The Registry of Ships, a Contribution of Panama to the World

The narrow isthmus, “continental waist” between the great Pacific and Atlantic oceans make Panama a unique country. Geography pointed to our destiny as a way of passage for communication between peoples. The isthmus shortened the barriers between the Atlantic and the Pacific and as the world developed, that small barrier was, in turn, projected as a vital point for world trade.

From the Camino de Cruces, the transisthmian road and the first multimodal route of America in the years of the Spanish conquest, the railway was transferred to that great work of human ingenuity: the Panama Canal. The history of our Nation is linked to the sea and its destiny is to be a bridge of union between countries and continents. That great wealth instead of taking hold with the great work of the Canal was snatched away by the Hay-Bunau Varilla Treaty.

The clauses that favoured the country were subject to a vile robbery with the interpretation imposed by the United States. The ports excluded by the treaty were not the ports of La Boca and Cristóbal (the only ones existing in the area) but the Fiscal Pier and the Public Market, and in Colón the Folks River.

At one stroke, our wealth, our geographical position were stolen and, as a result of the robbery, they turned the cities of Panama and Colón into ghettos without a future. In a letter of January 19, 1904, from Bunau Varilla to John Hay, he says: “In my opinion, the expression” cities of Panama and Colon “corresponds to the actual space effectively covered by the two agglomerations of houses, and it can not be understood that refer to any administrative definition that covers a theoretical surface. I believe that the United States is not obliged to yield an inch off the real surface covered by the agglomerations in both cases and that no protest can arise if it does not allow a suburban space to be added to the actual surface for further development of the populations “.

With this definition, they not only took away our wealth but also condemned us to perpetual poverty.

Who was it, or who were the Panamanians who realized that the maritime trade was globalizing and needed a flag that was not constrained by the nationality of the owner and the crew, and that would allow the shipping company to maintain control of its boat to operate it efficiently and thus lower the cost of world trade? I do not know. But the reading of the Gazette in which Law 63 of 1917 appears published indicates that the Executive Power was made up of true leaders of our nationality. The president was Ramón M. Valdés; Eusebio A. Morales, Secretary of Government and Justice; Narciso Garay, Aurelio Guardia, Guillermo Andreve and Antonio Anguizola occupied, respectively, the Secretariats of Foreign Affairs, Finance and Treasury, Public Instruction and Development.

First flagging

The “Belén Quezada”, of 1,141 tons, the first merchant ship to wear our flag, was transferred from the Canadian registry to the Panamanian one, in Vancouver, Canada. Its owners were a group of Central American investors, among whom there was also a Panamanian: Enrique Clare. The flag is dated August 20, 1919. The Americans suspected that the ship had been flagged in Panama to be dedicated to smuggling liquor to the United States, at that time under Prohibition, but was never caught in that activity. His first load was of wood to Cuba. As a curious fact, the Costa Ricans confiscated it in Punta Arenas during the Coto war and were going to use it to transfer 500 Costa Rican soldiers to invade Panama, but the conflict was over. The Ticos stayed with the “Belén Quezada” as a prey of war and baptized it as the “Costa Rica”. It ended up as scrap in Guayaquil in 1925.

The utility of the nascent registry for the world merchant navy stands out with the flagging of several ships that had been taken during the First World War by the United States as war prisoners and were not wanted to compete with the American ships. Therefore, the United States put them on sale, with the condition that they be flagged in another register. The buyers decided to flag them in Panama, a record that was accepted by the US government that had to authorize the transfer of their ships to other flags. This approval gave necessary recognition to our registry that thus began to grow as an alternative for the shippers to maintain control of their ships and their crews.

The first Greek shipping company that used the Panamanian flag was Aristotle Onassis and he was motivated by a conflict with the consul of his country in Rotterdam derived from the nationality of a cook. Today the Greeks, along with the Japanese, are the largest users of our registry.

The system is perfected: Law 32 of 1927 on corporations and the territorial source as a tax criterion

The flag required a complement for the management of the property of the ship that, in addition, facilitated the obtaining of financing on the part of the shipowners. Although the Panamanian registry allows the owner, natural or legal person, to be of any nationality, in the world of commerce an entity was needed whose management was simple but which, in turn, offered legal security to the owners and creditors. To fill this gap, the creativity of the Panamanians devised Law 32 of 1927, known as the Law of Corporations. A legal instrument was sought that would allow, in an increasingly interrelated world, that citizens of different nationalities could do business with each other in different countries. As a model, Panamanians used the laws of the states of New York and Delaware, that they had been promulgated with the purpose of facilitating the business of residents of different states of the Union. Panama extended that concept to the world. The essential complement of this law was the tax system that our men created for Panama by limiting the income tax to the territorial source. Therefore, the users of our flag and our societies only had to deal with their personal taxes but not to pay taxes to Panama for their income from an external source. The territorial tax thus constitutes a fundamental element of the system.

