The Panama Ca.n.a.l Conflict between Great Britain and the United States of America.

by La.s.sa Oppenheim.

PREFACE

To my great surprise, the publishers inform me that the first edition of my modest study on the Panama Ca.n.a.l conflict between Great Britain and the United States is already out of print and that a second edition is at once required. As this study had been written before the diplomatic correspondence in the matter was available, the idea is tempting now to re-write the essay taking into account the arguments proffered in Sir Edward Grey's despatch to the British Amba.s.sador at Washington of November 14, 1912--see Parliamentary Paper Cd. 6451--and, in answer thereto, in Mr Knox's despatch to the American Charge d'Affaires in London of January 17, 1913--see Parliamentary Paper Cd.

6585. But apart from the fact that the immediate need of a second edition does not permit me time to re-write the work, it seemed advisable to reprint the study in its original form, correcting only some misprints and leaving out the footnote on page 5. It had been written _sine ira et studio_ and without further information than that which could be gathered from the Clayton-Bulwer Treaty, the Hay-Pauncefote Treaty, the Hay-Varilla Treaty, the Panama Ca.n.a.l Act, and the Memorandum which President Taft left when signing that Act.

Hence, the reader is presented with a study which is absolutely independent of the diplomatic correspondence, and he can exercise his own judgment in comparing my arguments with those set forth _pro et contra_ the British interpretation of the Hay-Pauncefote Treaty in the despatches of Sir Edward Grey and Mr Knox.

L. O.

Cambridge, _February 15, 1913_.

I.

The Panama Ca.n.a.l conflict is due to the fact that the Governments of Great Britain and the United States do not agree upon the interpretation of Article III, No. 1, of the Hay-Pauncefote Treaty of September 18, 1901, which stipulates as follows:--

"The Ca.n.a.l shall be free and open 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 such nation, or its citizens or subjects, in respect of the conditions and charges of traffic, or otherwise. Such conditions and charges of traffic shall be just and equitable."

By Section 5 of the Panama Ca.n.a.l Act of August 24, 1912, the President of the United States is authorised to prescribe, and from time to time to change, the tolls to be levied upon vessels using the Panama Ca.n.a.l, but the section orders that _no tolls whatever shall be levied upon vessels engaged in the coasting trade of the United States_, and also that, if the tolls to be charged should be based upon net registered tonnage for ships of commerce, the tolls shall not exceed one dollar and twenty-five cents per net registered ton nor be less, _for other vessels than those of the United States or her citizens_, than the estimated proportionate cost of the actual maintenance and operation of the Ca.n.a.l[1].

[1] As regards the enactment of Section 5 of the Panama Ca.n.a.l Act that the vessels of the Republic of Panama shall be entirely exempt from the payment of tolls, see below IX, p. 48.

Now Great Britain a.s.serts that since these enactments set forth in Section 5 of the Panama Ca.n.a.l Act are in favour of vessels of the United States, they comprise a violation of Article III, No. 1, of the Hay-Pauncefote Treaty which stipulates that the vessels of all nations shall be treated on terms of entire equality.

This a.s.sertion made by Great Britain is met by the Memorandum which, when signing the Panama Ca.n.a.l Act, President Taft left to accompany the Act. The President contends that, in view of the fact that the Panama Ca.n.a.l has been constructed by the United States wholly at her own cost, upon territory ceded to her by the Republic of Panama, the United States possesses the power to allow her own vessels to use the Ca.n.a.l upon _such terms as she sees fit_, and that she may, therefore, permit her vessels to pa.s.s through the Ca.n.a.l either without the payment of any tolls, or on payment of lower tolls than those levied upon foreign vessels, and that she may remit to her own vessels any tolls which may have been levied upon them for the use of the Ca.n.a.l. The President denies that Article III, No. 1, of the Hay-Pauncefote Treaty can be invoked against such power of the United States, and he contends that this Article III was adopted by the United States for a specific purpose, namely, as a basis of the neutralisation of the Ca.n.a.l, and for no other purpose. This article, the President says, is a declaration of policy by the United States that the Ca.n.a.l shall be neutral; that the att.i.tude of the Government of the United States is that all nations will be treated alike and no discrimination is to be made against any one of them observing the five conditions enumerated in Article III, Nos. 2-6. The right to the use of the Ca.n.a.l and to equality of treatment in the use depends upon the observance of the conditions by the nations to whom the United States has extended that privilege. The privileges of all nations to which the use of the Ca.n.a.l has been granted subject to the observance of the conditions for its use, are to be equal to the privileges granted to any one of them which observes those conditions. In other words--so the President continues--the privilege to use the Ca.n.a.l is a conditional most-favoured-nation treatment, the measure of which, in the absence of an express stipulation to that effect, is not what the United States gives to her own subjects, but the treatment to which she submits other nations.

