I COMMERCIAL OVERVIEW OF THE SHIPPING INDUSTRY
The Panama Canal (the Canal) is considered one of the seven wonders of the modern world. Because of it, Panama is at the crossroads of some of the world’s most important shipping lanes. The Canal has been serving the shipping industry since its inauguration in 1914, and, particularly since the Torrijos-Carter Treaties of 1977, has been a catalyst in the development of the country. From 1,000 ship transits in 1914, the Canal now handles about 14,500 transits each year. It is run by the Panama Canal Authority (PCA), a Panamanian government agency, which took over from the Panama Canal Commission, an agency of the US government, in 2000.
Since the PCA took over the administration of the Canal, waiting time for users has fallen substantially and there are now fewer accidents per year. Revenues from the Canal has risen exponentially. In 2016, 330.5 million tonnes of cargo went through the Canal and the income generated from it was US$1.9 billion; profits for the country were US$1 billion. In 2007, after it was approved by a national referendum, Panama embarked on a US$5.3 billion expansion project. The expanded Canal was officially inaugurated on 26 June 2016. Its main feature is the addition of much bigger locks on both the Atlantic side and the Pacific side of the waterway, more than doubling its cargo capacity. The new locks are 25 per cent longer (now 1,400 feet), 51 per cent wider (now 180 feet) and 26 per cent deeper (now 60 feet). Traditional Panamax vessels have a maximum deadweight tonnage (DWT) of 80,000, but those of the Neopanamax size have up to 170,000 DWT. The biggest container vessels that could transit the Panama Canal before its expansion could carry up to 5,000 twenty-foot equivalent units (TEUs), whereas those that are now able to transit can carry up to 14,000 TEUs. The expansion project included deepening the Gatun Lake and the access channels at both sides of the Canal, as well as deepening, widening and straightening the Gaillard Cut. On 19 March 2017, Panama celebrated the transit of 1,000 Neopanamaxes through the expanded Canal. In the same month, there was a record number of transits of Neopanamaxes – 160 of a total of 1,111 transits – which constitutes 78 per cent of the available transit slots for Neopanamaxes. The expanded Canal will further bolster the growth of the maritime sector of Panama’s economy and generate record profits for the country.
The port system at both ends of the canal, particularly the privately operated container ports, are efficient and constantly growing. In this regard, Panama ranks first in Latin America and the Caribbean, having handled 6.7 million TEUs in 2015. The vast majority of cargo that comes to Panama is for transshipment purposes. There are currently five privately operated container ports operating on the Canal – three at the north end, and two in the south – with a railway linking four of them; in effect, they constitute an integrated logistical port system. There are also new oil terminals at both ends of the Canal, with more being built.
In the west of Panama, there is an oil pipeline linking the Atlantic and Pacific oceans, with port terminals capable of handling very large crude carriers. It has been in operation since 1982 and new storage tanks were recently built at both ends of the pipeline.
The maritime sector of Panama has grown substantially, fuelled by the Canal. The Panama Chamber of Shipping now has more than 250 members, whereas 20 years ago it had fewer than 30. These include regional offices of shipping companies, shipping agents, bunkering companies, shipyards, port operators, dredging companies, surveying companies, banks and insurance companies. As at the end of February 2016, there were 8,461 ships registered in Panama, totalling around 229 million gross tonnage.
II GENERAL OVERVIEW OF THE LEGISLATIVE FRAMEWORK
Panama has a unicameral National Assembly with 71 legislators who are elected every five years. The main pieces of maritime legislation are the Organic Law of the Panama Canal Authority and the Organic Law of the Panama Maritime Authority.
The Canal has a special chapter in Panama’s Constitution, the objective of which is to keep it as far away as possible from local politics.
Panama has ratified most of the IMO conventions. Their implementation and enforcement is carried out by the Panama Maritime Authority (PMA), which has directorates dealing with the merchant marine, seafarers, ports and auxiliary industries. Maritime substantive law is contained in the Law on Maritime Commerce (LMC), passed in 2008 by the National Assembly to replace the old Book II of the Code of Commerce, enacted in 1917, which had hitherto contained Panama’s substantive maritime laws. The Code of Maritime Procedure (CMP) regulates the two maritime courts operating in Panama and contains the procedural laws applicable to all maritime cases. The CMP has a section that incorporates the LLMC Convention in domestic law. The contents of the 1996 Protocol to that Convention have not been passed into law.
