The protection of foreign investments is one of the pillars of trade relations between countries. In particular, US investment protection in Panama is regulated by both Law 12 of 1983, which is the Investment Protection treaty signed by Panama and the United States; and also, Law 53 of 2007, which is the one that contains the Trade Promotion Treaty (TPC) between both countries.
The concept of investment protection is contained in Article 10.3 of the TPC which states that a US company cannot be treated differently than a Panamanian company. When the lawyers of the Trump Organization claim that the Panamanian state is committing a denial of justice if it does not intervene in civil proceedings taking place in a national court, they are invoking one of the technical grounds of lack of protection of the investments. The denial of justice they invoke has two clearly identified elements according to international law:
1. Preventing access to a judge to defend the rights of the investor;
2. Or breaching the usual procedural rules that are applicable to the resolution of judicial disputes in that state.
When a state is notified of this type of claim, the conflict is usually referred to a diplomatic negotiation mechanism and subsequently to international arbitration. According to the TPC, the diplomatic negotiation would be given six months and the arbitration would be remitted to the International Center for Arbitration of Investment Disputes (ICSID) of the World Bank. An arbitration panel of the ICSID ruled in Lowen v. United States in 2011 that to invoke the grounds of denial of justice, the affected party must exhaust all domestic remedies. That has not been done in the case of the Trump group.
If President Juan Carlos Varela intervened in the civil process that involves two US companies fighting for the control of the Trump Hotel in Punta Pacifica, he would be violating the constitution and establishing a terrible precedent. The Trump organization has several judicial channels that it can use in Panama and the United States directly against its business adversary, without the need for Panamanian political intervention. The responsibility of the state in this matter only occurs when there is a final decision of the Supreme Court of Justice and according to the jurisprudence of International law, is shown bad faith or fraud by the Panamanian authorities. So a business headache should not become the cause of an international diplomatic crisis.