Bill 371.

Summary.

The bill defines public utility as cases in which a state project, service, or measure is indispensable and directly necessary for the operation of essential infrastructure or the provision of basic services, with an objectively verifiable and quantifiable benefit. It limits social interest to actions essential to preserving public order, public safety, or public health, whose necessity is demonstrated through objective and verifiable criteria. The State could depart from those definitions only through a prior written agreement with the investor. If a measure conflicts with them, the investor could seek conciliation and the arbitration provided for in Article 20, including international arbitration where agreed.

The addition of Article 10-A to Law 54 of 1998 would allow a domestic or foreign investor who invests at least 100 million balboas (B/.100,000,000.00) to enter into a legal and tax stability contract with the State, represented by the Ministry of Commerce and Industries (Ministerio de Comercio e Industrias) and the Ministry of Economy and Finance (Ministerio de Economía y Finanzas). The contract would provide for an unchanged tax regime, application of a specified legal framework—including sectoral, environmental, labor, and public procurement rules—free repatriation of capital, profits, and dividends, and compensation for legal changes that adversely affect the agreed terms.

The income tax rate would depend on the reinvestment of annual profits in Panama or investment in previously approved projects of public interest: 0% when the amount equals 100% of profits, 7.5% when it equals at least 50% but less than 100%, and 15% when it is less than 50%. Social investment would have to be direct, verifiable, and documented, receive prior approval from both ministries, and obtain a certificate of compliance from the competent authority. The contract would include a customs duty exemption for project machinery, equipment, and materials, and accelerated depreciation over 5 years. Its indefinite duration would depend on voluntary continued participation in the regime, compliance with its requirements, and the absence of dissolution, liquidation, or bankruptcy; it would cease to have effect upon express withdrawal, serious and repeated noncompliance, dissolution, or bankruptcy. Article 10-B would give these contracts the force of law between the parties and precedence over conflicting subsequent general rules. It would require their publication on the ministry’s website, except for clauses containing duly substantiated classified or confidential information.

The amendment to Article 9 would exclude from the regime persons covered by the listed convictions, debts, and final decisions, including those connected with Criminal Code offenses involving drugs, money laundering, fraud, forgery, and corruption. The exclusion would also extend to legal entities connected with those persons through positions held, representation, share ownership, or beneficial ownership. The National Directorate of Business Development (Dirección Nacional de Desarrollo Empresarial, DINADE) would conduct periodic reviews. Cancellation of registration would require verification and a reasoned decision; when the grounds arise solely from a corporate connection, the entity would have 30 business days to remedy it before cancellation and termination of benefits.

Amended Article 20 would first submit disputes between the State and investors to conciliation. If no resolution is reached within 30 business days, the investor could turn to the competent authority, domestic arbitration, or, if agreed, international arbitration under the rules of the International Centre for Settlement of Investment Disputes (Centro Internacional de Arreglo de Diferencias Relativas a Inversiones, CIADI), the International Chamber of Commerce (Cámara de Comercio Internacional, CCI), or the United Nations Commission on International Trade Law (Comisión de las Naciones Unidas para el Derecho Mercantil Internacional, CNUDMI). Awards would be final, binding, and enforceable under national law and treaties ratified by the Republic of Panama. The bill would repeal Articles 18, 19, 21, and 22 of Law 54 of 1998. Investors registered with DINADE who meet the stated investment threshold could apply for the contract within 12 months of promulgation. The Executive Branch (Órgano Ejecutivo) would issue implementing regulations from the date of promulgation, when the law would take effect. The bill concerns the public entities cited and could be of interest to domestic and foreign investors, companies, infrastructure and service sectors, and participants in investment arbitration.