Lloyd's Maritime and Commercial Law Quarterly
PANAMA INTRODUCES NEW FINANCIAL LEASING LAW
Since 1983, several draft bills of laws have been proposed to regulate leasing business in Panama but have failed to attract the attention of Panama’s Legislative Assembly during previous governments: thus, leasing operations have been carried out in an unregulated environment and faced different problems and obstructions. The new democratic government of the Republic of Panama, understanding the importance of these operations, enacted Law No. 7 of 10 July 1990, which regulates the leasing business in and from Panama. Although strongly inspired in the UNIDROIT model leasing law, Law No. 7 was the object of strong debates in the Legislative Assembly and, as a consequence, has been subject to some positive modifications and additions.
Law No. 7 is divided into five (5) chapters; Chapter I is dedicated to the definition, nature, formalities and effects of the financial leasing contract; Chapter II regulates leasing operations; Chapter III contains the tax provisions applicable to the leasing contract; Chapter IV defines the responsibilities of the contracting parties, the procedures for the termination of the contract and for the recovery of the leased properties; Chapter V contains provisions related to international law and matters of transition.
A. The contract of leasing
The new law restricts its application exclusively to movable property. Article 2 has divided leasing contracts into two categories, local and international. For a contract to be considered as an international leasing contract under the Law, the performance of the contract must be executed in a different jurisdiction, even though the contract is concluded within Panamanian jurisdiction. Leasing contracts will be considered as local when the execution and performance of the contract are effected within Panamanian jurisdiction, in other words, when the property object of the contract is economically used in Panama. As will be seen below, the qualification of international or local contract will imply different tax incentives and jurisdictional exceptions.
(a) Elements and requisites
Article 3 of Law No. 7 provides that:
(1) The contract must be consensual. But for the contract to have effect, it must be in writing and authenticated by a notary public and in some instances registered at Panama’s Public Registry.
(2) The lessor must be a person dedicated to the business of leasing, in accordance with the provisions in that regard contained by Law No. 7.
(3) The lessor must be the owner of the leased assets, or must act by means of a trust or mandate.
(4) The leased assets can only comprise movable property, such as aircraft, vessels, oil platforms, heavy machinery, equipment, vehicles, computers and so on. In this respect, Art. 4 states that all movable properties, the ownership of which must
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