Chapter III, Section Three

LAW No. 19
(of June 11, 1997)

Chapter III - Patrimony, Finances, and Oversight,

Section Three - Oversight, Exemptions, and Payments

Article 40. For the oversight and control of actions in the management of funds and its patrimony, the Authority shall have an internal auditing system assigned to the appropriate administrative office. The Board of Directors shall also hire the services of independent auditors. In any case, the Office of the Comptroller General of the Republic shall conduct a post-audit of such actions.

Article 41. After covering the costs for Canal operation, investment, modernization, and expansion, as well as the necessary reserves provided by the Law and the Regulations, any surplus shall be forwarded to the national treasury in the following fiscal period.

Article 42. The Authority shall have summary jurisdiction to collect or obtain settlement of its receivables.

In addition to the documents specified in the Judicial Code, any internal audit certifications regarding obligations of any nature due the Authority shall cause a right of execution.

Article 43. The Authority is exempt from the payment of any national or municipal levy, tax, duty, fee, rate, charge, or contribution, with the exception of Panama Social Security payments, educational insurance, workmen's compensation, fees for public services, and those provided in Article 39 of this Law.

Article 44. The funds of the Authority may be placed in short-term investment instruments, and may not be used to buy other types of financial investment instruments issued by Panamanian or foreign public or private entities, nor to grant loans to said entities or to the National Government.

Article 45. The National Government may not commit the gross revenues received by or through the Authority, or offer any property from its patrimony as collateral for loans or any financial transaction of the State or by any of its autonomous agencies.

Also, the National Government may not charge, on its own, any expense against future Canal revenues.

Article 46. Neither the National Government nor the Authority may pay any debt, liability, or financial obligation undertaken prior to December 31, 1999, except as backed by funds received for the liquidation of the Panama Canal Commission, or as may arise from express acknowledgments or commitments undertaken by the State by reason of the transfer of the Canal.

Article 47. Without prejudice to the provisions of this Law, the Authority may not make any payment or transfer of money to any individual or corporation, whether state or private, except for services hired by the Authority, for property it may acquire, or for an obligation it has lawfully contracted.

Article 48. The Authority may render services by contract to the State, Government and non-governmental entities, as well as to workers, provided that an adequate surety for payment or a deposit has been posted similar to those set forth in Article 78 of this Law, or that the requirements established in the Regulations are met.

Article 49. The Authority may dispose of any personal or real property incorporated into its patrimony that is not required for the operation of the Canal, in favor of the State, autonomous agencies, or private individuals or corporations, pursuant to the provisions of the Regulations.

Article 50. The Authority may obtain loans or assume any other type of credit obligations for the purpose of having funds available for emergency expenses or to make investments, with the prior authorization of the Cabinet Council, and pursuant to the decisions made to this regard by the Board of Directors.

Article 51. The maximum ordinary term for concession or lease contracts shall be twenty years. Nonetheless, such contracts may be granted up to a maximum period of forty years, when, in the judgment of the Board of Directors of the Authority, as set forth in a resolution explaining the reasons, they involve projects that, because of the amount of their investment, economic impact, or job generation potential, require a longer than usual period.

Section Four: Contracting for Work, Acquisition of Goods, and Rendering of Services