PANAMA Law and Practice Contributed by: Kharla Aizpurúa Olmos, Mónica Moreno and Eduardo Oteiza, Morgan & Morgan
On the other hand, mortgages (either real estate or chattel) are terminated by the registration, in the Pub- lic Registry, of a termination or release deed. 5.7 Rules Governing the Priority of Competing Security Interests With respect to security established over the same assets, priority will be granted to the one that was established or created first, unless the secured party under the first guarantee expressly agrees to be sub- ordinated (via a subordination agreement or express consent) to a new security. Also, Panamanian law allows for there to be more than one security interest over the same collateral, provided all parties agree. For example, there can be a first and second mort- gage over chattel or real property. With respect to pledges, particularly share/quota pledges, and a first and second lien, given that one of the fundamental requirements of a pledge is for the creditor or a depositary to hold the pledged shares/ quotas in custody, a second pledge cannot be estab- lished, as the certificate cannot be physically held by two pledgees at once. Nevertheless, in such situa- tions, parties often establish a promise to pledge, which states that, once the first lien is released, the second pledgee will receive the pledged shares/quo- tas automatically. In general terms, contractual subordination provisions survive the insolvency of a borrower incorporated in Panama, except in cases of fraud by the insolvent party. 5.8 Priming Liens The most material security interests that arise by operation of law that can prime a lender’s security interest pertain to immovable assets. The Civil Code recognises a preferential right for the payment of taxes related to the asset and certain insurance premiums. 6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders Usually, a secured lender can enforce its collateral under an event of default as outlined in the credit
agreement or applicable collateral documentation regarding a specific transaction. Under Panamanian law, the enforcement of collateral by a secured lender can vary depending on the type of collateral involved (eg, real estate, movable assets, financial instruments) and the agreed terms between the parties. The lender may have the option to enforce the collateral either judicially or extrajudicially. Regarding a judicial enforcement, it involves the lend- er initiating legal proceedings in court to enforce their security interest. To this extent, the lender may opt to file for the seizure of the debtor’s assets to ensure the payment of the owed funds prior to the final judgment. Please note that if the collateral involves an enforce- able title ( “título ejecutivo” in Spanish) as determined by the Panamanian Judicial Code, lenders can opt for an expedited procedure to enforce their rights. Under the Panamanian Judicial Code, an enforceable title might include public deeds, promissory notes, bonds, or private documents (eg, a joint and several guarantee) of any kind provided that the debtor has acknowledged their signature before a judge, has been deemed to have confessed, has presented the document to a notary for certification or protocolisa- tion, or has passed away and their heirs have con- firmed the authenticity of the signature. When applicable and agreed upon, extrajudicial enforcement (generally in pledges or trusts) allows lenders to bypass court procedures, enabling quicker recovery of their assets. It is a cost-effective and flex- ible method for enforcing security interests. 6.2 Foreign Law and Jurisdiction The choice of foreign law to govern a contract is rec- ognised under Panamanian law. Furthermore, the agreement of a Panamanian party to submit to a for- eign jurisdiction is both lawful and enforceable and does not invalidate the jurisdiction clause. 6.3 Foreign Court Judgments Subject to the issuance of a writ of exequatur by the Supreme Court of Panama, any final judgment ren- dered by a foreign court or an arbitral tribunal would be recognised, conclusive and enforceable in the
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