Analissa Carles, Associate, Morgan & Morgan
On May 19, 2016, the concept of a “Bankruptcy,” as the legal term was defined, ceased to exist under Panamanian law. Law 12 of 2016 (the “Insolvency Law”) entered into force on that date and introduced new proceedings into our legal system. These proceedings are referred to as Reorganization and Liquidation.
The enactment of the Insolvency Law sought not only the protection of the rights of creditors, but also to achieve a differentiation between “efficient” and “non-efficient” companies, depending on the reasons and circumstances that give rise to their insolvency status.
For “efficient companies”, the law introduces the “Reorganization Proceeding,” the main purpose of which is the recovery and continuation of the company as an economic unit and employer.
A Reorganization Proceeding pursues similar objectives as the bankruptcy protection provisions established in Chapter 11 of the United States Bankruptcy Code. Thus, a Reorganization Proceeding allows the restructuring of a company’s debt obligations and can be initiated at the request of the insolvent company or by its duly organized creditors through a “Board of Creditors.” The insolvency petition must be accompanied by a series of documents that include, among others, the company’s financial statements, an inventory of its assets and liabilities, payroll obligations and the Reorganization Plan, in which the debtor must provide a financial, organizational, operational and competitiveness restructuring project with the intention of solving the causes that led to the company’s failure to make required payments, its imminent insolvency or foreseeable lack of liquidity.
This Reorganization Plan is significant in that it serves to initiate the proceeding itself. Subsequently, when the creditors formally join the proceeding to submit evidence of their credits, the Reorganization Plan must be subjected to a vote by the established Board of Creditors, who must either approved or reject said plan. The result of this vote will decide whether: a) the company will in effect be reorganized through the execution of said plan; b) the culmination of the proceeding without any agreement, in which case the bankruptcy protections would be lifted and the debtor would have to negotiate with each of its creditors separately; or, c) the Judicial Liquidation of the Company.
Judicial Liquidation Proceeding
The Judicial Liquidation Proceeding, as the name implies, focuses on liquidating “inefficient” companies in a prompt and orderly manner. This can be initiated at the request of the debtor by means of a Voluntary Liquidation or by means of a duly substantiated petition from a creditor, which in this case would be a Compulsory Liquidation.
In either case, the petition must be accompanied by a series of requirements and documentation. In the case of a Voluntary Liquidation petition, provided all requirements are met, the court will issue a resolution declaring that the company is in liquidation.
For Compulsory Liquidation, provided all requirements are met, the request will be accepted and the debtor will be given an opportunity to answer the creditor’s petition. The court will then set a date for an initial hearing. If the debtor opposes the petitioner’s claim against it and the judge deems such opposition to have sufficient grounds, it shall deny the claim and the proceeding shall terminate. However, if the court deems said opposition to have insufficient grounds or if the debtor does not even submit any opposition, the debtor may: a) allocate sufficient funds for the payment of the debt; b) agree with the requesting creditor for the hearing to be suspended in order for the parties to reach an arrangement; or, c) submit to a Reorganization Proceeding. If, however, the debtor does not choose any of the aforementioned options, the judge will issue a resolution for a Liquidation Declaration, with the corresponding legal effects.
It has been interesting to see the development and execution of this relatively new law before the courts of Panama, especially since it also provides for the creation of new Insolvency Circuit Courts, as well as the Fourth Superior Court of the First Judicial District, consisting of three justices elected by the Supreme Court, in full, with exclusive jurisdiction over insolvency proceedings. However, to date, these courts have not been created and, therefore, the Civil Circuit Courts are currently in charge of hearing such proceedings. These circumstances have forced the judges ruling over these cases to become overly reliant on the technical criteria of the Bankruptcy Administrators appointed by them within the proceeding. Consequently, said Bankruptcy Administrators, who serve as an assistant of the Court, must have the legal and accounting capacity to warn of possible irregularities within the proceeding, from the initial scrutiny of the insolvency application, together with all the supporting documentation. They must also be able to determine if, indeed, they are facing an efficient company that can improve its current financial condition, and they must even make recommendations against the aforementioned Reorganization Plan, before it is submitted to the Board of Creditors for their vote. This level of expertise, although not expressly required by law, has become a necessity given the unforeseen preponderance that the expert input of these Bankruptcy Administrators has acquired.
