Banking and Finance_news
Panama, May 7, 2021. We are proud to announce that our partner Kharla Aizpurúa Olmos was selected as Women Leader in Panama by IFLR1000 Women Leaders 2021 edition, a supplement based on research for the IFLR1000, the guide to the world’s leading financial and corporate law firms and lawyers.
The publication features 750 leading and most prominent female lawyers working in areas of law such as banking and finance, corporate, contractual, regulatory, and projects. This is an elite group of lawyers from 235 jurisdictions globally with outstanding reputations within their markets who either have expertise and experience of working on complex deals or who have risen to hold leadership roles with their firms or their practices.
The Americas Women Leaders 2021 ranking can be read at: Americas Women Leaders 2021.
Panama, January 21, 2021. Partners Carlos Ernesto González Ramírez (Antitrust & Competition), and Inocencio Galindo (Banking & Finance) have been included at LACCA Approved 2021, a selection of Latin American leading lawyers in specific areas of law.
Approved lawyers have been personally recommended by members of LACCA, who are all general counsel from the top multinationals and private companies across the region.
More information on http://laccanet.com/approved/.
Superintendence of Non-Financial Regulated Persons issues new regulations in relation to attorneys and accountants
Panama, 24 July 2020.
By means of Rule JD-01-2020, published in the Official Gazette No. 29076 of 24 July 2020, the Superintendence of Non-Financial Regulated Persons (SNFR) has established a set of rules and obligations imposed to attorneys and accountants whenever they incur in any of the regulated activities under Law 23 of 2015, which relates to prevention of money laundering, financing of arms of mass destruction and financing of terrorism.
Below, we summarize the relevant matters of this new regulation:
Access to Clients’ information
Art. 3 of Rule JD-01-2020 establishes that attorneys and accountants regulated by the SNFR incurring in any of the regulated activities, shall, at the requirement of SNFR, deliver a list of clients classified in qualitative and quantitative terms, based on risk parameters. With respect to clients that has terminated its commercial relation, shall be included in the list indicating an explanation of the cause of termination of the commercial relation.
During the supervision, all documents relating to the relation of each client (e.g. Contracts, agreements, etc.) shall be furnished, as well as the documentation related to the due diligence and control measures applied.
Due Diligence Measures
Art. 6 and 7 of Rule JD-01-2020 establishes the enhanced due diligence requirements applicable to natural or legal persons, that shall be requested by attorneys and accountants in the scenarios set forth under Law 23 of 2015, in which such measure is required in light of the high risk cases.
This new regulation also establishes a list of clients that may be subject to a simplified due diligence measures in virtue of the regulated activities exercised by attorneys and accountants, which is something that was not previously regulated.
Directors and Representatives
Attorneys and accountants shall, at requirement, disclose to the SNFR the identity of the persons designated or offered as nominees to its clients.
Rule JD-01-2020 derogated and left without effect Resolution JD-14-2015 and its amendments, that were the original regulation applicable to the regulated activities of attorneys and accountants.
For further information or advice on the matters described above please contact:
Senior Associate, Morgan & Morgan
Updated on May 5, 2020
Given the state of emergency declared by the Panamanian Government as a result of the COVID 19 pandemic, the stay at home orders issued by the health authorities and the social distancing that is essential to control the outbreak, the technological tools available for companies to operate remotely are vital.
Law 51 of July 22, 2008, regulated the use of electronic documents, electronic signatures, storage services for the electronic documents, the certification of electronic signatures and adopted other measures to develop e-commerce. Law 51 of 2008 was subsequently amended by Law 82 of November 9, 2012 and regulated through Executive Decree No. 684 of October 18, 2013.
Law 51 of 2008 defines “electronic signature” as the “technical method to identify a person and indicate that such person approves the information in data messages or electronic documents.”
