Panama is open for business: First FTA dispute relates typical Panamanian horror story

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Obama signs the FTA with Panama

And we have the first dispute under the Panama - USA free trade agreement! That treaty, described as a "major win for Panama corruption", went into effect late last year, thanks to the supposedly anti-FTA Obama, and the first dispute reads like an all-too-familiar Panamanian horror novel that many foreign investors will immediately recognize.

The dispute is filed by James Falgout, Barbara Falgout and Clarence Johnson. Years ago, they bought a piece of beachfront property in Chiriqui, not too far from the Costa Rican border. Their plan was to build a coastal residential development there called "Villas Playa Tortuga".

However, they had not counted with the omnipresent Panamanian corruption and thievery.

First they ran into various obstacles when they tried to obtain title on their property, which was bought under "right of possession" laws. Although no legal objections existed to grant that title and such was repeatedly promised, the title never materialized.

Then, a road was illegally built across their property on orders of the local mayor, the investors allege. That road was then used by drug traffickers who apparently operated in the area with impunity or even protection and assistance.

In their attempts to retrieve their land and start construction of the - officially approved - development, they then suffered a series of abuses that range from kidnap attempts, harassment by the local police and the mayor, setting their property on fire, attempts at their lives, planting drugs, threats with arrest and torture, and so on.

At one point, the National Ombudsman, Patria Portugal, even told them that "the mayor of Baru is very well protected" and "does as he pleases" and that Panama "does not recognize its obligations under treaties or international law", the complainants allege.

About the latter we are now about to find out. The notice of the dispute being filed has been sent to the new Attorney General of Panama, the Noriega crony Ana Belfon. She and her associates will probably try to stall everything as long as possible - a tried and tested tactic commonly employed by Panama to evade its international responsibilities.

The entire complaint, with all the gruesome details, is available for download here: FTA_notice_of_dispute.

11 thoughts on “Panama is open for business: First FTA dispute relates typical Panamanian horror story

  1. Long before ANATI Right of Possession was always a high risk Pandora’s box that could drag on or have the rug (land) pulled out from under the buyer.

    Stay away from any ROP sales!

    • If Panama give title to one party then it must provide to the US National Investor the same treatment, deniel of such treatment is in violation of the Bilateral Investment Treaty. If Jose the Politician gets island title in Bocas then ALL US National Investors have the right to title. This CAN NOT be denied to US National Investors. If Panama does deny as what MEF and ANATI have done then it is a violation of the Bilateral Investment Treaty and the US National Investor can implement International Binding Arbitration against Panama. The US National Investor does not need to take this to a court of law in Panama which we all know the outcome.

      The Bilateral Investment Treaty is very clear.

      any right conferred by law

      Each Party shall maintain favorable conditions for investment in its territory by nationals and companies of the other Party. Each Party shall permit and treat such investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country,

      Investment of nationals and companies of either Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Party. The treatment, protection and security of investment shall be in accordance with applicable national laws and international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investment made by nationals or companies of the other Party. Each Party shall observe any obligation it may have entered in with regard to investment of nationals or companies of the other Party.

      Each Party agrees to provide fair and equitable treatment and, in particular, the treatment provided for in paragraph 1 of this Article, to privately owned or controlled investment of nationals or companies of the other Party, where such investment is in competition, within the territory of the first Party, with investment owned or controlled by the first Party on its agencies or instrumentalities. In no case shall such treatment differ from that provided to any privately owned or controlled investment of nationals or companies of the first Party which is also in competition with investment owned or controlled by the Party or its agencies or instrumentalities.

      Investment of a national or a company of either Party shall not be expropriated, nationalized, or subjected to any other direct or indirect measure having an effect equivalent to expropriation of nationalization (“expropriation”) in the territory of the other Party, except for a public or social purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process and the general principles of treatment laid down in Article II(2). Such compensation shall amount to the full value of the expropriated investment immediately before the expropriatory action became known; include interest at a commercially reasonable rate; be paid without delay; be effectively realizable; and be freely transferable.

      the acquisition (whether by purchase, lease or otherwise), ownership and disposition (whether by sale, testament or otherwise), of personal property of all kinds, both tangible and intangible;

  2. I have met many individuals who have left Panama, do to the unfulfilled promises of this so-called Paradise!

    Individuals who used local architects and engineers to build roads, bridges, water and sewer system only to be bled dry by Local Officials and Ministry officials, continually being lied too about costs,materials, legal approvals, licenses, proof of proper registration, of course ownership paper trails!