There are many conceptual and practical elements to analyze in Law 12 of 2016. However, as is often the case, only through the practice and application of this law has allowed both lawyers and financial institutions to fully grasp the challenges ahead. Regardless of the above, the objective of the Law is positive – especially since, previously, a bankruptcy declaration was a de facto death knell for a company. It is therefore worthwhile to focus efforts on maximizing the advantages created under the law in order to obtain the desired results. These, however, will ultimately depend to a large extent on the good will and good faith dealings of both creditors and debtors.
Panama, August 5, 2019. Jose Carrizo, partner and head of the Litigation and Dispute Resolution practice of the firm, was listed once again in the Who´s Who Legal Thought Leaders Litigation Guide 2019, a publication that highlights the skills and know-how of the best litigation lawyers worldwide, based on the number of nominations received by clients and legal practitioners.
“Jose Carrizo commands great respect in the market and is known for providing clients with excellent representation on administrative law and banking matters.”, WWL says.
Please click here to visit Mr. Carrizo´s profile in the guide.
Panama, August 5, 2019. Mayte Sanchez, associate at the Litigation and Dispute Resolution practice group of Morgan & Morgan, was invited to participate as speaker in the National and International Arbitration Seminar, organized by the Conciliation and Arbitration Center of Panama (CeCAP, for its initials in Spanish).
The activity, which was held as part of the 25th Anniversary of CeCAP, covered important subjects on national and international arbitration laws, trends and regulations.
Morgan & Morgan featured in the International Comparative Legal Guide to: Investor-State Arbitration 2019
Jose Carrizo, partner and head of the Litigation and Dispute Resolution practice group of the firm, contributed with the International Comparative Legal Guide to: Investor-State Arbitration 2019, a publication that summarizes common issues in investor-state arbitration laws and regulations.
Mr. Carrizo is an experienced attorney with ample knowledge in both domestic and international arbitration processes. He has served as arbitrator in the National Arbitration and Mediation (NAM), based in New York. Mr. Carrizo is also a member of the Panama Chapter of the International Arbitration Court of the International Chamber of Commerce.
The complete guide is available here.
Morgan & Morgan represented Electron Investment, S.A. in an arbitration process filed by Constructora Seli Panamá, S.A. before the International Chamber of Commerce
Morgan & Morgan was part of the team of lawyers that represented Electron Investment, S.A. (“EISA”), in an arbitration process filed by Constructora Seli Panamá, S.A. (“SELI”), before the International Chamber of Commerce (“ICC”).
The request for arbitration was filed by SELI following certain disputes related to the contract for the construction of the tunnels of Pando and Monte Lirio Hydroelectric Projects, a contract that had been terminated by EISA as a result of a series of breaches by SELI, mainly due to failure to meet the deadline for the completion of the works. The construction contract was an EPC (engineering, procurement and construction) using the silver book of the International Federation of Consulting Engineers (FIDIC, by its initials French), where the contractor assumes responsibility for the design and construction of the project, in this case, of the tunnels of the hydroelectric power plants.
The process was under arbitration at law, according to Panamanian law and according to the rules of procedure of the ICC, having seat in Panama City, Republic of Panama. The total sum of the claim filed by SELI amounted to US$94,065,202.00; and EISA, for its part, filed a counterclaim for an amount of US$110,000,000.00.
After the evidence was heard and the corresponding steps of procedure were concluded, the arbitral tribunal issued the final award dated January 29, 2018, communicated to the parties on February 14, 2018, accepting most of the EISA’s claims and ordering SELI to pay EISA the sum of US$22,524,862.58; that after compensating the sums recognized in favor of SELI, results in an amount in favor of EISA of US$14,653,362.12, plus costs and expenses.
SELI subsequently filed a motion for annulment of the award before the Fourth Chamber of General Businesses of the Supreme Court of Justice, which is pending resolution.
