The first and third of these treaties may with propriety be considered in the first place, because they contain either matters introductory, or matters relating retrospectively, to the Hay-Pauncefote treaty itself.

The Clayton-Bulwer treaty of 1850 was largely a self-denying convention by which Great Britain and the United States undertook to refrain from assuming dominion for the purpose of interoceanic communication over any part of Central America. In so far as directly concerns the present controversy, the material parts of the Clayton-Bulwer treaty may be summarized as follows: The contracting powers proposed to set forth their intentions with reference to any means of communication by ship canal to be constructed between the Atlantic and Pacific Oceans; they bound themselves not to obtain any exclusive control over such ship canal, and not to acquire, directly or indirectly, for the subjects or citizens of the one any rights or advantages in regard to commerce or navigation through such canal which should not be offered on the same terms to the subjects or citizens of the other; they bound themselves (art. 3) to protect contractors for the making of such canal if undertaken on fair and equitable lines; they undertook (art. 4) to use their influence to procure the establishment of two free ports, one at each end of the said canal; they bound themselves (art. 5) to withdraw protection from the persons or company undertaking or managing the same, or establishing regulations concerning the traffic thereupon, in a way contrary to the spirit and intention of the convention, either by making unfair discriminations in favor of the commerce of one of the contracting parties over the commerce of the other, or by imposing oppressive exactions or unreasonable tolls; they engaged (art. 6) to invite every friendly State to enter into the like stipulations, to the end that all other States might share in the honor and advantage, affirming it to be the great desire of the convention that the canal was to be constructed and maintained for the benefit of mankind on equal terms to all; they agreed (art. 7) to give their encouragement to such persons or company as should first offer to commence the same with the necessary capital. Then follows the famous article 8.

It will be observed that the contemplation of the Clayton-Bulwer treaty was the undertaking by private persons with sufficient capital, under the encouragement and protection of the high contracting parties, to create the canal, and the stipulation that after the creation of the canal the high contracting parties, with the adhesion of as many friendly States as possible, were negatively to seek no preponderating control, and affirmatively to enforce equity and equality in the treatment of the commerce, not only of the parties to that convention but of all the States throughout the commercial world.

It must, of course, be conceded by all disputants that the scope and bearing of the Hay-Pauncefote treaty, which was brought into existence 50 years after, were of a very different kind. Shortly, the main differences may be grouped as follows:

(a) The canal was not to be formed by private contractors with the benevolent encouragement of Great Britain and the United States, but was to be created wholly with the capital and through the efforts of the United States. (b) The adhesion of States other than Great Britain and the United States was not to be invited, nor were they to be asked to enter into stipulations similar to those to which the contracted States bound themselves.

(c) Instead of the United States and Great Britain and such friendly States as adhered jointly affording their guaranty for the maintenance of neutrality, it was intended that the United States alone should be the guardian of the status of the canal. This was a matter to some extent discussed in the course of the negotiations which led up to the ratification of the Hay-Pauncefote treaty, the object of Great Britain being broadly stated to be the avoidance of the detriment of being placed in a less advantageous position than other commercial powers.

The importance of the close scrutiny of the Clayton-Bulwer treaty lies, of course, in the ascertainment of the "general principle of neutralization" thereby established. It seems expedient here to extract and define that " general principle" in so far as it can be deduced from the wording of that treaty, bearing in mind that the exclusive control over the canal is to-day no longer barred, but on the contrary assigned, to the United States. It was in the year 1850 contemplated that the canal would be a private undertaking, that the promoters and administrators of that undertaking might emanate from, and might to a certain extent be under the dominating control or influence of, Great Britain or of the United States, or of one or more of the States adhering to

and guaranteeing the convention and its enforcement, and that such dominating State might seek to acquire from the undertakers for its subjects or citizens differential rights or advantages in regard to navigation through the canal. In other words, all commercial States being regarded as potential customers of the private enterprise, it was provided that none should influence a preference to the detriment of any other. They further bound themselves to give protection and encouragement to such private undertakers who should provide capital on the one hand and avoid oppressive exactions or unreasonable tolls on the other. Their attitude was, in other words (if one may venture an analogy), that of a combination of shipping companies engaged in rival operations, jointly agreeing to finance a proposed canal undertaking on the basis of an agreement between themselves not to seek from such undertaking any exclusive advantages or preferential treatment. The essence of the neutrality bargain which within the Clayton-Bulwer treaty extends to every scheme of interoceanic communication was the maintenance of the status quo of the conditions of commercial rivalry. To this general principle we propose to return in the discussion of the precise point at issue.

