International commercial arbitration between U.S. and Latin American parties operates under a treaty framework that many practitioners do not fully understand — and in some cases do not know exists. The Inter-American Convention on International Commercial Arbitration, known as the Panama Convention, is not an obscure instrument. It has been ratified by the United States and most major Latin American economies and governs a meaningful share of cross-border arbitration enforcement in U.S. courts. Yet it is routinely overlooked in favor of the more familiar New York Convention.
For counsel advising on cross-border contracts or handling enforcement proceedings involving LATAM parties, the Panama Convention is a threshold consideration — not an afterthought.
What the Panama Convention Is
The Inter-American Convention on International Commercial Arbitration was signed in Panama City in 1975 under the auspices of the Organization of American States. It entered into force in 1976 and has been ratified by 19 countries, including the United States and most major Latin American economies: Mexico, Brazil, Colombia, Venezuela, Chile, Ecuador, Peru, Argentina, and others.
The Panama Convention does for inter-American commercial arbitration what the New York Convention does globally: it creates a treaty framework for the recognition and enforcement of arbitral agreements and awards between signatory states. For attorneys handling disputes between U.S. and Latin American parties, understanding which treaty applies — and how the two differ — is a threshold question before drafting an arbitration clause or filing an enforcement petition.
When the Panama Convention Applies Instead of the New York Convention
Under U.S. law (specifically 9 U.S.C. § 305), the Panama Convention applies when: (1) a majority of the parties to the arbitration agreement are nationals of states that have ratified the Panama Convention; and (2) the agreement is not governed by the New York Convention. In practice, this means the Panama Convention takes precedence over the New York Convention for agreements between parties who are nationals of Panama Convention states when there is no other connecting factor that would bring in the New York Convention.
The practical import: for a commercial contract between a U.S. company and a Colombian company — both nationals of Panama Convention states — with an arbitration clause and no other jurisdictional factors, the Panama Convention governs enforcement of the arbitration agreement and the resulting award in the United States.
When both conventions could apply, U.S. courts apply the Panama Convention first for inter-American disputes. The New York Convention applies as a fallback.
Key Similarities to the New York Convention
The core obligation is the same: signatory states must recognize and enforce agreements to arbitrate and arbitral awards made in other signatory states. The grounds for refusing enforcement under the Panama Convention (Article 5) mirror the New York Convention grounds almost exactly: incapacity of a party, invalid arbitration agreement, lack of proper notice, decision outside the scope of the submission, irregularity in the composition of the tribunal or arbitral procedure, non-binding award, award contrary to public policy.
The Panama Convention also incorporates the IACAC Rules (the Inter-American Commercial Arbitration Commission Rules) as the default procedural rules when parties have not agreed on a different set of rules. This is a significant departure from the New York Convention, which is silent on procedural rules.
Key Differences from the New York Convention
The IACAC default is the most practically significant difference. If a Panama Convention arbitration agreement names no institution and specifies no procedural rules, the IACAC Rules apply by default. The New York Convention has no such provision — an ad hoc agreement under the New York Convention requires the parties to specify their own rules or face uncertainty. Practitioners drafting arbitration clauses for inter-American contracts should be aware of this default and address it expressly.
On the written agreement requirement, the Panama Convention requires a written arbitration agreement, as does the New York Convention. But the Panama Convention is more flexible about what constitutes a "written" agreement — U.S. courts have interpreted this broadly in cases involving inter-American contracts.
For enforcement procedure, the Panama Convention is implemented in Chapter 3 of the Federal Arbitration Act (9 U.S.C. §§ 301–307). The New York Convention is implemented in Chapter 2 (9 U.S.C. §§ 201–208). The procedural requirements for enforcement petitions are similar but counsel should confirm they are pleading the correct chapter. Misidentifying the applicable treaty — and therefore the wrong FAA chapter — creates procedural problems that require the court to sort out the correct framework, often after motion practice that delays enforcement.
Why This Matters for Practitioners
Misidentifying the applicable treaty is not merely a technical error. A petition to confirm an award brought under the New York Convention when the Panama Convention applies (or vice versa) requires the court to sort out the correct legal framework — often after the petitioner has already invested time and resources in filing under the wrong statute. While courts are generally willing to apply the correct treaty once identified, the confusion wastes time and can create threshold disputes that a better-prepared petitioner would have avoided.
More importantly, knowing that the Panama Convention applies — and understanding its IACAC default rules provision — affects how counsel drafts the arbitration clause in the first place. A clause that is silent on procedural rules will incorporate IACAC Rules if the Panama Convention governs. If the parties prefer ICC, ICDR, or another institution, they need to say so explicitly.
Finally, the Panama Convention's enforcement grounds are interpreted by U.S. courts in light of the same public policy exception that governs the New York Convention. U.S. courts have consistently held that the public policy exception to enforcement is narrow — and that enforcing a foreign arbitral award does not itself violate public policy simply because the award applies unfamiliar or substantively different law.
Practical Guidance for Cross-Border Contracts
For contracts between U.S. parties and Latin American counterparties, counsel should determine whether the Panama Convention applies before drafting the arbitration clause and before filing any enforcement action. The nationality of both parties and the potential connecting factors need to be assessed at the outset.
If the Panama Convention applies and the parties want institutional arbitration under a specific set of rules — ICC, ICDR, JAMS — the clause should name that institution explicitly. Otherwise the IACAC default may apply, which may or may not be what the parties intended.
Enforcement petitions for LATAM arbitral awards in U.S. courts should be evaluated under both conventions to confirm which one governs. The Southern District of Florida and other courts with substantial LATAM enforcement dockets have developed a body of case law on this question that is worth reviewing before filing.