From these arguments of the President it becomes apparent that the United States interprets Article III, No. 1, of the Hay-Pauncefote Treaty as stipulating no discrimination against _foreign_ nations, but as leaving it open to her to grant any privilege she likes to her own vessels. According to this interpretation, the rules for the use of the Ca.n.a.l are merely a basis of the neutrality which the United States was willing should be characteristic of the Ca.n.a.l, and are not intended to limit or hamper the United States in the exercise of her sovereign power in dealing with her own commerce or in using her own Ca.n.a.l in whatever manner she sees fit. The President specifically claims the right of the United States eventually to allow her own vessels to use the Ca.n.a.l without the payment of any tolls whatever, for the reason that foreign States could not be prevented from refunding to their vessels tolls levied upon them for the use of the Ca.n.a.l. If foreign States, but not the United States, had a right to do this--so the President argues--the irresistible conclusion would be that the United States, although she owns, controls, and has paid for the construction of the Ca.n.a.l, is restricted by the Hay-Pauncefote Treaty from aiding her own commerce in a way open to all other nations. Since the rules of the Hay-Pauncefote Treaty did not provide, as a condition for the privilege of the use of the Ca.n.a.l upon equal terms with other nations, that other nations desiring to build up a particular trade, involving the use of the Ca.n.a.l, should neither directly agree to pay the tolls nor refund to their vessels tolls levied, it is evident that the Hay-Pauncefote Treaty does not affect the right of the United States to refund tolls to her vessels, unless it is claimed that rules ensuring all nations against discrimination would authorise the United States to require that no foreign nation should grant to its shipping larger subsidies or more liberal inducements to use the Ca.n.a.l than were granted by any other nation.

II.

It cannot be denied that at the first glance the arguments of the United States appear to be somewhat convincing. On further consideration, however, one is struck by the fact that the whole argumentation starts from, and is based upon, an absolutely wrong presupposition, namely, that the United States is not in any way restricted by the Hay-Pauncefote Treaty with regard to the Panama Ca.n.a.l, but has granted to foreign nations the use of the Ca.n.a.l under a conditional most-favoured-nation clause.

This presupposition in no way agrees with the historical facts. When the conclusion of the Hay-Pauncefote Treaty was under consideration, in 1901, the United States had not made the Ca.n.a.l, indeed did not own the territory through which the Ca.n.a.l has now been made; nor was the United States at that time absolutely unfettered with regard to the projected Ca.n.a.l, for she was bound by the stipulations of the Clayton-Bulwer Treaty of 1850. Under this treaty she was bound by more onerous conditions with regard to a future Panama Ca.n.a.l than she is now under the Hay-Pauncefote Treaty. Since she did not own the Ca.n.a.l territory and had not made the Ca.n.a.l at the time when she agreed with Great Britain upon the Hay-Pauncefote Treaty, she ought not to maintain that she granted to foreign nations the privilege of using _her_ Ca.n.a.l under a conditional most-favoured-nation clause, she herself remaining unfettered with regard to the conditions under which she could allow her own vessels the use of the Ca.n.a.l. The historical facts are five in number:--

Firstly, in 1850, Great Britain and the United States, by the Clayton-Bulwer Treaty, agreed that neither of them would ever obtain or maintain for herself any exclusive control over a future Panama Ca.n.a.l, or fortify it, or occupy or colonise any part of Central America; that the Ca.n.a.l should be neutralised, should be open to the vessels of all nations under conditions of equality; and so forth.

Secondly, in 1901, the two parties to the Clayton-Bulwer Treaty agreed to subst.i.tute for it the Hay-Pauncefote Treaty, Article II of which expressly stipulates _inter alia_ that the Ca.n.a.l may be constructed under the auspices of the Government of the United States and that the said Government, _subject to the provisions of Articles III and IV_, shall have the exclusive right of providing for the regulation and management of the Ca.n.a.l.

