JUDICIAL COSTS IN PANAMA

COSTS:

They are the expenses incurred by the parties involved in a process to guarantee an adequate defense of their rights.

The costs are described by article 1069 of the Judicial Code as the expenses incurred by the litigants in the course of the process, for the convenient and accurate defense of their rights, and include:

• The work invested by the litigant or his attorney in the aftermath of the process.
• The work in law either by the party or its representative, whether verbal or written.
• The expenses incurred in carrying out certain proceedings, such as expert fees and kidnappings, compensation to witnesses for the time they lose, and other similar expenses.
• The value of certificates and copies adduced as evidence.
  
  

Any other expense that in the judge’s opinion is necessary for the continuation of the process, but pecuniary condemnations made on a party by virtue of duress, or contempt, nor excess expenses that due to incompetence, negligence or bad will, will never be computed as costs. faith made by the parties, their attorneys or defenders.

The Panamanian author Jorge Fabrega in his work “Institutions of Civil Procedural Law”, provides a definition of the costs:

“The costs include the expenses incurred by the litigants in the course of the process, for the convenient and correct defense of their rights. Superfluous proceedings and actions and the amounts corresponding to the pecuniary condemnations that are imposed are excluded from the content of the costs do so under duress or contempt.

The concept of costs includes, therefore, the expenses incurred by a person to satisfy their claims and excludes, consequently, those expenses incurred outside the process, such as the payment of fees to a lawyer for advice prior to the procedural management, research expenses, etc.”

The concept of costs includes those expenses that are necessary for the defense of the rights of the litigants within the process; excluding those carried out outside of this, such as the payment of fees for advice prior to procedural management.

Regarding the expenses and disbursements necessary to carry out the process, which are assumed by the party that promoted or defended itself in the trial; cost orders are awarded in favor of the party and not the lawyer who represented it. The costs should not be considered as a way to increase the lawyer’s professional fees, since their objective is to repair the economic damage suffered by the party that was right in the trial.

However, if the party and his or her attorney agree that the costs awarded in the process will be allocated in whole or in part to the attorney’s professional fees, this stipulation is valid. If nothing has been agreed in this regard, the costs must be awarded to the party to whom they have been awarded.

It is essential that lawyers be cautious regarding this issue, as they could be sanctioned. In the event that nothing has been agreed regarding costs, the lawyer must reimburse them to his client.

Article 1075 of the Judicial Code states:

“Article 1075. If the plaintiff has requested more than what was owed to him, and the defendant has to incur expenses to defend himself from the payment of that excess, he will be sentenced to pay those costs, unless he has proceeded for a just reason of error, in the judge’s opinion. In this event compensation for costs is possible. In the Reconsideration Appeal, the appellant will always be ordered to pay costs when the respective resolution is upheld. If the parties terminate the process by agreement or transaction, the costs will be considered compensated, unless otherwise agreed.”

When the plaintiff asks for more than what is owed to him and the defendant has to make additional expenses to defend himself against that excess; the plaintiff may be ordered to pay costs.

Regarding the question, are the costs subject to interest for late payment? the First Superior Court of Panama, through a Ruling of June 8, 2021, within the ordinary process promoted by CEMENTO BAYANO, S.A. -VS- CRUSHER OF PANAMA, S.A.:

“In addition to the above, this College shares the arguments of the appellant Firm, in the sense that the collection of interest is not applicable to the order for costs, because the consequence of non-payment of the same for the process is that the losing party is not heard, as provided in article 1080 of the Judicial Code.

Now, in accordance with article 1079 of the Judicial Code, “The Secretary of the court of first instance will make the general settlement of all the costs that have been incurred in the course of the process except those that have become effective and those that are being charged in a separate notebook.  The judge will examine this settlement and approve it or rectify it if it is in error, but may not vary the appraisals approved by the superior, except in simple arithmetic errors…” Said settlement of costs provides executive merit and “can be charged for this process or joined to the obligation recognized in the decision, to make them effective under a single execution.”

What is established in said norm does not give room for the application of the legal interests provided for in article 993 of the Civil Code and that were established by the Judge of first instance, since the imposition of costs is not about the recognition of an obligation, but rather of a sanction to the losing party for not proving the facts that support its claim.

By virtue of the above, there is nothing left for this College to do other than revoke the contested resolution.”

The costs should not generate interest, since their imposition does not imply the recognition of an obligation, but rather a sanction to the losing party.

