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trying to get ourselves agreed on a $65 billion deficit. How can we talk about their economic problems, when such problems are really rampant all over the world as a result of the international energy crisis? With respect to confidence, I would tell you to go and see the people. There might be 3,000 in the Canal Zone, and we talked to the "Zonians." But, there are 6,000 Americans-double that number-living outside the zone in Panama City and elsewhere. If you listened to some of the zonians, you would think you were taking your life in your hands to go into Panama City. That is pure nonsense. There are 6,000 Americans living, working, eating, praying, teaching, just like normal people, out in Panama.

I had a chance to talk to the head of Pan-Am, and the man said that he had been in 17 countries-7 in Latin America. He said, "I can tell you, I have the best operational team." He said, "Maybe the team I had out in the Philippines would compare with it, but there is none better." He was talking about a Panamanian team. He made another interesting comment. He said, "In my years down here I have learned that the Panamanians are just as smart as the smartest we have in Latin America, and that is the Cubans." That was his experience.

I talked to the head of Inter-Comsat, which is Comsat, which handles 85 percent of all international communications. He brought down 2 years ago an operational team of 22. He says that he has sent all of them back but three. He says that they learn fast, they are competent and able, and they are not ill-prepared. Because there is 70 percent of them-a majority right now-this is a Panamanianrun canal this very minute.

The United States is "treating them good"—that is the next thing I hear. It was said this morning, "Treating them right."

Oh, boy. How can you really in conscience say such a thing? I will go into a little bit of that history, which we try to ignore. In talking about the relative per capita income, let's remember at the very beginning that we only paid the country of Panama $10 million, and we paid that "rancid" French company four times that amount, or $40 million. Can you imagine paying the French four times more than we paid Panama and our saying that "we treated them right"?

Can you imagine coming up here and taking the $10 million and investing it in New York real estate, when the country had a hard time getting it down there? The majority of that $10 million was taken by a New York bank. Read your friend David McCullough's book, "The Path Between the Seas" and get a feel and a sense of the history of "treating them right."

It sounds like the British rejoinder about India, "We treat them. nice, we treat them good, they shouldn't be free." "We treat them right down there."

Senators, just look over the entire history at $250,000 a year. I have computed that amount and you can correct my computation. Over the entire history of "treating them right," we paid them $70 millionless than the cost of a B-1 bomber. I am on the Space Subcommittee of the Commerce Committee and we tried to put up these communications satellites. We have already expended that amount just "blowing it" at Canaveral in the past 2 months. Seventy million dollars is what we have paid over 70 years.

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And some say to the Congress and say to the people of the United States that "we have treated them right." No wonder they are outraged down there.

It is said that the Supreme Court has found that we have title. Some keep on saying that we have title. I don't have the time to refute that. I notice you had the Attorney General before you, but I could not find in the record the Wilson v. Shaw case.

I ask the consent of the chairman that I be permitted to enter into the record the Department of Justice letter to me dated September 16, 1977, signed by John M. Harmon, the Assistant Attorney General in the Office of Legal Counsel because we might hear something about legal title, and the Wilson v. Shaw case of the Supreme Court has not found at all that we have title.

I think that record ought to be cleared up.

The CHAIRMAN. That will be inserted into the record at this point. [The information referred to follows:]


DEPARTMENT OF JUSTICE, Washington, D.C., September 16, 1977.

United States Senate, Washington, D.C.

DEAR SENATOR HOLLINGS: The Attorney General has asked me to respond to your letter of September 2, 1977 in which you ask for our views on the bearing of two Supreme Court cases, Wilson v. Shaw, 204 U.S. 33, and Vermilya-Brown v. Connell, 335 U.S. 402, on the interests of the United States in the Panama Canal Zone.

The basic provisions governing the rights of the United States in the Panama Canal Zone are Articles II and III of the Hay-Bunau Varilla Treaty of 1903 pursuant to which 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 said Canal of the width of ten miles extending to the distance of five iniles on each side of the center line of the route of the Canal to be constructed. Art. II.


*** all the rights, power and authority within the zone mentioned and described in Article II of this agreement and within the limits of all auxiliary lands and waters mentioned and described in said Artile II which the United States would possess and exercise if it were the sovereign of the territory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority. Art. III.

Article II deals with the kind of property interest the Republic of Panama would confer on the United States under private law, while Article III determines the rights of the United States in the Canal Zone under public and international law. It will be noted that Article II does not in terms confer title on the United States but rather the use, occupation and control in perpetuity. Again under Article III the United States was to have the rights, power and authority which it "would possess and exercise if it were the sovereign of the territory." This formulation indicates that the Republic of Panama was willing to permit the United States to exercise all the rights and powers of sovereignty and ownership in the Canal Zone, but not to relinquish sovereignty and title themselves, while the United States was content with the practical result that it could utilize in the Canal Zone all the powers it wanted and needed.

