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ARTICLES

Competition Litigation

What types of conduct and causes of action can be relied upon as the basis of a competition damages claim?

Conducts and causes of action that can be legal grounds for a competition damages claim are found in the Consumer and Competition Protection Act of 2007 (Law 45 of 2007). Law 45 of 2007 states which conducts are prohibited competition practices that may cause damages. The statute distinguishes anticompetitive practices between monopolistic practices and economic concentration prohibitions. Monopoly practices include vertical and horizontal cartel formation, abuse of dominant position, price fixing, bid rigging, information exchange to interfere with free markets, tacit collusion, market territory division, and predatory pricing (Unlawful Monopoly Practices). Economic concentration prohibitions include mergers or acquisitions between companies or asset takeovers that may cause irrational restrictions and damages to free markets (Unlawful Economic Concentration).

What is required (e.g., procedural formalities and standard of pleading) to commence a competition damages claim?

Basic procedural rules of pleading apply to competition damages claims. Law 45 of 2007 refers to the Judicial Code in aspects not provided and specified in the statute. So, the Judicial Code requires identifying the court and parties, stating the facts of the case, cause of action, and legal grounds. A claimant may require a court to jointly declare the defendant is carrying out Unlawful Monopoly Practices and the damages caused by it. Thus, pleading on competition damages claim based on Monopolistic Practices grounds requires the claimant to explain which Unlawful Monopoly Practice the defendant is conducting and how the Unlawful Monopoly Practice causes damages to the claimant. Anyone considered to have suffered harms or losses caused by Monopolistic Practices may commence a competition damages claim as a constitutional right protected by Article 295 of the Panamanian Constitution.

Suppose the competition damages claim is based on Unlawful Economic Concentration grounds. In that case, the claimant does not need a regulator ruling (Consumer and Competition Protection Authority/ ACODECO) to commence jointly an Unlawful Economic Concentration claim and competition damages claim caused by it. However, if ACODECO rules that the economic concentration is lawful, claimants cannot commence either Unlawful Economic Concentration claims or competition damages claims.

Suppose a court already declares that there have been Unlawful Monopoly Practices or Unlawful Economic Concentrations. In that case, anyone considering to have suffered harm or loss caused by these practices may commence a competition damages claim.

What remedies are available to claimants in competition damages claims?

Claimants may receive financial compensation for the harms or losses caused by Unlawful Monopoly Practice or Economic Concentration. This compensation may be turned into ‚Äútreble damage.‚ÄĚ That is to say; successful competition damages claims may turn to a punitive damage remedy since it may be set up to three times the amount of damages awarded to the claimant in both Unlawful Monopoly Practice and Unlawful Economic Concentration cases.

If a court holds that there is an Unlawful Monopoly Practice, ACODECO must fine the guilty competitor up to 1,000,000.00 USD. If the claimant seeking damages compensation also reported the Unlawful Monopoly Practice to ACODECO, the claimant must receive 25% of ACODECO’s fine imposed on the guilty competitor.

In case of two proven Unlawful Monopoly Practices by the same competitor, the Department of Commerce and Industry must cancel the competitor’s commercial licenses.

Regarding Unlawful Economic Concentrations, ACODECO may act as an investigation and sanctioning body. In economic concentration matters, ACODECO works as a ‚Äúsoft-law-approval‚ÄĚ body of mergers or acquisitions between companies or asset takeovers and even as a party in the competition damage trial. These roles give ACODECO sufficient legal power, recognized in Law 45 of 2007, to issue protective orders to cease transactions or agreements and order dissolutions of joint ventures, partnerships agreements, and mergers. Courts may issue protective orders, as well, since they can decide the merits of a competition damage trial (determining whether there is an unlawful competition practice and defining the number of damages caused). As the antitrust trial finishes, courts may declare agreements or transactions void and dissolve joint ventures, partnerships, or mergers.

What is the measure of damages? To what extent joint and several liability recognized in competition damages claims? Are there any exceptions (leniency applicants)?

Law 45 of 2007 does not provide a specific measurement method to damages. Thus, Panamanian Civil Code‚Äôs damage rules apply. Claimants must argue and prove the amount of damages required in the claim. In 2014, the Civil Chamber of the Supreme Court, reviewing an Unlawful Monopoly Practice case, held that damages contained ‚Äúan amount of money equivalent to the usefulness or benefit that would have been generated by its effective fulfillment, that is to say, the one that the claimant would have but for the defendant¬īs harmful act had not been carried out‚ÄĚ (Servicio de Monitoreo y Control de la Inversi√≥n Publicitaria, S.A., Et Al¬† vs Insight Advertising, S.A., Et Al).

