Chapter V: Section 5: of the Panama Canal Act are in conformity with Article III,

No. 1, of the Hay-Pauncefote Treaty.

[3] See the account of the practice of the American Court in
Scott's learned article in the _American Journal of International
Law_, Vol. I (1908), pp. 856-861.

It is a proof of the _bona fides_ of President Taft that he desired that the American Courts might be enabled to decide this question. In a message to Congress, dated August 19, 1912, in which the President stated his conviction that the Panama Canal Act under consideration did not violate the Hay-Pauncefote Treaty, he _inter alia_ suggested that Congress should pass the following resolution:--

"That nothing contained in the Act, entitled 'An Act to provide for
the opening, maintenance, protection, and operation of the Panama
Canal, and the sanitation and government of the Canal zone,' shall
be deemed to repeal any provision of the Hay-Pauncefote Treaty or
to affect the judicial construction thereof, and in any wise to
impair any rights or privileges which have been or may be acquired
by any foreign nation under the treaties of the United States
relative to tolls or other charges for the passage of vessels
through the Panama Canal, and that when any alien ... considers
that the charging of tolls ... pursuant to the provisions of this
Act violates in any way such treaty rights or privileges such alien
shall have the right to bring an action against the United States
for redress of the injury which he considers himself to have
suffered; and the District Courts of the United States are hereby
given jurisdiction to hear and determine such cases, to decree
their appropriate relief, and from decision of such District Courts
there shall be an appeal by either party to the action of the
Supreme Court of the United States."

Congress, however, has not given effect to the suggestion of the President, and the American Courts have not, therefore, the opportunity of giving a judicial interpretation to the Hay-Pauncefote Treaty and of deciding the question whether or no through the Panama Canal Act has arisen a conflict between American Municipal Law and International Law as emanating from the Hay-Pauncefote Treaty.

IX.

It has been asserted that the United States is bound by her general arbitration treaty of April 4, 1908, with Great Britain to have the dispute concerning the interpretation of the Hay-Pauncefote Treaty decided by an award of the Permanent Court of Arbitration at the Hague. It is, however, not at all certain that this dispute falls under the British-American Arbitration Treaty. Article I of this treaty stipulates:--

"Differences which may arise of a legal nature or relating to the
interpretation of treaties existing between the two contracting
parties and which it may not have been possible to settle by
diplomacy, shall be referred to the Permanent Court of Arbitration
established at the Hague by the Convention of the 29th of July
1899, provided, nevertheless, that they do not affect the vital
interests, the independence, or the honour of the two contracting
States, _and do not concern the interests of third parties_."

Since this stipulation exempts from obligatory arbitration such differences between the contracting parties as concern the interests of third parties, the question requires an answer whether in the controversial interpretation of the Hay-Pauncefote Treaty other States than Great Britain and the United States are interested. The term _interest_ is, however, a very wide one and so vague that it is very difficult to decide this question. Does "interest" mean "rights"? Or does it mean "advantages"? If it means "advantages," there is no doubt that in the Panama Canal conflict the interests of third parties are concerned, for the free use of the Canal by their vessels on terms of entire equality is secured to them by the Hay-Pauncefote Treaty. On the other hand, if "interests" means "rights," it can hardly be said that the interests of third parties are concerned in the dispute, for the Hay-Pauncefote Treaty is one to which only Great Britain and the United States are contracting parties, and according to the principle _pacta tertiis nec nocent nec prosunt_ no rights can accrue to third parties from a treaty. Great Britain has the right to demand from the United States, which owns and controls the Canal, that she shall keep the Canal open for the use of the vessels of all nations on terms of entire equality, but other States have no right to make the same claim. The case will be different when the Canal has been opened, and has been in use for such length of time as to call into existence--under the influence and working of the Hay-Pauncefote Treaty--a customary rule of International Law according to which the Canal is permanently neutralised and open to vessels of all nations, or when all maritime States, through formal accession to the Hay-Pauncefote Treaty, have entered into it with all rights and duties of the two contracting parties. So long as neither of these events has taken place Great Britain and the United States can at any moment, without the consent of third States, abrogate the Hay-Pauncefote Treaty and do away with the stipulation that the Canal shall be open to vessels of all nations on terms of entire equality.

In this connection it is of interest to draw attention to the fact that, in compliance with Article XIX of the Hay-Varilla Treaty of November 18, 1903, Section 5 of the Panama Canal Act entirely exempts vessels of the Republic of Panama from payment of the Panama Canal tolls. It would seem that this exemption in favour of the vessels of the Republic of Panama violates Article III, No. 1, of the Hay-Pauncefote Treaty, although it is in conformity with Article XIX of the Hay-Varilla Treaty which stipulates that:--

"The Government of the Republic of Panama shall have the right to
transport over the Canal its vessels and its troops and munitions
of war in such vessels at all times without paying charges of any
kind."

A treaty between two States can never invalidate a stipulation of a previous treaty between one of the contracting parties and a third State. Bearing this point in mind, it must be maintained that the United States, being bound by Article III, No. 1, of the Hay-Pauncefote Treaty, had not the power to enter into the stipulation of Article XIX of the Hay-Varilla Treaty by which she granted exemption from payment of tolls to vessels of the Republic of Panama, and that Great Britain is justified in protesting against the enactment of Section 5 of the Panama Canal Act in so far as it exempts vessels of Panama from the payment of tolls. The fact that the right of Panama to demand exemption from payment of tolls for her vessels is one of the conditions under which the Republic of Panama ceded to the United States the strip of territory necessary for the construction, administration, and protection of the Canal, cannot invalidate the previously acquired right of Great Britain to demand equal treatment of the vessels of all nations without any exception whatever. It must be left to the United States and the Republic of Panama to come to an agreement concerning Article XIX of the Hay-Varilla Treaty. Although the United States promised an exemption from tolls which she had no power to grant, the Republic of Panama need not drop her claim to this exemption. Since, however, the grant of the exemption would violate previous treaty rights of Great Britain, the Republic of Panama is at any rate entitled to a claim to an equivalent of the exemption, namely, the refunding, on the part of the United States, of tolls paid by vessels of the Republic of Panama for the use of the Canal. Whether these vessels are exempt from the payment of tolls or can demand to have them refunded, makes very little difference to the Republic of Panama, although Article XIX of the Hay-Varilla Treaty stipulates exemption from, and not the refunding of, tolls.

