Panama Law and Civil Judgment Collection

Introduction – We frequently get inquiries about collection of civil judgments from foreign countries in Panama. The short version is this is extremely difficult, time consuming, expensive and a most unlikely occurrence.

Foreign Civil Money Judgments defined – This term applies to a civil judgment for money issued by a court in a country other than Panama. The judgment can come from a city court, county court, state court or national court. Generally judgments have time limits which expire thus rendering the judgment uncollectible. Judgments can be valid for as few as three years for up to 25 years or longer in the country where they were issued or valid in a country that has a treaty allowing for the collection of a judgment from another country or jurisdiction. Panama has NO treaties or agreements allowing for the collection of a foreign judgment in Panama. No treaties means none, not with a single country.

Panama Treaties Lacking – Panama has no treaties calling for the collection of foreign judgments inside of Panama. Panama has no treaties calling for the collection of child support, spousal support, or alimony when the order or judgment was issued by a foreign court. Panama has no treaties pertaining to bankruptcy proceedings in any other country.

Collecting a foreign debt in Panama – Let us start out by saying we do not do debt collection work for creditors. We are an Asset Protection Law Firm. We protect assets for clients, not the other way around. That being said we will describe what a creditor faces if they try to collect a foreign debt in Panama.

Whose debt is it anyway? – In Panama if you have an anonymous bearer share corporation or an anonymous foundation, these entities are judicial persons or artificial persons. The foundations and corporations have their own assets and debts separate from yours and your personal assets and debts are separate from theirs. So the first step in asset protection is to have the assets in the name of anonymous bearer share corporations or anonymous foundations, preferably using both with the foundation owning the corporation. Now if the public ownership records of the corporation do not reflect your name (which is how we set things up here in Panama) how can one transfer your debts to the corporation? Good question and a very tough one for your financial enemies. This is so foreign and confusing to lawyers in other countries where these privacy safeguards do not exist that they often just give up, especially if they are working on commission. They often have little training and experience in such matters and really do not know what to do. Collection attorneys rarely chase debts into other countries let along a privacy jurisdiction like Panama.

Asset Recovery Law Firms - There are asset recovery international law firms that do understand such matters. They are extremely expensive with recovery fees often going into the multiple millions of dollars so they generally work on extremely large recoveries. For them to be effective there is generally some degree of criminality involved as well, and you will learn more about this as you read on. They generally work on fiduciary fraud cases for example a stock broker sells a non existent gold mine stock and runs away with $100,000,000. This is criminal, usually in multiple jurisdictions and the asset recovery team is brought in to find whatever assets they can that belong to the culprit so the victims can get some relief. The culprits usually secret the funds away and in many countries they may go to jail briefly and want to retire when they get out. The victims of course want to get as much back as possible so they collectively hire an asset recovery law firm and undertake a long arduous and expensive cross border effort to see were the funds are. Sadly much of the time the funds wind up as diamonds buried in the woods somewhere awaiting collection years later. If the culprits were knowledgeable and had resources it is near impossible to find their assets if they are unwilling to tell you what they did. Remember we said that asset recovery lawyer can possibly be effective when there is some criminality involved. If things are just civil in nature there is precious little they can do which we will explore more thoroughly.

Jurisdiction, Venue and Authority – If a financial enemy does bring suit against you in Panama it is likely to be thrown out of court. Why? Panama is not the correct location or venue for the action in most instances. Why? Because the events underlying the lawsuit took place outside of Panama. The judge will rule that Panama has no authority to decide on cases where the underlying events took place outside of the jurisdiction of Panama. The lawsuit will be dismissed out of court very quickly. So before we even get into the details the likelihood of the case surviving the first cut in court is extremely small unless somehow the underlying events that were tried in the foreign court involved Panama somehow like the lawsuit was based on events that transpired in Panama.

Judgment Creditors retaining counsel in Panama – When the judgment holder attempts to retain an attorney in Panama the attorney is going to say that the chances of success are not realistic unless something concerning the initial lawsuit in the other country happened in Panama. The attorney will be discouraging and probably not take the case in that it is wasting the funds of the client. There are over 400,000 corporations in Panama for a reason and that reason is asset protection. There are 150 banks in Panama City which is only 7.9 square miles, picture that. If this type of lawsuit was successful we wouldn’t have all these corporations here with 20% of the workforce working for a Panama bank.

Collecting a Foreign Civil Judgment in Panama – Let us assume one has a motivated financial enemy who has a civil judgment in their favor and wishes to pursue you to Panama for whatever reasons they may have. First whose name is the judgment in? Normally it will be in a corporate name or personal name different from the corporation or foundation holding the assets in Panama. So the first big obstacle is transferring the debt over to the entity that has the assets. Since the corporation or foundation is anonymous in that there is no published or available ownership records we have to stop and wonder how he is going to prove to a court that the corporation and or foundation is owned by you. We for this discussion are forgetting that the lawsuit and judgment from the other country has no authority in Panama. In reality no one owns a Panama Foundation, there is no legal beneficial owner of the Foundation and we generally have the foundation own the corporation, not you. You can be the protector of the foundation but that is different altogether and protectors are not owners. Protectors and beneficiaries of foundations are not published or publicly available. The fact that the corporation is owned by the foundation is not publicly available either. If you haven’t figured it out yet your financial enemy is lacking all the key ingredients to tie the debt to the corporation or foundation and even if they had this the Panama court still is lacking the authority since the venue is incorrect.

Type of Service – In many countries a person can be served with a lawsuit via the national postal service. Usually the person needs to sign for the envelope and this constitutes legal service. As an alternative some countries allow for service by publication in a newspaper as well. In Panama the only recognized type of service is personal service by an authorized process server or public official authorized to do such service. Any lawsuit where the service was by mail or publication or other than personal service is not recognized as valid by Panama. So if you were served by mail or publication and this service resulted in a judgment, that judgment is not considered valid according to the laws of Panama and this is above and beyond all the other protections offered described above. Panama is a unique jurisdiction with much to offer when it comes to asset protection.