III FORUM AND JURISDICTION
Two maritime courts have exclusive jurisdiction over all maritime judicial claims filed in Panama. Appeals are heard by the Court of Maritime Appeals, which comprises three justices; this is the only appeals court for maritime cases. After the relevant appellate briefs are submitted, there is a hearing in the Court of Maritime Appeals for the parties to present their cases before the justices. Under Article 19 of the CMP, the maritime courts have exclusive jurisdiction to hear and adjudicate cases that arise from within the territory or the territorial waters of the Republic of Panama. As per the same Article, the maritime courts also have jurisdiction to adjudicate cases arising outside Panama when:
- a vessel or other property of the defendant is arrested in Panama;
- the defendant is found within Panama;
- the involved vessels are Panamanian;
- Panamanian substantive law is applicable to the dispute; or
- the parties submit themselves, either expressly or tacitly, to their jurisdiction.
Under Article 22 of the CMP, cases arising out of Panama may be stayed in favour of a foreign forum (1) when the court considers that the Panamanian forum is not convenient, (2) when the parties have expressly agreed by contract to submit to the jurisdiction of a foreign forum or arbitration tribunal, and (3) when the dispute has previously been submitted to a foreign arbitration tribunal and court and a decision is pending. The CMP was amended in 2009 to, inter alia, make it more difficult to stay an action in favour of a foreign forum when the relevant forum selection clause is not contained in a contract that has been negotiated by the parties. Article 22(3) of the CMP expressly states that pro forma or adhesion contracts are not considered ‘previously and expressly negotiated’. There have been two recent Supreme Court decisions that have interpreted the modified Article 22(3) of the CMP in the context of forum-selection clauses in contracts of carriage evidenced by bills of lading. In a decision dated 30 May 2012,2 the Supreme Court affirmed a ruling of the Second Maritime Court that denied a motion to stay an action based on the standard arbitration clause contained in the 1994 CONGENBILL form, which incorporated, by reference, the arbitration clause in the charterparty. More recently, in a decision dated 6 January 2014,3 the Supreme Court affirmed a ruling of the First Maritime Court that denied a motion to stay an action in favour of the English High Court based on a forum-selection clause in a standard liner bill of lading. The lower court decision was affirmed, even though the parties had negotiated a service contract that incorporated the standard terms of the Maersk bill of lading. In both cases, the Supreme Court found that there was no evidence of a prior negotiation by the parties of the corresponding forum selection clauses. It must be said that the reason behind the legislative amendment to Article 22(3) of the CMP was to prevent stays of action based on forum selection clauses in bills of lading. If the relevant forum selection clause is contained in a charterparty or memorandum of agreement, which are normally actively negotiated by the parties, the Panamanian courts would tend to enforce it.
Article 566 of the CMP contains conflict-of-laws rules. In general, to resolve the dispute in contractual claims, the maritime courts apply the substantive laws as agreed by the parties to the contract. In tort claims, the substantive law of the flag state of the relevant vessel, or the laws of the place where the tort occurs, are applied.
ii Arbitration and ADR
The Maritime Law Association of Panama and the Panama Chamber of Shipping joined forces to create a maritime arbitration centre (CECOMAP). Recently, the rules and a table of fees were approved for the CECOMAP and an agreement with one of the established arbitration centres in the Chamber of Commerce or the Construction Chamber is being worked on to enable the CECOMAP to use their facilities. The CECOMAP is intended to be an arbitration centre in which the growing number of companies in the Panama Chamber of Shipping can resolve their disputes efficiently and cost-effectively. The intention is that the CECOMAP becomes an option for dispute resolution for the whole of Latin America.
iii Enforcement of foreign judgments and arbitral awards
Final foreign judgment and arbitration awards can be enforced in Panama. Before enforcement, however, the party seeking enforcement of its judgment or award must have it recognised and declared enforceable by the Fourth Chamber of the Supreme Court of Panama through exequatur proceedings. These proceedings normally last between six months and one year, depending on the opposition presented by the judgment or award debtor, who must be notified of the exequatur proceedings and may file opposition pleadings and evidence. The general rule is that a final judgment or award would be recognised and then enforced in Panama if the action that resulted in the judgment or award was properly and personally served on the defendant, so that it was not rendered by default, and if the obligation for which the judgment and award was sought would be considered a legal obligation in the Republic of Panama.