Razón de ser de los registros abiertos

Ships are valuable assets that are in commerce. They are bought, sold, mortgaged, chartered. They require officers and crews responsible for their management and international certificates (known as Technical Certificates) to navigate and reach foreign ports. In addition, they need competent professionals for the procedures inherent to this trade and the support, protection and services of the State of their flag. The key to a successful Open registry is to be, above all, a facilitator for the activities that the shipowner must carry out, from the flagging, financing, labor regime, chartering, and obtaining the Technical Certificates, until the cancellation is achieved. of its registration, either by changing the flag or by scrapping or sinking, are carried out quickly and with legal certainty. A) Yes, In the Panamanian registry, the shipowner maintains control of his property, and the financier, usually a bank specializing in maritime loans, has the security that the Panamanian mortgage gives him. Apart from this, they have the support of Panamanian lawyers with a long tradition of competing offering good services and reasonable prices and who also have contacts with lawyers and banks abroad in the main maritime financial centres.

Another fundamental support of the shipping company is an efficient consular body that serves from offices located in the main ports of the planet. In a traditional or closed registry, the shipowner or the company that owns the ship are subject to a series of controls established by the country of the flag that makes the handling of the ship as a commercial instrument extremely cumbersome. The claim that shipowners seek open records to save taxes is not correct. Nothing further from the truth. Almost all developed countries subsidize their merchant marine but in exchange, they impose a cost to operate the ship efficiently, particularly with regard to the requirements for the crew, as well as establishing restrictive rules for their sale to other registries, which make the operation.

Panama, the first record in the world

From that first merchant, the “Belén Quezada”, today, 100 years later, our registry has grown to become one of monumental dimension. Panama’s leadership is absolute, with a tonnage almost twice that of Liberia and Marshall Island, its closest competitors, and almost four times that of the Bahamas, which ranks fourth.

The size of the records can be seen in relation to their contribution percentage to the budget of the International Maritime Organization (IMO). The ten largest contributors (in British Pounds) to 2015 were:

The registry has been dynamic and the sector that includes lawyers, the Directorate of Ships, and the Public Registry, are constantly evolving to adapt to changes in the sector and global transparency policies. We must also keep our guard against attacks by the United States, our biggest competitor, through the Liberian and Marshall Islands registries that are 100% powerful North American interests. To delve into this unfair competition you can find the information on the web pages of both registries.

Dramatic chapters in the history and evolution of the record

It is little known that in the early 70’s the registry was about to be eliminated. That is, Panama would cease to be an open registry. For reasons mainly of my personal relationship with General Omar Torrijos I received an anguished call from Panángel Kouruklis, (qepd) at that time Director of Secnaves. I had to see right away “because of a matter of life or death.” At that time Secnaves was on Avenida Justo Arosemena in a building where a branch of the City Bank operated. There he showed me a note from the Minister of Finance, Lic. Miguel A. Sanchiz, ordering him that on instructions from the Head of Government he should immediately take the steps to cancel the registration. “You have to help me save the record,” he told me, “and you should talk to General Torrijos immediately so he can revoke that order.” I promised to do it in the afternoon but to prepare a memo on the importance of registration, especially in the economic and that should be very brief.

The information that it provided indicated that the registry represented income to the State for about 11 million dollars. I prepared a memo and went to see General Omar Torrijos at the house on 50th Street, the place where he dispatched when he was in the city. I was with a small group watching the evening news on television. The news of the day was about the audience of Sylvano Ward, a serial killer of women. He read my memo above and said “If you were Sylvano’s lawyer, you would have more chance to win the case. This you have lost. ” In the small group was my friend and fellow of the Faculty of Law, Ricardo Rodríguez (qepd), who also read the memo and told Omar: “General, Eduardo is right. I know of the Merchant Navy because I worked in a firm that has this activity. You have taught us to take care of the “jar” (the budget) and to take away 11 million is not a small thing “. Torrijos did not even look at him and when he left, Omar caught up with me and said: “It’s as if I had stirred a beer zengo and the foam is coming out from all sides. All the consuls of Europe are arriving. Come tomorrow for us to have lunch alone and talk about it. ” During lunch he says: “I do not want to close the Registry but we have to reform it”.

