by Jorge Quijano, LL.M.
J. Quijano Abogados
jorge@jquijano.com
www.jquijano.com

Ship Mortgage in Panama

A ship mortgage is a legal instrument that instills confidence in banks, leasing companies, and financial institutions when providing loans for the construction, sale, and operation of vessels to shipowners worldwide. Once the mortgage is recorded in the Public Registry of Vessels of the Panama Maritime Authority, it automatically grants the mortgagee the right to seize, take possession of, and manage the vessel, or to sell it to recover the outstanding debt.

According to Article 260 of Law 55 of 2008, the ship mortgage agreement may be executed either within or outside the Republic of Panama. It can be drafted in any language and must be formalized, whether by public deed or private document. If executed as a private document, the signatures of the parties must be authenticated by a public notary or a consul of the Republic of Panama in the exercise of their notarial powers.

Additionally, the mortgage agreement must be authenticated with an Apostille seal or by a consul of the Republic of Panama before its submission to the Public Registry. The deed may include any provisions that the parties consider necessary, but must include the following essential elements:

• The names and addresses of the mortgagor and mortgagee;
• The fixed or maximum principal amount secured, or a description of the obligations secured.

In addition to the principal, the mortgage will also secure all earned interest, court costs, collection expenses, amounts resulting from fluctuations in currency or payment methods, and any other sums agreed upon in the mortgage agreement.

• The dates for payment of the principal or for fulfilling the secured obligations and interest, or a method for determining those dates, unless the mortgage secures obligations that are payable on demand, are future obligations, or are subject to conditions precedent; 
• If interest has been agreed upon, the mortgage agreement must specify the agreed-upon interest rate, or the method by which it can be determined;
• The name, registration number, and call sign (if any) of the vessel, along with its registered tonnage and measurements. If the mortgaged vessel is under construction, the title of the vessel must be registered with the Public Registry, and evidence thereof must be provided through a builder’s certificate, which should include:
• The name of the person for whom the vessel is being built;
• The assigned navigation and radio license numbers;
• The measurement, tonnage, and type of service provided by the vessel;
• The name, address, and location of the shipbuilder;
• Confirmation of the builder’s intention to transfer the title of the vessel to the person for whom it is being built, along with that person’s acceptance.

Notably, with the latest amendment to several articles of Law 55 of 2008, banks and shipowners are now allowed to register preliminary and permanent mortgage deeds in English without the need for translation into Spanish, which was previously required.

This legislation amended Law 55 of 2008 by adding Article 251-A, which states:

“It could be registered together with the extract referred to in Articles 10, 251, and 252 of the present law, the original agreement in English language of titles and liens of the vessel for its preliminary or permanent registration.”

This legal development simplifies the recording process for mortgage agreements and reduces expenses for the parties involved.

Registration Expenses

The following governmental fees apply for registration of a ship mortgage: