Chapter II, Section One

LAW No. 19
(of June 11, 1997)

Chapter II - Administrative Organization,

Section One - Board of Directors

Article 13. The Board of Directors is composed of 11 directors, whose appointment shall be made as follows:

  1. A Director designated by the President of the Republic, who shall chair the Board of Directors and shall have the rank of Minister of State for Canal Affairs.
  2. A Director designated by the Legislative Branch, who may be freely appointed or removed thereby.
  3. Nine Directors appointed by the President of the Republic with the consent of the Cabinet Council and ratification by an absolute majority of the members of the Legislative Assembly.

The Directors shall serve in their posts for a term of 9 years, and may only be removed for the reasons set forth in Article 20 of this Law.

Provisional paragraph: For the initial designation, the President of the Republic shall appoint three Directors for a period of three years each, three others for six years each, and the remaining three for nine years each. Upon expiration of the initial periods, every Director's appointment shall be made for a period of 9 years.

Article 14. Directors must meet the following requirements:

  1. Be a Panamanian citizen of acknowledged integrity.
  2. Must not have been convicted by the Judicial Branch for any criminal offenses or offenses against the Public Administration.
  3. Must not be related, at the time of appointment, to any of the Directors, up to within the fourth degree of consanguinity or second of affinity.
  4. Hold a university degree or possess equivalent training.

Article 15. The Directors, as such, may not receive remuneration or representational expenses, but they may receive a per diem for their attendance to the meetings of the Board of Directors.

Article 16. Without prejudice to any other limitations established in the Law or in the Regulations, the members of the Board of Directors may not, on their own behalf nor through a third party, enter into any contract with the Authority or with organizations or firms connected thereto, nor undertake business dealings with the Authority during their term as members of the Board of Directors, nor for the two years following the expiration of their term. Directors may be candidates to elected office only if they resign from their posts at least six months prior to the election date.

Article 17. The decisions and resolutions of the Board of Directors shall be adopted by the favorable vote of the absolute majority of its members, except when this Law or the Regulations require a different majority.

Article 18. In addition to the authority assigned by the National Constitution, the Board of Directors shall exercise the following functions:

  1. Appoint and remove the Administrator, the Deputy Administrator, and the Inspector General, and establish their salaries and other payments. The Board of Directors may not designate any of its members to these posts while they are acting in the capacity of Director.
  2. Determine, upon previous consultation with the Administrator, the vessel admeasurement system to be used by the Canal.
  3. Set the tolls, rates, and fees for use of the Canal and related services, subject to final approval of the Cabinet Council.
  4. Adopt the annual budget proposal of the Authority, as well as any supplemental or special proposals, in accordance with the projects the Administrator may prepare to that effect, and submit them to the Cabinet Council for consideration; the Cabinet Council, in turn, will submit them for consideration of the Legislative Branch for review, approval, or rejection, pursuant to the National Constitution and this Law.
  5. Approve, pursuant to the authority granted by the pertinent general provisions established in this Law, the necessary or appropriate regulations for the proper operation, and modernization of the Canal, including the following:
a. Regulations that shall govern labor relations and establish, among other matters, criteria and procedures for selection and promotion and the wage scale and monetary benefits for officials, workers in positions of trust, and workers. These regulations shall contain, as a minimum, a Merit System; a Position Classification System; rules of ethics and conduct; occupational health and safety standards; training and development of human resources standards; disciplinary sanctions, measures, and procedures; grievance, claim, and arbitration procedures; and the rules that may guarantee the effective exercise of the right to unionize and bargain collectively.

b. Regulations to implement the provisions of Article 6 of this Law.

c. Regulations applicable to contract work, supply acquisition, and the rendering of services necessary or suitable for the proper functioning and modernization of the Canal, and the limits, conditions, and restrictions that shall govern therein.

d. Regulations on the criteria and procedures applicable to contracting special services the Authority may render or receive and to granting concessions.

e. Regulations applicable to the admeasurement and inspection of vessels, Canal navigation, marine traffic control, vessel pilotage, the procedures for investigation of accidents, the formulation and recognition of claims arising from accidents in the Canal, and other matters relative to Canal navigation.

f. Regulations on the criteria and procedures applicable to financial planning, accounting, and treasury standards; audits of Canal finances; and the budget preparation and execution process.

g. Regulations applicable to the criteria and procedures relative to the rendering of services and the disposition of movable property of the Authority to the National Government, autonomous entities, municipalities, non-government organizations, private enterprises, and civic organizations.