This point is made evident with respect to the sovereignty issue by a letter of Secretary of War Taft transmitted to Congress by President Theodore Roosevelt. That letter was dated January 12, 1905, i.e., less than a year after the ratification of the 1903 Treaty on February 25, 1904.

The truth is that while we have all the attributes of sovereignty necessary in the construction, maintenance, and protection of the canal, the very form in which these attributes are conferred in the treaty [of 1903] seems to preserve the titular sovereignty over the Canal Zone in the Republic of Panama, and as they have conceded to us complete judicial and police power and control over the Zone and the two ports at the end of the canal, I can see no reason for creating a resentment on the part of the people of the Isthmus by quarreling over that which is dear to them but which to us is of no real moment whatever. S. Doc. 401, 59th Cong., 2d Sess., 2392, 2399 (vol. III).

The decision of the Supreme Court to which you referred should be read against that background. Wilson v. Shaw, 204 U.S. 24 (1907) involved a taxpayer's suit against the Secretary of the Treasury seeking to enjoin the expenditure of money in connection with the construction of the Panama Canal. Rather than to dismiss the case in limine for lack of standing or for want of equity the Court chose to demonstrate that the plaintiff was not entitled to any relief. (At p. 31). The Court pointed out first that most of the plaintiff's objections had been obviated by legislation ratifying the actions of the executive branch. The Court then addressed itself to the argument that the United States had no power to engage in the work of digging the Canal because the Canal Zone was "no part of the territory of the United States, and the government therefore was powerless to do anything of the kind therein." (At p. 32). The Court answered that contention by quoting Article II and III of the 1903 Treaty. It then continued:

It is hypercritical to contend that the title of the United States is imperfect, and that the territory described does not belong to this Nation, because of the omission of some of the technical terms used in ordinary conveyances of real estate. (At p. 33).

In this context the passage can stand for no more than a statement that the United States had a sufficient interest in the Canal Zone to enable it to engage in the work of constructing the Canal therein.

If this sentence was intended to have a broader import its precedential value has been undermined by two subsequent decisions. In Luckenbach S.S. Co. v. United States, 280 U.S. 173, 177-178 (1930), the Court used far more careful language. The opinion of the Court, written by Chief Justice Taft, stated:

Whether the grant in the treaty amounts to a complete cession of territory and dominion to the United States or is so limited that it leaves at least titular sovereignty in the Republic of Panama, is a question which has been the subject of diverging opinions and is much discussed in the briefs. But for the purposes of this case the construction of the treaty in that regard need not be examined as an original question.

The Court concluded that the Canal Zone was a foreign port within the meaning of a statute governing the carriage of sea mail.

Vermilya-Brown v. Connell, 335 U.S. 377 (1949), the second case about which you inquired, involved the question whether the Fair Labor Standards Act applied only to these "territories and possessions" over which the United States had sovereignty of whether it extended also to those areas over which the United States had legislative jurisdiction but where it was not sovereign. Directly involved in that case was the base on Bermuda leased under the HullLothian Agreement, the so-called Destroyer deal. In that connection the Court observed that the Act was made applicable to the Canal Zone "admittedly territory over which we do not have sovereignty” (at p. 381). The opinion concluded (at p. 390):

[I]t is a matter of statutory interpretation as to whether or not statutes are effective beyond the limits of national sovereignty. It depends upon the purpose of the statute. Where as here the purpose is to regulate labor relations in an area vital to our national life, it seems reasonable to interpret its provisions to have force where the nation has sole power, rather than to limit the coverage to sovereignty. Such an interpretation is consonant with the Administrator's inclusion of the Panama Canal Zone within the meaning of 'possession.' ***" Emphasis supplied.

Vermilya-Brown then stands for the proposition that the United States has legislative jurisdiction but no sovereignty over the Canal Zone. It does not have any bearing on the question of title as a matter of private law.

I hope that this answers your inquiry.


Assistant Attorney General, Office of Legal Counsel.

Senator HOLLINGS. One minute someone says, "I don't know what sovereignty is." Well, Governor Reagan knows what sovereignty is. He has come around. But he does not appear here before this committee. He has learned a lot, however.

In his statement to the Subcommittee on the Separation of Powers before the U.S. Senate he does not want to appear before this committee he got through his act. You see, we are into a PR game. In his "act" on September 8 he did admit something, however. He said:

In that treaty we acquired the rights of sovereignty over the Canal Zone to the exclusion of the exercise of such rights by the Republic of Panama.

But he says:

We did not acquire

Can you imagine Governor Reagan saying this?

We did not acquire the Canal Zone as we did the Louisiana Purchase or Alaska. Many people think we did, but the fact is that the Canal Zone is unique. Now who started the rumor? Who started it? Heavens above, we heard it all last year against President Ford.