A review of the material documents would be incomplete without reference to the Hay-Bunau-Varilla treaty, under which the United States acquired from the Republic of Panama, in 1903, the territorial rights to the strip of land through which the canal is cut. Under this treaty (art. 18) the canal has to be opened in conformity with the stipulations of the Hay-Pauncefote treaty. It is true that this treaty in itself throws little light on the true construction of the treaty rights of Great Britain. It, however, is clearly a convention (dealing, as it does, with the title to a portion of territory) within the cognizance of the Supreme Court of the United States.

The Hay-Pauncefote treaty of 1901 was "to remove any objection which may arise out of the convention of the 19th April, 1850, commonly called the Clayton-Bulwer treaty, to the construction of such canal under the auspices of the Government of the United States, imposing the general principle of neutralization established in article 8 of that convention." The provisions of the treaty may be summarized as follows:

Article 1 supersedes the convention of 1850 in any event for the purposes of the proposed canal, and possibly altogether. Article 2 provides that the United States shall construct, at its own cost, the canal, having the exclusive right of providing for the regulation and management thereof. Article 3 provides that the United States should adopt as the basis of the neutralization of such canal the following rules, substantially as embodied in the convention of Constantinople, signed the 28th October, 1888, for the free navigation of the Suez Canal: (1) 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; such conditions and charges of traffic shall be just and equitable. (2) The United States is to be at liberty to maintain military police for the protection of the canal. (3) Provisions are added regarding the vessels of war of a belligerent. (4) No belligerent shall embark or disembark troops. Waters adjacent or within 3 military miles of the canal shall be regarded as within its ambit. (6) The plant, etc., part of the canal shall enjoy immunity. Article 4 provides that no change of territorial sovereignty or of international relations of the country or countries traversed by the canal shall affect the general principle of neutralization.

(5)

The "general principle of neutralization" established by the Clayton-Bulwer treaty has been found to be the maintenance of the status quo of the conditions of commercial rivalry. The essence of the difference between the treaty of 1850 and the treaty of 1901 is to be found in the fact that, following out the analogy hazarded above, it is no longer an instance of a combination of shipowners regarding a private canal undertaking, but an agreement between two individual shipowners that one of them shall construct the canal and maintain the existing conditions of commercial rivalry without detriment to the other or to other shipowners, even though not parties to the contract, for the time being making use of the canal, and consequently observing the above rules.

It can scarcely be said that the wording of the Hay-Pauncefote treaty is happy. The unfortunate incorporation in the preamble of the provisions of

the Suez Canal convention is an instance of the evil of the process of legislation by reference. The scheme of that convention has reference to an agreement between parties in the nature of sovereign States external to the actual ownership and control of a canal owned by a commercial company, whereas the Hay-Pauncefote treaty implies the plan of a State-owned undertaking.

The present controversy has been too much the subject of recent controversy to make it necessary to set forth the exact words of the actual provision of the Legislature of the United States which are said to violate international agreement. Shortly, the main ground of objection is to the proposal to grant immunity from tolls to the coasting vessels of United States nationality passing through the canal.

It seems clear that one attractive argument used by those who take exception to the action of the United States must be ruled out. It is sought to be said that by reason of the concession to unduly favored vessels the expense of the undertaking must of necessity be borne in a larger proportion by the vessels using the canal. This is upon the assumption that the canal dues paid by vessels passing through in any one year are at least in their totality to amount to a sum representing the whole annual burden, including repayment of capital construction expenditure by means of a sinking fund, as well as the actual expenses of maintaining and working the canal. It is of course possible that the canal dues to be levied are to be calculated on this basis, but there is no treaty obligation on the part of any international parties that the canal shall be in the nature of a self-paying concern. So long as the canal dues fall within the condition of the Hay-Pauncefote treaty that they are to be “just and equitable," it seems that the United States may elect to treat the canal as a losing or as a profit-making commercial speculation. The Panama Canal, however, will have cost in construction some £80,000,000, and this sum, with its consequent annual burden increased by all the liabilities of maintenance, working, police, and protection, is wholly a charge falling upon the finances of the United States.