However, once the damage claim succeeds, the claimant may seek punitive damages. Law 45 of 2007 explicitly recognizes the ‚Äútreble damage‚ÄĚ standard in competition damages law. That is to say, three times the number of damages awarded to the claimant.

Despite no specific rule in Law 45 of 2007 related to whether joint and several liability applies to guilty defendants, Competition Courts declare joint and several liable to all guilty competitors who carried out either Unlawful Monopoly Practice or Unlawful Economic Concentration.

Neither Law 45 of 2007 nor caselaw provide benefits to leniency applicants.

What are the relevant limitation periods for competition damages claims? How can they be suspended or interrupted?

The statute of limitations for both Unlawful Monopoly Practice and Unlawful Economic Concentration claims and the damages claims caused by it is three (3) years since the unlawful conduct has been taken.

The statute of limitation is interrupted only with complaint filing and service. 

Which local courts and/or tribunals deal with competition damages claims?

Competition Protection Courts deal with competition damages claims. Law 45 of 2007 created seven courts, but up to date, only three out of seven courts are operating. The Third Court of Appeals of the First Judicial District deals with appellate matters on competition damages claims, and the Civil Chamber of the Supreme Court may review Unlawful Monopoly Practice or Unlawful Economic Concentration cases over 500,000.00 USD. 

How does the court determine whether it has jurisdiction over the competition damages claim?

Law 45 of 2007 textually provides that Consumer and Competition Protection Courts have jurisdiction over Unlawful Monopoly Practices claims, Unlawful Economic Concentration claims, thus, damages claims caused by it.

How does the court determine what law will apply to the competition damages claim? What is the applicable standard of proof?

Competition Protection Courts does not need to determine which law apply to competition damages claims, since Law 45 of 2007 directly and textually provides that Consumer and Competition Protection Courts have to apply Law 45 of 2007’s provisions to Unlawful Monopoly Practices claims and Unlawful Economic Concentration claims, and damages claims caused by it. Competition Courts may also apply Judicial, Civil and Commercial Codes’ provisions to procedural or substantive loopholes that may arise during the trial.

Consequently, to answer Question 2, Law 45 of 2007 requires claimant to argue and prove that the competitor has been undertaking anticompetitive practices since the claimant does not need ACODECO ruling. The question of whether there is an Unlawful Monopoly Practice or an Unlawful Economic Concentration is solved by Competition Protection Courts. Thus, the standard of proof for claimants in competition trials is considerable. In addition, the claimant would need to determine how the anticompetitive practice is causing damages. In an Unlawful Monopoly Practice case of 2014 (Servicio de Monitoreo y Control de la Inversión Publicitaria, S.A. vs Insight Advertising, S.A., Et Al), the Civil Chamber of the Supreme Court of Panama held that the claimant must set and present the evidence of the damage in the competition trial. 

To what extent are local courts bound by the infringement decisions of (domestic or foreign) authorities?

Local courts are not bounded by infringement decisions of local or foreign regulators and authorities since claimants do not need a regulator ruling to commence an Unlawful Monopoly Practice claim.

In economic concentration cases, however, Competition Courts will be bound to the extent that a ACODECO issues a favorable ruling to an economic concentration. Once ACODECO rules positively to an economic concentration, claimants are not able to commence an Unlawful Economic Concentration claim.

To what extent can a private damages action proceed while related public enforcement action is pending? Is there a procedure permitting enforcers to stay a private action while the public enforcement action is pending?

Private damages action does not need to proceed while the regulator or public enforcement action is pending. Under Panamanian Competition Law, a regulator ruling is not required to commence either an Unlawful Monopoly Practice claim or an Unlawful Economic Concentration claim. Private claimants may commence the competition trial without an ACODECO ruling. In fact, ACODECO may commence the competition trial acting equally as a private claimant. However, ACODECO’s claim would be restricted only to determine whether the competitor has conducted Unlawful Monopoly Practice or Unlawful Economic Concentration and would not be able to seek damages.

In economic concentration cases, however, competitors to be concentrated may ask ACODECO for an investigation and ruling about the transaction’s lawfulness. If ACODECO issues a favorable ruling, claimants cannot commence an Unlawful Economic Concentration claim.

What, if any, mechanisms are available to aggregate competition damages claims (e.g. class actions, assignment/claims vehicles, or consolidation)? What, if any, threshold critera have to be met?

Judicial Code provides joinder of claims possibility to any trial when claims against the defendant are similar when the claims to be joined are at the same trial stage. That is to say if claimants have the same Unlawful Monopoly Practice claim or Unlawful Economic Concentration claim against the same defendant arising from the same conduct. In competition damages cases, the joinder’s threshold to be met includes claimants to argue that claimants share the same competitor within the pertinent market or commercial niche, or that claimants are part of the same production chain. Since ACODECO may commence Unlawful Monopoly Practice claims or Unlawful Economic Concentration claims, ACODECO usually joins the competition trial as an individual claimant, in all competition cases. Competition Courts may sua sponte aggregate competition damages claims.