DIFFERENCES BETWEEN FEES AND COSTS:

The fees received by the lawyer for the services provided may be prior or after the process; while the costs are the necessary expenses that are generated during the process and that must be assumed by one of the parties, depending on the decisions made by the judge. That is, while the fees refer to the remuneration of the lawyer’s work, the costs are related to the expenses incurred by one of the parties to defend their rights during the process. 

The difference between fees and costs has been analyzed by the Supreme Court of Justice, through the Ruling of February 24, 2012 of the First Civil Chamber:

“The costs, as the Superior Court points out in the appealed ruling, are a consequence of a decision unfavorable to the losing party (Article 1071 of the Judicial Code) in favor of the person who has obtained the favorable decision, and undoubtedly belong to the person who has invested resources for the jurisdiction to act. This person is no other than the party involved in the process and not his legal representative, since the latter has a professional contract to represent the party and is not exactly the one who incurs the expenses referred to in article 1069 of the Judicial Code to ensure the recognition of the rights contained in the substantial law (Civil Cassation Appeal José Morris Quintero and Antonio Osorio Abrego vs. Industrial Union of Workers of the Chiriquí Land Company and Related Companies).”

A distinction is made between costs and attorney’s fees; costs being the expenses incurred by the party in the process to assert their rights before the judge, and therefore they are not the responsibility of the lawyer, who, in principle, does not incur expenses, since he must receive financial compensation for his professional services, which must be stipulated in a contract or fee letter.

By means of a ruling of August 5, 1994, the Plenary Session of the Supreme Court of Justice:

“Like what the losing party must pay in favor of the winning party for the useful expenses that the latter has incurred in the process.” “…That one thing is the fees set by the lawyer and another is the costs, although some try to encompass them. Since, in these, the taxation criterion obeys the useful and legal expenses incurred during the trial, in the former – the fees – the criterion responds to the simple management – judicial or extrajudicial – that the attorney-in-fact carries out. In the latter, above all, the will of the parties prevails, that is, an agreement between the client and the lawyer; in the other it is the Law or the Judge that sets them…”

(Plenary of the Supreme Court of Justice, Protection of Constitutional Guarantees against the order to do contained in Order PJ-6 of January 13, 1994, issued by the Conciliation and Decision Board No. 6 of the Ministry of Labor).

Regarding who the costs belong to, the author Hernán Fabio López, professor at the Externado University of Colombia, in his work “Institutions of Colombian Civil Procedural Law” establishes the following:

“Given that the costs, that is, the expenses plus legal agencies, are presumed to have been paid by the party, the obvious reason arises here why the costs awards are in favor of the party and not the attorney, an aspect with which must be taken with the utmost care since our lawyers usually estimate that these sums will increase their professional fees when this is not the case since the philosophy that guides the issue is that whoever goes to a lawsuit and proves that they were right, financially owes come out unscathed.”

Naturally, there is nothing contrary to the fact that if the party agrees with his lawyer that the legal agencies that the judge indicates as part of the costs will totally or partially increase his professional fees, or that the lawyer will pay the expenses and therefore will be compensated to him, said stipulation is entirely valid, but from here to maintaining that they always go to the lawyer, the difference is great so that legal professionals must be particularly cautious, delicate and prudent in relation to these issues and in all events. in which they have not agreed on the destination of the costs, return these to their principal in order to avoid possible disciplinary sanctions, including criminal sanctions for improper appropriation of said sums.”

In the absence of an agreement between the client and the lawyer, the costs correspond to the client, who incurred expenses to assert his legal action or defense.

LAWYER CLIENT RELATIONSHIP:

Contractually we must consider articles 1107, 1112 and 1113 of the Civil Code: 

Generally, attorneys’ professional fees are established by a written contract, or a fee proposal, with terms and conditions of contract. Through this contract, one of the parties undertakes to provide legal services and the other undertakes to remunerate said services through a previously agreed rate, called “fees”.

It is necessary that there be the consent of the parties, that is, that both agree with the
terms and conditions of the contract and accept them voluntarily.

Consent is manifested when one of the parties offers the services and the other accepts the offer, with its terms and conditions, including the cause that gives rise to it.

In relation to the professional practice of law in Panama, article 16 of Law No. 350 of December 21, 2022 “That regulates the practice of law in Panama”:

“Article 16. When there is no service contract between the client and the lawyer, it is understood that both are subject to the current fee rate.”

If an agreement is not reached and there is no contract, the application of the minimum rates of professional fees approved by the Supreme Court of Justice, through Agreement No. 609-A of June 4, 2021, could be considered.

In accordance with article 1705 paragraph 1 of the Civil Code, the obligations regarding the payment of fees, rights, expenses and disbursements made by the lawyer during a process expire within a period of two (2) years.