Thirdly, the parties agreed--see the preamble of the Hay-Pauncefote Treaty--that the general principle of the neutralisation of the Ca.n.a.l as established by the Clayton-Bulwer Treaty should not be impaired, and that, therefore, the United States--see Article III of the Hay-Pauncefote Treaty--agrees to adopt as the basis of the neutralisation of the Ca.n.a.l certain rules, substantially the same as those embodied in the Suez Ca.n.a.l Convention of 1888, and amongst these a rule concerning the use of the Ca.n.a.l by vessels of all nations on terms of entire equality without discrimination against any such nation, or their citizens or subjects, in respect of the conditions or charges of traffic, or otherwise, such conditions and charges to be just and equitable.

Fourthly, the parties agreed--see Article IV of the Hay-Pauncefote Treaty--that no change of the territorial sovereignty or of the international relations of the country or countries traversed by the future Ca.n.a.l should affect the general principle of the neutralisation or the obligation of the parties under the Hay-Pauncefote Treaty.

Fifthly, when, in 1903, the United States by the Hay-Varilla Treaty, acquired from the Republic of Panama the strip of territory necessary for the construction, administration, and protection of the Ca.n.a.l, she acquired sovereign rights over this territory and the future Ca.n.a.l _subject to the antecedent restrictions imposed upon her by the Hay-Pauncefote Treaty_, for Article IV of the latter stipulates expressly that _no_ change of territorial sovereignty over the territory concerned shall affect the neutralisation or obligation of the parties _under the treaty_.

These are the unshakable historical facts. The United States did not _first_ become the sovereign of the Ca.n.a.l territory and make the Ca.n.a.l, and _afterwards_ grant to foreign nations the privilege of using the Ca.n.a.l under certain conditions. No, she has never possessed the power of refusing to grant the use of the Ca.n.a.l to vessels of foreign nations on terms of entire equality, should she ever make the Ca.n.a.l. Free navigation through the Ca.n.a.l for vessels of all nations on terms of entire equality, provided these nations were ready to recognise the neutrality of the Ca.n.a.l, was stipulated by the Clayton-Bulwer Treaty, and this stipulation was essentially upheld by the Hay-Pauncefote Treaty, and it was not until two years after the conclusion of the Hay-Pauncefote Treaty that the United States acquired sovereign rights over the Ca.n.a.l territory and made preparations for the construction of the Ca.n.a.l. For this reason the contention of the United States that she has granted to foreign nations the use of the Ca.n.a.l under certain conditions and that such grant includes a conditional most-favoured-nation treatment, is absolutely baseless and out of place. She has not granted anything, the free use of the Ca.n.a.l by vessels of all nations having been the condition under which Great Britain consented to the abrogation of the Clayton-Bulwer Treaty and to the stipulation of Article II of the Hay-Pauncefote Treaty according to which--in contradistinction to Article I of the Clayton-Bulwer Treaty--the United States is allowed to have a ca.n.a.l constructed under her auspices.

III.

If the a.s.sertion of the United States that she herself is entirely unfettered in the use of the Ca.n.a.l, and that the conditions imposed upon foreign vessels in return for the privilege of using the Ca.n.a.l involve a most-favoured-nation treatment, were correct, the United States would not be bound to submit to the rules laid down by Article III, Nos. 2-6, of the Hay-Pauncefote Treaty. She could, therefore, if she were a belligerent, commit acts of hostility in the Ca.n.a.l against vessels of her opponent; could let her own men-of-war revictual or take in stores within the Ca.n.a.l even if there were no strict necessity for doing so; could embark and disembark troops, munitions of war, or warlike materials in the Ca.n.a.l, although all these were destined to be made use of during the war generally, and not only for the defence of the Ca.n.a.l against a possible attack. There ought, however, to be no doubt that the United States is as much bound to obey the rules of Article III of the Hay-Pauncefote Treaty as Great Britain or any other foreign State. These rules are intended to invest the Ca.n.a.l with the character of neutrality. If the United States were not bound to obey them, the Ca.n.a.l would lose its neutral character, and, in case she were a belligerent, her opponent would be justified in considering the Ca.n.a.l a part of the region of war and could, therefore, make it the theatre of war. The mere fact that Article III of the Hay-Pauncefote Treaty refers to the rules in existence concerning the neutralisation of the Suez Ca.n.a.l, and that Article IV of the Suez Ca.n.a.l Treaty of 1888 expressly stipulates the neutralisation of the Ca.n.a.l even should Turkey be a belligerent, ought to be sufficient to prove that the neutralisation of the Panama Ca.n.a.l is stipulated by the Hay-Pauncefote Treaty even should the United States be a belligerent.