According to Law 45 of 2007, class actions are allowed only in Consumer Protection claims, which are different from competition cases. Class actions are not expressly allowed in competition cases under Law 45 of 2007. 

Are there any defences (e.g. pass on) which are unique to competition damages cases? Which party bears the burden of proof?

There are no specific or special defenses for competition damages cases textually recognized in Law 45 of 2007. Competition case law has focused on answering whether Unlawful Monopoly Practice or Unlawful Economic Concentration has occurred, rather than analyzing competition damages defenses that may arise during the trial. In competition damages trials, defendants tend to argue there is no Unlawful Monopoly Practice or Unlawful Economic Concentration under the ‚Äúrule of reason standard‚ÄĚ. Law 45 of 2007 makes no distinction among who has the burden of proof. The burden of proof depends on which party introduces the argument. For instance, the claimant must proof the damages caused by Unlawful Monopoly Practice or Unlawful Economic Concentration.

Is expert evidence permitted in competition litigation, and, if so, how is it used? Is the expert appointed by the Court or the parties and what duties do they owe?

Expert evidence is permitted in competition litigation. The Judicial Code’s rules apply to Expert witnesses and evidence. Expert evidence must be announced during the preliminary hearing. During the main hearing, expert witnesses and evidence are examined and cross-examined with the previously filed expert report. Parties usually appoint experts, but the Court may appoint experts as well. Experts must deliver an impartial and objective report and answer any point asked by the parties or the judge.

Describe the trial process. Who is the decision maker at trial? How is the evidence dealt with? Is it written or oral, and what are the rules on cross-examination?

Competition trials, either under Unlawful Monopoly Practice claim or Unlawful Economic Concentration claim, are mainly oral and start with the complaint. After the complaint service, the defendant has ten days to answer the complaint. Counterclaims are not allowed in competition trials. Once the ten days to answer the complaint have passed away, the court sets out a date for a preliminary hearing, which must take place within 60 days after the time to answer the complaint finishes. Complaint, answer, or petition amendments are allowed until the last day before the preliminary hearing.

During the preliminary hearing, the court and parties must set out the facts to be proved, cause of action, claims, and the amount of evidence. Then, the main hearing takes place and parties may examine and cross-examine witnesses and expert witnesses in a 45 days span. Courts may require sua sponte evidence during the trial. After the 45 days span finishes, both parties have 5 days to make oral or written closing arguments. After closing arguments, the judge takes 30 days to issue its final ruling considering all arguments, evidence, and defenses discussed during the trial. Judicial Code appellation rules apply to the appeal procedure. Which means that the appellate party has three days after the final ruling is serviced to announce an appeal, and then five days to file the appeal writ.

How long does it typically take from commencing proceedings to get to trial? Is there an appeal process? How many levels of appeal are possible?

Competition trial begins since Competition Courts admit the claim. In Unlawful Monopoly Practices cases, it usually takes around 2 months from pleading stage to get to the main hearing stage.

Law 45 of 2007 alongside the Judicial Code recognize an appeal process. In competition cases, only the final ruling and rulings on precautionary measures are reviewable. The appellate party has three days after the final ruling is serviced to announce an appeal, then five days to file the appeal writ.

There are two levels of appeal. First in the Third Court of Appeals of the First Judicial District. Second, the Civil Chamber of the Supreme Court may review competition cases over 500,000.00 USD.

Do leniency recipients receive any benefit in the damages litigation context?

Law 45 of 2007 does not expressly and textually recognize benefits to leniency applicants or recipients. However, if Competition Courts find that defendants acted without bad faith or without direct intent to cause damages, Competition Courts may reduce the ‚Äútreble damage‚ÄĚ standard referenced above, to two times the amount of damages awarded to claimants.

How does the court approach the assessment of loss in competition damages cases? Are ‚Äúumbrella effects‚ÄĚ recognized? Is any particular economic methodology favored by the court? How is interest calculated?

Law 45 of 2007 does not provide a clear methodology to calculate the assessment of loss. Despite some cases give some indication of how to calculate the assessment of loss, Civil Code’s damage rules apply. Damages include the financial loss and the foregone profit caused by the unlawful competitive conduct.  

No umbrella effects are recognized in Law 45 of 2007 or competition caselaw. Can a defendant seek contribution or indemnity from other defendants? On what basis is liability allocated between defendants?

