my first trip to paris - Legal Advisor Panamá

It is inevitable that when talking aboutParis one may first think of a plannedpleasure trip in first class. Most times,people visit this city to go to museums,take photos on the Eiffel Tower, drink aglass of bourgogne in a chic place atPigalle, listening to Mireille Mathieusinging C'est si bon in the background; tohave your pencil portraits in Montmartreand -in the case of the young Chinesebourgeoisie- to the eternal weddingphoto sessions in a red wedding dress.

That is the usual stuff to look forward.However, my first trip to Paris on theweek of April 25th, 2016, was notanything like that. It was a really"different trip" (Reséndez dixit), becauseI had to go in a hurry, stuck on board ofa KLM airplane, in economy class, withmy knees pressed against the chair infront, accompanied by a collaborator,during a 10-hour flight to Schiphol,where I made a stopover, as the GeneralDirector of Revenue of Panama (DGI), toattend a technical meeting with theFrench Tax Administration (DGFIP),which had just put Panama back on thelist of “Tax havens”, after the “PanamaPapers”.

When the “Panama Papers” werepublished on April 16, 2016, Panama

MY FIRST TRIP TO PARISA TESTIMONY ON THE “PANAMA PAPERS”

N O V E M B E R 5 T H , 2 0 2 1 | I S S U E N ° 3 2

by Publio Cortés

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they paid to its suppliers and relatedcompanies abroad from Panama.Legend has said that, the timing wasjust perfect, when the PanamanianGovernment, had awarded theconstruction of Line One of the PanamaMetro, to a consortium that includedFrench trains back in 2010. I am notaware that this was the main objectiveof the DTC, therefore, I hereby deny it.

I held tenure of office in October 2014.From that date until April 2016, whenthe “Panama Papers” came out, the rolethat had been assigned to me within thedesign of the country's foreign tax policy

was not on the French “tax havens” list.It had been before. However, in 2011 anAgreement to Avoid Double Taxation(DTC) had been signed and was alreadyin force between Panama and France,which allowed the exchange of taxinformation for all taxes. Based on theDTC, France had removed Panama fromthe list.

Some misconceptions believe that it wasa quid pro quo because France obtainedfor its companies that earned incomewithin Panama, the right to substantiallyreduce Panama's withholding tax ondividends, royalties, and interest, which

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had been very low-key. Strange, sincethe Tax Administration is the executingfocus of most of these policies and on apersonal level perhaps, I could havecontributed to the discussion, because Iknew something on the matter. At thattime, the Ministry of Economy andFinance did not have a specializedsection on international tax policyeither, so the important role of the DGIseemed logical.

Now, after the “Panama Papers”, I wasincreasingly more admitted to the clubof those who contributed with ideas. Iparticipated in a team that, despite theresistance of the usual recalcitrant, wasable to advance Panama's taxtransparency agenda a lot andcontinued to do so when I returned tomy private practice in April 2018.

Anyhow, that was later. Before the“Panama Papers”, the issue was handledalmost officially and exclusively withinthe Ministry of Foreign Affairs where thestaff close to the Minister, always had

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very close ties with highly respectedPanama law firms dedicated, amongother things, to large-scale offshorecorporate business, as also did otherCabinet Ministers, including the Ministerof Economy and Finance, the Minister ofthe Presidency and the CounselorMinister. I refer in the latter case, to thenow world-famous Ramón FonsecaMora.

In that period prior to the “PanamaPapers”, the execution of the pendingexchanges of tax information hadencountered difficulties in the DGI, dueto the accumulation of unattended filesthat we had inherited and those thatcontinued to arrive. Only a very seriousofficial handled the issue and hecontinued to do so, and he also had toaccompany me on my first trip to Paris.

In fact, in the first 4 or 5 months of myadministration, I was not able to domuch either because I did not have theright to sign anything as the competentauthority for exchange of information,

because of inexplicable bureaucraticdelays, had delayed the completion ofthe administrative delegation that theMinister of Economy and Finance had togrant for me to be able to act. Therewere some comments going aroundimplying that, such appointment wasnever going to be made, because theywere considering bringing out thematter of the DGI and moving itelsewhere. I could never fact-check ifthat was an option.

When I was finally granted the right tosign, reality showed us that having asingle official to attend to this issue, nomatter how capable and diligent he was,was not enough. I asked forreinforcements, but no additionalpersonnel were appointed until monthsafter the “Panama Papers”, when westarted creating a department and theoutlook improved.

