Legal Market Overview
One of the fastest growing economies in the world – and the fastest growing economy in Central America – Panama has seen high levels of activity in the maritime sector (thanks to its position as a conduit for international trade via the Panama Canal), as well as in finance and infrastructure construction and development. However, the effects of the Covid-19 pandemic are likely to be very strongly felt in these areas over the coming months.
In 2019, firms saw fewer corporate, finance and projects transactions as a result of uncertainty over the elections held in May that year and the transition to a new administration. After President Laurentino Cortizo took office in August 2019, the market once again became more active.
In the financial sphere, law firms continued to advise the large numbers of international banks that have a presence in Panama. Firms have been particularly active assisting with mergers and consolidation in the banking sector, as smaller banks struggle with the additional costs of increased regulation (such as the OECD’s reporting requirements) and higher capital adequacy fund requirements under Basel III.
Outside of the financial sector, firms have seen an increase in M&A activity across a number of industries (notably hospitality, food and beverages, and telecoms) as multinational companies look to consolidate and strengthen their positions in Central America, often using Panama as a hub for their operations.
There has also been an upturn in projects work, with firms advising on a growing number of renewable energy projects and major infrastructure projects. Among the most significant recent projects were the development of a fourth bridge over the Panama Canal and the expansion of Panama City’s metro network. This level of activity is likely to increase even further following the introduction of a new public-private partnership law. The purpose of the law is to update and streamline Panama’s legislation in this area and allow for the private sector to finance public infrastructure projects, thus requiring less government funding.
Panama remains a hub for offshore services, although this industry has seen some decline in recent years – particularly since the Panama Papers scandal in 2016 – as new regulations have been introduced and sales of offshore corporations scaled back. As a result, firms that were formerly active in this area have begun to diversify into other practice areas.
In the shipping sector, lawyers have remained busy advising on ship registration and finance. Regulations on marine sector fuel emissions in international waters, introduced by the International Maritime Organisation (IMO) from 1 January 2020, as well as rules on ballast water management previously brought in by the IMO, are likely to have an effect on ship owners, due to the increased costs of meeting the new requirements. However, firms have so far not reported an impact on their workload.
Firms in Panama have also been expanding their arbitration practices, as the country’s overworked court system can mean litigation – particularly involving high-value disputes – takes many years to resolve.
The legal market continues to be dominated by full-service Panamanian firms, including Alemán, Cordero, Galindo & Lee, Arias, Fábrega & Fábrega, Galindo, Arias & López and Morgan & Morgan. A number of boutique firms, such as IP specialist Estudio Benedetti and shipping-focused practices Arias B Associates and De Castro & Robles, also have a presence in the market, as do Central American firms Arias and Dentons Muñoz (part of the global Dentons network).
Recent additions to the market include Virtù Atelier Legal, a finance and corporate-focused firm established in October 2019 by former partners from Anzola Robles & Associates Abogados and Dentons Muñoz. Another development is the incorporation of local firm Hoyos & Asociados into Veló Legal in August 2020; the newly combined firm provides legal services in the real estate, infrastructure, financial services, energy and telecoms, and industry and technology sectors.