Part 2

If this is correct, it might be maintained that the United States is, under the Hay-Pauncefote Treaty, subjected to more onerous conditions than Turkey and Egypt are under the Suez Canal Treaty, for Article X of the latter stipulates that Egypt and Turkey shall not by the injunctions of Articles IV, V, VII, and VIII of the same treaty be considered to be prevented from taking such measures as might be necessary to ensure the defence of Egypt and Turkey by their own armed forces. But this opinion would not be justified because in this respect the case of the Panama Canal is entirely different from that of the Suez Canal. Whereas the Panama Canal is an outlying part of the United States, and no attack on the main territory of the United States is possible from the Panama Canal, an attack on Egypt as well as on Turkey is quite possible from the Suez Canal. There is, therefore, no occasion for the United States to take such measures in the Panama Canal as might be necessary to ensure the defence of her main territory. Indeed there might be occasion for her to take such measures in the Canal as are necessary to ensure the defence of the Canal and the surrounding territory, if a belligerent threatened to attack it. Although this case is not directly provided for by the Hay-Pauncefote Treaty--in contradistinction to Article XXIII of the Hay-Varilla Treaty--there is no doubt that, since, according to Article II of the Hay-Pauncefote Treaty, the United States shall have and enjoy all the rights incident to the construction of the Canal as well as the exclusive right of providing for the regulation and management of the Canal there is thereby indirectly recognised the power of the United States to take all such measures as might become necessary for the defence of the Canal against a threatening attack. Apart from this case, the United States, even if she herself were a belligerent, has no more rights in the use of the Canal than her opponent or a neutral Power; on the contrary, she is as much bound as these Powers to submit to the rules of Article III, Nos. 2-6, of the Hay-Pauncefote Treaty.

IV.

However this may be, the question as to whether the stipulation of Article III, No. 1, of the Hay-Pauncefote Treaty that vessels of all nations shall be treated on the basis of entire equality is meant to apply to vessels of all nations without exception, or only to the vessels of _foreign_ nations and not to those of the United States, can only be decided by an interpretation of Article III which takes the whole of the Hay-Pauncefote Treaty as well as the Clayton-Bulwer Treaty into consideration.

(1) There is no doubt that according to the Clayton-Bulwer Treaty the future Canal was to be open on like terms to the citizens of all nations including those of the United States, for Article VIII expressly stipulates "that the same canals or railways, being open to the subjects and citizens of Great Britain and the United States on equal terms, shall also be open on like terms to the subjects and citizens of every other State which...."

(2) The Clayton-Bulwer Treaty has indeed been superseded by the Hay-Pauncefote Treaty, but it is of importance to notice the two facts, expressed in the preamble of the latter:--(_a_) that the only motive for the substitution of the latter for the former treaty was to remove any objection which might arise under the Clayton-Bulwer Treaty to the construction of the Canal under the auspices of the Government of the United States; (_b_) that it was agreed that the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty should not be considered to be impaired by the new treaty. Now the equal treatment of American, British, and any other nation's vessels which use the Canal is part and parcel of the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty, and such equal treatment must, therefore, be considered not to have been impaired by Article III of the Hay-Pauncefote Treaty.

(3) Article III of the Hay-Pauncefote Treaty stipulates--as a consequence of the fact, expressed in the preamble of the Treaty, that the general principle of neutralisation of the Canal as established by Article VIII of the Clayton-Bulwer Treaty shall not be impaired by the Hay-Pauncefote Treaty--that the United States adopts, as the basis of the neutralisation of the Canal, six rules _substantially as embodied in the Suez Canal Treaty of Constantinople of 1888_. Now although the Suez Canal Treaty nowhere directly lays down a rule which is identical with the rule of Article III, No. 1, of the Hay-Pauncefote Treaty, it nevertheless insists upon equal treatment of the vessels of all nations by stating in Article XII:--"The high contracting parties, _in application of the principle of equality concerning the free use of the canal, a principle which forms one of the bases of the present treaty_, agree that...." That this principle of equality of all nations concerning the free use of the Suez Canal means equality of vessels of all nations with the exception of the vessels of Egypt or even of Turkey, has never been contended; such a contention would, I am sure, have been objected to by the parties to the Suez Canal Treaty. For this reason the term "all nations" in the Hay-Pauncefote Treaty can likewise only mean _all_ nations, including the United States.

(4) The literal meaning of the words "all nations" leads to the same conclusion. If something is stipulated with regard to "all" nations, every nation is meant without exception. If an exception had been contemplated, the words "all nations" could not have been used, and if all foreign nations only were contemplated, the words "all foreign nations" would have been made use of.

