Hay-Pauncefote treaty leaves unimpaired, since the United States alone fixes reasonable and equitable rules for the canal traffic; since the canal may be used by all nations on no other condition than that they observe those rules; and since as shown by the elimination from this treaty of article 3 of the unratified Hay-Pauncefote treaty of February, 1901-adherence to the treaty by the other powers is not to be invited. If by construing article 8 in connection with other articles of the Clayton-Bulwer treaty any controlling principle of neutralization is to be deduced, it is the simple requirement that the same terms shall be made to all customers of the canal, a requirement restricting the rights of the canal owner to just that extent and no more and not disabling it from treating its own shipping in any way it sees fit. The like result follows from the Constantinople convention of 1888, which is declared to be the basis of the neutralization of the canal and of the rules laid down in article 3 for its navigation. By that convention identical rules are to apply to all vessels using the Suez Canal in time of war or time of peace without distinction of flags, but "the rights of Turkey as the territorial power are reserved," together with the sovereign rights of the Sultan and the rights and immunities of the Khedive.

It has been contended that the Senate of the United States understood the Hay-Pauncefote treaty to mean what Great Britain now claims it to mean, because of the Senate's failure to pass the Bard resolution in favor of American coastwise shipping. But the claim seems to be thoroughly disposed of by proof that the reason of the failure was the opinion of Senators that the resolution was superflous, that nothing in the treaty prohibited the United States, as the builder and owner of the canal, from exempting its coastwise shipping from tolls. Senator Bard himself has since so stated in a letter which was publicly read in the House of Representatives. He is emphatically corroborated on that point by other Senators.

It is also contended that American vessels must pay tolls, because otherwise the reasonable and equitable tolls provided for by the treaty can not be ascertained. The contention assumes, of course, the very thing at issue, namely, that in the contemplation of the treaty and by its true construction American vessels are bound to pay tolls. But no other answer seems to be required than that, for the purpose of computing reasonable tolls for the use of the canal, it is not necessary that American vessels should pay tolls, but only that the amount they would pay if they were not exempt should be calculated and used in the computation as if paid.

To sum up the conclusions resulting from the foregoing considerations it is submitted that

1. The United States, as builder and owner of an artificial waterway within its own territory, is entitled to dictate the conditions of its use unless and only so far as it has contracted the right of way.

2. It has made no such contract, except with Great Britain and by the HayPauncefote treaty and by the clauses of that treaty which stipulate for the use of the canal by "all nations" on equal terms and for reasonable and equitable tolls.

3. As the term "all nations" comprehends not only states, but their nationals, the crucial question is: Are the words "all nations" inclusive or exclusive of the United States and its nationals?

4. The principle is well settled that a state conveys away its rights of sovereignty or property only by terms which are clear and express and are not susceptible of any other reasonable construction. If the terms are vague and of doubtful import, the presumption is against the state's intention to part with or abridge its jurisdictional or property rights.

5. Hence, as the term "all nations" as used in the treaty may be taken to mean either all without exception or all except the United States, the latter meaning is to be accepted as the true one, because the least restrictive of the normal rights and powers of the United States.

6. But it is unnecessary to rely upon presumption. The treaty assumes the United States to be the owner of a canal to be built by it on its own territory, and must be taken to have had as its natural and legitimate aim the fixing of the terms upon which other nations might use it. Except as necessarily abridged by such terms, nothing in the treaty indicates any purpose to further abridge the rights of the United States as canal builder and owner.

7. In short, the treaty is an instrument by which the proprietor of a canal fixes and states the terms of use to its customers.

There is an utter absence of evidence that the United States regarded itself as one of its customers.

It

8. The neutralization proposed by the Clayton-Bulwer treaty resembles that proposed by the Hay-Pauncefote treaty only in the idea that the operating charges and rules for use of the canal shall be the same for all nations. differs, of course, in the vital feature of conditioning such equality of terms upon protection being afforded to the canal.

9. When five out of six of the treaty rules for the use of the canal do not apply to the United States it is a reasonable conclusion that the sixth also was not meant so to apply.

10. The different phases of American public and official sentiment respecting the canal are noteworthy and not to be overlooked in construing the HayPauncefote treaty.

While the United States was expecting to be merely one of the users of the canal, it strenuously insisted upon equality of rules and charges for the use of the canal and did not concern itself about the rights of the canal owner.

