PANAMA Law and Practice Contributed by: Kharla Aizpurúa Olmos, Mónica Moreno and Eduardo Oteiza, Morgan & Morgan
some of these to be subject to Panamanian law and jurisdiction. Despite the above, under Law 93 of 2019, any dis- putes or claims related to the interpretation, appli- cation, or execution of the PPP contract must be resolved through arbitration after a period of direct negotiation. The arbitration will be conducted in Pan- ama City, Panama, in Spanish, and the applicable law will be that of the Republic of Panama. 8.4 Foreign Ownership Panamanian legislation imposes certain restrictions on the ability of foreign entities to own real property (both surface and subsurface) in connection with spe- cific projects. For example, the Panamanian Political Constitution dictates the following restrictions: • Foreign individuals or entities, as well as domestic entities with foreign capital, either fully or partially, are not permitted to acquire ownership of national or private lands located within ten kilometres of the borders. • The wealth of the subsoil belongs to the state but may be exploited by state or mixed enterprises or subject to concessions or contracts as established by law. • The lands and waters allocated to public services and all types of communications, as well as lands and waters designated or that the state designates for public services, such as irrigation, hydroelectric production, drainage, and aqueducts, belong to the state. • No foreign government, nor any foreign official or semi-official entity or institution, may acquire own- ership of any part of the national territory, except in the case of embassy headquarters, in accordance with what is stipulated by law. Regarding water rights, depending on the project, a water use concession may need to be requested from the Ministry of Environment. 8.5 Structuring Deals In Panama, foreign investment is generally unrestrict- ed, though certain activities may have limitations for
foreign governments or government-owned entities. A detailed review of the project scope and an under- standing of the involved bilateral treaties, such as those for tax benefits, might be necessary. Often, the project companies are structured as cor- porations ( sociedades anónimas ). However, if a share- holder of the project company is a US national, the company is typically structured as a limited liability company ( sociedad de responsabilidad limitada ) to address certain US tax considerations. 8.6 Common Financing Sources and Typical Structures In Panama, typical financing sources and structures for project financing include: • Bank Financing: This includes both local commer- cial banks and international banks with operations in Panama. International banks often offer larger- scale financing for major infrastructure and indus- trial projects. • Export Credit Agency (ECA) Financing: ECA financing has been instrumental in several major infrastructure projects such as the Panama Canal expansion and the Metro Line 3. • Project Bonds: This includes both local bonds issued in the Panamanian capital market and bonds issued in international markets. • Alternative Source of Funding: Project financing in Panama often involves multilateral development banks and development finance institutions. Pri- vate equity funding is commonly seen in renewable energy projects. • Sustainable Finance Programmes: Banco Nacional de Panamá and the Ministry of Economy and Finance offer credit and guarantee structures for social impact projects. 8.7 Natural Resources Under the Panamanian jurisdiction, any project that involves the extraction of natural resources will most likely require the approval of the Ministry of Commerce and Industry and the Ministry of Environment or other applicable entity depending on the resource. Addition- ally, depending on the activity, a duly approved Envi- ronmental Impact Assessment (EIA) can be required
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