Chambers Shipping Guide - Panama 2021

Originally published in Chambers and Partners

The new Shipping 2021 guide covers 22 jurisdictions. The guide provides the latest information on port state control, marine casualties and owners' liability, cargo claims, maritime liens and ship arrests, passenger claims, ship-owners' income tax relief and the implications of COVID-19.

1. Maritime and Shipping Legislation and Regulation

1.1 Domestic Laws Establishing the Authorities of the Maritime and Shipping Courts

Law 8 of 30 March 1982, which created the Maritime Courts and dictates the Rules of Maritime Procedure, with the modifications, additions and deletions adopted by Laws No 11 of 1986, No 12 of 2009, and others, establishes a specialised maritime jurisdiction composed of two first-instance maritime courts, of equal standing, and a Maritime Court of Appeals with nationwide jurisdiction. The most common maritime and shipping claims are the following.

  • Ordinary Proceedings (in personam).

  • Special Proceedings:

  • collision;

  • ship-owner’s limitation of liability;

  • enforcement of maritime liens (in rem);

  • enforcement of naval mortgage;

  • creditors’ concursus;

  • abbreviated proceedings seeking summary judgment; and

  • special proceeding for enforcement of domestic and foreign decisions.

All these claims are subject to the specialised maritime jurisdiction of the Republic of Panama.

1.2 Port State Control

The inspections of Port State Control (PSC) in Panama are carried out by technical staff of the General Directorate of Merchant Marine of the Panama Maritime Authority, which is the government entity which must guarantee compliance with the Maritime Conventions approved and ratified by the Republic of Panama. These inspections are carried out in accordance with the provisions of international maritime conventions such as the International Convention for the Safety of Life at Sea 1974 (SOLAS), the International Convention for the Prevention of Pollution from Ships (MARPOL), 'Standards of Training, Certification, and Watchkeeping (STCW), Tonnage and Ballast Water Management (BWM) for the purposes of identifying deficiencies in ships visiting Panamanian ports. Ships which may be rendered sub-standard under the terms of these conventions should take measures to remedy the deficiencies found and the inspectors of the Panama Maritime Authority will take the necessary steps to ensure that such remedial measures are taken to guarantee safety and protection of the marine environment.

Panama is part of the Viña del Mar Memorandum of Agreement (the Latin American Agreement on Port State Control of Vessels) and the Tokyo Memorandum of Understanding (MOU), so port state control inspections are carried out following the guidelines of those two memorandums of understanding, as well as based on the guidelines established in the International Maritime Organization (IMO) Resolution A.1138(31), adopted on 4 December 2019, updating the procedure for Port State Control Inspections.

In relation to marine casualties such as grounding, investigations are carried out by the Panama Maritime Authority as the Flag State. These functions in practice are not mixed with the obligations of the authority as Port State. As a flag state, it is the Maritime Casualty Investigations Department of the Panama Maritime Authority which co-ordinates the casualty investigations aboard flag ships around the world and also incidents in Panama's jurisdictional waters.

In the case of pollution or wreck removal, the Directorate General of Ports of the Panama Maritime Authority is the entity in charge of investigating and carrying out related actions.

1.3 Domestic Legislation Applicable to Ship Registration

Laws 55 and 57 of 6 August 2008, known as the Maritime Commerce Law and the General Merchant Marine Law, respectively, are the pieces of legislation that govern all matters related to the registration of domestic and international service vessels under the laws of the Republic of Panama.

There are two governmental institutions within the Panama Maritime Authority (PMA) in charge of the registration of vessels:

  • the Directorate General of Merchant Marine (DIGEMAR) which is in charge of all administrative matters such as the enrolment of vessels and ensuring safety and security matters thereof; and

  • the Directorate General of Public Registry of Property of Vessels (Ships Registry) which is in charge of recording all matters related to the legal status of the vessels concerning ownership and encumbrances.

1.4 Requirements for Ownership of Vessels

There are no citizenship requirements for registration of a vessel under the Panamanian Register. Any person, natural or juridical, irrespective of the nationality, may enrol a vessel under the Panamanian flag.

Panamanian laws allow the registration of a vessel while under construction. To that end, a certificate issued by the shipyard describing the vessel which is being built, the name of the company for which the vessel is being constructed and a declaration of the intention to transfer ownership thereof will serve as title of ownership to be registered at the Ships Registry.

1.5 Temporary Registration of Vessels

The General Merchant Marine Laws of Panama allows temporary registrations as follows:

Special Registration for Temporary Navigation

This registry allows the enrolment of a vessel for a period of up to three months for ultimate scrapping, for a delivery voyage or any other kind of temporary navigational purpose. The interested party needs to pay a sole charge of 40% of the net tonnage of the vessel plus USD150.

The vessel will be deleted by operation of law at the end of the three-month period at no cost, but the interested party may, at any moment, request such deletion by way of filing a petition thereof and effecting payment of the regular deletion of governmental fees.

The registration of title of ownership or mortgages is optional for this type of registration. Nevertheless, if a mortgage is to be recorded, the registration of title must contain acknowledgment by the mortgagee that the registration of the vessel will elapse at the end of the three-month registration period.

Lay-up Registration

This registration is valid for one renewable year and allows the registration of vessels under Lay-up status, subject to certification issued by a Recognised Organisation (RO) or the applicable Port Authority where the vessel is located.

One of the advantages of this type of registration is that no enrolment fees apply to vessels that will be enrolled in Panama under this type of registration for the first time, and they will be exonerated from paying part of the applicable regular annual tonnage taxes and fees. In addition, they will be exempt from having technical, safety and security certificates on board, but the respective RO should make the pertinent annotations concerning the Lay-up status in the subject certificates.

Once re-activated, an inspection must be carried out by an RO to ascertain that the vessel is duly fitted and in accordance with all national and international maritime laws and regulations as a requirement to revert to a regular international service registration.

In addition, Panamanian laws allow dual bareboat-charter registrations. It is permitted that a ship with primary registration on a foreign registry be registered under the laws of Panama as a secondary registry, pursuant to bareboat charterparty arrangements. The inverse situation is also permitted by Panama's laws.

The system contemplated under Panamanian laws results in the dismemberment of the features or attributes of registration. On the one hand, the laws of the primary registry govern the juridical status of a vessel in terms of the concept of ownership and encumbrances, while, on the other hand, the laws of the special subordinated registry govern matters regarding the administrative and technical operation of the vessel, ie, manning, labour relations