Law 54 Protecting Foreign Investment in Panama
|LAW N.54 (July 22,1998) Whereby provisions for the Legal Stability of Investments are adopted. THE LEGISLATIVE ASSEMBLY DECREES. Please Note that the laws of Panama are amended and updated over time and you must research all amendments that would applie to any project that you wish to do.|
|Chapter I Investment Protection|
Article 1 The State promotes and protects investments within the country, in all areas of economic activity established in the Law, and in any enterprise or contractual form in accordance with national legislation. For the purpose of this Law, an investment is the disposition of capital, in cash or credit facilities, capital goods or transfers of assets designated to the effective production of goods and services, in accordance with activities establishes in article 5 of this Law.
Article 2 Foreign investors and the enterprises in which they participate, have the same rights and duties as national investors and enterprises, with no other limitation than those established in the Political Constitution and the law, including those that refer to the freedom of trade and industry, and export and import. Furthermore, the freedom to dispose of the profits obtained in their investments, the freedom to repatriate their capital, dividends, interest and profits produced by their investments and the freedom to commercialize their production is guaranteed hereby to said investors.
Article 3 Property rights for investors have no limitations other than those established by the Political Constitution and the law.
Article 4 Copyrights and trademark rights of foreign investors are subject to the same regulations as established for national investors.
|Chapter II Application Scope|
Article 5 The present legal stability regulation is granted to individuals or private entities, foreign of domestic, who carry out investments within the national territory to develop the following activities. Tourism, industrial, agricultural, exports, agroforestry, mining, export processing zones, commercial and petroleum free zones, telecommunications, constructions, port and railroad development, and any all activities approved by the President's Cabinet, previously recommended by the Ministry of Commerce and Industries.
Article 6 The Ministry of commerce and Industries is the authority in charge of enforcing this Law and the regulations that develop it.
Article 7 Except for information protected by law, government entities and public offices have to provide the information and assistance required by the Ministry of Commerce and Industries to enforce this Law.
Article 8 To receive the benefits of this Law, the investor must develop the investment in accordance with the investment plan presented for such purposes, must be duly registered in the entity in charge of promoting and supervising such investments, if it is the case, and must comply the other duties established in article 16 of this Law. Said entity, on sight of the petition of party in interest, shall certify the existence of the investment and shall send copy of it to the Ministry of Commerce and Industries, entity that shall decide to file or deny the file of the investment in the Registry, through a motivated opinion, within a term of six months. Foreign and domestic investors who, previous to the promulgation of this Law, have been engaged in investments in accordance with the requirements as prescribed by article 16 and who are interested to receive the benefits of this Law, shall have a term of six months to do so, after the promulgation of this Law. The legal and tax stability provisions in effect at the moment of their inscription in the registry provided for in this article shall be guaranteed to these investors, in the event that they were duly registered in the entity responsible for promoting and supervising the respective type of investment. For the purposes of the previous paragraph, the entity responsible for promoting or supervising the activity, duly required by the interested party, must send to the National Board of Enterprise Development of the Ministry of Commerce and Industry, identified with the acronym "DINADE", copy of the inscription, in order that the Board may file or deny the file of said investment in the Registry. In the case of activities which investment does not require to be registered in an entity in charge of promoting and supervising it, the investor request from DINADE the authorization for the corresponding inscription, which may be denied or accepted by the Board, in order to obtain the benefits of this Law. All inscription requests must follow the guidelines established in this article.
Article 9 The following are not allowed to obtain the benefits of this Law.
|Chapter III Guarantees|
Article 10 The individual or entity who develops investments in the activities prescribed in article 5 and who comply with the obligations set forth in article 16 of this Law, since its promulgation, shall receive the following benefits for the term of ten years.
Article 11 To assure the effects of the previous article, the DINADE shall send to the pertinent municipal and government authorities, a copy of the filed registry, which act as a proof in favor of the investor.
Article 12 If, during the enforcement of the law for the legal stability of investments, any exoneration or modification of the national taxes, which constitute part of the guaranteed tax statute, should expire, the investor shall pay taxes in accordance with the tax statute in effect at the time of its registration in the DINADE, unless the modification answers to public or social interests. If the abolishment of any of the taxes that form part of the guaranteed tax statute result from its substitution with a new tax, that investor shall pay the new tax up to an amount which does nor exceed the amount that he would have has to pay annually under the abolished law. Exoneration and their enforcement period will be regulated by the legal norms that enacted them.
