PANAMA Trends and Developments Contributed by: Jorge Molina Mendoza and Alberto de Urriola Rubio, FABREGA MOLINO
The Fourth Chamber of the Supreme Court of Justice of Panama issued a landmark ruling on 7 May 2024. The court addressed a claim by one of the parties involved in an arbitration proceeding alleging that the final award was null and void since its counterpart had been represented by lawyers who were not Panama - nian and lacked the required licence to practise law in the arbitration seat, which was Panama. Case Description Within the framework of a construction contract entered into with a government entity, in which a subcontractor and an insurance company intervened to ensure the faithful performance of the contract, an arbitration clause was signed, within which a pri - or conciliation of 30 days was stipulated. The par - ties subsequently agreed to submit their differences arising from the contract to arbitration, following the rules of the Conciliation and Arbitration Center of the Chamber of Commerce and Industries of the Republic of Panama (“CeCAP”). The parties also agreed that the tribunal would be composed of three arbitrators. In its statement, the claimant company requested that the arbitral tribunal declare breach of the subcontract by the defendant company, and as a result of this declaration, the insurance company had to pay the sum insured to guarantee such compliance, as previ - ously stipulated. After going through the relevant stages, the duly con - stituted arbitral tribunal issued its award on 7 Septem - ber 2021, supplemented by an additional corrective award dated 28 September 2021. In its decision, the arbitral tribunal upheld the claimant’s requests. Action filed with the Supreme Court of Justice of Panama Disagreeing with the arbitral tribunal’s award, the defendant insurance company filed the only remedy provided for under Panamanian law that can be pro - posed against an arbitral award, that is, an annulment action. As the basis for its appeal, the defendant insurer relied on two grounds. The first of these was that the arbitra - tion procedure was not in accordance with the agree - ment signed between the parties, since the law firm,
as well as the private lawyers who represented the plaintiff, were not licensed to practise law in Panama, which in their opinion violated the arbitration proce - dure. The appellant added that the arbitral tribunal allowed this to happen, despite having denounced it in a time - ly manner, and having reiterated it during the clos - ing arguments in which it requested the nullity of all proceedings. However, the arbitral tribunal denied the motions, characterising them as being made in bad faith. Based on official certifications confirming that the plaintiff’s lawyers were not qualified to practise law in Panama, the appellant argued that all the actions taken to defend the interests of the plaintiff were con - trary to the provisions of the arbitration clause, which specified that the arbitration must be carried out in law and in accordance with Panamanian law. The second argument raised by the appellant was the violation of public order, since the arbitral tribunal allowed the participation of a law firm and foreign pri - vate lawyers, who were not authorised to practise law in Panama. The facts on which this second ground is based are fundamentally the same as those on which the first is based, as summarised in previous para - graphs. Opposition to the action for annulment The claimant, who received a favourable award, opposed the arguments of his counterpart, accepting that, in effect, he was represented by foreign attor - neys, but that this fact alone did not violate any of the provisions invoked by the opposing party. This is because, in the seat of arbitration in Panama, it is not an essential condition to be represented by a locally licensed lawyer, as allowed by Article 9 of Law 131 of 2013, which governs national and international com - mercial arbitration in Panama. In addition, it was argued that the law that regulates the legal profession in Panama does not apply to arbi - tration proceedings, which as a whole, should dismiss the appellant’s claim.
602 CHAMBERS.COM
Powered by FlippingBook