Protests the Establishment of Ports, Tariffs, Custom-Hous and Post Offices in the Canal Zone, August 11, 1904.*

No. 7.1

Mr. de Obaldia to Mr. Hay.

[Translation.]

LEGATION OF PANAMA, Washington, August 11, 1904.

EXCELLENCY: I have the honor to transmit to you the statemen with regard to the difficulties which have arisen in Panama owing to the interpretation given to some obscure points in the Bunau Varilla-Hay treaty. In this statement I have endeavored to clear up these points, which, after being elucidated, seem to me to show that the conduct observed by the governor of the canal zone is not in conformity with the letter and spirit of the treaty.

When your excellency shall have studied this statement in detail, you will find that the Republic of Panama is clearly and unmistakably right in demanding of this nation that its rights be recognized, which, if denied it, would bring upon it ruin and dishonor as an autonomous entity.

I do not doubt that your excellency, being guided by justice and equity, will determine this incident, as I hope to have demonstrated it in the acompanying statement.

My Government trusts that your excellency's decision will be in accord with the conduct with which you have always observed and which reflects such great credit on your industrious public life. With feelings of the highest regard, etc.,

J. D. DE OBALDÍA.

Mr. de Obaldía to Mr. Hay.

[Translation.]

No. 6.]

LEGATION OF PANAMA, Washington, August 11, 1904. EXCELLENCY: I have received instructions from my Government to take before your excellency's illustrious Government steps looking toward the obtaining of a satisfactory settlement of the difficulties which have unexpectedly arisen between the authorities of the Republic and the governor of the canal zone, owing to the interpretation given by the latter to some of the clauses of the agreement concerning the Isthmian Canal concluded between the two countries on November 18 last.

There are several points on which a difference of opinion has arisen, and it is necessary, first of all, to make a general estimate of the treaty as a whole, in order to apply, in each case, the interpretation which is most in conformity with the harmony among its various clauses, most in concord with previous declarations made by

*Foreign Relations of the United States, 1904, pp. 597–607.

your excellency's illustrious Government, and most suited for the. maintenance of the cordiality which has existed between the two countries since my country became part of the family of nations.

As an indispensable antecedent of the Hay-Varilla_convention must be regarded the Hay-Herran treaty, concluded January 22, 1903, approved by the United States Senate, and rejected by the Republic of Colombia.

Both treaties were concluded with the same principal objectviz, to facilitate for the United States the construction of a ship canal between the Atlantic and Pacific oceans. In neither case was it the intention of the high contracting parties to conclude a treaty for the cession of territory or for the absolute renunciation of sovereignty on the part of either of them. Your excellency's illustrious Government, in order to make clear before the world, and especially before the nations of Central and South America, the real object of the negotiations which resulted in the conclusion of the Hay-Herran treaty, made in the latter the formal and categorical declaration contained in Article IV, which reads as follows:

The rights and privileges conceded to the United States by the terms of this convention shall not affect the sovereignty of the Republic of Colombia over the territory within whose limits such rights and privileges are to be exercised. The Government of the United States fully recognizes this sovereignity and disclaims any intention to minimize it in any manner or to increase its own ter ritory at the expense of Colombla or of any of the sister republics of Central and South America; it desires, on the contrary, to strengthen the power of the republics on this continent, and to promote, develop, and preserve their prosperity and independence.

This solemn declaration, made in a public document of the most elevated character, as is a treaty among nations, involves, in the opinion of my Government, the perpetual promise of a generous and noble line of conduct on the part of the United States, a promise which has not been destroyed by the fact that the Hay-Herran treaty no longer exists, for the declaration in which it is embodied expresses the purpose of following a frank and honest policy, accepted and confirmed afterwards by the Senate of the United States, which is the highest legislative body in this country. This declaration, as your excellency knows, had for its object the removal of the fear existing in the American republics of a more or less remote absorption by this nation, which is so powerful in every respect; and it had a decisive influence on the Government of my country in causing it to approve unreservedly and without modification the Varilla-Hay convention. As my Government considers that this solemn and spontaneous declaration has a perpetual and definitive character, it trusts that your excellency's illustrious Government will interpret the agreement concerning the Isthmian Canal in the manner most harmonious and consistent therewith, and in this conviction I will now lay before your excellency some other more specific observations.