When the rôle of builder and owner of the canal was forced upon it, it as strenuously insisted upon complete ownership and complete control, and complete elimination of all foreign participation or control.

Its purposes and views are completely defeated if the Hay-Pauncefote treaty is to be construed according to the British contention, and the United States has lost the ordinary and normal right of the canal owner to be exempt from the tolls and charges it makes to customers.

On the grounds and in view of the considerations above stated, the United States may contend-and it is believed can rightfully contend-that the HayPauncefote treaty of November, 1901, does not, as justly interpreted, prevent the United States from exempting its coastwise shipping from the payment of tolls for the use of the Panama Canal. But to the English contention that the controversy should be referred to arbitration there seems to be no sufficient answer. Both countries are firmly committed to arbitration as the best method for the settlement of international disputes. It may be safely assumed without argument that if the matter in difference is not otherwise disposed of it will be left to an arbitral tribunal. It does not follow that resort must be had or should be had to The Hague or The Hague Permanent Court of Arbitration. Our existing arbitration treaty with Great Britain, article 1, expressly excepts from reference to that court differences which "concern the interests of third parties"—and in the case of the present difference over the meaning of the HayPauncefote treaty the " 'third parties" with interests concerned, but without legal standing in respect of them, include almost all the countries of Europe. That the present difference should not go to The Hague Permanent Court is as clear as that the parties are not bound to send it there. International arbitration derives its chief value from confidence in the arbitral tribunal and in its ability and purpose to do justice-an award lacking that confidence is not only likely to work unfortunately as regards the particular case, but also to discredit the cause of arbitration generally-and the fact must be reckoned with that in this country there is a widespread conviction which has been publicly voiced in high official circles that all Europe is interested in the success of the British contention, and that submission of the controversy to arbitration under The Hague convention would be in the nature of a farce. American sentiment on this point is no doubt in part due to the nature of the subject matter in controversy. The claim of Great Britain is, in effect, a territorial claim. The United States possesses no more costly and perhaps no more valuable piece of territory than the Panama Canal, and Great Britain's claim is that the Hay-Pauncefote treaty not only encumbers that territory with equal rights of use by all other nations, but impresses upon it a servitude by which the United States loses the free use of its own canal for its own vessels. It is rights of that nature as to which both countries are especially sensitive and which both countries have been peculiarly careful to safeguard. Thus, for territorial claims the general arbitration treaty of 1897 (perfected as such on the part of Great Britain, but killed in the United States Senate) provided a tribunal of six arbitrators, three of whom should be chosen by each party, and whose award should be final only when made by not less than five arbitrators. The same general idea governed in the case of the Alaska boundary, though the final award might be by four out of the six. A more important difference, however, is that in the case of the Alaska boundary the arbitrators were to consist of "impartial jurists of repute," whereas by the 1897 treaty they were to be taken from the judges of the highest courts of the

respective countries. That such a tribunal should be made the interpreter of the Hay-Pauncefote treaty, if arbitration of its terms becomes necessary, and would be greatly preferable to a tribunal constituted as in the Alaska boundary controversy is unquestionable. It would be superior in dignity, in impartiality, and in general competency. It would be infinitely more likely to be regarded as beyond the reach of any but the most correct motives and influences, and the results would be infinitely more likely to command the cheerful acquiescence of both countries.

[From Senate Document No. 32, Sixty-third Congress, first session.]

PANAMA CANAL TOLLS.

The Issues Between the United States and Great Britain in Regard to Panama Canal Tolls, as Raised in the Recent Diplomatic Correspond

ence.

(Address by Chandler P. Anderson, formerly counselor for the Department of State, before the American Society of International Law at the morning session on Apr. 25, 1913.)

It has seemed desirable to the committee in charge of the program for this meeting of the society that, as a preliminary to the discussion of the Panama Canal tolls questions which are included in the program, a brief outline should be presented showing the exact issues between the two Governments in that controversy as raised in the diplomatic correspondence, and the arguments which have been advanced on both sides in support of their respective contentions. It is for this purpose, rather than for the purpose of weighing the value of these arguments, that this paper has been prepared.