    It seems that unless you are very very wealthy, have made the right connections(MONEY) paid off the local and Ministerial Officials you will not only loose your money, your time, but possibly your life in the process!

    Panama wants investor, just do to not plan to take any of your money or profits with you when you leave!

    There are a lot of Gringo’s and Expat’s that are very doing well here, they are the minority.

    Other wise Panama is a real paradise, if you do not personally have to get involved with any Lawyers, Government Ministry, Local Officials, the Police, the Court system, the Banks, Credit unions, or Investment Brokerage houses!

    This is an over simplification!

    It is truly buyer beware, also keep your money in your home country where it is protected somewhat compared to what can actually happen here and has!

    • And this is exactly why the Bilateral Investment Treaty gives the investor the right to take Panama to International Binding Arbitration for damages of over $98,000,000. This does not include interest that under international law and the Bilateral Investment Treaty Panama must Pay. Nor, does this include moral damages in which the International Tribunal will set the sum of the amount.

      With the Bilateral Investment Treaty the game is over for Panama.

      Joseph C. Lemire v. Ukraine ICSID Case the Tribunal made the follow statement

      When agreeing to BITs, States confer rights to foreign investors, which are
      unavailable to their own citizens. Most jurisdictions deny local investors, who
      have suffered unfair or inequitable treatment at the hands of their own authorities,
      a specific cause of action. Municipal law typically restricts remedies to the
      annulment of administrative acts, to the declaration, under limited circumstances,
      of the public administration‟s tort liability or to the right to compensation in
      certain cases of expropriation.

      Foreign investors covered by a BIT enjoy an additional level of protection: they
      can avail themselves of the same instruments open to local investors, and
      additionally they can draw protection from the international law rights conferred
      by the treaty. The different treatment between foreign and domestic investors is a
      natural consequence of a BIT. However, this unequal treatment is not without
      justification: justice is not to grant everyone the same, but suum cuique tribuere.
      Foreigners, who lack political rights, are more exposed than domestic investors to
      arbitrary actions of the host State and may thus, as a matter of legitimate policy,
      be granted a wider scope of protection.

      The facts proven in the present case are a good example of the role played by
      BITs

      Joseph C. Lemire, a radio station owner won his case as follows,
      Tribunal, by majority decision, hereby:
      1. Orders Respondent to pay to Claimant 8,717,850 USD as compensation for
      Respondent‟s violation of the FET standard defined in the BIT, within 60
      days from the delivery of this Award;
      2. Orders Respondent to pay to Claimant 750,000 USD as compensation for the
      costs and expenses incurred in this arbitration, within 60 days from the
      delivery of this Award;
      3. Orders Respondent to pay to Claimant interest on the amounts established in
      the two preceding paragraphs, if such amounts have not been paid within 60
      days from the delivery of this Award; interest shall (i) accrue as from the
      date of delivery of this Award until full payments of any amounts owed, (ii)
      be calculated at the LIBOR rate for six month deposits denominated in USD,
      on the date of delivery of this Award, and adjusted every six months
      thereafter, plus a margin of 2% and (iii) be capitalised every six months from
      the date of delivery of this Award;
      4. Dismisses all other claims.

  3. Well said especially the second to the last paragraph.

    Like the old saying if you want to make a million here bring at least three!

    • And this is exactly why the Bilateral Investment Treaty gives the investor the right to take Panama to International Binding Arbitration for damages of over $98,000,000. This does not include interest that under international law and the Bilateral Investment Treaty Panama must Pay. Nor, does this include moral damages in which the International Tribunal will set the sum of the amount.

      With the Bilateral Investment Treaty the game is over for Panama.

        • You are most welcome, what ever you need we have, video, photo, official documents, testimony, etc. Within the International Arbitration the burden of proof is always on the claimant. We have such proofs.

  4. US Nationals Need to Know Your Rights.
    All other Nationals should consult with your Embassy or Government to find out what Bilateral Investment Treaties are in implementation.

    My apologies if this is long, but Foreign National Investors need to be aware that they do not have to put up with the games of Panama. That you can take your claim outside of the corrupted system of Panama. This deals with US National Investors.

    I thank you for this opportunity,

    James Falgout, US National Investor

    To my knowledge Panama has 16 Bilateral Investment Treaties with other nations. You can download those treaties at
    http://www.sice.oas.org/ctyindex/PAN/PANBITs_e.asp

    Panama has two international Obligations with the USA and Panama and others with other countries. The issue is at an international level with Panama for violations of the Bilateral Investment Treaty and that of the TPA or Free Trade Agreement with Panama.
    Those two instruments are available for download here
    http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005356.asp

    US National can also contact the TCC of items of enforcement of the treaties with Panama.