On the other hand, many of theresponses to requests for informationmade to Lawyers, related to requestsfrom other States, came with evasiveand sometimes even offensive phrases,in which they simply repeated the thesisthat the Resident Agents did not have toknow the information that wasrequested from corporations andprivate interest foundations and thatthere was no law that required them tohave that information available.

Moreover, speaking of the lack of a law,Director of Revenue did not havedissuasive powers to sanction privatesources of information that did notprovide the information required to

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respond the requirements of otherStates.

In summary: Panama's responses werelate and many of those sent on time didnot contain useful information, whichlowered Panama's rating in the OECD's“Global Forum for Transparency andExchange of Information for TaxPurposes”, because all countries werealso assessed, on the level ofsatisfaction of their exchange partnersregarding the quality and timeliness ofthe information shared.

By the way, at the level of relations withthe aforementioned Global Forum, ofwhich both Panama and France areparticipants, and which is based in Paris,the atmosphere was tense regardingPanama, because I was informed that ina technical meeting in 2015 the team ofthe Ministry of Foreign Affairs haddistributed a letter from a law firm inthe United States, representing thePanamanian State, where the legitimacyof the forum was questioned. This wastaken as an insult, especially comingfrom Panama, a founding country of thisforum in 2010. Today it has 163member countries.

This was the panorama when the"Panama Papers" exploded and I wasuncomfortably flying asleep on the KLMplane, headed to Paris.

When I stopped at Schiphol, I passed bya newsstand. I clearly remember thecover of LE MONDE which I more or lessunderstood referencing to the fact thatin the “Panama Papers” there was

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something dark about the managementof funds from the Palestine LiberationOrganization (PLO) in previous years.The cover of PARIS MATCH, as well asthat of most of the newspapers inEurope, also had other news about“Panama Papers”. I breathed deeply andsaid to myself: "May God be with us onthis one. This is far greater than what theyimagine in Panama."

We arrived in Paris on a Wednesdayafternoon. We stayed in a small,comfortable hotel in the Opera area, onRue Volney, II District, on the right bankof the Seine. My room was very small,the elevator was a "one person" artifact. I agreed with my DGI colleague that wewould meet in the lobby in an hour togo for a walk. He had been to Parisbefore and I wanted him to, at leastshow me where the Louvre Museumwas. As I recall, the plan was to have themeeting with the French on Thursdayand travel back to Panama on Saturday.

Upon the agreed time, we met. We leftour secondary street and arrived at theBoulevard des Capucines, without a mapand without Google maps. We took to

our left and went down the sidewalk,walking, stretching our legs. A bit laterthe same street changed its name andbecame Boulevard de la Madeleine. Wecontinued to the corner where youcould see the Madelaine Church, which,more than a Spanish style church orcathedral, it resembles a pagan Greektemple.

At that corner we turned left, and I sawfor the first time a LADURÉE shop andthe very French sweets called macarons. Because of its pronunciation in French,it sounds like “macarrón”. Although thename is similar, they have nothing to dowith the very thick spaghetti that we eatin the “fondas” of Chitré.

We continued down Rue Royale, on the

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sidewalk in front I saw the MAXIM'S. Wequickly reached the Place de la Concorde,which I was excited about, becausethere is nothing more French thanseeing the place where the guillotinetore so many heads. We crossed thestreet, continued in the direction of theChamps Elysees and I saw the Arc deTriomphe in the background for the firsttime.

At that moment I got impatient andasked my colleague: "In which directionis the Louvre Museum?" He hesitated abit. Then he pointed me to the left sideof the Champs Elysees, a building thatlooked huge from where we werestanding and seemed to have a glassand steel vault. I was very satisfied. Wereturn to the hotel by the same route,now in reverse. We had to sleep earlyto get up to review the matters to bediscussed and then attend the meetingwith the French the next day.

At night, before going to sleep, I readonline everything I could, translated intoEnglish or Spanish, from the Frenchnewspapers of recent weeks, tounderstand the environment a bit and itbecame clear to me that in a certainsector of French public opinion therewas annoyance with the Frenchgovernment, because at the time thenews of the “Panama Papers” broke out,Panama was not on the list of taxhavens in France. Why had they taken itout? In exchange for what? Theywondered. Thus, I concluded that theinclusion of Panama back on the list hadbeen a largely political matter for theGovernment of François Hollande, in

whose administration the treaty withPanama had not been signed, but thestatus quo had been maintained.

