Representation, Agency and/or Distribution Agreements

Representation Agreements in the Republic of Panama are not regulated by a specific rule, since Cabinet Decree No. 344 of 1969, which regulates the representation, agency and/or distribution of products or services of foreign and national manufacturers or firms in the Republic of Panama, was declared unconstitutional by the Supreme Court of Justice in a ruling dated August 2, 1989.  on the grounds that regulating private legal relations restricted competition and thus directly violated the Constitution.

In the absence of legislation regulating distribution agreements in the Republic of Panama, it is understood that they shall be governed by the autonomy of the shall of the parties in accordance with the provisions of article 1106 of the Civil Code that textually states:

“The contracting parties may establish the pacts, clauses and conditions that they consider convenient, provided that they are not contrary to law, morality or public order”

In this same vein, it is necessary to examine the provisions of the Code of Commerce on the principles governing commercial acts, so we have that article 6 of the aforementioned legal text states:

“Article 6. Acts of commerce shall be governed:

1. As to the essence and immediate or immediate effects of the obligations resulting from them and unless otherwise agreed, by the laws of the place where they are celebrated;
2. As to the manner of compliance, by the laws of the Republic of Panama, unless otherwise stipulated;
3. As for the form and external solemnities, by the law of the place where they are celebrated, except in cases where the law expressly provides for the contract;
4. As for the capacity of the contracting parties, by the laws of their respective country.”

From the norm transcribed above it is concluded that the parties can freely agree, the law that shall govern their commercial relationship, regarding the immediate or immediate effects of the obligations contracted, the way of fulfillment, and the forms and solemnities of the act or agreement to be signed.

On the other hand, the Judicial Code of the Republic of Panama, regulates everything concerning the competence or power to administer justice by the Panamanian courts, in order to resolve a conflict that is presented before them for their consideration, so we have that the legal text mentioned above in its article 248 contemplates the so-called “prorogation of jurisdiction”,  which is nothing more than the act by which the parties clearly designate the court to which they submit, in case a conflict arises.

That is to say, that the parties have complete freedom to choose the law that shall govern the contractual relationship and the court that shall resolve conflicts that arise as a result of a commercial or civil relationship.