Furthermore, one must come to the same conclusion if one takes into consideration the objects, which are three in number, of the neutralisation of an inter-oceanic ca.n.a.l.

The first object is that a ca.n.a.l shall be open in time of war as well as in time of peace, so that navigation through the ca.n.a.l may be unhampered by the fact that war is being waged. If the ca.n.a.l were not neutralised, the territorial sovereign would be compelled, if he were neutral in a war, to prevent the pa.s.sing through the ca.n.a.l of men-of-war of either belligerent, because such pa.s.sage would be equivalent to the pa.s.sage of belligerent troops through neutral land territory.

The second object is that the territorial sovereign shall be prevented from closing a ca.n.a.l or interfering with the free use of it by vessels of all nations in case he himself is a party to a war. If the ca.n.a.l were not neutralised, the belligerent territorial sovereign could, during the war, close the ca.n.a.l or interfere with its free use by neutral vessels.

The third object is that a ca.n.a.l shall not be damaged, nor navigation thereon be prevented or hampered by the opponent in case the territorial sovereign is himself a belligerent. If the ca.n.a.l were not neutralised, it could be blockaded, militarily occupied, and hostilities could be committed there.

With these points in mind one may well ask whether it was worth while to agree at all upon the five rules of Article III, Nos. 2-6, of the Hay-Pauncefote Treaty if the United States were not to be considered bound by these rules. That two years after the conclusion of the Hay-Pauncefote Treaty the United States acquired sovereign rights over the Ca.n.a.l territory and that she is at present the owner of the Ca.n.a.l has not, essentially at any rate, altered the case, for Article IV of the Hay-Pauncefote Treaty stipulates that a change of territorial sovereignty over the Ca.n.a.l territory should not affect the obligation of the contracting parties under that treaty.

If this is correct, it might be maintained that the United States is, under the Hay-Pauncefote Treaty, subjected to more onerous conditions than Turkey and Egypt are under the Suez Ca.n.a.l Treaty, for Article X of the latter stipulates that Egypt and Turkey shall not by the injunctions of Articles IV, V, VII, and VIII of the same treaty be considered to be prevented from taking such measures as might be necessary to ensure the defence of Egypt and Turkey by their own armed forces. But this opinion would not be justified because in this respect the case of the Panama Ca.n.a.l is entirely different from that of the Suez Ca.n.a.l. Whereas the Panama Ca.n.a.l is an outlying part of the United States, and no attack on the main territory of the United States is possible from the Panama Ca.n.a.l, an attack on Egypt as well as on Turkey is quite possible from the Suez Ca.n.a.l. There is, therefore, no occasion for the United States to take such measures in the Panama Ca.n.a.l as might be necessary to ensure the defence of her main territory. Indeed there might be occasion for her to take such measures in the Ca.n.a.l as are necessary to ensure the defence of the Ca.n.a.l and the surrounding territory, if a belligerent threatened to attack it. Although this case is not directly provided for by the Hay-Pauncefote Treaty--in contradistinction to Article XXIII of the Hay-Varilla Treaty--there is no doubt that, since, according to Article II of the Hay-Pauncefote Treaty, the United States shall have and enjoy all the rights incident to the construction of the Ca.n.a.l as well as the exclusive right of providing for the regulation and management of the Ca.n.a.l there is thereby indirectly recognised the power of the United States to take all such measures as might become necessary for the defence of the Ca.n.a.l against a threatening attack. Apart from this case, the United States, even if she herself were a belligerent, has no more rights in the use of the Ca.n.a.l than her opponent or a neutral Power; on the contrary, she is as much bound as these Powers to submit to the rules of Article III, Nos. 2-6, of the Hay-Pauncefote Treaty.

IV.

However this may be, the question as to whether the stipulation of Article III, No. 1, of the Hay-Pauncefote Treaty that vessels of all nations shall be treated on the basis of entire equality is meant to apply to vessels of all nations without exception, or only to the vessels of _foreign_ nations and not to those of the United States, can only be decided by an interpretation of Article III which takes the whole of the Hay-Pauncefote Treaty as well as the Clayton-Bulwer Treaty into consideration.