h. Regulations that apply to the lease, sale, or other transfer or concession for the use of the real or movable property of the Authority granted to third parties when this property is no longer used or becomes obsolete or otherwise ceases to be necessary or suitable for the adequate management, operation, conservation, maintenance, or modernization of the Canal.

i. Regulations for the application of laws for ecological preservation in a manner that may not affect the adequate operation of the Canal.

j. Regulations concerning surveillance and security of the Canal.

k. Regulations to set tolls, rates, and fees charged by the Authority and its concessionaires for the transit of vessels through the Canal, and the rendering of related services.

l. Regulations to organize and establish the responsibilities for the administration of the Canal, the organization of functions and duties of the various bureaus and departments of the Authority.

m. Regulations on sanitation, health, and safety related to the transit of vessels and the areas reserved for the operation of the Canal.

n. Regulations on the criteria and procedures applicable to the management of information and records to allow for proper and adequate recording and to duly document the policies and transactions of the Authority.

ñ. Regulations for the use of the area of compatibility with Canal operations.

  1. Propose the boundaries of the Canal watershed, and the reviews to be made to said boundaries, for approval by the Cabinet Council and the Legislative Branch.
  2. Authorize, upon duly reasoned and supported proposal by the Administrator, the acquisition of loans and other credit obligations upon approval by the Cabinet Council and within the terms provided by this Law.
  3. Adopt the policies, programs, and projects of the Authority aimed at integrating the operation of the Canal to the national maritime strategy adopted by the Executive Branch, and, to that effect, authorize the coordination with the National Government and the State agencies in charge of the development preparation and implementation of such strategy.
  4. Adopt policies for engaging in any commercial or industrial activities or services that complement the operation of the Canal, either directly by the Authority or through concessions to third parties.
  5. Adopt administrative, scientific, and technological policies that will promote and ensure the competitiveness and profitability of the Canal and the development of its human resources.
  6. Approve indemnity payments to third parties for damages, to the extent that the amount of the respective indemnity exceeds the limits the Administrator is authorized to grant, pursuant to the Regulation.
  7. Supervise the Administrator's performance.
  8. Ratify the appointments of bureau chiefs made by the Administrator.
  9. Approve the requirements for Authority funds to be deposited in private or official banks.
  10. Appoint committees of three or more of its members and delegate functions to them, provided they are not those established in items 1, 2, 3, 4, 5, 6, 7, and 11 of this Article.
  11. Issue its internal regulations.
  12. Exercise other functions and duties as assigned by the Law and the Regulations.

Article 19. Because of the international public service provided by the Canal, the Authority will have an Advisory Board on which Panamanian and foreign citizens may serve. The Board of Directors will designate the individuals who will make up this Advisory Board, taking into account their past experience and areas of expertise.

Article 20. The members of the Board of Directors may be suspended, and, as the case may be, removed from their posts for any criminal offense or offense against the Public Administration.

The suspension or removal of the Directors shall be applied without prejudice to any appropriate criminal punishment.

Directors also may be suspended or removed because of proven physical, mental or administrative incompetence, by decision of the President of the Republic, with the consent of the Cabinet Council and the Legislative Assembly.

Article 21. The Chairman of the Board of Directors shall exercise the following functions:

  1. Chair the meetings of the Board of Directors. During the temporary or occasional absences of the Chairman, the Director selected by the Board for such purpose shall perform his duties.
  2. Attend the meetings of the Cabinet Council, having the right to voice and vote, and provide reports, suggestions, and explanations regarding projects and activities of the Authority.
  3. Propose and defend, together with the Administrator, all actions pertaining to the Authority that may require authorization or approval by the Executive Branch, and endorse them.
  4. Submit and justify to the Cabinet Council the draft of the annual budget of the Authority, and its supplementary credits, and justify them to the Legislative Assembly. In this instance, he shall be accompanied by the Administrator, who shall have a right to be heard.
  5. Submit and justify to the Cabinet Council the revision of tolls, fees, and rates charged by the Authority and its concessionaires for the rendering of services. In these instances he shall be accompanied by the Administrator, who shall have a right to be heard.
  6. Keep the Board of Directors and the Administrator informed of the policies, programs, and projects of the National Government that may affect the operation and modernization of the Canal.
  7. Submit annual reports of the operations and finances of the Authority to the President of the Republic, the Legislative Assembly, and the Office of the Comptroller General.
  8. Perform other duties set forth in this Law and the Regulations.


Section Two: The Administrator and Deputy Administrator