Granted that the highest tolls commercially possible are levied upon ships passing through the canal, it is not reasonably probable that the undertaking will be other than a losing one from the point of view of administrative profit and loss. The real question, therefore, is whether there is any interference with the general principle of neutralization," which involves an infringement of existing conditions of commercial rivalry.

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It must be conceded that direct competition upon an unfavorable basis can not arise. The nationals of no State other than those of the United States can own vessels employed in the coasting trade of the United States. Naturally this does not conclude the question, because an extension of the coasting trade might conceivably be detrimental to ocean-borne traffic. Is such an interference with the conditions of commercial rivalry forbidden by convention?

Now, the rules to be applied to the interpretation of treaties, as laid down by William Edward Hall (Int. Law, 5th ed., p. 335), are few and clear. They must be construed according to the plain and reasonable sense to be attached to the ordinary meaning of words; when terms used in a treaty have a different legal sense within the two contracting States, they are to be understood in the sense which is proper to them within the State to which the conditions containing them applies; when the words of a treaty fail to yield a plain and reasonable sense by recourse to the general sense and spirit of the treaty as shown by the context or by the provisions of the instrument as a whole, or by taking a reasonable instead of a literal sense of the words. No treaty, again, can be taken to restrict by implication the exercise of rights of sovereignty or property or self-preservation whilst whatever may be necessary to the enjoyment of things granted by it is understood to be tacitly given or imposed by the gift or imposition of that upon which it is attendant.

The question, therefore, must be solved in one of three ways—

(1) By the precise words of the particular provisions of the Hay-Pauncefote treaty;

(2) By the context and preamble of that treaty; or

(3) By what may be termed natural justice.

It will scarcely be contended that natural justice, unfettered by documentary construction, would refuse to the United States the privilege of the limited discrimination incorporated in the bill.

The following considerations may be briefly noted:

(a) The importance to the United States of the encouragement of their coasting trade compared with its relative unimportance to other States using the canal. Compare the percentage of ocean-borne goods carried by American ships in the year of the Clayton-Bulwer treaty with that appearing in the Navigation Report for the year preceding the Hay-Pauncefote convention and it will be found to have declined from 75.2 per cent to 9.3; that is to say, a reduction of from nearly four-fifths to under one-tenth. Compare, on the other hand, the increased statistics during the same period of the coasting trade, and the trend is precisely in the opposite direction.

(b) The responsibility cast upon the United States not only in the con struction and management, but also in the maintenance and protection of the canal.

(c) The risks, whatever they may be, inherent to every commercial undertaking, and essentially to such an enterprise risks which deterred all comers to such an extent that the canal has only been brought into concrete being after the delay or failure of 50 years.

(d) The absence of any guaranty of monopoly of traffic across Central America, because conceivably canals and probably other means of communication-e. g., railway facilities-may be brought into active competition.

(c) There is no international convention of recognition of neutrality, except by Great Britain, and no guaranty of the maintenance of neutrality by any State whatever. Even the provision for the neutrality of alternative routes contained in the Clayton-Bulwer treaty has possibly been superseded.

(f) If there be by implication a guaranty on the part of Great Britain not to encourage or discourage the use of the canal by any system of bounty, subsidy, or the like, there is no obligation upon any other State, save that of observing the rules elaborated in the Hay-Pauncefote treaty during the actual user of the canal.

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The case against the United States must therefore be based upon the strict construction of the precise words of the treaty, adopting the language of Lord Clarendon in the construction of the Clayton-Bulwer treaty in the case of the "Mosquito Indians," alleging that "the true construction of a treaty must be deduced from the literal meaning of the words employed in the framing." It is necessary for the opponents of the United States to contend that the expression "free and open to the vessels of all nations observing these rules" implies including the nation owning and administering the canal," and that the expression "no discrimination against any such nation "— i. e., observing these rules "-implies or in favor of the nation which enforces these rules." It seems that this would be a strained, though perfectly possible, construction. But it is scarcely a construction of "literal meaning." Nay, more, having regard to the obvious intention to deal with the position of States external to the convention, and not even intended to signify their adherence thereto, it is submitted that such a construction is the necessary or even the reasonable one.