I.

THE AGREEMENT CONCERNING THE ISTHMIAN CANAL DOES NOT IMPLY CESSION OF TERRITORY AND ABSOLUTE TRANSFER OF SOVEREIGNTY.

The simple reading of Article IV of the Hay-Herran treaty, which is an antecedent of inappreciable value, inasmuch as therein is

expressed the intention of the United States in negotiating with Colombia, is sufficient to establish the truth of the proposition which I have just set forth; but there are, besides, powerful reasons to sustain it, deduced from the Varilla-Hay treaty, which is identical in most of its clauses with the Hay-Herran treaty. In effect, as I have had the honor to observe to your excellency before in this same note, both treaties, relate to the concession to the United States of the use, occupation, and control of certain lands and waters in order to facilitate the construction, preservation, exploitation, sanitation, and protection of a maritime canal between the Atlantic and the Pacific. This is the principal and dominant idea in both documents; in 'neither of them was there used any expression implying transfer of the absolute dominion over the territory, much less the transfer of sovereignty.

This concession might have been made by Colombia before November 3, 1903, and by the Republic of Panama after that date to any legal company or association, without its being possible, by reason of the grant, that a right should be claimed to the dominion over the strip of land in which the work was to be executed, or much less the exercise of absolute sovereignty.

The legal relation in this supposed case, just as in the present case, would be that which exists between a lessor and a lessee. Owing solely to the fact that the lessee is another republic, there may be confusion respecting the character and the essence of the contractual relations created by the agreement.

If the intention of the high contracting parties in either of the two cases to which I have just referred had been the absolute cession of the dominion and sovereignty of the territory, both treaties might have been reduced to two articles, one specifying the thing sold and the other expressing the price of sale; but both parties understanding that this was not the case, and satisfied that the intention was otherwise, found themselves obliged to fix, as far as possible, the relations between the lessor and the lessee, taking into account the peculiar circumstances of that highly important negotiation and the necessities that might arise owing to the very nature of the work which was about to be undertaken.

Thus, for example, inasmuch as the enterprise was to be one of indisputable utility, in which were to be invested considerable sums from the Federal Treasury of the United States, and in connection with which daily controversies might arise with regard to the work, would it have been wise on the part of Colombia, first, and Panama afterwards, to demand absolute jurisdiction over all these questions and to claim the exclusive power to settle and decide them when one of the parties was a foreign nation?

It was natural that some provision should be made in this regard, and hence certainly arose the idea of conferring on the United States the authority of establishing a restricted judicial power in this zone.

In the Varilla-Hay treaty this concession was broader than in the Hay-Herran treaty, but still it was not absolute.

Article III of the Varilla-Hay treaty, the only one treating of the rights of sovereignty, stipulates that the United States should (shall) possess and exercise the rights, power, and authority which the Republic of Panama conceded it over the zone, as if it were sovereign in the

territory; but this expression implicitly conveys the idea that it is not sovereign, and although in the final part of the article is added" to the entire exclusion of the exercise by the Republic of Panama of such sovereign rights, power, and authority," these words, which are in obvious contradiction to those which precede, must be interpreted in accordance with other subsequent articles of the agreement which demonstrate the real intention of the contracting parties.

In Article VI, for instance, the property rights of private persons in the zone are treated of, and it was agreed that all damages caused by reason of the concessions made to the United States or of the construction, preservation, exploitation, sanitation, and protection of the canal and its auxiliary works should be investigated, appraised, and decided upon by a mixed commission appointed by the two countries and whose decisions should be final. If the United States possessed the sovereignty over the zone to the absolute exclusion of the Republic of Panama, this clause would be inexplicable.