(5) There is also an argument from Article IV of the Hay-Pauncefote Treaty which states that no change of territorial sovereignty or of the international relations of the country or countries traversed by the Canal should affect the general principle of neutralisation or the obligation of the high contracting parties under the treaty. The general principle of neutralisation is, as laid down in the preamble of the Hay-Pauncefote Treaty, the general principle of neutralisation as established by Article VIII of the Clayton-Bulwer Treaty, and it has already been shown--see above IV, No. 2, p. 24--that equal treatment of British, American, and any other nation's vessels using the Canal is part and parcel of that general principle of neutralisation.

(6) Lastly, Article IV of the Hay-Pauncefote Treaty must be read in conjunction with Article II. The latter does not exclusively contemplate the construction of the Canal by the United States, it contemplates rather the construction _under the auspices of the United States, either_ directly at her cost, _or_ by gift or loan of money to individuals or corporations, _or_ through subscription to or purchase of stocks and shares. The question may well be asked whether, in case the United States had not acquired the Canal territory and had not herself made the Canal, but had enabled a company to construct it by the grant of a loan, or by taking shares, and the like, she would then also have interpreted the words "all nations" to mean "all foreign nations," and would, therefore, have claimed the right to insist upon her own vessels enjoying such privileges in the use of the Canal as need not be granted to vessels of other nations. Can there be any doubt that she would _not_ have done it? And if we can reasonably presume that she would not have done it under those conditions, she cannot do it now after having acquired the Canal territory and having herself made the Canal, for Article IV declares that a change in the territorial sovereignty of the Canal territory shall neither affect the general principle of neutralisation nor the obligation of the parties under the treaty.

V.

I have hitherto only argued against the contention of President Taft that the words "all nations" mean all foreign nations, and that, therefore, the United States could grant to her vessels privileges which need not be granted to vessels of other States using the Panama Canal. For the present the United States does not intend to do this, although Section 5 of the Panama Canal Act--see above I, p. 6--empowers the President to do it within certain limits. For the present the Panama Canal Act exempts only vessels engaged in the American coasting trade from the payment of tolls, and the memorandum of President Taft maintains that this exemption does not discriminate against foreign vessels since these, according to American Municipal Law, are entirely excluded from the American coasting trade and, therefore, cannot be in any way put to a disadvantage through the exemption from the payment of the Canal tolls of American vessels engaged in the American coasting trade.

At the first glance this assertion is plausible, but on further consideration it is seen not to be correct, for the following reasons:

(1) According to Article III, No. 1, of the Hay-Pauncefote Treaty the charges for the use of the Canal shall be just and equitable. This can only mean that they shall not be higher than the cost of construction, maintenance, and administration of the Canal requires, and that every vessel which uses the Canal shall bear a proportionate part of such cost. Now if all the American vessels engaged in the American coasting trade were exempt from the payment of tolls, the proportionate part of the cost to be borne by other vessels will be higher, and, therefore, the exemption of American coasting trade vessels is a discrimination against other vessels.

(2) The United States gives the term "coasting trade" a meaning of unheard-of extent which entirely does away with the distinction between the meaning of coasting trade and colonial trade hitherto kept up by all other nations. I have shown in former publications--see the _Law Quarterly Review_, Vol. XXIV (1908), p. 328, and my treatise on International Law, 2nd edition (1912), Vol. I, Sec.579--that this attitude of the United States is not admissible. But no one denies that any State can exclude foreign vessels not only from its coasting trade, but also from its colonial trade, as, for instance, France, by a law of April 2, 1889, excluded foreign vessels from the trade between French and Algerian ports. I will not, therefore, argue the subject again here, but will only take into consideration the possibility that Great Britain, and some other States, might follow the lead of America and declare all the trade between the mother countries and ports of their colonies to be coasting trade, and exclude foreign vessels therefrom. Would the United States be ready then to exempt coasting trade vessels of foreign States from the payment of Panama tolls in the same way that she has exempted her own coasting trade vessels? If she would not--and who doubts that she would not?--she would certainly discriminate in favour of her own vessels against foreign vessels. Could not the foreign States concerned make the same assertion that is now made by the United States, viz. that, foreign vessels being excluded from their coasting trade, the exemption of their own coasting trade vessels from tolls did not comprise a discrimination against the vessels of other nations? The coasting trade of Russia offers a practical example. By a Ukase of 1897 Russia enacted that trade between any of her ports is to be considered coasting trade, and the trade between St Petersburg and Vladivostock is, therefore, coasting trade from which foreign vessels are excluded. Will the United States, since the Panama Canal Act exempts all American coasting trade vessels from the Panama Canal tolls be ready to exempt Russian coasting trade vessels likewise? Surely the refusal of such exemption would be a discrimination against Russian in favour of American coasting trade vessels!