(1) There is no doubt that according to the Clayton-Bulwer Treaty the future Ca.n.a.l was to be open on like terms to the citizens of all nations including those of the United States, for Article VIII expressly stipulates "that the same ca.n.a.ls or railways, being open to the subjects and citizens of Great Britain and the United States on equal terms, shall also be open on like terms to the subjects and citizens of every other State which...."

(2) The Clayton-Bulwer Treaty has indeed been superseded by the Hay-Pauncefote Treaty, but it is of importance to notice the two facts, expressed in the preamble of the latter:--(_a_) that the only motive for the subst.i.tution of the latter for the former treaty was to remove any objection which might arise under the Clayton-Bulwer Treaty to the construction of the Ca.n.a.l under the auspices of the Government of the United States; (_b_) that it was agreed that the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty should not be considered to be impaired by the new treaty. Now the equal treatment of American, British, and any other nation's vessels which use the Ca.n.a.l is part and parcel of the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty, and such equal treatment must, therefore, be considered not to have been impaired by Article III of the Hay-Pauncefote Treaty.

(3) Article III of the Hay-Pauncefote Treaty stipulates--as a consequence of the fact, expressed in the preamble of the Treaty, that the general principle of neutralisation of the Ca.n.a.l as established by Article VIII of the Clayton-Bulwer Treaty shall not be impaired by the Hay-Pauncefote Treaty--that the United States adopts, as the basis of the neutralisation of the Ca.n.a.l, six rules _substantially as embodied in the Suez Ca.n.a.l Treaty of Constantinople of 1888_. Now although the Suez Ca.n.a.l Treaty nowhere directly lays down a rule which is identical with the rule of Article III, No. 1, of the Hay-Pauncefote Treaty, it nevertheless insists upon equal treatment of the vessels of all nations by stating in Article XII:--"The high contracting parties, _in application of the principle of equality concerning the free use of the ca.n.a.l, a principle which forms one of the bases of the present treaty_, agree that...." That this principle of equality of all nations concerning the free use of the Suez Ca.n.a.l means equality of vessels of all nations with the exception of the vessels of Egypt or even of Turkey, has never been contended; such a contention would, I am sure, have been objected to by the parties to the Suez Ca.n.a.l Treaty. For this reason the term "all nations" in the Hay-Pauncefote Treaty can likewise only mean _all_ nations, including the United States.

(4) The literal meaning of the words "all nations" leads to the same conclusion. If something is stipulated with regard to "all" nations, every nation is meant without exception. If an exception had been contemplated, the words "all nations" could not have been used, and if all foreign nations only were contemplated, the words "all foreign nations" would have been made use of.

(5) There is also an argument from Article IV of the Hay-Pauncefote Treaty which states that no change of territorial sovereignty or of the international relations of the country or countries traversed by the Ca.n.a.l should affect the general principle of neutralisation or the obligation of the high contracting parties under the treaty. The general principle of neutralisation is, as laid down in the preamble of the Hay-Pauncefote Treaty, the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty, and it has already been shown--see above IV, No. 2, p. 24--that equal treatment of British, American, and any other nation's vessels using the Ca.n.a.l is part and parcel of that general principle of neutralisation.

(6) Lastly, Article IV of the Hay-Pauncefote Treaty must be read in conjunction with Article II. The latter does not exclusively contemplate the construction of the Ca.n.a.l by the United States, it contemplates rather the construction _under the auspices of the United States, either_ directly at her cost, _or_ by gift or loan of money to individuals or corporations, _or_ through subscription to or purchase of stocks and shares. The question may well be asked whether, in case the United States had not acquired the Ca.n.a.l territory and had not herself made the Ca.n.a.l, but had enabled a company to construct it by the grant of a loan, or by taking shares, and the like, she would then also have interpreted the words "all nations" to mean "all foreign nations," and would, therefore, have claimed the right to insist upon her own vessels enjoying such privileges in the use of the Ca.n.a.l as need not be granted to vessels of other nations. Can there be any doubt that she would _not_ have done it? And if we can reasonably presume that she would not have done it under those conditions, she cannot do it now after having acquired the Ca.n.a.l territory and having herself made the Ca.n.a.l, for Article IV declares that a change in the territorial sovereignty of the Ca.n.a.l territory shall neither affect the general principle of neutralisation nor the obligation of the parties under the treaty.