May 18, 1904.--Messrs. Day and Russell assigned the 68,888 shares of the railroad stock to the Secretary of War.

June 14, 1904.-John F. Wallace was appointed chief engineer, the appointment taking effect on June 1. He arrived on the Isthmus the 29th of June, and entered on his duties the 1st of July. June 20, 1904.--The currency agreement between the Isthmian Canal Commission, represented by the chairman, and the Secretary of War, and the fiscal commissioners of the Republic of Panama, was made.

June 22, 1904.-General Davis, as governor, concluded with the Panama authorities a provisional agreement delimiting the Zone and determining the boundaries of Colon and Panama carved out of the Zone by the Hay-Varilla treaty. The towns of Colon and Panama until then had never had defined boundaries.

June 24, 1904.-An executive order was issued putting into force on the Isthmus the Dingley tariff act, the effect of which was to make the Zone for tariff purposes a part of the United States and to exclude it from the Republic of Panama by a tariff wall. July 14, 1904.-Commissioners Walker, Burr, and Grunsky were made directors of the Panama Railroad Company; Commissioner Parsons was made a director September 15, and Commissioners Davis, Harrod, and Hecker were made directors on October 27. August 3, 1904.-The Commission reached the Isthmus and held daily sessions until September 7, when it returned to the United States. During this period it considered and adopted a great many impor

tant laws.

September 14, 1904.-Chief Engineer Wallace left the Isthmus for the United States, returning to Isthmus November 16.

November 17, 1904.-The Secretary of War left for Panama, arriving on the Isthmus November 27, and returning thence December 7, arrived in Washington December 14.

December 3, 1904.-The Executive order to establish a modus vivendi under the Spooner Act and the Hay-Varilla treaty with the authorities of Panama was issued. Subsequent slight modifications were made in December and January following, including a revocation of the order of June 24 (Dingley Act order) March 4, 1905.--The Fifty-eighth Congress expired, and the legislative power of the Commission over the Zone, by the terms of the act of April 28, 1904, ceased.

March 29, 1905. The resignations of the old Commission were requested and accepted.

March 29, 1905.-Mr. Wallace left the Isthmus, summoned to Washington to take part in the reorganization of the new Commission and to confer.

April 1, 1905. The new Commission was appointed and an order issued defining the organization.

April 15, 1905.-The annual meeting of the stockholders of the Panama Railroad Company was held and the Government first elected the full directory and a new set of officers, with Mr. Shonts as President and Mr. Wallace as Vice-president and General Manager. May 6, 1905.-General Davis was ordered home from the Isthmus, ill. May 16, 1905.-Mr. Wallace and Governor Magoon, under the new organization, sailed for the Isthmus; arrived on the Isthmus May 24..

June 5, 1905.-Mr. Wallace applied for and was granted leave to return for a conference as to his relations as chief engineer of Commission. June 22, 1905.-Mr. Wallace arrived at New York.

June 25, 1905.--Mr. Wallace and the Secretary of War had an interview at the Manhattan Hotel, in which Mr. Wallace's resignation was requested.

June 29, 1905.-The account of the interview between Mr. Wallace and the Secretary of War was published.

June 30, 1905.-Mr. Stevens was appointed Chief Engineer of the Canal.

June 30, 1905.-The Secretary of War left for the Philippines.

July 26, 1905.--Mr. Shonts, the chairman of the Commission, and Mr. Stevens, the chief engineer, reached the Isthmus.

September 1, 1905.-The Consulting Board of Engineers met and continued in sessions until December.

October 2, 1905.-The Secretary of War reached Washington from the Philippines.

October 27, 1905.-The Secretary of War left Washington for Panama, arriving at Colon November 2, and returning thence November 7 reached Washington November 15.

February 19, 1906.-The reports of the consulting engineers and of the Canal Commission on the type of the canal were submitted to Congress by the President.

THE GOVERNMENT OF THE ZONE, ITS JUDICIAL SYSTEM, AND WHAT IS NEEDED IN THE WAY OF ADDITIONAL LEGISLATION BY CONGRESS.

Under the painstaking and efficient administration of General Davis, together with the very satisfactory laws which were enacted by the Walker Commission, with the assistance and on the recommendation of their general counsel, Judge Magoon, the government of the Zone has been in every way satisfactory. Although the population has grown from two or three thousand people to 30,000, the public_order maintained has been excellent, taxes have been collected honestly and honestly expended, schools have been established and are being established as rapidly as conditions permit.