Pursuant to Law 51 of 2008, electronic signatures are valid mechanisms in Panama to consent to agreements or sign documents or legal transactions, provided that the following two (2) conditions (established in article 8 of the law) are satisfied: (i) the availability of a method to identify the originator of the data message and indicate that the content is approved, and (ii) that such method is appropriate and reliable for the purpose for which the message was generated and communicated.
It is important to stress that electronic signatures are different from digitalized signatures, the latter being frequently used to share, through electronic means, Portable Document Format (PDF) versions of documents bearing handwritten signatures. In this sense, Law 51 of 2008 defines a digitalized or scanned signature as “an image of the drawing of a handwritten signature, meaning, the result of its scan. This type of signature is not, in any case, a qualified electronic signature.”
Not only does Law 51 of 2008 provide legal validity to an electronic signature – as opposed to a digitalized signature – as long as the two aforementioned conditions are satisfied, but, furthermore, it creates the possibility to elevate the standard of efficacy and legal effect given to the electronic signature ipso jure, by using the so called “qualified electronic signature.”
The aforementioned article 8 of Law 51 of 2008 establishes that the two conditions for the electronic signatures to be legally binding, shall be presumed ipso jure in case of a qualified electronic signature which is supported by a certificate issued by a certifying service provider duly authorized by the Electronic Signature National Authority (in Spanish, “Dirección Nacional de Firmas Electrónica”).
But what exactly is a “qualified electronic signature”?
Law 51 of 2008 defines it as an “electronic signature the validity of which is backed by a qualified electronic certificate that:
- Allows the identification of the signer and detect any subsequent change to the signed content.
- Is bound to the signer in a unique manner and to the data to which it refers.
- Has been created using secured devices for creating an electronic signature, which are exclusively in the control and possession of the signer.
- Has been created through the infrastructure of a certifying service provider registered with the Electronic Signature National Authority.
In order for a qualified electronic signature to be generated, an independent third party known as “Certifying Service Provider” must intervene. This third party will bind a device that generates an algorithm validating the identification of the signer and its consent, to the act to which the electronic signature is added. This independent third party must be registered with the regulator of all matters pertaining to electronic signatures in the Republic of Panama: the Electronic Signature National Authority which, pursuant to Law 82 of November 9, 2012, is part of the Public Registry of Panama.
Currently, a person interested in obtaining a qualified electronic signature in Panama can register such signature with the Electronic Signature National Authority which as regulating authority, has enabled this registry.
The qualified electronic signature, as previously defined, grants the highest level of legal certainty to the fact that the signer is the person indicated in the qualified certificate and that their consent was given through a data message. In this manner, Law 51 of 2008 deems such qualified electronic signature equal to a handwritten signature authenticated before a public notary, which for all purposes, certifies its genuineness. Notwithstanding the foregoing, a qualified electronic signature does not grant such certainty with respect to its date, unless it is stated through timestamping, provided by a registered certifying service provider. Timestamping is an online mechanism that evidences that certain data have been in existence and have not been altered, since a specific moment in time. In order to have certainty of the date in which an electronic document was signed, a timestamping mechanism must be incorporated, in addition to the qualified electronic signature, in order to simultaneously certify the date of its execution and delivery.
For companies that wish to obtain qualified electronic signatures allowing their employees to sign on behalf of the company, it is important to bear in mind article 15 of Law 51 of 2008, which establishes that “the electronic certificates of legal entities are requested for electronic devices used in a company, such as computers, servers, among others, and shall be requested by its management or duly authorized legal representative with sufficient capacity.” The company, however, can set restrictions and limitations as it deems convenient for the use of electronic signatures by each signer. It is also important to mention that Law 51 of 2008 expressly establishes that if a signer uses the electronic signature on behalf of the company in violation of the restrictions or limitations imposed by such company, the latter shall only be bound vis-à-vis third parties if it acknowledges or ratifies such act, or if it benefits from it. With respect to the legal responsibility of an individual that resorts to the use of electronic signature on behalf of the company, if such individual carries out any acts in violation of the limitations or restrictions imposed by the company in the use of the electronic signature and against the interests of the company, the effects of such act will be enforceable against the individual with access or in possession of the device for the creation of electronic signatures, who can, in turn, file legal actions against the third party that in fact misused the electronic signature of the company, if it was a person other than said employee.