The next day at 7 in the morning we hadbreakfast. At 8:30 a.m. we once againreviewed the information tables that wehad prepared in Panama with the statusand details of the informationrequirements of France. Later, a driverfrom the Panamanian Embassy pickedus up and headed towards Bercy, thesector where the Ministry of Finance islocated.

They received us on time, in modern,practical offices, with obvious securitymeasures and not very ostentatious.The meeting was conducted in Englishand was purely technical on the specifictopics. The first thing we checked wasthe number of requirements becausethe French claimed to have more thanwe had. The element that the Frenchwere sending the requirements byregular mail immediately jumped out,which in Panama was a risk.

We asked them why they didn’t send itby “Courier” like the other countries.They told us they did that, but theycouldn't show the tracking guides. Itturns out that we were talking aboutpears and apples, because in French“Courier” is “Correo” (regular mail) whilefor us the “Courier” were the well-knownprivate courier companies, which itseems that it was not so obvious forthem. We agreed that those that hadbeen lost would be resent.

In that same section we informed them,

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and we proved that many of therequests that they had marked asunanswered, had already beenresponded and delivered to the FrenchEmbassy in Panama, to play it safe,since an official from the Embassyaccepted such cooperation. They had noidea. It was evident that at this pointthere was little communication betweenthe Ministry of Finance and the Ministryof Europe and Foreign Affairs of France.We agreed that they would rescue theresponses.

We then move on to the substantiveissues. The first one was about how farthe retroactivity of the treaty went. Weargued that the treaty allowed them torequest information on fiscal year 2012and beyond. On the French side therewas an interpretation that sought to gofurther back. There was no agreement.I suspected then and still do today, thatthey were seeking to address thepressure of French public opinion tocollect older information, because the“Panama Papers” referred to manycases prior to 2012.

We then moved on to the level ofresponsibility of the Resident Agents inconservation and the duty to shareinformation about the companies andfoundations of private interest.According to the French, the role of theResident Agents should imply a greaterdegree of information management onthe activities of the corporations andfoundations that they incorporated orwhich they served.

They related the issue to the classicAgency Contract of Mercantile Law, the

purpose of which is to promote orconclude contracts in the name and onbehalf of the represented businessmanfor a period, with which they concludedthat the Resident Agent should knowand handle information about thecompanies and foundations of privateinterest that they constitute orrepresent. For the French, this obligationwent to the extreme that the ResidentAgents “should” have the IBAN numbersof each bank account that companiesand foundations incorporated inPanama had anywhere in the world.

In response, as a good Panamanianlawyer, I widely defended the usualcatechism: that in Panama the ResidentAgents did not have those levels ofobligation on the companies theyincorporated, that the financial andbusiness performance was typical of thecorporation, that there was no legalsupport to demand these levels ofinformation management on so manythousands of private interest companiesand foundations, etc. We were not ableto reach an agreement on that mattereither.

I must confess that from that conceptualconfrontation with the French I began toprivately doubt, if the usual thesis on theResident Agents, was solid.

Sometime later, when I had already readSAPIENS by Yuval Noah Harari, Iconcluded that this legal approach,endorsed several times by our SupremeCourt of Justice, is probably an"imagined reality" that PanamanianLawyers have given ourselves since1927, which we have kept very much

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alive within the controlled environmentof our semi-feudal country. We havecome to convince ourselves of that"imagined reality" because it supports amultimillion-dollar business that, untilnow, has had very few responsibilitiesand pays very little taxes, whenever itdoes pay.

The weakness of our position as acountry vis-à-vis the internationalcommunity is precisely concentrated inthe fact that no one, outside of Panama,already believes this "imagined reality"of the supposed total disengagement ofthe Resident Agent with respect to thecorporate vehicles that it incorporatesor/and provides them with services. Nordoes this fiction maintain much prestigewithin Panama today.

As Harari explains, all those imaginedrealities, such as religion, ideologies, ormoney, last and are useful, if mosthuman beings believe them. And allseems to indicate that, within the HomoSapiens species, there is only a very fewminorities of specimens in the worldthat still believe in the “Religion of theResident Agent”, within which there is asector of Panamanian Lawyers.