Under the order of the President of May 9, 1904, power was given to exclude undesirable characters coming into the Zone from its territory, and this has been exercised, in cases of extradition of fugitives. from justice from the Republic, charged with misdemeanor, in lieu of a provision in the treaty of extradition covering misdemeanors.

The judicial system consists of a supreme court of three judges and three courts of first instance in the three judicial districts into which the Zone is divided. Each member of the supreme court sits as a judge in a court of first instance, and appeals are taken from his decrees to the supreme court in bank. General Davis was opposed to the appointment of more than one judge, on the ground that the business to be done was not enough to justify the paying of three judges. I concur with him in the view that the business now is not sufficient to occupy the three judges as they ought to be occupied, but it seems necessary to have an appellate tribunal and not to submit the important civil and criminal cases which arise to the decision of one judge, especially when in the courts of first instance there can be no intervention of a jury.

Objection has been made that under this system a citizen of the United States charged with crime in the Zone would be tried by a

court sitting under the authority of the United States for his life or liberty and convicted without a jury. I submit that the power to do this has been upheld by the supreme court in the Philippines in a case of a citizen of the United States there convicted of a felony by the sentence of the court sitting without a jury. The Canal Zone is certainly no more a part of the United States proper than are the Philippines. It is impossible to distinguish the two cases. It would be utterly impracticable to have a jury trial in the Canal Zone. The people are not used to such a method of trial, and the establishment of the system would make it a farce. There would be few, if any, Americans resident in the Zone to make up a jury, except Government employees, and the natives are entirely unfitted to fill a panel. An American citizen who goes to the Zone must know that if he is charged with an offense he can not have a jury trial.

With deference to the suggestion which has been made here, I venture to point out that, were the Zone to be put under a military government, or to be constituted a military reservation, the only method of trial would be by court-martial, which is not supposed to be any less summary than the trial before civil judges. The constitution of the court is, I think, fortunate. Señor F. Mutis Duran is a citizen of the Republic of Panama, one of the leading lawyers of the Republic, who speaks English and is an authority on civil law. Objection is made to him that he is not a citizen of the United States. There is no law which requires that he should be, and in a jurisdiction of such anomalous character as that which the United States exercises in the midst of another people, in the belly of another country, so to speak, a jurisdiction in which many citizens of the Republic of Panama will be greatly interested, it seems just and fair that upon a court of three, one Panamanian should be appointed. Of the other two judges, Judge Gudger was consul-general in Panama for a number of years, and speaks English and Spanish and is quite familiar with the customs and laws of the Isthmus. The third judge, Judge Collins, was for two terms a judge of the superior court of Chicago and resigned to go into practice. The court is an excellent one.

The failure of Congress to continue the operation of the Act of April 28, 1904, deprived the President of the power to appoint a legislature for the Zone, but the Government went right on. On the expiration of the Fifty-eighth Congress, I telegraphed General Davis as follows:

DAVIS, Panama.

WASHINGTON, March 6, 1905.

The government of the Canal Zone will continue to be administered pursuant to the laws of the United States in force in that territory, the Executive orders heretofore issued and the laws of the Canal Zone enacted by the Isthmian Canal Commission during the period the Commission was authorized by act of Congress approved April 28, 1904, to exercise the powers of legislation. The government of the Canal Zone was established, the powers of the several branches defined and official duties distributed by legitimate exercise of lawful authority duly conferred by Congress. It is therefore a government de jure and defacto.

It seems to me, gentlemen, that there is no reason to be found in the operation of the present government of the Zone to justify the adoption of a different system. It would be quite sufficient if the act of April 28, 1904, were reenacted so as to give an opportunity for legislation, and if there were added to the act two provisions which Congress alone can supply. The first is that of appeal in a limited class.

of cases from the supreme court of the Zone to the Supreme Court of the United States, and the other is that permission should be given to the President to direct that suits may be brought by the United States to test the validity of land titles claimed by it, and that by permission of the President suits may be brought by others claiming an interest in land against the United States to determine title. By this short act I think that Congress will furnish all the governmental power to the President that may be needed to govern the Zone properly. I deprecate the enactment of a law, elaborate in its provisions, which would prove to be inelastic and quite unadapted to the government of so small a district as that of the Zone.

THE HAY-VARILLA TREATY AND THE POLITICAL RELATIONS BETWEEN THE UNITED STATES AND THE REPUBLIC OF PANAMA, AND THE NECESSITY AND REASONS FOR THE ISSUING OF THE EXECUTIVE ORDER OF DECEMBER 3, WITH ITS MODIFICATIONS, AS A MODUS VIVENDI.