The only additional requirement is that of reciprocity. As per Article 424 of the CMP, if the judgment or award comes from a country that would not recognise judgments or awards rendered in Panama, Panama would not recognise judgments or awards from such country.
In 1982, Panama ratified the New York Convention. This makes the recognition and enforcement of arbitration awards issued in countries that are also parties to the Convention simpler and somewhat faster than a normal exequatur for recognition of a foreign judgment.
One important feature of enforcing a maritime foreign judgment or arbitration award is that the maritime courts may attach assets of the judgment or award debtor, and thereby obtain security for the enforcement while the exequatur proceedings are pending in the Supreme Court. This is important because, much of the time, such assets (such as ships, cargoes, bunkers) would be passing through the Canal or calling at Panamanian ports for only a brief period.
IV SHIPPING CONTRACTS
The shipbuilding industry is not well developed. Ships that are built in Panama are mostly small craft used in local trade or the local maritime service industries. There is one shipyard with a dry dock that accommodates the current Panamax dimensions, which is at the Pacific entrance to the Canal – MEC Shipyard – but it is used for the maintenance and repair of vessels, rather than newbuilds. Ship repairers have standard form contracts, which may be amended by the parties to accommodate their needs.
ii Contracts of carriage
Chapter I of Title II of the LMC contains substantive maritime law on contracts of carriage. While Panama has not ratified any of the international conventions dealing with contracts of carriage, the Chapter incorporates the Hague-Visby Rules, with some minor additions. Article 58 of the LMC contains the same defences available to a carrier under Article IV, Rule 2 of the Hague-Visby Rules, including the ‘act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation and management of the ship’. Article 63 of the LMC determines how any loss to cargo interests is to be calculated and includes the same limitations of liability to the carrier by package (666.67 special drawing right (SDRs) per package) and weight (2 SDRs per kilogram). Article 57 contains the concept of when a deviation would be considered a ‘reasonable’ deviation. Article 58 provides liability to the carrier for damage or loss caused by delay, unless the delay was caused by one of the exempted perils. It also establishes that, unless the parties have agreed on a specific duration, there is a delay when the goods have not been delivered in the designated port or place within a ‘reasonable’ time. The duties of the shipper are contained in Section 3 of Chapter I and again mirror those of the Hague-Visby Rules. In general, the LMC transposes the Rules to domestic maritime law, except that it provides for carrier liability for loss or damage caused by delay.
There is some very modern legislation on contracts of carriage, but the vast majority of contracts of carriage cases in Panama’s maritime courts are not resolved in accordance with Panamanian substantive law. Article 566(10) of the CMP provides that the applicable substantive law to determine the effects of contracts of carriage is that agreed by the parties or, only when there is no governing-law clause, by the laws of the place of shipment. Since most contracts of carriage nowadays contain a governing-law clause, and it is only very seldom that parties have agreed on Panamanian substantive law, cargo claims almost invariably end up being litigated in accordance with the substantive laws of other countries.
Article 244 of the LMC contains a list of the 13 types of claims that give rise to maritime liens on ships or ‘preferred maritime credits’. Contract of carriage claims can give rise to a maritime lien against the carrying ship under items 7 and 12. Claims that give rise to liens on cargo are listed in Article 248 of the LMC. Inter alia, contract of carriage claims for unpaid freight and contributions to general average give rise to liens on cargo in favour of the carrier that may be exercised by possession.
iii Cargo claims
Of the claims filed in Panama’s maritime courts, the most common are cargo claims. Most of these involve damage to containerised cargo, but there are also bulk cargo claims. Claims for damage to fruit cargoes carried from Panama and Latin America to Europe and the United States are fairly common. Under Panamanian substantive law, whichever party suffered the loss – either the shipper or the consignee – can sue the contractual carrier, the actual carrier or the servant of the carrier that was entrusted with the care and custody of the cargo when the damage occurred. Subrogated cargo underwriters have title to sue. Under Article 202 of the LMC, upon payment by an insurer to its insured, the insurer is vested with title to sue by operation of law; a formal assignment of rights is not required. In Panama, it is normally the cargo underwriter who files suit; however, when the claim is subject, for instance, to English law, a prudent litigator would always include the consignee under the bill of lading as a claimant to avoid title-to-sue issues under such law.