The meeting with the French was longand exhausting. We also reviewedspecific cases related to confidentialinformation. The worst part was when asenior official from the Ministry ofFinance arrived, disrupting the cordialitythat had prevailed and speaking to mein a much strong tone of voice. I repliedin the same tone and told him that I didnot understand his lack of diplomacy,aside from the polite demeanor of his

team. His participation was fleeting. Heleft. We continued talking a little moreand then it was over.

Both my collaborator and I took notes.We went to the Embassy of Panamalocated on the second floor of atraditional residential building on a notvery busy street, I can’t remember inwhich area. We commented a bit aboutwhat happened to Ambassador Pilar deAlemán, a top-class lady who always didwhat was in her power to improve therelationship with France, within thescope of respect.

We went to an office and sent a longand detailed report by email on all thepoints of the meeting, addressed to theMinister of Economy and Finance, theMinister of Foreign Affairs, and the teamat the Embassy of Panama in Paris. Weonly omitted the confidentialinformation of the Tax Administrations.

We arrived very late at our hotel on RueVolney. Shortly before 10 o'clock at nightwe went out to dinner, drained, andtired, and we only found one restaurantopen on the Boulevard des Capucines.We walked in and it was empty. Manywaiters and no diners, except for ourtable.

While we were being served, I

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commented to my distinguished co-worker that I could understand theFrench had their motives. However,these reasons had in any case existedlong before the “Panama Papers” and,despite this, they had not put us on thelist prior to the publication. I had nodoubt that his motives were now alsoan excuse to support a case to keep uson the list.

During the meal, my candid companioncommented that he was struck by thefact that the background song was inSpanish, and he told the waiter and thewaiter asked in English where we werefrom. He went ahead and told him fromPanama. Just by mentioning the nameof the country created a buzz on thesite. All the waiters began to murmurand look at us, with mocking smiles, Ionly remember that they repeated theexpression in French: “Évasion fiscale”.When we finished eating and headedout the door, they made us kind of a"street of dishonor" and kept onwhispering. It was a very unpleasantmoment.

Before going to sleep, I received anemail that changed my plans: I had tostay to accompany the Minister of theEconomy, the following Monday, to themeeting that was scheduled with theFrench Minister of Finance Michel Sapin. The Minister of Panama was arriving. Iknew of that meeting, but initially it wasnot established that my presence wasrequired. At the MEF in Panama theywere in charge of adjusting my planeticket.

The next day I gave my colleague the

day off. I had breakfast with theAmbassador and the Minister anddiscussed some initial ideas about whatcould take place on Monday. Althoughthe underlying issue was left for aprevious work meeting that would takeplace on Monday morning at theEmbassy, in which Dr. Ricardo AlbertoArias, former Ambassador of Panama tothe United Nations also had toparticipate, who would join thedelegation, I understand that at therequest of the Minister of ForeignAffairs. I rested during what remainedof that morning. At the afternoon Iwalked a couple of streets around theOpera de Garnier, looked for areasonable place, and had dinner.

On Saturday I said goodbye to the DGIofficial. The rest of the unforeseenweekend in Paris, I walked, walked, andwalked. At one point I asked someonepassing by, where the Louvre Museumwas located, and he pointed to abuilding a bit far away in a totallyopposite direction from the one mytraveling companion had pointed out tome the previous Wednesday.

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At the hotel on Sunday night, I textedmy distinguished colleague and askedhim about his arrival to Panama. He toldme that everything had gone well. ThenI said, “Were you yanking my chain aboutthe Louvre? Because I was walking aroundthere, asking questions and I realized thatthe building you showed me is not theLouvre Museum, that one is called theGrand Palais, which is the one with a glassdome. The Louvre is somewhere else, andit doesn't have that”. He told me that hereally did not know.

On Monday I had an early breakfast,dressed in a suit and tie, and went tothe Embassy. I greeted everyone and wewent to a little room where Iparticipated in a meeting withAmbassador Pilar de Alemán, theMinister of Economy and Finance,Dulcidio de la Guardia and Dr. RicardoAlberto Arias. If I remember correctly,there was also a shorter participation(by speaker phone) from the Minister ofForeign Affairs, Isabel de Saint Malo deAlvarado.