Before taking up the issues which have been raised in the diplomatic correspondence, it is important to have in mind the following considerations:

Inasmuch as the United States and Great Britain are the only parties to the Hay-Pauncefote treaty of November 18, 1901, Great Britain alone of all nations is entitled to question the course adopted by the United States under that treaty, but even Great Britain is not entitled under the terms of the treaty to question the course adopted by the United States toward other nations with reference to the use of the canal so long as that course involves no discrimination against Great Britain. Great Britain has no authority under the treaty or otherwise to speak for other nations on the subject of the canal tolls, and is not concerned with the attitude of the United States toward other nations in dealing with this matter except as Great Britain's own interests are affected thereby. The attitude of the United States toward other nations will unquestionably be that best adapted for securing their observance of the rules adopted by the United States for the use of the canal, the purpose of which rules is to carry out the traditional policy of the United States for the neutralization of the canal. In this connection, however, it is of interest to note that there is nothing in the treaty which would prevent the United States from granting equal treatment to any other nation even if that nation does not observe the rules. the observance of which would insure equal treatment. Moreover, it is open for the United States to make with any other nation any arrangement which is mutually agreeable on the subject, and the only interest of Great Britain therein is that there shall be no discrimination against British interests.

It is clear from these considerations that any discussion between Great Britain and the United States on the subject of canal tolls must be limited to the question of discrimination against British vessels, and it will be found upon examining the diplomatic correspondence that this limitation has been recognized by Great Britain.

There has apparently been considerable confusion in the widespread discussion about canal tolls which has been going on for the past eight months in this country as to the exact contentions of both Governments and the real ques tion at issue between them. A large part of this discussion has been directed to the question of whether the United States is not at liberty under the treaty to do what it pleases in regard to the payment of tolls by its own vessels in its cwn canal. As a matter of fact, this contention is not made by Great Britain, and there is nothing in the treaty which would justify any such contention. The United States is clearly entitled to exempt its own vessels, either of war or of commerce, whether engaged in the coastwise or foreign trade, from the pay

ment of any tolls, and likewise it is entitled to refund tolls exacted from those vessels. The question at issue is not whether that can be done, but whether the United States, having exempted its own vessels from the payment of tolls, is at liberty under the treaty to exact tolls from British vessels so long as Great Britain observes the rules adopted by the United States in the treaty.

That issue is not one which should arouse bad feeling or justify the charge of bad faith on either side, for it involves at most only a question of pecuniary damages, and does not present a situation under which the United States would gain any advantage by postponing its settlement until after the canal is opened. If it should finally appear that under the treaty the United States was not entitled to impose tolls upon British vessels when United States vessels are not subjected to the same treatment, Great Britain would have a claim against the United States for the amount of the tolls improperly paid by British vessels. Clearly, therefore, it is not a case where an immediate settlement is necessary in order to prevent an irreparable injury, for there can be no irreparable injury in enforcing a law when the damages can be measured by the payment of money improperly collected. Obviously it would be more convenient for the United States to have this question determined before the canal is opened and before tolls are collected, which would have to be refunded if this question should be decided against the United States; but even if it should be so decided, either before or after the canal is opened, in either case it would remain for the United States alone to determine whether equality of treatment should be secured by imposing equal tolls upon American vessels or by exempting British vessels equally with the American vessels from the payment of tolls.

The fundamental question underlying this controversy is whether or not the rules adopted by the United States under article 3 of the Hay-Pauncefote treaty "as the basis of the neutralization of the canal" were intended to apply to the United States as well as to other nations.

If these rules are understood as not applying to the United States, then their adoption by the United States is nothing more than a declaration of policy to the effect that the United States will so regulate and manage the canal, under the authority reserved in Article II, as to insure, in accordance with the first of these rules, that "the canal shall be free and open to the vessels of commerce and of war of all nations observing these rules, on terms of entire equality, so that there shall be no discrimination against any such nation, or its citizens or subjects, in respect of the conditions or charges of traffic, or otherwise," and also that "such conditions and charges of traffic shall be just and equitable."

This is the interpretation which the Government of the United States has accepted as expressing the true intent and meaning of this treaty, the effect of which under this interpretation has been aptly described as insuring to other nations "conditional favored-nation treatment, the measure of which, in the absence of express stipulations to that effect, is not what the United States gives to its own nationals, but the treatment which it gives to other nations." Great Britain, on the other hand, although apparently admitting that none of the other rules adopted by the United States as the basis of neutralization apply to the United States, nevertheless contends that the first of these rules does apply to the United States as well as to other nations, and that by adopting it the United States has imposed upon itself an obligation to treat its own vessels and the vessels of any nation observing these rules on terms of entire equality, "so that there shall be no discrimination against any such nation, or its subjects or citizens," etc. In contending for this interpretation, however, Great Britain has recognized the necessity for determining what constitutes discrimination and particularly whether or not inequality of treatment in favor of vessels of war of the United States and of vessels of commerce engaged in the coasting trade of the United States would constitute discrimination against British vessels under this clause.