The Panamanian courts uphold the incorporation by reference of charterparty clauses into contracts of carriage evidenced by bills of lading. The leading case on incorporation by reference is Agrowest SA, COMEXA & Dos Valles SA v. Maersk Line. In a decision dated 6 February 2006, the Supreme Court held that an arbitration clause in a service contract could be incorporated by reference into contracts of carriage. Since then, the maritime courts incorporate, by reference, charterparty terms into contracts of carriage. However, while the governing-law clause in a charterparty may be incorporated by reference into the contract of carriage, a forum-selection clause incorporated by reference may be ineffective to stay an action in favour of the contractually selected forum, unless negotiation between the parties can be evinced (see discussion of the ‘Nagoya Bay’ in Section III.i).
iv Limitation of liability
Panama has incorporated the LLMC Convention into domestic law (but without its 1996 Protocol) almost verbatim. Procedurally, the limitation action is regulated by Articles 517 to 529 of the CMP. Some of its most important features are that the action must be commenced within six months of the receipt of a claim in writing by the person seeking to limit; that the limitation fund may not only be constituted by a cash bond, but also through a guarantee issued by a bank or an insurance company licensed in Panama; and that the party seeking to limit may also petition the court for a finding of no liability.
For oil pollution claims, limitation of liability is regulated by the CLC Convention and its 1992 Protocol.
As previously stated, cargo claims may be limited in accordance with the package and weight limitation of the Hague-Visby Rules, which have been incorporated into the LMC.
i Ship arrest
With more than 14,000 canal transits per year and the busiest container ports in Latin America, Panama is an ideal place to arrest not only vessels, but cargoes, bunkers and any other assets that may enter the jurisdiction. The arrest procedure is fairly simple, and the maritime courts are open 365 days per year, 24 hours a day for urgent matters, such as arrests or the lifting of arrests. The three types of arrests contemplated in the CMP are:
- arrests merely to secure an in personam claim. In this type of arrest, the defendant is a company with operations in Panama and that can be served with process within the court’s jurisdiction. The claimant or arrestor must post between 20 and 30 per cent of the arrest amount as counter-security with the court;
- arrests to confer jurisdiction to Panamanian maritime courts over the defendant. This type of arrest has the effect of serving the complaint on the defendant, besides securing the claim. Defendants are companies that cannot be served with process within Panama – normally foreign companies with no operations in Panama or Panamanian companies that do not have any operations within Panama. Only US$1,000 is required as counter-security, irrespective of the claim amount, but prima facie evidence of the claim and its quantum must be filed with the complaint and arrest petitions; and
- arrests to enforce a maritime lien or other in rem right. In this type of arrest, the defendant is not a person but the vessel itself. To effect these arrests, the claimant must have a claim that gives rise to a maritime lien or other in rem right (for instance, a statutory right in rem) against the vessel. The counter-security is US$1,000 irrespective of the claim amount, but the claimant must provide the same prima facie evidence requirement as stated in point (b).
Most arrests in Panama fall under types (b) and (c). When the complaint and arrest petitions are filed, the corresponding maritime judge would review the prima facie evidence and, if he or she considers that it sufficiently supports the claim and its quantum, he or she immediately issues the arrest order. The marshal of the court then serves the arrest order on the vessel, normally when at anchor when the vessel is waiting to transit the Canal at either Balboa or Cristobal anchorages, or at any of the ports. If feasible, an arrest order may also be served by helicopter on the target vessel, provided the vessel is within Panamanian territorial waters. When the target is the vessel in respect of which the claim has arisen, the claimant may also request an inspection of documents on board the vessel to obtain evidence. Inspection of documents is particularly important in arrests of bunkers or cargoes, in order to confirm that the defendant owns the bunkers or cargoes.
An arrest cannot be effected in Panama to secure proceedings in another jurisdiction. It is a requirement that substantive proceedings be commenced in Panama simultaneously with the arrest petition; however, the case can later be stayed in favour of a foreign forum. The security obtained through the arrest can be replaced with security in the foreign forum, or the security in Panama can be maintained in the maritime courts to the order of the foreign forum.
Amounts to be posted as security may be consigned to the court in the following forms:
- a guarantee certificate drawn on cash from Panama’s central bank;4
- a letter of guarantee from a bank operating locally;
- a guarantee issued by a local insurance company; or
- any other form of security on which the parties may agree.
