The year 2018 has been interesting as to developments in judicial decisions and new legislation enacted in relation to the practical aspects of maritime arrests and injunctions in the Republic of Panama. This article will highlight a recent court decision relating to injunctions and a new law defining the measurement and extension of the territorial sea of the Republic of Panama. Both will help strengthen the Republic of Panama’s position as global hub for maritime arrests and disputes, allowing parties to execute arrests on vessels transiting the Canal or visiting the Panamanian ports.

Landmark decision on injunction requirements

The Maritime Court of Appeals issued a recent decision on the requirements for the application of injunctions on causes arising outside of the Republic of Panama. Injunctions are regulated in Law 8 of 1982, as amended, as cautionary measures available to plaintiffs who have reasonable fear that an imminent or irreparable danger may occur and as such the results of the process would not be guaranteed. Through an injunction, a notation is made in the ship’s records in the Public Registry, stating there is pending litigation and prohibiting the sale or transfer of title.

The request for injunction must be accompanied by prima facie evidence of the claim and substantiated fear of danger, and the corresponding bond to be set by the Maritime Court. The Maritime Courts had previously allowed injunctions on Panamanian flagged ships, under the sole condition of the flag itself. However, the recent Maritime Court of Appeals established other requirements that must be complied with in order to grant the injunction:

“Now, in regards to No. 4 of the second paragraph of article 19 of the maritime Law in question, whereby the A-quo court justified that it had jurisdiction and therefore admitted the claim and granted the injunction requested (unnamed, atypical and generic precautionary measure), this provided that “when a ship or one of the involved ships is registered in Panama”, there is a caveat for its application, which is that when the cause has arisen outside of the territory of the Republic of Panama, as established in the second paragraph of article 19, there is “sine qua non” condition for the Panamanian courts to have jurisdiction, which is that the presumed or actual owner of the defendant ship has its principal business domicile in the Republic of Panama, notwithstanding that the ship is registered in Panama and its owner is a Panamanian corporation, as established in article 166, numeral 2, which states “…it is considered that the defendant is outside of the Panamanian jurisdiction when its effective and real business domicile is outside the Republic of Panama, even if the company is Panamanian or registered as a foreign company in Panama or has branches or affiliates in Panama or that the ship is registered in Panama.”; therefore, the provision is clear indicating that in said event, Panamanian courts lack jurisdiction on the cause, therefore courts could not admit a claim, and much less grant an injunction, as it happened in this case.”[1]

Therefore, in order to grant an injunction on causes arising outside of the Republic of Panama, plaintiff must file “prima facie” evidence of the claim and substantiated fear of danger, complying with the requirements of “fumus bonis iuris and periculum in mora” (“proper right and danger in the delay”). The other requirements to complete the test are that the ship subject to the injunction is registered in Panama, and that the defendant has an effective and real business domicile in the Republic of Panama. This decision was upheld by the Supreme Court of the Republic of Panama, through a decision on a special constitutional writ of “amparo”[2].

Territorial sea boundaries

Law 8 of 1982, as amended, establishes that Panamanian Maritime Courts will exercise jurisdiction over Panama’s territorial waters, which include the territorial sea, rivers and lakes, and the Panama Canal. The territorial sea limits must not exceed 12 nautical miles as established by article 3 of the United Nations Convention on the Law of the Sea, of which Panama is a signatory[3]. However, the territorial sea baselines and points of measurements in the Republic of Panama were not clearly established. This caused confusions when executing arrests within jurisdictional boundaries.

In order to remedy this situation, Panama’s Ministry for Foreign Relations and the Maritime Authority, jointly prepared a new law project which was submitted for approval by the National Assembly. The result is Law 47 of 2018[4], which sets the baselines from which the width of the territorial sea is measured in the Republic of Panama, in the Caribbean Sea and the Pacific Ocean.

Law 47 of 2018, a very brief bill, establishes in its articles 2 and 3 a list of geographical coordinates on points of measurements which will serve to clearly limit the territorial sea extension in the Caribbean Sea and the Pacific Ocean. The importance of Law 47 of 2018 is paramount to the proper execution of arrests in the Republic of Panama and will help court marshals recognize jurisdiction. A recent decision by the Maritime Court of Appeals on in rem proceedings for the execution of privileged maritime lien held the following:

“When this type of action is directed against a ship, the maritime forum can only have jurisdiction once the ship is apprehended materially within the maritime spaces that the international treaties subscribed and our own regulations allow in the Republic of Panama, therefore precautionary measures are only possible in the territorial sea.

In view of the above, the arrest carried out becomes illegal and does not grant jurisdiction to the court of first instance, since it has been executed in a maritime space where there are no faculties to execute it. Without taking into account the analyzed elements, it is impossible to execute a privileged maritime lien in this case, since the physical apprehension of the ship is of the utmost importance, as it not only represents the guarantee of the process, but also the way in which this Panamanian maritime forum acquires jurisdiction over the cause as it is originated by events that occurred outside the Republic of Panama, and finally it is also the means by which the defendant is notified that the action has commenced.”[5]

The 12 nautical mile jurisdiction has not changed, it has simply been clarified and enhanced through a thorough study of the baselines and the enactment of this useful piece of legislation. Courts will now have the availability of accurate measurements dictating their jurisdiction over the territorial waters of the Republic of Panama.