Even though this law was enacted in 2008, there has been relatively little practical applications of it, as well as little to no judicial precedents from the Panamanian courts. It is likely that, due to such lack of judicial precedents, companies have been reluctant to implement the electronic signature as a method to sign legal documents, uncertain as to how the Panamanian judiciary will ultimately interpret the provisions of Law 51 of 2008. However, considering the current COVID-19-related circumstances, technological tools such as electronic signatures are without a doubt legally available options for increased efficiency and competitive advantage. Precisely for that reason, we believe that Panamanian authorities should, without delay, acknowledge and embrace the provisions and mechanisms created by Law 51 of 2008, in order to bring an environment of legal certainty with respect to the use of electronic signatures. This will allow market agents to implement the use thereof to help mitigate the effects of the health crisis currently confronting Panama and, in fact, the world.
Pablo Epifanio, senior associate, Morgan & Morgan
Morgan & Morgan contributed to the first edition of the Latin American corporate investigations guide
Panama, January 31, 2020. Partners Inocencio Galindo, Ricardo Aleman, Kharla Aizpurua Olmos, and associate Joy Paull Torres contributed with the first edition of the Latin American investigations guide, a frequently asked questions for conducting corporate investigations in various jurisdictions on Latin America.
This publication of the international law firm Hogan Lovells provides an overview from leading legal experts across the region.
The publication is available here.
Or a PDF version (Panama Chapter) is available to download here.
January 13, 2020
For a long time, we have heard in different social media, for various reasons, some more positive than others, information related to Turnkey Contracts and the State indebtedness resulting from the Partial Payment Accounts (in Spanish, “Cuentas de Pago Parcial”) and Certificates of No Objection (in Spanish, “Certificados de No Objeción”). Do you know what these legal concepts that have been used to finance the largest State projects in the last two government administrations are? Let’s get today into a few lines, because in the words of Rudyard Kipling “You learn more by what people talk to each other or by what it is understood, than by asking questions.”
- What is a Turnkey Contract?
Turnkey Contracts are regulated by Law 22 of 2006, as amended from time to time, concerning public procurement. This same law defines this type of contracts as: “the one in which the contractor undertakes before the State to perform different services, that must include as a general rule, studies, designs, supplies and execution of a project for a determined global price by the bidder entity, in accordance with the provisions of the contract and of the tender documents”. These contracts may also include the equipment, operation of the project or any other provision within the contractor’s obligations. In addition, the contractor must have its own financing for the project.
Consequently, the contractor accepts responsibility of the project delivery (taking over construction risk) but in addition to the operation, in the sense that the mandate must include as the term says, “turnkey”, the project delivery ready to be put into operation by the State (for the purposes of this article I will refer to the State in general terms, without specifying or differentiating between Central Government, decentralized entities and public companies), which has carried out the correspondent bid.
The greatest responsibility assumed by the State in this type of contracts is the supervision of the construction of the respective project and payment to the contractor.
- What is a Partial Payment Account or a Certificate of No Objection?
First, is that both terms refer to the same type of legal instrument and have only been interchangeably used depending on the entity that issued them. For reference, the Ministry of Public Works, the Social Security Fund, Empresa de Transmisión Eléctrica, S.A. and the National Institute of Culture have named it as “Partial Payment Accounts”; nevertheless; the Ministry of Health and the Metro de Panamá have named it as “Certificate of No Objection.” Therefore, from now on, we will call them the “Payment Documents”. Having clarified the above, the Payment Documents have been regulated through regulations and/or procedures adopted and promulgated by the respective entities as well as in the Turnkey Contracts. There is no law that regulates them.