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Equally it would appear that recourse to context and preamble would enable the United States, having regard to the "general sense and spirit," to succeed. There is no contractual undertaking by any States outside the United States on the one hand, and Great Britain on the other. There is no provision analogous to that contained in the Clayton-Bulwer treaty providing for the adherence to the convention of any third State. The whole of the advantages are to be enjoyed by any State for the time being accepting the conditions of working, without any obligation on the part of any State to remain bound to such conditions further than during periods which may be of intermittent user. Even between the actual contracting parties, Great Britain and the United States, there are no collateral or reciprocal obligations by way of consideration explicitly undertaken. Any State for the time being using the canal, and so assenting to be bound by the conditions, can, by bounty to its own vessels or in any other way not amounting to a breach of international obligations, differentiate in favor of its own vessels and against those of any other State, including the United States.

To sum up, it is reasonably arguable-

(a) That the United States can support its action on the precise words of the material articles of the treaty; that its case is strengthened by reference to the preamble and context, and that its case is difficult to challenge on grounds of general justice;

(b) That there is no international obligation to submit the construction of its legislative act to any process of arbitration; and

(c) That any aggrieved party has an appropriate, an impartial, and a competent tribunal in the Supreme Court of the United States.

II. The Panama Canal Act.

(By C. A. Hereshoff Bartlett, LL. B.)

The Republic of Panama comprises some 40,000 square miles and has a population of about 300.000. On November 18, 1903, a treaty was signed between the Republic and the United States whereby the Republic of Panama granted to the United States in perpetuity the use, occupation, and control of a zone of land and land under water for the construction, maintenance, operation, sanitation, and protection of a canal of the width of 10 miles, 5 miles on both sides of the center thereof, and extending into the Pacific Ocean and Caribbean Sea 3 miles from low water. By this treaty the Republic of Panama granted to the United States all the rights, power, and authority of a sovereign. The grant was a grant of land and sovereign rights thereover and not a mere concession or privilege. The Panama Canal Zone is a territory appurtenant and belonging to the United States. This zone is as much and as exclusively the property of the United States as are the rivers and Territory of Alaska, and is subject to such laws as the Congress of the United States may make respecting it; and, when made, such laws become the sole and only rule of action within the territory, even superseding the provisions of a treaty in conflict therewith. Congress has plenary power under the Constitution of the United States over its Territories, and its power to deal with trade or commerce in the Territories does not depend upon the authority of the interstate-commerce clause of the Constitution; and this plenary power gives to Congress the undoubted right to pass laws and make uniform regulations governing the use of its appurtenant territory.

In conformity with this power Congress in August last passed an act to provide for the opening, maintenance, protection, and operation of the Panama Canal and the sanitation and government of the Canal Zone, by section 5 of which it is provided that no tolls shall be levied upon vessels engaged in the coastwise trade of the United States. After the passage of this act the British Government filed a protest thereto, alleging that the act of Congress was in violation of the Hay-Pauncefote treaty—

(a) Because it vests the President with discretion to discriminate in fixing toils in favor of American ships and against foreign ships engaged in foreign trade, although there is nothing in the act to compel the President to make such a discrimination.

(b) Because it discriminates in favor of the coastwise trade of the United States by providing that no tolls shall be charged on vessels engaged in that trade passing through the canal.

The passage of this act and the affixing of his signature thereto by the President has raised such diversity of opinion both at home and abroad as to whether it is or is not in conflict with the Hay-Pauncefote treaty that it becomes proper to review this subject from an impartial and unprejudiced point of view, entirely aside from any question of nationality or politics.

The provision of the Hay-Pauncefote treaty involved is one of the rules adopted by the United States as the basis of the neutralization of the canal, and is as follows:

1. 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. Such conditions and charges of traffic shall be just and equitable.

It is a well-recognized principle that, like other contracts, treaties are to be read in the light of the conditions and circumstances existing at the time they were entered into, with a view to effecting the objects and purposes of the States thereby contracting. It becomes necessary, therefore, to ascertain what were the conditions and circumstances existing at the time when the Hay-Pauncefote treaty was concluded.

The Hay-Pauncefote treaty, in mentioning vessels of commerce of all nations, never contemplated such an eventuality as the United States becoming the owner