I. GENERAL

The purpose of this document is to provide information and advice to companies that are to enter into public contracts with the Government of Panama in connection with the proceedings that must be fulfilled.

It is not unusual for us to see companies and/or investors who have incurred in expenses arising from the execution of an existing or possible contract with the Government although the respective instrument has not been properly endorsed and, at the time of submitting the request for payment or performance of an obligation, it is not accepted by the officer in charge of the respective department or staff.

We also happen to see quite often that when a president’s tenure of office ends and, therefore, is replaced, other uncomfortable situations may arise with newly appointed personnel who may ask for clarifications or, in the worst cases, the Office of the Attorney General decides to request a deposition or a statement in respect of situations incurred mostly in good faith.

Another inconvenience that could arise if the content of this guide and the recommendations we are to submit below are not fully complied with, is a situation that may require filing a contentious-administrative action before the Third Chamber of the Supreme Court of Justice against the Government with a view to obtaining financial  compensation, which in most cases ends in a resolution of dismissal.  The Contentious-Administrative jurisdiction is quite firmly reputed for being most careful with formalities.  This is now once more a reminder that one has to make sure that the contract must be endorsed by the Office of the Comptroller General, otherwise it shall not be admitted in the Contentious-Administrative jurisdiction.

II. PUBLIC CONTRACTS IN PANAMA

Article 87 of the Sole Text of Law 61 de 2017, which amended  Law 22 of the 27th of June, 2006, stipulates that public contracts are to be considered executed and effective upon their endorsement by the Office of the Comptroller General of the Republic of Panama. If the contract itself or an agenda thereof has not been endorsed by the Office of the Comptroller General, it shall not be possible to obtain that the proper party of the Government may proceed to receive, process and/or pay as agreed therein.

The solemnity of public contracts in Panama is clearly established above, since the law requires that they be endorsed by Office of the Comptroller General in order to be valid and enforceable and to be as effective as intended therein. Otherwise, such a contract shall not achieve its purpose. Among other consequences, the official at the counter is usually under specific orders not to receive a request for payment if it is not submitted with a simple copy of the contract involved.

III. RECOMMENDATIONS CONCERNING APPLICATIONS TO COLLECT PAYMENTS FROM THE GOVERNMENT

In order to conduct a collection process with effective results, the following recommendations should be taken into account:

1)       Firstly, make sure that when you submit the payment request to the Government, the contract bears the endorsement by the Office of the Comptroller General of the Republic of Panama in accordance with the provisions of its Resolution 50-2010-DC-DFG of the 31^st of May, 2010, which formally requires any and all providers for the Government and all of the public entities to abstain from receiving assets, providing services or starting the work before the contract and any addenda thereof has received the endorsement.

2)   Once the contract has been endorsed, verify that the performance or the obligations of the contractor as established in the contract have been fully performed or complied with as expressly agreed in the contract in order to give rise thereby to the Government’s obligation to pay.

3)      When the purpose or the obligations arising from the contract have been complied with, the party of the Government receiving the application must produce the minutes stating “received as agreed”, which have to be attached to the request for payment.

4)      In addition to the above, the respective request for payment has to be timely submitted in accordance with the terms stipulated in the contract which must abide by the formalities of such requests in the specific form established (usually with three (3) copies attached) and the following formalities required:

a) Original of the invoice.

b) Certificate of “received as agreed”.

c) Copy of the cédula of the legal representative of the contractor.

d) Power of attorney authorizing whomever may be acting as legal representative if the person who is to sign the collection request is not actually the legal representative of the contractor.

e) A copy of the Contract with addenda, if any.

f) A copy of the performance bond if a bond is required.

g) A certificate of no obligations of the contractor pending with the Social Security Entity.

h) A certificate of no obligations of the contractor pending with Dirección General de Ingresos (the Tax Authority in Panama).

IV. CONCLUSIONS

• The public contract in Panama has the solemnity of a contract.
• Due to the solemnity of public contracts, no assets are to be received, no services are to be performed and no work started before the endorsement of the contract (with addendas, if any) as the case may be.
•  The risk of financial damages and other connected legal problems arising if assets are delivered or services are provided or the works started may be avoided if any assets are delivered, any service is provided and the work starts only after the endorsement has been obtained.
• All of the items agreed in the contract (and its addenda, as the case may be) have to be fully complied with in order to be able to submit a successful request for payment and performance of public contracts.
• The collection form must be accompanied by all the requirements outlined in section III of this document.