(3) The unheard-of extension by the United States of the meaning of the term coasting trade would allow an American vessel sailing from New York to the Hawaiian Islands, but touching at the ports of Mexico or of a South American State, after having passed the Panama Canal, to be considered as engaged in the coasting trade of the United States. Being exempt from paying the Canal tolls she could carry goods from New York to the Mexican and South American ports concerned at cheaper rates than foreign vessels plying between New York and these Mexican and South American ports. There is, therefore, no doubt that in such cases the exemption of American coasting trade vessels from the tolls would involve a discrimination against foreign vessels in favour of vessels of the United States.

(4) It has been asserted that the wording of Article III, No. 1, of the Hay-Pauncefote Treaty only prohibits discrimination _against_ some particular nation, and does not prohibit a _special favour_ to a particular nation, and that, therefore, special favours to the coasting trade vessels of the United States are not prohibited. But this assertion is unfounded, although the bad drafting of Article III, No. 1, lends some slight assistance to it. The fact that in this article the words "so that there shall be no discrimination against any such nation" are preceded by the words "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_," proves absolutely that any favour to any particular nation is prohibited because it must be considered to involve a discrimination against other nations.

VI.

There is one more contention in the memorandum of President Taft in favour of the assertion that the United States is empowered to exempt all her vessels from the Panama Canal tolls. It is thefollowing:--Since the rules of the Hay-Pauncefote Treaty do not provide, as a condition for the privilege of using the Canal upon equal terms with other nations, that other nations desiring to build up a particular trade which involves the use of the Canal shall not either directly pay the tolls for their vessels or refund to them the tolls levied upon them, the United States could not be prevented from doing the same.

I have no doubt that this contention is correct, but paying the tolls direct for vessels using the Canal or refunding to them the tolls levied is not the same as exempting them from the payment of tolls. Since, as I have shown above in V (1), p. 30, every vessel using the Canal shall, according to Article III, No. 1, of the Hay-Pauncefote Treaty, bear a proportionate part of the cost of construction, maintenance, and administration of the Canal, the proportionate part of such cost to be borne by foreign vessels would be higher in case the vessels of the United States were exempt from the payment of tolls. For this reason the exemption of American vessels would involve such a discrimination against foreign vessels as is not admissible according to Article III, No. 1.

VII.

With regard to the whole question of the interpretation of Article III of the Hay-Pauncefote Treaty, the fact is of interest that prominent members of the American Senate as well as a great part of the more influential American Press, at the time the Panama Canal Act was under the consideration of the Senate, emphatically asserted that any special privileges to be granted to American vessels would violate this Article. President Taft, his advisers, and the majority of the Senate were of a different opinion, and for this reason the Panama Canal Act has become American Municipal Law.

It is likewise of interest to state the fact that the majority of the Senate as constituted thirteen years ago took a different view from the majority of the present Senate, a fact which becomes apparent from an incident in the Senate in December 1900, during the deliberations on the Hay-Pauncefote Treaty of February 5, 1900, the unratified precursor of the Hay-Pauncefote Treaty of November 18, 1901. Senator Bard moved an amendment, namely, that the United States reserves the right in the regulation and management of the Canal to discriminate in respect of the charges of the traffic in favour of vessels of her own citizens engaged in the American coasting trade, but this amendment was rejected by 43 to 27 votes. As Article II, No. 1, of the unratified Hay-Pauncefote Treaty of 1900 comprises a stipulation almost identical with that of Article III, No. 1, of the present Hay-Pauncefote Treaty, there can be no doubt that the Bard amendment endeavoured to secure such a privilege to American coasting trade vessels as the United States now by the Panama Canal Act grants to these vessels. But the Bard amendment was defeated because the majority of the Senate was, in 1900, convinced that it involved a violation of the principle of equality for vessels of all nations pronounced by Article II, No. 1, of the unratified Hay-Pauncefote Treaty of 1900.

VIII.

The conflict concerning the interpretation of the Hay-Pauncefote Treaty throws a flood of light on the practice of the United States respecting the relations between International Law and her Municipal Law.

Two schools may be said to be opposing one another in the science of International Law with regard to the relations between International and Municipal Law.

There are, firstly, a number of publicists who assert that International Law is above Municipal Law and that, therefore, the rules of the former are stronger than the rules of the latter. Accordingly, a Municipal Court would have to apply the rules of International Law whether they are expressly or implicitly recognised by the Municipal Law of the State concerned or not, and even in a case where there is a decided conflict between a rule of Municipal Law and a rule of International Law. "_International Law overrules Municipal Law_" must be said to be the maxim of this school of thought.