By Article X the Republic of Panama obligates itself not to levy or to allow to be levied contributions or taxes of any kind, either national, departmental, or municipal on the canal itself or on the railroad and auxiliary works or on its tugs and vessels, nor on the employees, workmen, and other persons in the service of the canal, of the railroad, and of the auxiliary works; but from this stipulation it is deduced that it does preserve the right to levy these contributions on property and persons not comprised in the exception.

According to Article XII the Republic of Panama is obliged to permit the immigration and free access to the lands and workshops of the canal and of its auxiliary works, of all employees and workmen of whatever nationality who may arrive, either already contracted for or in search of work, and it obligates itself to consider them as exempt. from military service.

In conformity with Article XIII the United States may import into the zone and the auxiliary lands of the canal, free of duty on the part of the Republic of Panama, all kinds of ships, dredges, machines, etc., necessary and suitable for the construction, exploitation, sanitation, and protection of the canal, as well as everything necessary for the laborers, employees, and their families. The same observation should be made regarding this article as I made with regard to Article X.

Finally, it was agreed between the parties, according to Article XXIII, that the United States should enjoy the right to employ its own land and naval forces for the protection of the railroad, the canal, and its auxiliary works, and that it might construct fortifications for this purpose.

As is deduced from these stipulations contained in clauses subsequent to Article III, and all in clear, precise, and peremptory terms, the Republic of Panama still preserves part of the judicial power of the canal zone; she has pledged herself to permit the entry into the canal zone of certain immigrants, which implies that if the clause did not exist she could prevent it; she has obligated herself not to levy contributions on the canal or its auxiliary works, etc., which demonstrates that if it were not for the special renunciation contained in the article she would preserve the sovereign right to levy them; she has agreed to admit the introduction into the zone, free of import duties, of all articles necessary for the canal, the auxiliary works, and the

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employees thereof, an obligation which can only be contracted by one having the authority and right to levy such taxes; finally, she has authorized the United States to use its land and naval forces in case they should be necessary for the protection of the canal, which neces sarily implies that if this clause did not exist the United States would not have such authority.

None of the stipulations which I have enumerated would have any raison d'être if the Republic of Panama had renounced the dominion over the zone and her rights of sovereignty absolutely;, but her intention never was to renounce these rights, nor was it the purpose of the United States to acquire them, for the latter, quite to the contrary, has declared that it does not wish to increase its territory at the expense of Colombia or of any other republic of Central or South America, and there is nothing to justify the most remote suspicion that this declaration is not sincere.

In public treaties the existence of useless or contradictory clauses can not be admitted. Those which appear useless must be interpreted in such manner as to produce some effect, and those which are contradictory should be interpreted by taking into account the tenor of the last ones, for it is to be supposed, as Woolsey says, that these express the last idea or thought of the parties.

If there should exist any discrepency between the clauses to which I have just called your excellency's attention and the third one of the Bunau-Varilla-Hay treaty, it is obvious that the last ones should prevail, because they are more specific and more clear, and because they are more in conformity than that one with the remaining clauses of the same treaty and with the external policy of the United States with regard to the South and Central American nations.

My Government considers that the idea of the contracting parties is obscure in everything relating to these delicate questions of dominion and sovereignty; but after a careful study the conclusion may be arrived at that the two countries exercise conjointly the sovereignty over the territory of the canal zone, and that in the cases expressly specified in the Bunau-Varilla-Hay treaty the use of such right be longs to the United States by virtue of delegation from the Republic of Panama, but in all that concerning which the treaty is silent the rights of the Republic of Panama remain unalterable and complete. Such a situation, which would give rise to constant disputes if it were prolonged, necessitates the conclusion of an explanatory convention to be discussed by the parties in the conciliatory spirit which has hitherto prevailed in the relations of the two countries, and to this the Government of my country is disposed.

Passing on now to the special questions which have been raised, your excellency will please permit me to treat them separately.

II.

PORTS.

In the canal zone, as described in Article II of the Bunau-VarillaHay treaty, are not included the cities of Panama and Colon or their adjacent ports. Both have been expressly excluded from said zone, and consequently, even conceding the assumption that the United States possesses the right of sovereignty over the zone, such right