Since my political rank was the lowest, Ichose to listen and wait for anytechnical support questions. Overall,after the technical meeting we hadalready emailed a very detailed reporton the conflict issues. I was sure wewould eventually get to that point andthen I could. However, the meeting wasgoing on and no one asked me aboutthe report. Necessary matters ofdiplomatic strategy were discussed,previous contacts, initial words, etc.,were reviewed, but nothing about thereport.

As it seemed important to me and I amone of those who cannot remain silent, Itried to intervene on two occasions tobring technical tax issues into thedebate but was not able to attract anyattention. I made a third more directattempt and Dr. Ricardo Alberto Ariastold me that these very technical issueswere not dealt with in these types ofmeetings, and he politely dismissed me. I was left thinking that it made no senseto have me stay and that it would havebeen better for me to go to Panama onSaturday. From there on, I remaineddead silent.

When we left for the meeting in Bercy, Ihad to accompany a Panamanianemployee from the embassy in hersmall private car, who had always livedin Paris and with great diplomaticexperience, whose mission at themeeting was to take notes directly inFrench. We arrived at the Ministry ofFinance by convoy. Those "ahead" hadthe fanciest car. Our car was the last. Asthe appointment was with the Minister,we now entered through the main door,with all the rigorous protocol.

Upon reaching the meeting floor, theymade us go first to a receiving room andthen to the living room where theconversation table was located. On thePanama side there were 4 positions. Wewaited standing until Minister Sapincame out. When he made his entrance,we all greeted each other and sat, faceto face, the conversation was going totake place in Spanish and French. Therewas a Spanish interpreter from the

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French side who would take care of it.When I saw Sapin head-on, he struck meas a superb and clearly imperialist guy.For a moment I had an Ally McBeal-stylehallucination and envisioned the FrenchMinister dressed in the uniform and allclothing of an SS officer.

After the opening remarks and thepresentations, the Panamaniandelegation began by reviewing thehistorical ties of friendship betweenFrance and Panama, from the FrenchCanal and that sort. The interest inresolving the dispute was mentionedand general proposals were made.Sapin spoke up and quickly turned thepage of friendship and diplomacy. Hewas obviously not a diplomat. Heimmediately went to review the allegedbreaches of Panama with thecommitment to exchange taxinformation.

I immediately recognized in everythinghe said, the same approaches andallegations of the technical team thathad met with me the week before. Onour part, it was basically said that wewere already working in Panama to

aaddress these issues. In my humbleopinion, Sapin did not go to the meetingto seek a solution. He just went to tell uswhat to do.

On the way out, I asked my Panamanianhostess about the meeting on the wayback. She had read our technical reportbut had not participated in thepreparatory meeting. Her comment wasthat it seemed in her opinion, that theproposals made by Sapin were the sameas those discussed in our report, butthat on our end they were not answereddirectly.

At the Embassy, ideas about themeeting were exchanged. I did notspeak much. My impression of thesituation with France remained thesame, derived from my analysis of whatI perceived from public opinion inFrance, regarding the profound impactof the “Panama Papers” and thereproach that there was regarding whywas Panama not considered "Taxhaven" when the scandal started.

From that experience, I began tovisualize that the publication of the"Panama Papers" was nothing morethan a symptom of the disease. Morethan the beginning of a problem, thispublication was nothing other than themost eloquent and explosivemanifestation up to that moment thatPanama, under the dominantleadership of the elite linked to theOffshore business, was “at war” with themost powerful countries in theinternational community. Clearly thissituation had been accumulating for

Michel Sapin

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years. The dispute and the lack ofcommunication was monumental andwas much more complicated thanverifying whether specific requests forinformation exchange with a specificcountry such as France had been met.

I think there was some other worklunch. The truth is that the next day ortwo I was back to Panama by the sametravel route: Charles de Gaulle-Schiphol-Panama. France did not removePanama from the list at the time andhas not yet done so. Panama's foreignpolicy on this matter remains tangled,confused by vested interests. We shouldhave negotiated more than a decade

ago as others did. Now our prestige issignificantly compromised and there isno other choice but to take sides in theinterests of the majority.

I had one day of work left during theweek when I returned to Panama, whichI dedicated to signing papers andanswering emails on local issues, andover the weekend I went to Chitré to restin the hammock. When I was goingalong the Inter-American Highway,through the Jagüito crosspath, I thoughtthat this was not exactly the type of tripI had had in mind, when on occasions Ihad caressed the idea of one dayvisiting Paris.

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