The Panama Canal Conflict between Great Britain and the United States of America | Page 2

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].
[1] As regards the enactment of Section 5 of the Panama Canal Act that
the vessels of the Republic of Panama shall be entirely exempt from the
payment of tolls, see below IX, p. 48.
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