In general terms, the main characteristics of the Payment Documents are:
- Once each Payment Document has been issued, it constitutes an autonomous, independent, unconditional and irrevocable obligation of the contracting entity for the amount expressed therein and is payable on the date indicated in the document without the possibility that once issued, the entity can make tax reductions, fines, penalties, compensations, deductions, claims or other withholdings.
- The contracting entity may only deduct or compensate amounts from the Payment Documents to be issued.
- Once the Payment Document is issued by the entity and endorsed by the General Comptroller of the Republic, contains the net amount to pay.
- Having issued and endorsed the Payment Document, the contracting entity will only have the resource to initiate corresponding legal proceedings against the respective contractor or the guarantor for taxes, fines, penalties, compensations, deductions, claims or other withholdings; and
- Payment Documents must be paid on the date indicated on them, even in the case of early termination, suspension or administrative resolution of the Turnkey Contract, regardless of the cause or claims between the contracting entity, the contractor and/or the bonding company, with respect to any matter related or not to the project and regardless of whether the project has been completed.
In accordance with the information published by the Ministry of Economy and Finance and on the website datosabiertos.gob.pa as of October 31st, 2019, there were Payment Documents that sum up the amount of US$834,770,000 (payable between October 2019 and until the year 2022) as detailed by contracting entity and by the respective project, on the website of the Ministry of Economy and Finance (www.mef.gob.pa) and www.datosabiertos.gob.pa.
- Why are Payment Documents attractive in financing?
Two important facts mentioned in previous answers: in Turnkey Contracts the contractor must have its own financing for the project and the inherent characteristics of the Payment Documents. Based on these two factors, the Payment Documents, as mean of payment for the contracting entities, turn the Turnkey Contracts into a way of securing and conserving the interest of financial entities in relevant State projects.
Financial institutions acquire the Payment Documents at a discount and the contractors assign these Payment Documents to the financial entities. The financial institutions are certain of the payment from the State on the date set forth in the Payment Document regardless of what happened with the respective work or project.
In case of non-payment by a contracting entity, provided that it is part of the Central Government of a Payment Document, there is always the possibility of suing the State, municipality or any other decentralized, autonomous or semi-autonomous entity, under the procedure established in the articles 1047 and 1048 of the Judicial Code.
- What does the issuance of Payment Documents represent for the State?
The Payment Documents do not represent a financial indebtedness to the State, that is, they are not shown in their finances as in the case of bonds issuance. The Payment Documents are accounts payable as a result of investment expenses, which are also of long duration and therefore, must be covered by subsequent general State budgets (the general budget of the State is approved annually).
Based on the foregoing, and since everything must be shown in the annual general state budget, the Ministry of Economy and Finance, for example, per each Turnkey Contract, must: (i) give its no objection to the conditions related to the dates and payment amounts of the work, as well as its duration and the total amount, prior to the call for bid; and (ii) once the bid has been awarded to a contractor, funding proposal must be delivered which will be subject to its review, negotiation and subsequent approval.
- How does the Social Tax Responsibility Law affect?
Law 34 of June 5, 2008 on Social Tax Responsibility, as amended from time to time, aims to establish rules, principles and methodologies to consolidate tax discipline in the financial management of the Public Sector. Said law and the General State Budget Law, refer to the term “Non-Financial Public Sector”, as the group of all the entities of the General Government (composed by the National Assembly, the General Comptroller of the Republic, the different ministries, the Judicial Authority, the Public Ministry and the Electoral Court) and Non-Financial Public Companies (industrial or commercial units owned by the Government that sell public goods and services on a large scale, and that are constituted as stock capital companies or of other type of legal status such as: the Colon Free Zone, the Panama Maritime Authority or the National Charity Lottery). The “Non-Financial Public Sector” differs from the total Public Sector which includes public financial institutions, deposit collectors, Empresa de Transmisión Eléctrica, S.A., Empresa Nacional de Autopistas, S.A., Aeropuerto Internacional Tocumen, S.A. and the Panama Canal Authority.