EISA is a Panamanian company whose shareholders are Aurel, S.A. (a Panamanian company owned by Grupo Eleta), Compañía Española de Financiación del Desarrollo, COFIDES, S.A. (a Spanish company whose purpose is to provide medium and long-term financing for viable private investment projects abroad in which there is Spanish interest), and Genera Avante, S.L. (a Spanish owned company of Grupo Inveravante).
EISA has two hydroelectric generation concessions that use of the waters of the Chiriqui Viejo, Pando and Monte Lirio Rivers, which together have an installed capacity of 85MW. Monte Lirio started operations in October of 2014, while Pando is still under construction due to delays in the excavation of the tunnel.
José Carrizo and Ramón Varela, partners; and the associates Mayte Sánchez, Ana Carolina Castillo Solís and Analissa Carles, participated in this process.
Panama, September 25, 2018. Morgan & Morgan and sixteen attorneys of the firm were recognized in the Chambers Latin America 2019, guide of the best lawyers and law firms across 20 countries of Central America, the Caribbean, South America and Mexico.
The firm has been ranked in the first Bands within the areas of Banking & Finance, Capital Markets, Corporate/M&A, Dispute Resolution, Energy & Natural Resources, Intellectual Property, Offshore, Projects, Real Estate, Shipping and Shipping Litigation.
Likewise, the publication noted as leaders in their areas attorneys Inocencio Galindo, Francisco Arias, Ramon Varela, Roberto Vidal, Simon Tejeira, Jose Carrizo, Luis Vallarino, Ana Carolina Castillo, Allen Candanedo, Maria Eugenia Brenes, Roberto Lewis, Luis Manzanares, Enrique De Alba, Jazmina Rovi, Juan David Morgan Jr. and Francisco Linares.
One of the clients interviewed stated that “Judging by the results that the firm achieves, I can say that their advice is effective and arrives in a timely manner. I would highlight their availability and technical competence”.
About Morgan & Morgan
With over 80 lawyers and 20 practice areas, Morgan & Morgan is a full service Panamanian law firm, regularly assisting local and foreign corporations from different industries, as well as recognized financial institutions, government agencies and individual clients. Of particular note is our continuous advice for clients involved in all stages of the development of important projects related to energy, water supply, construction, oil, mining, public infrastructure, retail, ports, transportation, among others. Learn more at www.morimor.com.
Panama, September 19, 2018. Jose Carrizo, partner and head of the Litigation and Dispute Resolution practice group of the firm, contributed with the Panama chapter of The Arbitration Review of the Americas 2019, a publication that summarizes relevant issues that help general counsel, arbitrators and private practitioners to avoid the pitfalls and seize the opportunities of international arbitration.
Mr. Carrizo provided a comprehensive analysis of the arbitration system in Panama, its legislation and every aspect that confirms the country as an international and regional center for the resolution of arbitral disputes.
Jose Carrizo is an experienced attorney with ample knowledge in both domestic and international arbitration processes. He has served as arbitrator in the National Arbitration and Mediation (NAM), based in New York. Mr. Carrizo is also a member of the Panama Chapter of the International Arbitration Court of the International Chamber of Commerce.
The guide is available here.
Morgan & Morgan represented a prestigious company in the electricity sector, in a criminal complaint filed against them, their directors and technical staff, for the alleged commission of crime against collective security.
Partner Omar Rodriguez and associates Rodolfo Palma, Humberto Vanegas and Mayte Sanchez, participated in this process.
Morgan & Morgan represented a company that offers products for the construction industry, in a criminal complaint for the alleged commission of crimes against the environment and territorial ordering.
Partner Omar Rodriguez and associates Rodolfo Palma, Rolando Milord and Humberto Vanegas, participated in this process.
Morgan & Morgan represented a company from the construction industry in an arbitration process against the Panamanian State
We advised a recognized foreign company in the construction industry that has an arbitration process against the Panamanian State as a result of the execution of a multi-million dollar construction contract, under the rules of the International Court of Arbitration (ICC) including protective measures.
Partner Jose Carrizo, and associates Mayte Sanchez, Ana Carolina Castillo Solis and Analissa Carles, participated in this process.