    US National Investors are protected under the Bilateral Investment Treaty and that of the TPA.

    The Constitution of Panama is clear Article 4 is that Panama abides by International Law and Article 20 gives Foreigners certain rights under treaties.

    Panama is is international legally bound to the Vienna Convention on the Law of Treaties of 1969 and Panama signed on 28 Jul 1980
    Article 2, 1(a) “treaty” means an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation;

    Article 26
    “Pacta sunt servanda”
    Every treaty in force is binding upon the parties to it and must be performed by them in good faith.

    Article 27
    Internal law and observance of treaties
    A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty. This rule is without prejudice to article 46.

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    The Bilateral Investment Treaty is clear.

    Foreign investors are to be accorded treatment in accordance with international law and are to be treated no less favorably than investors of the host country and no less favorably than investors of third countries, whichever is the most favorable treatment, (“national” and “most-favored-nation” treatment) subject to certain specified exceptions;

    International law standards shall apply to the expropriation of investments and to the payment of compensation for expropriation;

    Procedures are established which allow an investor to take a dispute with a Party directly to binding third-party arbitration.

    The Bilateral Investment Treaty concept of “investment” is broad and designed to be flexible; although numerous types of economic interests are enumerated, the intent is to include all legitimate interests in the territory of either Party, whether directly or indirectly controlled by nationals of the other, having economic value or “associated” with an investment. Protected “companies of a Party” are those incorporated or otherwise organized under the laws of a Party in which nationals of that Party have a substantial interest.

    There is no definition of what an investment is or the amount of what constitutes and investment. Panama does not have the right to state the conditions of what is an investment and Panama can not apply internal law, regulations, rules, codes, administrative acts, etc.. to escape their obligations under the Bilateral Investment Treaty or TPA.

    The Bilateral Investment Treaty and TPA confers protection from unlawful interference of property interests and assures compensation in accordance with international law standards. It provides that any direct or indirect taking must be: for a public purpose; nondiscriminatory; accompanied by the payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general standards of treatment discussed above. The Bilateral Investment Treaty and TPA definition of “expropriation” is broad and flexible; essentially “any measure” regardless of form, which has the effect of depriving an investor of his management, control or economic value in a project can constitute expropriation requiring compensation equal to the “fair market value.” Such compensation, which “shall not reflect any reduction in such fair market value due to . . . the expropriatory action,” must be “without delay,” “effectively realizable,” “freely transferable” and “bear current interest from the date of the expropriation at a rate equal to current international rates.”

    Main Articles of the Bilateral Investment Treaty
    Article I
    (d) “investment” means every kind of investment, owned or controlled directly or indirectly, including equity, debt, and service and investment contracts, and includes:
    (i) tangible and intangible property, including rights, such as mortgages, liens and pledges;
    (ii) a company or shares of stock or other interests in a company or interests in ; the assets thereof;
    (iii) a claim to money or a claim to performance having economic value and associated with an investment;
    (iv) intellectual and industrial property rights, including rights with respect to copyrights, patents, trademarks, trade names, industrial designs, trade secrets and know-how; and goodwill;
    (v) licenses and permits issued pursuant to law, including those issued for manufacture and sale of products;
    (vi) any right conferred by law or contract, including rights to search for or utilize natural resources, and rights to manufacture, use and sell products; and
    (vii) returns which are reinvested. Any alteration of the form in which assets are invested or reinvested shall not affect their character as investment;
    (e) “own or control” means ownership or control that is exercised through subsidiaries or affiliates, wherever located; and
    (f) “return” means an amount derived from or associated with an investment, including profit; dividend; interest; capital gain; royalty payment; management, technical assistance or other fee; and return in kind.

    ARTICLE II
    1. Each Party shall maintain favorable conditions for investment in its territory by nationals and companies of the other Party. Each Party shall permit and treat such investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies, or of nationals or companies of any third country.