Article 10 of the Social Tax Responsibility Law provides that the annual laws of the General State Budget and the budget execution shall be subject to the guidelines of this law. In addition, it is set forth that the Gross Domestic Product of the reference shall be calculated by the National Statistics Institute of the General Comptroller of the Republic. The maximum limit of the Tax Balance deficit of the Non-Financial Public Sector will be of 3.50% of the Gross Domestic Product for fiscal year 2019, of 2.75% for fiscal year 2020, of 2.50% for fiscal year 2021 and 2.0% as of fiscal year 2023.
In addition, Article 13 of Executive Decree No. 52 dated June 3rd, 2019, which regulates the Social Tax Responsibility Law, establishes that the investment expenses to be made under the modalities of turnkey projects and of deferred payment projects in a tax term may not exceed 20% of the total investment expenses of the Non-Financial Public Sector in the respective fiscal period.
The use of this type of legal instruments as a form of payment allows contracting public entities to obtain greater efficiency in the financing of projects and to manage their annual budgets based on an agreed payment schedule. To the extent that the limits of the Social Tax Responsibility Law are met and complied, without requesting continuous waivers to these limits, they are still an efficient way to handle accounts payable debt due to the investment expenses necessary to keep public services at appropriate levels of services to the requirements of the population.
Kharla Aizpurua Olmos
Partner, Morgan & Morgan
Panama, January 7, 2020. Partners Jose Carrizo, Inocencio Galindo, Aristides Anguizola, and associate Analissa Carles contributed with the Chambers & Partners Insolvency Guide-Trends & Developments, providing their professional insights into Panama’s legal insolvency restructuring market.
The online Panama chapter is available here.
Or a PDF version is available to download here.
Panama, January 6, 2020. Morgan & Morgan is pleased to announce the promotion of Aristides Anguizola to the partnership of the firm. The designation of Mr. Anguizola comes to reinforce the firm´s already robust Corporate Law team.
Mr. Anguizola has concentrated his practice in mining and has significant experience providing legal support for mineral exploration and mine development and finance. He is often involved advising clients in transactions related to corporate and commercial, project finance and development, mergers and acquisitions, banking law, capital markets, and regulatory work.
With almost ten years of experience as a corporate lawyer, Mr. Anguizola has acted as co-counsel on complex mega-projects such as Cobre Panama, the most significant private sector investment in the country; Metro de Panama, the most important public infrastructure project under development in Panama; and Metro Bus, the public bus rapid system for Panama City. Recently, he was part of the team that advised the Ministry of Public Works on the drafting and approval of the new law for public-private partnerships (PPPs).
Before joining Morgan & Morgan, Mr. Anguizola gained experience as a summer associate in McConnell Valdes LLC, San Juan, Puerto Rico. He also worked as a summer associate in Greenberg Traurig LLP, Washington D.C., U.S.A., dealing with the Government Affairs Practice Group to lobby the U.S.-Panama Trade Promotion Agreement.
Mr. Anguizola contributed as a writer in some publications such as the Panama Chapter of Doing Business (a project of the World Bank Group), and the Panama Chapter of Chambers & Partners´ Insolvency and Mining guides.
Panama, December 16, 2019. Morgan & Morgan repeated as a leading Panamanian firm in The Legal 500 – Latin America Guide. Banking and Finance, Corporate and M&A, Dispute Resolution, Intellectual Property, Offshore and Shipping earned the top-tier rankings.
In addition, five lawyers of the firm received recommendations:
Panama, November 25, 2019. Partners Carlos Ernesto González Ramírez (Antitrust & Competition), Inocencio Galindo (Banking & Finance), and Francisco Arias (Corporate and M&A) have been included at LACCA Approved 2020, a selection of Latin American leading lawyers in specific areas of law.
Approved lawyers have been personally recommended by members of LACCA, who are all general counsel from the top multinationals and private companies across the region.
More information on http://laccanet.com/approved/.