PANAMA Law and Practice Contributed by: Nadya Price and Joaquín De Obarrio, Patton Moreno & Asvat
5.11 Insolvency Laws Applied by Maritime Courts Panama enacted Law 12 of 2016 on insolvency pro - ceedings (the “Insolvency Law”), which came into effect in January 2017. The Insolvency Law includes provisions similar to those in Chapter 11 of the United States Bankruptcy Code, creating a specialised insol - vency jurisdiction before the civil courts. Bankruptcy financial protection will be granted by the civil courts to the debtor who undergoes a reorgani - sation process under the Insolvency Law. During this period, no executory proceedings, executions of any kind, restitution of assets or evictions may be initiated against the debtor. The Insolvency Law is still recent and has not been extensively tested by the courts. 5.12 Damages in the Event of Wrongful Arrest of a Vessel Any party who by mistake, fault, negligence or bad faith seizes an asset or property that does not belong to the defendant or in contravention of a prior and express agreement between the parties (or where a party requests an arrest for a maritime lien which is nonexistent or time-barred by the statute of limita - tions) will be responsible for the damages caused, as well as for the payment of the expenses and costs arising from that action. 6. Passenger Claims 6.1 Laws and Conventions Applicable to the Resolution of Passenger Claims Chapter IV of the Maritime Commerce Law regulates contracts for the carriage of passengers by sea, while Chapter II of Law 8 of 1982 (the “Code of Maritime Procedure”) regulates the procedure for limiting a ship-owner’s liability. Article 1651 of Panama’s Code of Commerce estab - lishes a one-year time-bar provision for indemnities derived from shipping transport or charter contracts, and a time-bar provision of six months if its issuance is within the territory of the Republic of Panama.
After the full purchase price has been paid by the suc - cessful bidder, the court will issue a statutory adju - dication certificate in favour of the purchaser. This document will constitute the legal title of the vessel and will state that the vessel has been acquired in a judicial sale free from any encumbrances. The sums collected from the judicial sale of the vessel will be consigned with the court by the marshal and will be deposited in a special account maintained by the court. The marshal must apply to the court for payment of their fees and expenses of arrest, custody and sale. Once the sale proceeds have been paid into the court, any party who has obtained a judgment in rem against the vessel or its sale proceeds may apply to the court for determination of priorities, if necessary, and for payment of their claim. Notice of such an application will be given by the court to all parties who have actions filed against the vessel, warning them to lodge their claims. If claimants do not reach an agreement with respect to the distribution of the sale proceeds, the court will appoint an admin - istrator to determine the order in which to pay the privileged maritime lien holders. The naval mortgage will rank fourth in priority. The marshal’s claim against the sale proceeds for their fees and expenses has the highest priority, and until they have been paid in full the court will always reserve sufficient funds in court for that purpose. The plaintiff will also be reimbursed for the sums that they supplied to the marshal for the arrest, custody and conservation of the vessel, before payment is made to any maritime lien holder. The order of priorities in which the sale proceeds will be paid will be deter - mined by the applicable substantive law. The judicial sale of arrested vessels is undertaken by the Maritime Courts. A private sale may be allowed extrajudicially if the parties have agreed to such terms in the mortgage or loan documents, with the ship- owner granting an irrevocable mandate to the mort - gagee.
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