P&I letters of undertaking, which fall under point (d), above, are probably the most common form of security for the lifting of arrests in Panama; however, they are not accepted as a matter of law and the claimant must consent to this form of security before the maritime court will accept it to lift an arrest. The amount of security is determined by the quantum of the claim, the legal interest and the provisional judicial costs (including attorneys’ fees) set by the maritime judge. If the claim amount exceeds the value of the ship, the security may be limited to that value. If, however, the parties cannot agree on the value of the ship, the court will have to order an appraisal, which could cause a substantial delay in lifting the arrest. Once adequate security is posted, the maritime court will promptly issue the order lifting the arrest, which the marshal of the court will serve on the master of the vessel, returning the documents removed from the vessel and removing the custodians from the vessel. The whole process could last from one to several hours, depending on the location of the vessel (Balboa or Cristobal).
In the event of a wrongful arrest, the CMP provides the aggrieved party with summary proceedings to lift the arrest. This is called apremio, which consists of a special motion to lift the arrest upon showing sufficient evidence that the arrest was wrongful, which, under the CMP, means it was effected:
- over property (ship, cargo, bunkers, etc.) not belonging to the defendant;
- in contravention of a previous express agreement by the parties to refrain from arrests; or
- when a maritime lien has been extinguished or is inexistent (in rem claims).
Upon the filing of an apremio motion with the required supporting evidence, the maritime judge will immediately consider and resolve the motion. If the motion is admitted, the judge will call the parties to a special hearing to be held in the shortest possible time (usually within one day), in which the claimant would have the burden of proving that the arrest was not wrongful and should therefore be maintained. If it fails to carry that burden of proof, the maritime judge will order the immediate release of the vessel or other property arrested. The claimant may appeal the decision, but this does not prevent the lifting of the arrest.
ii Court orders for the sale of a vessel
A pre-judgment judicial sale of a vessel can be ordered. This is usually done when it becomes apparent that the defendant will not, or cannot, lift the arrest. When the judge orders the judicial sale of a vessel, he or she appoints an appraiser to issue a report on the market value of the vessel. The court then sets three dates for the judicial auction of the vessel by the marshal. On the first date, the lowest bid may be no lower than three-quarters of the appraised value of the vessel. If there are no bidders in the first auction, the lowest bid in the second auction may be half of the appraised value of the vessel. If the vessel is not sold in the second auction, there is no minimum bid in the third auction. The vessel is sold by the marshal to the highest bidder. Usually, vessels sell for less than their appraised value.
Panama has passed SOLAS into law; this is the most important legislation on safety for Panamanian merchant vessels. It is implemented by the PMA and it relies on its recognised organisations (ROs) for the certification of the merchant vessels registered in Panama. The COLREGs have also been passed into law. They apply to Panamanian merchant vessels and are the ‘rules of the road’ for navigating Panamanian territorial waters. The PCA has, however, adopted its own COLREGs (PCA COLREGs), with certain variants from the IMO’s COLREGs, which apply to all vessels in Panama Canal waters. These include the designated anchorage areas at both sides of the Canal (Balboa and Cristobal). The PCA COLREGs are almost identical to their IMO counterparts, but have slightly different regulations dealing with instances when the master of a vessel is required to be on the bridge, navigation in the Gaillard Cut and through the locks, and lookout duties.
ii Port state control
The port state control entity in Panama is the PMA. The PMA’s Directorate of Merchant Marine and its Directorate of Ports and Auxiliary Industries execute random inspections of merchant vessels of any nationality entering Panamanian waters. Panama subscribes to and is part of the Viña del Mar MOU, which groups the maritime authorities of South America, Mexico, Panama and the Caribbean.
iii Registration and classification
Panama has the biggest open registry in the world. Shipowners of any nationality – except those from countries to which the United Nations has applied restrictions (currently North Korea and Iran) – may register their vessels in Panama. The procedure is very quick and simple. The shipowner just needs to complete a form detailing the ship’s particulars and present it to the Directorate of Merchant Marine of the PMA, with a copy of the minimum safe manning certificate from the previous registry – newbuilds are, of course, exempted from the latter requirement. Upon payment of the registration fees and annual tonnage taxes, which vary according to the vessel type, the vessel is issued a provisional patent of navigation, which is valid for six months.
The registration procedure can be carried out in Panama through a lawyer or at one of the many Panamanian consulates in key ports and maritime centres throughout the world. A lawyer must always be appointed as the vessel’s legal representative before the PMA. After the provisional registration, the shipowner has six months to complete permanent registration of the vessel. To do so, title over the vessel must be duly registered in the Registry of Titles and Mortgages of the PMA, the deletion certificate from the previous registry must be filed before the PMA and the corresponding technical certificates evidencing compliance with the various IMO conventions must be issued by the classification society or RO selected by the shipowner. For fishing and fishing support vessels (reefers that carry fish), a certificate of compliance from the Authority of Aquatic Resources of Panama must be obtained before the permanent registration of the vessel can be accomplished.
