Too early to know its effectsBy Marijulia Pujol Lloyd
Last month the Panama National Assembly approved legislation that restructures bearer shares, with the intention of getting off the OECD “fiscal paradise list”.
Law No 568 created much controversy among lawyers and economists. On one side are those who believe that Panama is bowing to the demands of industrialized countries in the Organization for Economic Co-operation and Development (OECD) that want to control the Panamanian financial system, while others think that it is good for the country’s image.
Bearer shares were criticized by international organizations because they can be used to hide assets. Now they will have to be put under the custody of authorized entities for two years until their owners can be identified in those cases where the veil of incorporation is lifted.
A group of specialist lawyers said that this legislation will reduce the competitiveness of Panama’s international financial center and that there are member countries of the OECD which have bearer shares. It is also said that this will affect the registration of vessels, because many of Panama’s shipowner clients use this system to do business.
However, not all the lawyers think the same. Mario Rognoni, a specialist in corporate and financial law from the legal firm Arosemena, Noriega & Contreras does not believe that the registration of vessels will be affected by the new legislation, because: “although it is true that countries such as Liberia and the Marshall Islands compete with us and permit bearer shares without a custody regime, the fact is that Panama has adopted all the norms of the International Maritime Organization, the certainty and security offered by the Panamanian Public Registry and the specialized legal services with regards to maritime issues that are important factors that are taken into account by shipowners when they register a vessel”.
Rognoni added that he does not believe that Panama leadership on ship registration will be reduced because of the advantages.
This position totally contradicts the views of Eduardo Morgan from the law firm Morgan & Morgan, who, in an article published in the daily newspaper La Estrella de Panama, on July 17, said that “You have to be very naive to think that when a lawyer says to his Greek, Korean, Chinese or Japanese shipowner that he will have to put his shares in the hands of a third party, that he will continue in the Panamanian Register. There is no doubt that he will change flags and will go to countries like Liberia or the Marshall Islands.”
However, as Rognoni explained, it is too early to see how this sector and other service industries will be affected by this law. “We have to wait for the regulations to see the effect in the legal services, because the bearer shares are one of the advantages that are offered by the Limited Liability Company Law.”