PANAMA Law and Practice Contributed by: Kharla Aizpurúa Olmos, Mónica Moreno and Eduardo Oteiza, Morgan & Morgan
courts of the Republic of Panama without reconsid- eration of the merits, provided that: • such foreign court grants reciprocity to the enforcement of judgments of courts of the Repub- lic of Panama; • the party against whom the judgment was ren- dered was personally (not by mail) served in such action within such jurisdiction; • the judgment arises out of a personal action against the defendant; • the obligation in respect of which the judgment was rendered is lawful in the Republic of Panama and does not contradict the public policy of the Republic of Panama; • the judgment is properly authenticated by dip- lomatic or consular officers of the Republic of Panama or pursuant to the 1961 Hague Conven- tion on the legalisation of documents; • the judgment of a foreign court or arbitral tribunal does not violate the public policy of Panama; • the judgment was issued by a competent court of the foreign jurisdiction; and • a copy of the final judgment is translated into Spanish by a licensed translator in Panama. 6.4 A Foreign Lender’s Ability to Enforce Its Rights In general, there are no specific issues affecting a foreign lender’s ability to enforce rights under a loan or security agreement. However, each contract must be individually examined to determine enforceability, especially when governmental entities are involved, which may be subject to additional scrutiny.
rights to enforce liens are subject to limitations. For instance, under the Insolvency Law, upon the filing of a reorganisation request by the debtor to the cor- responding tribunal, the debtor is generally prohibited from constituting and executing guarantees over its assets, including guarantee trust arrangements. More- over, once the reorganisation is admitted and officially commences per the tribunal’s resolution, a financial protection period starts from said resolution’s date until a reorganisation agreement is reached between the creditors and the debtor, and is approved by the judge overseeing the proceedings. During this financial protection period, executory pro- ceedings ( procesos ejecutivos ) of any class are pro- hibited from commencing, as well as any proceedings for restitution of goods or for eviction of the debtor (to this effect, statute of limitation periods are suspend- ed). Also, during the financial protection period, no proceedings to enforce any security or lien over assets of the debtor may be commenced and those that have commenced but have yet to reach the auction stage are suspended. Nonetheless, once the financial pro- tection period has commenced, the reorganisation proceeding’s judge may, on the request of a credi- tor, authorise such security or liens enforcement if the judge finds that this would not affect the operations of the company or the ability of the debtor and credi- tors to reach a reorganisation agreement. However, if more than six months elapse from the date on which the financial protection period commenced, the rights to enforce real property security/liens over real prop- erty, or guarantee trusts, are automatically reinstated without the need for a judicial resolution. On the other hand, in a liquidation insolvency pro- ceeding, under the Insolvency Law, creditors with in rem security interests ( derechos reales ) over the debt- or’ assets may continue their actions against assets so encumbered by a mortgage, antichresis or pledge, without affecting the ability of such actions to be car- ried out in the liquidation insolvency proceeding. 7.2 Waterfall of Payments According to Panama’s Civil Code, priority among classes of secured creditors is determined in accord- ance with the assets securing their credit.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
Generally, lenders have statutory rights to enforce their liens outside a restructuring or insolvency context, which, generally, consists of filing an executory pro- ceeding ( proceso ejecutivo ) before the corresponding tribunal and undergoing an auction process to recover any amounts from the assets. However, in a reorganisation insolvency proceeding, under Law 12 of 2016 (the “Insolvency Law”), creditor
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