The permanent patent of navigation, issued after the foregoing requirements are met, is valid for five years, after which an application for renewal can be filed. Vessels that are continually detained by the PSC of the various MOUs can be deregistered by Panama. Upon receiving the corresponding PSC reports, the Director of Merchant Marine can commence an ex officio cancellation process, which may lead to the vessel being deleted from the registry, unless it is mortgaged and the mortgagee bank, which must be served with notice of the process, appears before the Directorate of Merchant Marine and opposes the cancellation. Technical certificates evidencing compliance with the various IMO conventions are issued by Panama through the classification societies and ROs authorised by Panama to issue certificates on its behalf. All members of the International Association of Classification Societies (IACS) are authorised by Panama, as are a number of non-IACS ROs. Most are Panamanian, but some foreign ROs are also authorised by Panama. There have not been any cases filed against classification societies or ROs in Panama’s maritime courts but, in principle, there is nothing in Panamanian law that would exempt them from liability for negligence in the issuance of certificates, if such negligence were to cause damage to shipowners or third parties.
On 17 November 2017, Panama and China entered into a Maritime Transport Agreement in Beijing that grants most-favoured-nation treatment to Panamanian-flagged vessels calling at Chinese ports. This means that Panamanian-flagged vessels will be charged preferential rates in Chinese ports and thus reduce their operational expenses. Panama completed the required internal approval process on 27 March 2018 when the law that enacts the Maritime Transport Agreement, Law No. 24 of 20 March 2018, was officially published. The next step is completion of the internal approval process by China. The Agreement will come into force 30 days after receipt of notice that China has completed the process.
iv Environmental regulation
Panama has ratified MARPOL (73/78), which is the primary legislation regulating pollution from ships. The PCA also has its own regulations in place to prevent pollution from ships and to sanction those ships that cause oil pollution while transiting the Canal. For severe offences, PCA fines can reach US$1 million. Panama also has a Ministry of the Environment, whose jurisdiction includes Panamanian territorial waters. Normally, its focus is on pollution events on land, but it could also fine any vessels causing pollution. In 2002, the Sydney Star had a collision with the Royal Ocean in Cristobal. As a result, one of its bunker tanks was ruptured and it spilled bunkers at the north entrance of the Canal. Both the PMA and the PCA fined the vessel. It was ruled by the Supreme Court that both entities could fine the vessel independently of each other but the PMA did reduce its fine, taking into account that the PCA had already levied a fine of US$25,000 against the vessel.
v Collisions, salvage and wrecks
Collisions and salvage are regulated in Chapters I and II, respectively, of Title III of the LMC. In general, for a salvor to collect any salvage award, the salvage must be at least partially successful.
vi Passengers’ rights
Panama ratified the Athens Convention and its 2002 Protocol on 7 November 2013. There have not yet been any cases litigated in the maritime courts to which the Athens Convention has been applied.
vii Seafarers’ rights
Panama ratified the Maritime Labour Convention 2006 (MLC) in January 2009. There have been no detentions in Panama resulting from a breach of the MLC. Panama has its own Maritime Labour Law (MLL), passed in 1998, which regulates all labour issues not dealt with in the MLC. There is a scale of compensation for seafarers who have suffered accidents on board Panamanian vessels, established by virtue of Article 82 of the MLL. The maximum compensation on this scale is US$50,000 in the event of death or permanent disability; however, the compensation is considered to relate to employment and thus seafarers could also sue the shipowner for civil liability, in which case they must prove the negligence of the shipowner in the cause of the accident. Any payment awarded according to the scale of compensation would be deducted from any damages arising from any civil liability.
Under Article 92 of the MLL, the shipowner and the seafarer may agree on any law and jurisdiction other than Panama in their contracts. In a judgment dated 26 March 2006,5 the Supreme Court of Panama upheld a decision from the lower labour courts dismissing for lack of jurisdiction a claim arising on board a Panamanian vessel because the parties had agreed on Philippine law and jurisdiction in the relevant labour contract.
Panama’s two maritime courts have jurisdiction for any civil claims against a shipowner, whereas labour claims against shipowners of Panamanian-flagged vessels must be filed in Panama’s labour courts.