It is of the greatest advantage to the United States Government in the pursuit of its object on the Isthmus to have the good will and cooperation of the people and Government of Panama. By the logic

of the situation we find ourselves and our work in the midst of these people, and it would certainly much increase the great burdens we have at all events, if we have to encounter the hostility of the people of the Isthmus, and the passive resistance, or lack of sympathy, of the Government.

I do not mean for a moment to indicate that the United States can not take care of itself and suppress. by force all obstruction and interferences with its work, but I think it must be conceded that it is greatly better that we live on the most amicable terms with the people of the Isthmus, provided we do not yield to them any rights necessary to us in carrying out our great enterprise.

The people of the Isthmus are vitally interested in the question of how far they may be permitted to trade with the people whom we introduce into the Zone for the purpose of building the canal. They are vitally interested in the rates which we charge upon the Panama Railroad Company and the accommodations which we furnish. They are vitally interested in the order which we preserve in the Zone. They are not so vitally interested in the precautions which we take against yellow fever, for the reason that they are generally immune from that disease; and whether they are vitally interested in sanitary measures taken against other diseases or not, most of the people are quite lacking in sympathy with rigid rules of sanitation which it is absolutely necessary for the Government of the United States to maintain and enforce, not only in the Zone itself, but in the contiguous territory, and especially in Colon and Panama. It is of importance, therefore, that we should obtain from the Panamanian Government not only the right to prescribe health ordinances which must be enforced in Panama and Colon, and other important towns which may be infected, but also that we should be given an opportunity to supervise the enforcement of these ordinances, because in Spanish-speaking countries it is not the form of the law or its declarations which are defective, but it is its administration. As I shall show a little further on, we have secured, by the good will of the Panamanian Government, an opportunity to take over from the beginning the enforcement of the health

regulations in every town from which it is likely that danger or disease may come, though the treaty granted only the right to enforce health regulations after the Panamanians had failed.

There are many other matters constantly arising between the American representative on the Isthmus and the Panamanian authorities calling for adjustment. We are living in the same house and family with them, so to speak, and if we do not get on in a friendly way it will be uncomfortable for both.

The attitude of the Panama people and Government, after the ratification of the Hay-Varilla treaty, was exceedingly cordial, and this continued until an unfortunate mistake in our policy in respect to the customs law of the Zone. When General Davis, who went to the Isthmus on the 17th of May, came to deal with President Amador and his cabinet in respect to the many matters it was necessary to adjust, he found no difficulty whatever in their acquiescing in his suggestions. Under the act of April 28, 1902, the President was directed to take possession of the Canal Zone. The Canal Zone was defined in the treaty to be 10 miles wide, extending to a distance of 5 miles on each side of the center line of the route of the canal to be constructed. The route of the canal was not fixed, except so far as it could be inferred by reference to the axis of the canal as laid out by the French. Again, the cities of Panama and Colon, and the harbors adjacent to such cities, were excluded from the grant, although they necessarily came within the zone thus described. The boundaries of these two cities never in their history were surveyed or fixed by law, nor was there any means of determining what were the harbors adjacent to these two cities. So indefinite was this description of the Zone that the execution of the Congressional direction to the President to take possession was impossible without friction and conflict with the Panama authorities, unless the Federal Executive, by himself or agent, made some adjustment or provisional agreement with them. Accordingly, General Davis did, on the 22d of June, make a provisional agreement of delimitation with the authorities of Panama, a copy of which is shown in the record, in the report of General Davis, on page 2300, et seq.

Ι

About this same time General Davis had recommended to the Commission the adoption on the Isthmus of a system of customs taxation, with rates approximating those of the Panamanian Government. I attach a copy of General Davis's dispatch (marked Exhibit 3) recommending a form of customs law, fixing the Dingley rates on certain articles, but fixing the Panamanian rates on others. The Commission presented the recommendation to me, and I, in turn, carried it to the President and the cabinet. For lack of information, and in the necessity for action, which General Davis emphasized, it was thought safer to extend the tariff laws of the United States as a whole to the Zone, and to make the Zone a part of the United States, in such a way that goods might be imported into it from any port in the United States free of duty, but that all goods and merchandise brought into the Zone from any foreign country, including the Republic of Panama, should pay the rates under the Dingley Act. General Davis was directed on June 24 to promulgate an order to this effect. The order contained two clauses looking to negotiation for the adjustment of tariff matters with the Panamanian authorities which should prevent friction. These two sections were not included in the order when it was published