Article 13 At any moment, investor registered in the DINADE shall elect, only once, to benefit from the tax statute applied to the investors nor protected by this Law. In that case, said statute will constitute, for the investor, the new parameter the same shall remain in force without modification, unless public or social interest mediate, for the rest of the ten year period provided by article 10 of the present Law. The investor who elect to change the tax statute, in accordance with the aforementioned, shall notify such change to the DINADE, who shall issue the respective resolution, which shall be notifies to the Ministry of Finance and Treasury. Likewise, investors who have elected to receive the benefits guaranteed by this Law, shall, at any time, after duly having notified DINADE, waive such guarantees and thus become bound to normal conditions that, in legal and tax matters, are in force to other investors not protected by this Law.
|Chapter IV Counsel Board|
Article 14 The Counsel Board for Investment Legal Stability herein named as the Counsel is created under the jurisdiction the Ministry of Commerce and Industries, and shall be integrated as follows.
Article 15 The duties of the Counsel Board shall be as follows.
|Chapter V Investor's Obligations|
Article 16 All investors interested in receiving the benefits of this Law shall comply the following procedure.
Article 17 The investor's default of whichever of the obligations outlined in the previous article, shall produce the loss of the protection system a term that shall not exceed a two years term, computed from the time of the registration, except that the nature of the investment demands a term extension, that DINADE shall determine it. Once the term for the investment have elapsed, the investor must accredit the amount invested and the activity developed, which shall be done through an affidavit, the certification of a certified public accountant and the corresponding evidence annexes. The affidavit certification shall be presented to the authority in charge of supervising the investment, or to the DINADE in the case of activities that does not require to be registered with an authority in charge of promoting and supervising their investment. For the purpose of this Law, with the exception of those activities where the authority in charge of supervising the investment has disposed the content of the respective investment plan, the plan should contain at least the following information.
Article 18 The Government shall indemnify the investor in the event that, for social or public interest, an investment protected by this Law be expropriated, as long as that decision causes damages which can be proven. The indemnity shall he determining in the manner provided in article 22 of this Law. The investor will not receive said indemnity if the investment have been insured against country risk by a foreign government, by the World Bank Multilateral Guarantee Agency (MIGA) or any other local insurance company. The government will encourage local insurance companies to offer investment insurance for the activities described in this Law.
Article 19 When, in accordance with this Law, a foreign government, an international organization or a foreign or domestic insurance company, has issued the investor any insurance or financial guarantee against country risk, the Government shall recognize the investor's subrogation rights, when that insurance or financial guarantee has been paid out.
|Chapter VI General Rules|
Article 20 Any controversies, claims and differences that arise between the government and investors with regard to the application, execution or interpretation of this Law, will be settled in a direct and friendly manner through conciliation, in accordance with the conciliation Rules of the Panamanian Center of the Conciliation and Arbitration. Supervisory actions from national and municipal tax administrations and administrative acts of interpretation and tax collection and other public order rules are excluded from the conciliatory and arbitration process referred to herein. If no solution is reached within the thirty days the conciliatory process has been promoted and after the corresponding claim has been presented the investor might elect to refer.
Article 21 The Government shall nor take direct or indirect measures of modification or derogation of laws which carry the same effect, against investments developed under the protection of this law, unless such measures the adopted under the following criteria.
Article 22 The indemnity referred to in the previous article shall be based on the market value, according to fiscal laws, of the investments affected on the date immediately previous to that in which the adopted measure is communicated to the affected party. When there is a difficulty to determine said value, the indemnity may be fixed according to the principles of evaluation generally applied, taking into account the amount of capital invested, its depreciation, the amount of repatriated capital up to date, replacement value and other relevant factors. In any of the cases deserved in the previous article, the procedure for payment of the indemnity shall adjust to that established in Part II, Title XVI, Book II of the Judicial Code.
Article 23 This Law shall nor affect the rights, conditions or benefits granted to investments by virtue of treaties for the promotion and protection of investments undersigns by the Republic of Panama.
Article 24 The Executive Branch will regulate the precision contained in this Law. Article 25. This Law shall be effective as of its promulgation and it revokes law regulation, which contravenes it. PROMULGATE IT AND COMPLY WITH. Approved on third debate at the Justo Arosemena Palace, Panama City, on the 18th day of July, nineteen hundred and ninety eight. ALBERTO MAGNO CASTILLERO HARLEY JAMES MITCHELL D. Acting President Secretary General NATIONAL EXECUTIVE BRANCH -PRESIDENCY OF THE REPUBLIC- PANAMA, REPUBLIC OF PANAMA, JULY 22, 1998 ERNESTO PEREZ BALLADARES OSCAR CEVILLE President of the Republic Acting Chief of Staff