Torrijos had just arrived from a visit to Europe and in the ports all the yachts, even the boats, had the Panamanian flag. Of course he had received complaints that Panama was being lent so that the rich would not pay property tax for the yachts. “The flag,” he tells me, “has become a rag and this is unacceptable.” The business of the consuls was to flag a yacht and transfer it to a Panamanian society and it was the main income of these officials, but there was practically nothing for the State. At that time, society still did not pay a single annual rate (it was established in 1977) and the yacht paid duties based on tonnage. Thus, a yacht could pay up to less than one dollar per right of flag. The business of the consuls was to flag a yacht and transfer it to a Panamanian society and it was the main income of these officials, but there was practically nothing for the State. At that time, society still did not pay a single annual rate (it was established in 1977) and the yacht paid duties based on tonnage.

Thus, a yacht could pay up to less than one dollar per right of flag. The business of the consuls was to flag a yacht and transfer it to a Panamanian society and it was the main income of these officials, but there was practically nothing for the State. At that time, society still did not pay a single annual rate (it was established in 1977) and the yacht paid duties based on tonnage. Thus, a yacht could pay up to less than one dollar per right of flag.

This began a process of reforms to make more profitable the flagging of yachts, but much more important, that reforms were made to the naval mortgage of the Panamanian registry to give total security to the banks that financed the construction and purchase of ships that their Credit was automatically backed up with the provisional registration of the mortgage. This step was fundamental and had much to do with the then consul of Panama in Hong Kong, Gary Martin, who, in the promotion of the flag among the important Hong Kong shipmen, realized that the ship’s flag was not set by the shipowner but by the finance bank. With the reforms and efficient service of Secnaves and Panamanian maritime lawyers, the banks acquired total security in the Panamanian registry.

The other great crisis

During the fight against the regime of Manuel Antonio Noriega, there were events that did enormous damage to the country and its economy, such as the closure of the banking system, a fact that profoundly affected our ship registry: the embargo by states United to the ships of our flag. They prohibited Panamanian flagged ships from berthing in their ports. Between this measure and the departure of Noriega from power, there was very little time and it was revoked immediately after the new government headed by Guillermo Endara was commissioned. We can not forget the rain of faxes from customers requesting the change of flag to other jurisdictions. An institution that was key to the globalization of the economy and to the development of the country as a maritime power was going to be destroyed in a few days.

Apademar and registry protection

The Panamanian Association of Maritime Law (APADEMAR) has been an effective barrier to face and not thrive the ambitions of public servants or influential people of different governments; so that they do not affect the Registry maneuvers to take advantage of the multiple services that Panama provides to the international maritime community. The cases in which they wanted to monopolize the line of certificates for officers, the provision of technical services, etc. are well known. Although many came to be effective, their duration was slowed by the protests of APADEMAR.

A Panamanian flag ship

The unfair competition

The great competitors of Panama are Liberia and the Marshall Islands. Both offer the Registry of Ships and Corporations and boast of being protected by the United States (both are concessions to powerful North American firms) and that are on the OECD white list. It must be recognized that the last governments have not given the system the protection it needs and they have not claimed that, like Panama, they are required to eliminate bearer shares, which, as we know, are a very valuable instrument in financing maritime banking.

An incursion to the website of both registers highlights that they have bearer shares; Companies from other jurisdictions may continue to recognize bearer shares and have no obligation to know the customer.

To finish this brief history of our registration on his 100th birthday, I am calling on APADEMAR to take the initiative so that the government faces this unfair competition to an institution that has given great benefits to our country; which is an example of private enterprise-national government cooperation; which produces front-line jobs in both sectors; that it gives us a consular service from the first world nation and that, since its creation in 1917, has produced revenues of several million to the State, all from abroad. More important are the sources of work and activities that place our small country as an important player in world trade. In this sense, the contribution of Panamanian lawyers has been extraordinary. We continue to develop maritime activity that is complemented by laws such as the Law of Regional Headquarters and the Maritime Court makes Panama an important factor in the global economy. Someday Panamanian society will recognize that great contribution of our profession to human development and the economy of our small but great country.



Source: La Prensa