There are, secondly, other publicists who maintain that _International Law and Municipal Law are two essentially different bodies of law_ which have nothing in common but that they are both branches--but separate branches!--of the tree of Law. The rules of International Law are never, therefore, _per se_ part and parcel of the Municipal Law of a State, and a Municipal Court cannot apply the rules of International Law unless they have been adopted, either expressly or implicitly, by the Municipal Law of the State concerned. Should there be a conflict between a rule of International Law and a rule of Municipal Law, a Municipal Court can only apply the rule of Municipal Law, leaving it to the legislature of its State to do away with the conflict by altering the Municipal Law.

I believe that the teaching of the latter school of thought is correct[2] since International and Municipal Law differ as regards their sources, the relations they regulate, and the substance of their law. Rules of International Law can, therefore, only be applied by Municipal Courts in their administration of the law in case and in so far as such rules have been adopted into Municipal Law either by a special Act of the legislature, or by custom, or implicitly.

[2] See my treatise on International Law, 2nd edition (1912), Vol. I, Sec.Sec.20-25.

Now the practice of the Courts[3] of the United States neither agrees with the doctrine of the former nor with the doctrine of the latter school of publicists, but takes a middle line between them. Indeed it considers International Law to be part and parcel of the Municipal Law of the United States. It is, however, far from accepting the maxim that International Law overrules Municipal Law, it accepts rather two maxims, namely, first, that _International Law overrules previous Municipal Law_, and, secondly, that _Municipal Law overrules previous International Law_. In the administration of the law American Courts hold themselves bound to apply the Acts of their legislature even in the case in which the rules of these enactments are not in conformity with rules of previous International Law. It is true that, according to Article VI of the American Constitution, all international treaties of the United States shall be the supreme law of the land, but in case an Act of Congress contains rules not in agreement with stipulations of a previous international treaty, the American Courts consider themselves bound by the Act of Congress, and not by the stipulations of the previous treaty. It is obvious that, according to the practice of the Courts of the United States, International Law and Municipal Law are of _equal_ force, so that on the one hand new rules of International Law supersede rules of previous Municipal Law, and, on the other hand, new rules of Municipal Law supersede rules of previous International Law. For this reason, the American Courts cannot be resorted to in order to have the question decided whether or no the enactments of Section 5 of the Panama Canal Act are in conformity with Article III, No. 1, of the Hay-Pauncefote Treaty.

[3] See the account of the practice of the American Court in Scott's learned article in the _American Journal of International Law_, Vol. I (1908), pp. 856-861.

It is a proof of the _bona fides_ of President Taft that he desired that the American Courts might be enabled to decide this question. In a message to Congress, dated August 19, 1912, in which the President stated his conviction that the Panama Canal Act under consideration did not violate the Hay-Pauncefote Treaty, he _inter alia_ suggested that Congress should pass the following resolution:--

"That nothing contained in the Act, entitled 'An Act to provide for the opening, maintenance, protection, and operation of the Panama Canal, and the sanitation and government of the Canal zone,' shall be deemed to repeal any provision of the Hay-Pauncefote Treaty or to affect the judicial construction thereof, and in any wise to impair any rights or privileges which have been or may be acquired by any foreign nation under the treaties of the United States relative to tolls or other charges for the passage of vessels through the Panama Canal, and that when any alien ... considers that the charging of tolls ... pursuant to the provisions of this Act violates in any way such treaty rights or privileges such alien shall have the right to bring an action against the United States for redress of the injury which he considers himself to have suffered; and the District Courts of the United States are hereby given jurisdiction to hear and determine such cases, to decree their appropriate relief, and from decision of such District Courts there shall be an appeal by either party to the action of the Supreme Court of the United States."

Congress, however, has not given effect to the suggestion of the President, and the American Courts have not, therefore, the opportunity of giving a judicial interpretation to the Hay-Pauncefote Treaty and of deciding the question whether or no through the Panama Canal Act has arisen a conflict between American Municipal Law and International Law as emanating from the Hay-Pauncefote Treaty.

IX.

It has been asserted that the United States is bound by her general arbitration treaty of April 4, 1908, with Great Britain to have the dispute concerning the interpretation of the Hay-Pauncefote Treaty decided by an award of the Permanent Court of Arbitration at the Hague. It is, however, not at all certain that this dispute falls under the British-American Arbitration Treaty. Article I of this treaty stipulates:--