Panama Confirms the “Non-Amparization” of Arbitral Awards

In Latin America, the generally called “amparo” is a means of protection against any violation of a person’s (natural or legal) constitutional rights.

In essence, after obtaining an unfavorable arbitral award or requesting the enforcement and recognition of it, the interested party has to go before the competent judicial authorities. After said processes, many Latin American legislations provide the “amparo” as a means to challenge the judicial resolutions rendered therein, by which the parties may allege a violation of a constitutional right. As a consequence, where admissible against arbitration proceedings and its awards, “amparo” motions could be considered an obstruction to an arbitral award’s finality. Thus, resulting in unfriendly arbitration jurisdictions.

Recently, with the issuance of an April 12, 2023 Judgment by the Panamanian Supreme Court of Justice (the “Supreme Court”) (“the 2023 Judgment”), Panama’s highest court confirmed the country’s position as an attractive arbitration seat by restating that the only remedy available against arbitral awards for constitutional -or any other- purposes is the annulment motion. Through the 2023 Judgment, Panama declared that the following highlighted portion of Article 66 of the Panamanian Arbitration Law, Law 131 of 2013, is not unconstitutional:

Article 66. Action for annulment .

An arbitral award may be appealed to a court only by means of an action for annulment in accordance with the following article. This remedy constitutes the only means of challenging the award and aims to review its validity on the grounds exhaustively established in the following article. The appeal is resolved by declaring the validity or nullity of the award. It is understood that the remedy of annulment of the award is the only specific and suitable way to protect any constitutional right threatened or violated in the course of the arbitration or in the award.

Earlier this year, a Panamanian private practitioner filed an unconstitutionality claim against Article 66 of Law 131 of 2013. This claim sought the unconstitutionality of this Article given that its effects, according to the claimant, went against several due process, effective legal protection, and access to justice provisions of the Panamanian Political Constitution. A detailed analysis by the Supreme Court, considering arguments from different law firms, arbitration centers, and arbitral institutions, reached the following determinations:

First, by restating that party autonomy is the cornerstone of the arbitral system and by giving value to the minimal intervention principle of ordinary tribunals, the Supreme Court found that the last paragraph of Article 66 of Law 131 of 2013 procures the protection of due process. According to the Supreme Court this is so as, through Article 66, the State fulfills its obligation of guaranteeing a motion, within the arbitral jurisdiction, i.e. the annulment motion, that protects all parties from acts that might breach fundamental rights. Furthermore, the Supreme Court stated that Article 66 does not restrict or limit the rights or fundamental guarantees of parties to an arbitration as, to the contrary, the annulment motion is meant to protect -in an “easy and efficient” manner- any threatened constitutional right either through the course of the arbitral proceedings or in the award.

Second, the Supreme Court described annulment motions as being in accordance with the constitutional provisions stating that procedural norms must be subject to the principles of process simplification, procedural economy, and the absence of formalities. According to the Supreme Court, annulment motions indeed do not involve any formalities and much less undermine the object of arbitral proceedings, which is the recognition of rights enshrined in Panamanian substantive law.

Third, taking into consideration that the requirements related to the efficiency of arbitral proceedings justify the limited character of the control of arbitral awards, the Supreme Court found that the exclusive character of annulment motions is not unconstitutional. According to the Supreme Court, the fundamental rights protection that the annulment motion singularly fulfills before an arbitral award, is not supposed to be provided by unconstitutionality or amparo motions. Precisely, because the Panamanian Political Constitution provides that justice administration could also be executed by the arbitral jurisdiction, legislators created the autonomous and extraordinary annulment motion to satisfy the effective legal protection of parties to arbitral proceedings.

It must be stated that a Magistrate deciding this controversy issued a dissent stating that annulment motions, being limited to certain grounds, disregard that constitutional rights are not subject to limits, and as such the last Paragraph of Article 66 could indeed be considered unconstitutional. This Magistrate further argued in favor of the possibility of the co-existence between the annulment and the amparo motions against arbitral proceedings. However, it is evident from the 2023 Judgment that the majority of the Magistrates who issued this decision supported the Panamanian Supreme Court’s objective of securing the characteristics that make arbitrations seated in Panama prompt and effective proceedings – as expressly stated in the 2023 Judgment.

Relevant to this dissenting opinion, the 2023 Judgment made a reference to Article 207 of the Panamanian Political Constitution which states that no unconstitutionality or amparo motions will be admitted against judgments by the Supreme Court and its Chambers. This means that anything decided by the Fourth Chamber of the Supreme Court regarding the nullity of an award may not be object of revision by the Plenary of the Supreme Court which is the Chamber invested with powers to review constitutional matters. By rejecting amparo motions against arbitration proceedings, the 2023 Judgment potentially procures the avoidance of contradictory or impractical opinions about the same arbitral proceedings by different Chambers of the Supreme Court.

As stated by the Supreme Court, the Panamanian jurisdiction has a clear position regarding party autonomy, as such, its norms are oriented to reinforce such autonomy by allowing the intervention of ordinary tribunals in arbitral proceedings in an extraordinary manner, i.e., in matters pertaining to injunctive relief, protective orders, practice of evidence, motions against awards, and award enforcement. Furthermore, as stated by a Magistrate in a complimentary opinion, it is understood from party autonomy that parties to an arbitration understand that motions in arbitration are horizontal and that the control of fundamental rights is exclusively in hands of the State’s Judicial Organ through the public order filter executed by the Fourth Chamber of the Supreme Court. Consequently, and as recognized by other arbitration jurisdictions based on the UNCITRAL Model Law, as of today in Panama, annulment motions are the only specific and suitable way to protect constitutional rights threatened or violated in the course of arbitrations or in arbitral awards. Indeed, in words of the Magistrates behind the 2023 Judgment: “only an adequate application [of annulment motions] can guarantee the autonomy, development, and utility of arbitration”.

Author : Mayte Sanchez G. and Alejandro E. Chevalier

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