| [ I.] | Article III, No. 1 of the Hay-Pauncefote Treaty of 1901 and Section 5 of the American Panama Canal Act of 1912, pp. 5-6—The Memorandum of President Taft, pp. 7-9—The interpretation of Article III of the Hay-Pauncefote Treaty preferred by the United States, pp. 9-11. |
| [ II.] | The claim of the United States that she has granted the use of the Panama Canal under a conditional most-favoured-nation clause, pp. 11-14—The United States has never possessed the power of refusing to grant the use of the Panama Canal to vessels of foreign nations on terms of entire equality, p. 15—Such use is the condition under which Great Britain consented to the substitution of the Hay-Pauncefote Treaty for the Clayton-Bulwer Treaty, p. 16. |
| [ III.] | If the use of the Panama Canal by vessels of foreign nations were derived from most-favoured-nation treatment, the United States would not be bound to submit to the rules of Article III, Nos. 2-6, of the Hay-Pauncefote Treaty, p. 17—The Panama Canal would then lose its neutral character and would be in danger of eventually being made the theatre of war, p. 18—But it is the intention of the Hay-Pauncefote Treaty permanently to neutralise the Panama Canal, p. 18—The three objects of the neutralisation of an Inter Oceanic Canal, pp. 19-20—Is the United States, under the Hay-Pauncefote Treaty, subjected to more onerous conditions than Turkey and Egypt are under the Suez Canal Treaty?, pp. 20-22. |
| [ IV.] | Six reasons for the untenability of the American interpretation of Article III, No. 1, of the Hay-Pauncefote Treaty, p. 23—The stipulation of Article VIII of the Clayton-Bulwer Treaty, p. 23—The motive for, and the condition of, the substitution of the Hay-Pauncefote Treaty for the Clayton-Bulwer Treaty, p. 24—The rules of the Suez Canal Treaty which serve as the basis of the neutralisation of the Panama Canal, p. 25—Literal meaning of the words "all nations," p. 26—Importance of Article IV of the Hay-Pauncefote Treaty, p. 26—The various contingencies contemplated by Article II of the same treaty, p. 27. |
| [ V.] | The American contention that the exemption of American coasting trade vessels from the payment of canal tolls does not discriminate against foreign vessels, p. 29—Every vessel shall bear a proportionate part of the cost of the Panama Canal, p. 30—Meaning of the term "coasting trade" as upheld by the United States, pp. 30-33—Coasting trade vessels of the United States can trade with Mexican and South American ports, p. 33—Any special favour to a particular nation involves discrimination against other nations, p. 34. |
| [ VI.] | Is the United States prevented from refunding to her vessels the tolls levied upon them for use in the Panama Canal?, pp. 34-35—Difference of such refunding from exempting the vessels concerned from the payment of tolls, p. 35. |
| [ VII.] | Prominent members of the Senate and many American newspapers condemn the special privileges granted to American vessels by the Panama Canal Act, p. 36—The defeated Bard Amendment of 1900, p. 37. |
| [ VIII.] | Two schools of thought concerning the relations between International and Municipal Law, p. 38—The maxim that International Law overrules Municipal Law, p. 39—The doctrine that International and Municipal Law are two essentially different bodies of law, p. 39—The two maxims of the practice of the American Courts, pp. 40-42—President Taft's message to Congress suggesting a resolution which would have empowered the American Courts to decide the question as to whether Section 5 of the Panama Canal Act violates Article III, No. 1, of the Hay-Pauncefote Treaty, pp. 42-44. |
| [ IX.] | The Panama Canal conflict and the British-American Arbitration Treaty, pp. 44-45—Does the term "interests" mean "advantages" or "rights"?, p. 46—Pacta tertiis nec nocent nec prosunt, p. 47—The exemption of the vessels of the Republic of Panama from payment of tolls, pp. 48-50. |
| [ X.] | Why it must be expected that the Panama Canal conflict will be settled by arbitration, pp. 51-52—Mr Thomas Willing Balch's letter to the New York Sun, pp. 53-57. |
I.
The Panama Canal 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 Canal 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 Canal 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 Canal, 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 Canal[1] ] .
Now Great Britain asserts that since these enactments set forth in Section 5 of the Panama Canal 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 assertion made by Great Britain is met by the Memorandum which, when signing the Panama Canal Act, President Taft left to accompany the Act. The President contends that, in view of the fact that the Panama Canal 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 Canal upon such terms as she sees fit, and that she may, therefore, permit her vessels to pass through the Canal 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 Canal. 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 Canal, and for no other purpose. This article, the President says, is a declaration of policy by the United States that the Canal shall be neutral; that the attitude 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 Canal 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 Canal 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 Canal 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 Canal are merely a basis of the neutrality which the United States was willing should be characteristic of the Canal, 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 Canal 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 Canal 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 Canal. 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 Canal, 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 Canal upon equal terms with other nations, that other nations desiring to build up a particular trade, involving the use of the Canal, 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 Canal than were granted by any other nation.