Frequently Asked Questions on Ship Arrest in the Republic of Panama

By: Jorge A. Quijano, LLM

1. How fast can a ship within Panama territorial waters or transiting through the Panama Canal be arrested?

The arrest of the ship can be arranged within the same day. The Maritime Courts of Panama are available 24/7 to seize the vessel once located at any port or dock in Panama or at the beginning or completion of its transit through the Panama Canal. Once resources have been assigned by the Panama Canal Authority for the ship to transit, it can only be detained after conclusion of the transit, but before leaving Panamanian waters.

2. Which types of claims can be secured with a ship arrest in Panama?

•      Bunker debts

•      Cargo or freight claims

•      Personal Injury claims

•      Seaman labor claims

•      Stevedores claims

•      Charter Party disputes

•      Towage claims

•      Salvage claims

•      Mortgage executions

•      Any claim arising out of acts related to maritime commerce, transportation and traffic arising inside or outside the territory of Panama (Art. 19 of Maritime Procedure Law).

 3. What documents are required by the Maritime Courts to file an arrest against a ship which is transiting through the Panama Canal or found in jurisdictional waters in Panama?

(a) Power of Attorney granted to our law offices and Good Standing Certificate of the claimant party.  If not readily available, a cash bond for US$1,500 must be deposited in order to act as “Unofficial agents” until certified originals of these documents are available.

(b) Complaint and application for arrest.

(c) Security deposit of US$1,000 for damages

(d) Deposit for custody and maintenance of the vessel US$2,500 (or US$4,500 if the vessel is over 10,000 GRT)

(e) Documentation in support of application for arrest.  “Prima facie evidence”, such as agreements, invoices, e-mail communications, correspondence, etc.

(f) Certification of the vessel’s flag of registry and ownership.  (i.e. copy of a reputable international shipping directory listing the vessel’s details.)

The above documentation could be presented to the court, at the initial stage of the judicial process without formalities i.e. legalized or authenticated originals.  Documents may even be filed in English language and photocopies or scanned copies will suffice.

4. How is the priority and/or ranking of creditors determined under maritime claims in Panama?

 The priority or ranking of creditors is determined in Chapter 2, Article 244 of Law 55 of 6th August 2008 amended by Law 27th of 28th October 2014 in the following order: 

1. Court costs incurred in the common interests of all maritime creditors.

2. Expenses, compensation and wages, for any assistance and salvage.

3. Wages, remuneration and compensation owed to the master and crew members.

4. Ship mortgages.

5. Debts owed to the Panamanian government on rates and taxes.

6. Salaries and wages due to stevedores and dockworkers hired directly by the owner, operator, or master of the vessel, for her loading or discharge.

7. Any compensation payable for damages caused due to fault or negligence.

8. Amounts owed for general average contributions.

9. Debts incurred in procuring the vessels’ necessities and provisions.

10. Bottomry loans for the ship’s hull, rigging, stores, equipment and outfit, and insurance premiums.

11. Wages of pilots, watchmen, and the cost of the ship’s maintenance and custody, rigging and stores.

12. Compensation payable to shippers and passengers for failure to deliver cargo or for damage thereto sustained and attributable to the master or crew.

13. The price obtained for the ship’s last sale and any interests owed.

5. Asides from the ship arrest, which other alternative does a plaintiff have to secure any outstanding debt against a defendant when the vessel is registered under Panama Flag?

Any plaintiff with legal standing can file a complaint, with application of conservative measure, whenever the vessel is registered under Panama Flag. This remedy is known as conservative measure and regulated in Article 206 of Panama Maritime Procedure Law as follows:

“Article 206.  In addition to the cases provided for, a person with reason to believe that during the time prior to a judicial recognition of his right he will suffer immediate or irreparable danger, may request from the Judge the most appropriate conservatory or protective measure which will provisionally guarantee, depending on the circumstances, the effects of a judgment of law.  The petitioner shall present his motion, accompanying the preliminary evidence and, furthermore, the corresponding security for damages, which in no case shall be less than one thousand dollars (US$1,000.00) or more than fifty thousand dollars (US$50,000.00).  In case of prohibitions to transfer or encumber vessels or other assets, the bond shall not be less than ten thousand dollars (US$10,000.00).”

6. How can a ship be released from arrest?

In order to lift the arrest, the defendant or arrested party must deposit a guarantee in court, either in cash or in a cashier’s check drawn on a bank with the proper license to operate in Panama; or in surety bonds issued by banks, insurance companies, or other bonding agencies in the Republic of Panama, authorized to engage in such transactions; or any other guarantee agreed by the parties (i.e. P&I club letters of undertaking (LOU) issued by their local agents in Panama).  This guarantee must cover the amount claimed in the complaint and the costs assessed by the court including attorney fees, interests, and expenses.

7. How quick can the ship be released?

 The release of the vessel takes place immediately once the guarantee is posted at the Maritime Court.

8. Can the arrested party file a motion for wrongful arrest at the Maritime Courts in Panama?

Yes.  Pursuant to Article 187 of the Panama Maritime Procedure Law, the defendant as part of its defense may file an action for wrongful arrest when:

a)    The arrest has been performed over property which is different from the one against which the complaint was brought; or

b)    Which does not belong to the defendant; or

c)    On which the maritime lien or in rem right for whose execution the arrest was filed is extinguished or inexistent; or

d)    If the arrest was filed in contravention to a prior agreement amongst the parties, as the case may be.