But the case of the vessels of Panama is quite unique, for their exemption from tolls was one of the conditions under which the Republic of Panama ceded to the United States the Canal territory. Great Britain and the United States being the only contracting parties to the Hay-Pauncefote Treaty, and third States not having as yet either by formal accession become parties to this treaty or acquired, by custom, a claim to equal treatment of their vessels, there would seem to be nothing to prevent Great Britain from consenting to the exemption of the vessels of Panama, should she be disposed to do so.

X.

However this may be, the question as to whether the United States is by the British-American Arbitration Treaty compelled to consent to have the dispute concerning the interpretation of the Hay-Pauncefote Treaty brought before the Permanent Court of Arbitration is of minor importance. For, even if she be not compelled to do so, it must nevertheless be expected that she will do so. If any dispute is, by its very character, fit and destined to be settled by arbitration, it is this dispute, which is clearly of a legal nature and at the same time one which concerns the interpretation of treaties. Neither the independence, nor the honour, nor any vital interest of the parties can be said to be involved in the dispute.

Indeed it may be maintained that much more important than the dispute itself is the question whether it will or will not be settled by arbitration. Great Britain has already declared that if the dispute cannot be settled by means of diplomacy, she will request arbitration. The eyes of the whole world are directed upon the United States in order to find out her resolution. Throughout her history, the United States has been a champion of arbitration, and no other State has so frequently offered to go, or consented to submit, to arbitration. It was the United States who at the First, as well as the Second, Hague Peace Conference led the party which desired that arbitration should be made obligatory for a number of differences, and she will, I am sure, renew her efforts at the approaching Third Peace Conference. Should she refuse to go to arbitration in her present dispute with Great Britain, the whole movement for arbitration would, for a generation at least, be discredited and come to a standstill. For if the leader of the movement is false to all his declarations and aspirations in the past, the movement itself must be damaged and its opponents must be victorious. Prominent Americans are alive to this indubitable fact, and it would seem to be appropriate to conclude this study with the text of the letter of Mr Thomas Willing Balch of Philadelphia--the worthy son of his father who was the first to demand the settlement of the Alabama dispute by arbitration--which the _New York Sun_, an influential American paper, published on September 4, 1912, on its editorial page.

"To the Editor of the _Sun_. Sir:--

A half century ago, Americans believed firmly that we had a good
cause of grievance against Great Britain for having allowed, during
our great Civil War, the use of her ports for the fitting out of a
fleet of Confederate cruisers, which caused our maritime flag to
disappear almost entirely from the high seas. We pressed Great
Britain long and persistently to agree that our claims, known under
the generic name of the Alabama claims, should be submitted for
settlement to an impartial arbitration. Finally, with reluctance,
Great Britain acceded to our demands. And as a result the two
Nations appeared as litigants before the Bar of the International
Court of Justice, popularly known as the Geneva Tribunal. The
result was a triumph for the United States, but also it was a
greater triumph for the cause of civilization.

To-day our Government and that of Great Britain have once more come
to an _impasse_, this time over the interpretation of the
Hay-Pauncefote Panama Treaty. Our Government has definitely granted
free passage through the Panama Canal to our vessels engaged in the
coastwise trade. And as a consequence Great Britain has entered a
protest and given notice that she will request that the
Hay-Pauncefote International contract shall be submitted for
interpretation to a judicial decision by The Hague Tribunal. Though
so short a time has elapsed since the Panama Canal Bill became a
law, mutterings have been heard of the possibility that the United
States would refuse this request of Great Britain to refer the
point in dispute to The Hague Court. But such a policy would be
most unwise for the United States to pursue. No better means to
injure our foreign trade and relations could be devised. Apart,
however, from the material aspect of the question, our national
honor and credit would suffer if we refused to refer the matter for
judicial settlement at the Bar of The Hague International Court,
especially as we have a treaty agreement with Great Britain to
refer many forms of possible international dispute to that very
tribunal in case ordinary means fail to settle them. In acceding to
such a solution of the point of difference between the two Powers,
the honor of the United States and Great Britain surely will be as
safe in the hands of their respective counsel as the honor of a
private individual is in those of his lawyer in a suit before a
Municipal Tribunal.

The Alabama Arbitration which involved a large and important part
of the rights and duties of neutrals and belligerents towards one
another, was a notable advance in strengthening the power and
majesty of International Law among the Nations of the world. The
present dispute will turn on the correct interpretation of a treaty
concerning whose meaning various parties and persons have offered
different views. It seems to be clearly a case for a judicial
decision.

At the proper time, let the question be argued before The Hague
Court, and whatever the decision may be, which both parties will be
pledged in advance to accept, another triumph will have been won
for the Law of the Nations. Another step forward--and International
Law and Justice can only advance a step at a time--towards the
distant goal of universal peace through the expansion of the Law of
Nations will be accomplished to the substantial gain and credit of
civilization and humanity. And new honor and glory will accrue to
the United States, which ever since the signing of Jay's Treaty in
1794 have done so much, probably more than any other Power, to
promote the cause of justice among the Nations."

Cambridge: PRINTED BY JOHN CLAY, M. A. AT THE UNIVERSITY PRESS