Data
- Date:
- 27-11-2023
- Country:
- Panama
- Number:
- Court:
- Supreme Court of Justice of Panama
- Parties:
Keywords
CONSTITUTIONAL JUDGMENT ON A STATE LAW APPROVING THE MINING CONCESSION CONTRACT BETWEEN THE STATE OF PANAMA AND A PANAMANIAN MINING COMPANY - USE OF TO THE UNIDROIT PRINCIPLESIN AS A PARAMETER TO EVALUATE THE PARTIES' BEHAVIOR IN THE CONCLUSION AND EXECUTION OF THE CONCESSION CONTRACT - REFERENCE TO ARTS. 1.7 AND 3.2.6 UNIDROIT PRINCIPLES
Abstract
The case concerns the issue of constitutional legitimacy of art. 1 of the Law No. 406 of October 20, 2023, "Approving the Mining Concession Contract between the State of Panama and Minera Panama, S.A." (hereinafter "Law No. 406"), which declares the approval of the concession contract in its entirety and transcribes the terms and conditions of the contract in full.
The Supreme Court of Justice unanimously ruled that Law No. 406 was unconstitutional.
The Court concurred, among other things, that the required procedures were not followed for granting the concession as there was no bidding process. Additionally, the agreement between the parties violated constitutional norms related to the environment and health, as the State could not ensure that the population lives in a healthy environment free from pollution.
Subsequently, the Supreme Court of Justice addressed the issues of the ethics of international investment and the risk of arbitration. In doing so, it maintains that States, in the exercise of their sovereignty, enter into international agreements with other States to promote secure investment, international good faith, and the general principles of international law.
In order to evaluate the actions and conduct of the parties, the Court referred to the UNIDROIT Principles of international commercial contracts, that codify the principle of good faith and fair dealing as a standard of conduct to which the parties must adhere throughout all stages of the contractual relationship.
Analyzing the conduct of Minera Panama, the Court pointed out that the company was already aware of the risk of a declaration of unconstitutionality when the mine's ownership was transferred through a sale to First Quantum Minerals LTD in 2011. Prior to that sale, there were already constitutional challenges against the concession contract regulated by the previous law of 1997.
Similarly, the Supreme Court drew attention to the mining company's insistence on announcing its intention to initiate multimillion-dollar arbitration claims against the Panamanian government in the event of a declaration of unconstitutionality and/or if the conditions of the contract were not renegotiated directly between the parties. For the Supreme Court, these intimidations, warnings and threats compromised the free expression of will. The Court expressly pointed out that, in the context of international arbitration, a "source of law that can be used is the UNIDROIT Principles" and referred to Articles 1.7 and 3.2.6, which address good faith in negotiation and contractual performance, as well as intimidation and threats as defects in will that render the contractual bond invalid.
The UNIDROIT Principles were therefore used as a parameter to evaluate the parties' behavior in the conclusion and execution of the concession contract.
(Abstract kindly provided by Christopher Glasscock)
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