PANAMA Law and Practice Contributed by: Rafael Rivera, Malvis Mina, Nicole Pérez and Carolina Lino, BDO Panama
1. Legal System 1.1 Legal System and Judicial Order Panama has a civil legal system, ie, its legal system is purely based in written laws and legal codes. The highest norm is the Political Con - stitution of Panama, enacted in 1972. Panama recognises conventionality control; hence rati - fied international treaties are recognised at the same level as the Constitution. After the Constitution, Panamanian law recog - nised 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 handles cases in accordance with their specific 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 authorisa - tion. The country maintains a liberal and inves - tor-friendly legal framework that encourages foreign participation across most sectors of the economy. Foreign investors are generally grant - ed the same rights and protections 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 investment is made. These limitations are typically related to national security, public inter - est or activities reserved exclusively for Panama - nian nationals under applicable laws. 2.2 Procedure and Sanctions in the Event of Non-Compliance In Panama, foreign investors are generally not required to obtain prior authorisation to conduct business. However, certain regulated sectors do require specific approvals or licences including, but not limited to, financial services, banking and insurance, public utilities such as telecommuni - cations, electricity and broadcasting. If a foreign investor engages in a regulated activ - ity without obtaining the necessary authorisation from the competent Panamanian authorities, they may be subject to administrative sanc - tions, including fines and the potential closure of their business operations. The applicable pro - cedures and timelines for enforcement will 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 nation - ality-based restrictions on foreign investment in specific sectors. For example, only Panamanian nationals are permitted to engage in retail trade and to practise liberal professions, such as law and medicine, in accordance with constitutional and regulatory provisions. Furthermore, foreign investors seeking to oper - ate in regulated sectors – such as financial ser - vices, banking and insurance – must obtain the appropriate licence from the relevant supervi -
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