Competition Courts use Civil Code basic rules of damages in competition litigation. Competition Courts have applied Section 1644 of Civil Code and have considered that guilty defendants are jointly and severally liable for damages caused to claimants. Law 45 of 2007 does not recognize contribution or indemnity between defendants, and there is no registered caselaw dealing with this issue. 

In what circumstances, if any, can a competition damages claim be disposed of (in whole or in part) without a full trial?

Judicial Code provides three mechanisms to dispose of claims without a full trial. First, parties in any trial may reach an out-of-court settlement subject to Competition Court approval. ACODECO is legally entitled to reach out-of-court settlements (alongside claimants) with defendants. Competition Court may approve the settlement if defendants compromise to adopt and accept measures to stop anticompetitive practices. Second, claimants may withdraw from the claim. Finally, defendants may accede to the claim, finishing the competition damages claim without a full trial. 

What, if any, mechanism is available for the collective settlement of competition damages claims? Can such settlements include parties outside of the jurisdiction?

An out-of-court settlement is available as a mechanism to reach agreements and collective settlement in competition damages claims. Out-of-court settlement may include foreign parties, but the agreement will only have an effect for parties involved in the competition damage case.

What procedures, if any, are available to protect confidential or proprietary information disclosed during the court process? What are the rules for disclosure of documents (including documents form the competition authority file or from other third parties)? Are there any exceptions (e.g. on grounds of privilege or confidentiality, or in respect of leniency or settlement materials)?

The right to privacy is a fundamental right under the Panamanian Constitution. Law 45 of 2007 protects confidential information in a competition context. ACODECO has a duty to protect any collected information, which can not be shared without authorization. However, Competition Courts may require confidential information to ACODECO in a competition damage trial context. During examination and cross-examination, Competition Courts may, sua sponte, dismiss questions that contain intent to disclose confidential information. Competition Courts have the discretion to determine limitations on information exchange during the trial.

Can litigation costs (e.g. legal, expert and court fees) be recovered from the other party? If so, how costs are calculated, and there any circumstances in which costs recovery can be limited?

Guilty defendant must pay legal costs as part of the competition damage conviction. Judges  have to consider the amount of work litigant lawyers carried out, experts’ costs, all miscellaneous costs produced during the trial. Litigation costs’ recovery is not subject to be limited. Law 45 of 2007 recognizes it as part of the competition damage conviction.

Are third parties permitted to fund competition litigation? If so, are there any restrictions on this and can third party funders be made liable for the other party¬īs costs? Are lawyers permitted to act on a contingency or conditional fee basis?

Law 45 of 2007 does not provide express and textual rules about funding competition litigation. However, commercial practice in Panama permits it as a private transaction. Third party funders may cover litigation expenses, and liability would depend on the agreement reached between third party funders and parties at trial.

As a default rule, Panamanian law permits lawyers to act in a contingency or conditional fee basis.

What, in your opinion, are the main obstacles to litigating competition damages claim?

Panamanian competition litigation faces several obstacles, considering that Unlawful Monopoly Practice claims and Unlawful Economic Concentration claims are not usual claims that Panamanian courts deal with. We may sum up the challenges of competition damages litigation in two main obstacles.

First, the trial length and argumentative quality of litigants and courts. Despite the specialization level of ACODECO on competition matters, Competition Courts still need to develop top notch skills when dealing with competition damages litigation. For instance, competition damage litigation centers on asking whether an Unlawful Monopoly Practice or Unlawful Economic Concentration takes place rather than bringing particular competition litigation defenses up to the trial. The trial length may take around five years from pleading to a first instance decision and up to 8 years for a final appeal decision.

Second, when both ACODECO and Competition Courts face high-profile competition damages cases involving close competitors or even the Government as a party, they are reluctant to assess the case’s merits, denying access to justice.

What, in your opinion, are likely to be the most significant developments affecting competition litigation in the next five years?

When facing possible Unlawful Economic Concentrations, competitors have developed diligent practices to collaborate with ACODECO to get favorable rulings. In 2022, two significant companies’ mergers undertook the favorable ruling procedure in ACODECO. Once the number of companies getting favorable rulings with ACODECO, the level of Unlawful Economic Concentration claims litigation may decrease. This does not mean that Unlawful Monopoly Practice claims will be restricted since a lawful economic concentration might as well carry Unlawful Monopoly Practice out.

Regarding litigation rules, the Panamanian legal system is reforming civil and general litigation rules by enacting a new Civil Procedure Code that will replace the Judicial Code., The new Civil Procedure Code was approved in the National Assembly and had recent presidential approval, becoming Law 935 of 2023. New Civil Procedure Code is expected to go into effect in October 2025. The new Civil Procedure Code will introduce digital filling, reduce time length in litigation, and automatize court behavior in private law trials.

Authors

Jorge Molina CIArb

Senior Partner

Andres Beck

Attorney

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