He goes on to say:

It seems clear, from the language of the 1903 treaty, that the intention of the Government was to acquire a firm, unshakable, legal basis for building, operating, and defending the canal. The language that says we shall act as if we were sovereign underscores the point, for we did not acquire the Canal Zone for the purpose of extracting minerals, tilling the soil, establishing a mercantile colony. The important thing to remember is that only one nation can exercise those sovereign rights.

Then he goes on-and I will get to the next point:

There is nothing to prevent a Panamanian regime from deciding one day to nationalize the canal and to demand that we leave immediately.

Well, there is nothing to prevent that right this minute. They are beginning to see the problem.

Senator CHURCH. Were you still quoting Governor Reagan at that point?

Senator HOLLINGS. Yes; I am still quoting Governor Reagan. I would ask consent to put his entire statement into the record at this point. This was Ronald Reagan before the Subcommittee on the Separation of Powers, U.S. Senate Committee on the Judiciary, Washington, D.C., Thursday, September 8, 1977, 10 a.m.

[The information referred to follows:]


Mr. Chairman and members of the subcommittee, thank you for inviting me to appear before you this morning to testify. You are concerned, as I am, with constitutional and other issues arising out of the proposed Panama Canal treaties, and I appreciate this opportunity to share my views with you.

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It is necessary first to comment as you have on the constitutional issue. Even though I am not a lawyer myself, I can appreciate the hours of research lawyers put into these matters. In reading about the Panama Canal, its history and its operation, as well as its national and international significance, I found myself spending more and more of my time studying the legal cases and opinions which bear on the canal and our relations with Panama. There is a plentiful supply of logic and common sense in those cases and opinions.

The executive branch argues that the President's treatymaking powers under the Constitution are enough to dispose of U.S. territory and property without any implementing legislation by the Congress; that transfers of property as specified in a treaty become self-executing once the Senate ratifies the treaty. Historically, Congress has held to a different view, though there have been enough ambiguities over the years to revive the argument with each new cause. At a glance, the United States Constitution does seem to be ambiguous about the matter:

Article II, Section 2, Clause 2 gives the President authority to negotiate and enter into treaties.

Article VI, Section 2 declares that treaties are the supreme law of the land. But, the Constitution also places a congressional act and a treaty on the same footing.

Article IV, Section 3, Clause 2 grants "The Congress", meaning both houses, the power to dispose of territory and other Federal property.

Treaties, of course, must not be in violation of the Constitution which grants various powers to the President, the Congress and the States. All of these, at face value, are unlimited, but in reality they are subject to the limitations imposed by other sections of the Constitution, in the form of specific prohibitions, or by the fact that the Constitution vests concurrent or exclusive power in certain units of the Government.

Whether the proposed Panama Canal treaty needs implementing legislation in order to dispose of U.S. property lies in this question of "concurrent" versus "exclusive" power.

In his recent paper titled "The Treaty Power and Congressional Power in Conflict: Cession of United States Property in the Canal Zone to Panama”, Kenneth Merin, Legislative Attorney of the American Law Division of the Library of Congress, makes the point that, “The Constitutional issue is not, or should not be, involvement of the House of Representatives in treaty negotiations", but "... whether, by virtue of Article IV, Congress exercises exclusive or concurrent power over the disposal of territory and property."

Presumably, if it could be proved that Congress' power is concurrent, the proposed Panama Canal treaties would be complete and self-executing if ratified by the Senate. If, on the other hand, the weight of the evidence is for the other view-that the Congress holds exclusive power over the disposal of territory and property-then Senate ratification is not enough. Implementing legislation by the House of Representatives would be required. I believe that careful examination of legal cases as well as historical precedent leads one to the inevitable conclusion that Congress does hold exclusive power and that implementing legislation will be needed in the case of the Panama Canal treaties.

Now, the executive branch may cite as evidence to support its position the treaties we entered into in the last century with a number of Indian tribes. In these treaties we appeared to be ceding land to the tribes without requiring implementing legislation. The practice was stopped altogether more than a century ago, with the passage of the Indian Appropriations Act of 1872, but a closer look at the Indian land treaties shows they were very different from this proposal to turn over U.S. property in the Canal Zone to a foreign government.

The American Indian tribes have always had a unique relationship with the Federal Government and have not been considered foreign nations. When lands were turned over, the tribes were usually given "right of occupancy", with ultimate authority over the lands still to be held by the Federal Government. Even in cases where the treaties gave the tribes the land in fee simple, the Government reserved the right of eminent domain and sometimes the right to hold veto power over transfer of the land to third parties. Neither of these reservations would apply, of course, when turning property over to a foreign nation, such as Panama.

Other arguments will be put forward to support the contention that implementing legislation is not needed in order to dispose of our property in the Canal Zone. One may have to do with treaties which involved boundary claims. The

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