So far as other nations are concerned the British position is understood to be that this clause "embodies a promise on the part of the United States that the ships of all nations which observe the rules will be admitted to similar privileges" as enjoyed by the ships of the United States and Great Britain.

In support of the British contention that the words "all nations observing these rules," as used in Rule I, include the United States, and therefore that British vessels using the canal are entitled to equal treatment with those of the United States, the only argument advanced by Great Britain is that the

general principle of neutralization established by Article VIII of the ClaytonBulwer treaty, as the basis of which principle the United States adopted these rules, is in effect nothing more than a general principle of equality of treatment. Before taking up this argument it is necessary to examine briefly the provisions of Article VIII of the Clayton-Bulwer treaty, and trace their connection with the present treaty. Article VIII of the Clayton-Bulwer treaty recites: The Governments of the United States and Great Britain having not only desired, in entering into this convention, to accomplish a particular object, but also to establish a general principle, they hereby agree to extend their protection by treaty stipulations, to any other practicable communications, whether by canal or railway, across the isthmus which connects North and South America.

The first seven articles of that treaty related exclusively to interoceanic communications across Central America, and it was distinctly understood by Great Britain in making that treaty that the Isthmus of Panama was not regarded as a part of Central America. This article of the treaty, therefore is the only part of the treaty which had any relation to a canal across the Isthmus of Panama. The significance of this is that this article expressed the only rights Great Britain ever had in relation to the Panama Canal route, so that Great Britain has actually sacrificed nothing by abrogating the rest of the Clayton-Bulwer treaty. In other words if the Clayton-Bulwer treaty was in force to-day Article VIII is the only part of it which would apply to the Panama Canal, and so far as the effect of Article VIII has been changed by the HayPauncefote treaty, it will be found that these changes have been made at Great Britain's suggestion.

The article then continues:

In granting, however, their joint protection to any such canals or railways as are by this article specified, it is always understood by the United States and Great Britain that the parties constructing or owning the same shall impose no other charges or conditions of traffic thereupon than the aforesaid Governments shall approve of as just and equitable; and that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on like terms to the citizens and subjects of every other State which is willing to grant thereto such protection as the United States and Great Britain engage to afford.

It is evident from this clause of the article that the agreement to extend protection was a conditional one, and the condition was that charges imposed on traffic should be approved by both Governments as just and equitable, and that the canal should be open to their citizens and subjects upon equal terms.

It is clear that the right to equal treatment went hand in hand with the obligation to extend protection, but the general principle established by this article related primarily to the protection of the canal, the object being to secure its neutralization, and as an inducement to granting protection it was provided that equality of treatment should go with it. Clearly neutralization as used there meant exemption from interference, and equality of treatment was only incidental as an inducement to noninterference.

That both Governments understood that neutralization rather than equality of treatment was the general principle adopted by Article VIII of the ClaytonBulwer treaty is evident from the fact that the preamble of the Hay-Pauncefote treaty of 1901, as well as the preamble of the earlier treaty of 1900, characterized that general principle as "the general principle of neutralization established in Article VIII of that convention." The connection established by Article VIII of that convention between the obligation to protect the canal and the right to equal treatment is also recognized and carried into the first HayPauncefote treaty of 1900 by the second article of that treaty, which provides: The high contracting parties, desiring to preserve and maintain the "general principle" of neutralization established in Article VIII of the Clayton-Bulwer convention, adopt as the basis of such neutralization the following rules, etc.

The first of these rules is as follows:

The canal shall be free and open, in time of war, as in time of peace, to the vessels of commerce and of war of all nations on terms of entire equality, so that there shall be no discrimination against any nation or its citizens or subjects in respect of the conditions or charges of traffic, or otherwise.

It will be observed that in this treaty Great Britain joined with the United States in adopting rules which were to furnish the basis of neutralization, so that in that case both Governments were equally committed to the neutralization of the canal, and the rules recognized that in consequence of such joint obligation the vessels of both Governments were entitled to equal treatment.