a foreign investor engages in a regulated activity without obtaining the necessary authorisation from the competent Panamanian authorities, they may be subject to administrative sanctions, including fines and the potential closure of their business operations. The applicable procedures and timelines for enforce - ment vary depending on the nature of the activity and the regulatory body overseeing the sector, as not all industries fall under the jurisdiction of the same authority. 2.3 Commitments Required From Foreign Investors Panamanian legislation imposes certain nationality- based restrictions on foreign investment in specific sectors. For example, only Panamanian nationals are permitted to practise liberal professions, such as law and medicine, in accordance with constitutional and regulatory provisions. Although a foreigner may own a business in Pana - ma, it is important to note that the Political Constitu - tion of the Republic of Panama reserves retail trade to Panamanian nationals or to legal entities whose shareholders are Panamanian nationals. Retail trade is understood as the sale to consumers or the repre - sentation or agency of manufacturing or commercial companies, or any other activity that the law classifies as falling within such trade. Furthermore, foreign investors seeking to operate in regulated sectors ‒ such as financial services, banking and insurance ‒ must obtain the appropriate licence from the relevant supervisory authority, such as the Superintendency of Banks or the Superintendency of Insurance and Reinsurance. In the case of public utility services, including tele - communications, electricity, and broadcasting, inves - tors are required to obtain a licence from the Public Services Authority (ASEP) prior to commencing opera - tions.
Panama has a civil law legal system, ie, it is primarily based in written laws and legal codes. The highest norm is the Political Constitution of Panama, enacted in 1972. Panama recognises conventionality control; hence ratified international treaties are recognised at the same level as the Constitution. After the Constitution, Panamanian law recognised the legal codes, law, decrees, executive decrees, resolutions and ordinances as binding laws. Judicial order in Panama is structured as follows, from highest to lowest dependency: • the Supreme Court of Panama; • superior courts; and • lower courts. Each of these hears cases in accordance with its spe - cific faculties and area of law. 2. Restrictions on Foreign Investments 2.1 Approval of Foreign Investments Generally, foreign direct investment in Panama does not require prior governmental authorisation. The country maintains a liberal and investor-friendly legal framework that encourages foreign participation across most sectors of the economy. Foreign inves - tors are generally granted the same rights and protec - tions as domestic investors. Nevertheless, certain sector-specific restrictions and regulatory exceptions may apply, depending on the nature of the activity or industry in which the invest - ment is made. These limitations are typically related to national security, public interest or activities reserved exclusively for Panamanian nationals under applicable laws. 2.2 Procedure to Obtain Approval and Sanctions for Non-Compliance In Panama, foreign investors are generally not required to obtain prior authorisation to conduct business.
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