    2. Investment of nationals and companies of either Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Party. The treatment, protection and security of investment shall be in accordance with applicable national laws and international law. Neither Party shall in any way impair by arbitrary and discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investment made by nationals or companies of the other Party. Each Party shall observe any obligation it may have entered in with regard to investment of nationals or companies of the other Party.
    3. Each Party agrees to provide fair and equitable treatment and, in particular, the treatment provided for in paragraph 1 of this Article, to privately owned or controlled investment of nationals or companies of the other Party, where such investment is in competition, within the territory of the first Party, with investment owned or controlled by the first Party on its agencies or instrumentalities. In no case shall such treatment differ from that provided to any privately owned or controlled investment of nationals or companies of the first Party which is also in competition with investment owned or controlled by the Party or its agencies or instrumentalities.

    ARTICLE IV
    1. Investment of a national or a company of either Party shall not be expropriated, nationalized, or subjected to any other direct or indirect measure having an effect equivalent to expropriation of nationalization (“expropriation”) in the territory of the other Party, except for a public or social purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process and the general principles of treatment laid down in Article II(2). Such compensation shall amount to the full value of the expropriated investment immediately before the expropriatory action became known; include interest at a commercially reasonable rate; be paid without delay; be effectively realizable; and be freely transferable.
    2. Consistent with Article I(d), if either Party expropriates the investment of any company duly incorporated, constituted or otherwise duly organized in its territory, and if nationals or companies of the other Party, directly or indirectly, own, hold or have other rights with respect to the equity of such company, then the Party within whose territory the expropriation occurs shall ensure that such nationals or companies of the other Party receive compensation in accordance with the provisions of the preceding paragraph.

    ARTICLE VII
    1. For purposes of this Article, an investment dispute is defined as a dispute involving: (a) the interpretation or application of an investment agreement between a Party and a national or company of the other Party; (b) the interpretation or application of any investment authorization granted by its foreign investment authority to such national or company; or (c) an alleged breach of any right conferred or created by this Treaty with respect to an investment.

    2. In the event of an investment dispute between a Party and a national or company of the other Party with respect to an investment of such national or company in the territory of the first Party, the parties to the dispute shall initially seek to resolve it by consultation and negotiation.

    3. (a) The national or company concerned may choose to consent in writing to the submission of the dispute to the Additional Facility for settlement, either by conciliation or binding arbitration, at any time after six months from the date upon which the dispute arose. Once the national or company concerned has so consented, either party to the dispute may institute proceedings before the Additional Facility, provided the dispute has not, for any reason, been submitted for resolution in accordance with any applicable dispute settlement procedures previously agreed to by the parties to the dispute, and the national or company concerned has not brought the dispute before the courts of justice, administrative tribunals or agencies of competent jurisdiction of either Party.
    (d) Each Party shall provide for the enforcement within its territory of Additional Facility arbitral awards.

    ARTICLE XII
    This Treaty shall apply to political subdivisions of the Parties.

    AGREED MINUTES
    The duly authorized Plenipotentiaries of the Parties have agreed upon the following provisions clarifying their intent in respect of certain Articles of the Treaty Concerning Treatment and Protection of Investment signed this date, which shall be considered integral parts of the Treaty:
    1. With respect to Article II(1), the Parties agree that associated activities include:
    (a) the establishment, control and maintenance of branches, agencies, offices, factories or other facilities for the conduct of business;
    (b) the employment of professional, technical and managerial personnel of their choice, regardless of nationality, for the particular purpose of rendering professional, technical and managerial assistance necessary for the planning and operation of an investment;
    (c) the organization of companies under applicable laws and regulations; the acquisition of companies or interests in companies or in their property; and the and the sale, liquidation, dissolution or other disposition, of companies organized or acquired;
    (d) the making, performance and enforcement of contracts;
    (e) the acquisition (whether by purchase, lease or otherwise), ownership and disposition (whether by sale, testament or otherwise), of personal property of all kinds, both tangible and intangible;
    (f) the leasing of real property appropriate for the conduct of business;
    (g) the acquisition, maintenance and protection of copyrights, patents, trademarks, trade secrets, trade names, licenses and other approvals of products and manufacturing processes, and other industrial property rights;
    (h) the borrowing of funds from local financial institutions, as well as the purchase and issuance of equity shares in the local financial markets;
    (i) the use of means of communication, transport and public utilities; and
    (j) access to courts of justice, administrative tribunals and agencies, and the right of employment of persons by nationals or companies of the other Party, who otherwise qualify under applicable laws and regulations of the forum, regardless of nationality, for the purpose of asserting claims and enforcing rights, including those arising under the provisions of this Treaty, with respect to their investment and associated activities.

    4. With respect to Article IV (1), both Parties understand that the estimate of the full value of expropriated investment can be made using several methods of calculation depending on the circumstances thereof.

    ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    PROTOCOL BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE
    GOVERNMENT OF THE REPUBLIC OF PANAMA AMENDING THE TREATY CONCERNING
    THE TREATMENT AND PROTECTION OF INVESTMENTS OF OCTOBER 27, 1982.
    PROTOCOL WAS SIGNED AT PANAMA CITY, ON JUNE 1, 2000

    Amended Article VII(3)(b) constitutes each Party’s consent
    to the submission of investment disputes to binding arbitration
    in accordance with the choice of the investor under amended
    Article VII(3)(a).
    Amended Article VII(3)(c) provides that if the parties
    elect conciliation or arbitration using Convention Arbitration
    or the Additional Facility, the regulations and rules of ICSID
    or the Additional Facility, as applicable, will govern.
    Under amended Article VII(3)(d), each Party commits to
    enforcing arbitral awards rendered pursuant to Article VII. The
    Federal Arbitration Act (9 U.S.C. 1 et seq.) satisfies the
    requirement for the enforcement of non-ICSID Convention awards
    in the United States. The Convention on the Settlement of
    Investment Disputes Act of 1966 (22 U.S.C. 1650-1650a) provides
    for the enforcement of ICSID Convention awards.
    Amended Article VII(3)(e) provides that any non-Convention
    Arbitration shall take place in a country that is a party to
    the United Nations Convention on the Recognition and
    Enforcement of Arbitral Awards done at New York, June 10, 1958.
    This provision facilitates enforcement of arbitral awards.
    Paragraph 2 amends Article VII(5) of the 1982 Treaty by
    replacing that paragraph with the text set forth in Article
    I(2) of the Protocol. Amended Article VII(5) provides that, for
    the purposes of Article 25(2)(b) of the ICSID convention and
    Article VII of the 1982 Treaty, the nationality of a company in
    the host country will be determined by ownership or control,
    rather than by place of incorporation. This provision allows a
    company that is an investment covered by the 1982 Treaty to
    bring a claim in its own name.

  5. In reference to the delay tactics that are commonly practice in Panama.

    # Panama has six months in which to find an amicable solution and those six months are being counted the day Panama was officially notified on 09 JAN 2012. The US National Investors do not have to wait for Attorney General of Panama, Ana Belfon to do anything except what is required by the Organs of the State under the Bilateral Investment Treaty and that of International Law. If not, another violation of the Bilateral Investment Treaty at the highest levels of the government of Panama.

    Notification was implemented under UNCITRAL Arbitration Rules,
    Notice and calculation of periods of time
    Article 2
    1. A notice, including a notification, communication or proposal,
    may be transmitted by any means of communication that provides
    or allows for a record of its transmission.
    2. If an address has been designated by a party specifically for
    this purpose or authorized by the arbitral tribunal, any notice shall
    be delivered to that party at that address, and if so delivered shall be deemed to have been received. Delivery by electronic means such as facsimile or e-mail may only be made to an address
    so designated or authorized.

    5. A notice shall be deemed to have been received on the day it is
    delivered in accordance with paragraphs 2, 3 or 4, or attempted
    to be delivered in accordance with paragraph 4. A notice transmitted
    by electronic means is deemed to have been received on the day
    it is sent, except that a notice of arbitration so transmitted is only
    deemed to have been received on the day when it reaches the
    addressee’s electronic address.

    # The practice of delay is under international law an act of omission and therefore yet, another violation by Panama.

    # Interest is building and that interest is not going away. So, the more delay, the more it will cost Panama. Once again this is stated with the Bilateral Investment Treaty and that of International Law.

    The US National Investors are aware of this behavior from Panama because that is all Panama has to fall upon, is acts of omission. The reality is that we have Panama by the horns and we are not letting go. Panama is not looking good at all.

    However, the US National Investors have made it clear to Panama that we are willing to find an amicable solution.

    • One big Question?

      Time is money!

      So just how much does one pay $$Money$$ (Approximately) just to have a viable civil suit, then to take it thorough the series of Courts both national and international?

      The Majority of Individuals and Corporations do not have deep pockets or unlimited time to pursue such long legal engagements!

      Since Panama has never following any type signed of treaty, International laws, its own Law and Constitution unless it was an economic gain for some particular group or an individual to personally profit from such adverse illegal tactics.

      The Panamanian Government its Ministries, Politicians, Businesses have always blocked, imitated, or stopped any type of adversity (Political or civil) with illegal delays, just plain outright deceitful diversionary, immoral, unethical, and physical intimation style tactics without any legal repercussion!

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