66

they to be asked to enter into stipulations similar to those to which the contracted States bound themselves.

(c) Instead of the United States and Great Britain and such friendly States as adhered jointly affording their guaranty for the maintenance of neutrality, it was intended that the United States alone should be the guardian of the status of the canal. This was a matter to some extent discussed in the course of the negotiations which led up to the ratification of the Hay-Pauncefote Treaty, the object of Great Britain being broadly stated to be the avoidance of the detriment of being placed in a less advantageous position than other commercial

powers.

The importance of the close scrutiny of the ClaytonBulwer Treaty lies, of course, in the ascertainment of the 'general principle of neutralization" thereby established. It seems expedient here to extract and define that "general principle" in so far as it can be deduced from the wording of that treaty, bearing in mind that the exclusive control over the canal is to-day no longer barred, but on the contrary assigned, to the United States. It was in the year 1850 contemplated that the canal would be a private undertaking, that the promoters and administrators of that undertaking might emanate from, and might to a certain extent be under the dominating control or influence of, Great Britain or of the United States, or of one or more of the States adhering to and guaranteeing the convention and its enforcement, and that such dominating State might seek to acquire from the undertakers for its subjects or citizens differential rights or advantages in regard to navigation through the canal. In other words, all commercial States being regarded as potential customers of the private enterprise, it was provided that none should influence a preference to the detriment of any other. They further bound themselves to give protection

and encouragement to such private undertakers who should provide capital on the one hand and avoid oppressive exactions or unreasonable tolls on the other. Their attitude was, in other words (if one may venture an analogy), that of a combination of shipping companies engaged in rival operations, jointly agreeing to finance a proposed canal undertaking, on the basis of an agreement between themselves not to seek from such undertaking any exclusive advantages or preferential treatment. The essence of the neutrality bargain which within the Clayton-Bulwer treaty extends to every scheme of inter-oceanic communication was the maintenance of the status quo of the conditions of commercial rivalry. To this general principle we propose to return in the discussion of the precise point at issue.

A review of the material documents would be incomplete without reference to the Hay-Bunau-Varilla Treaty, under which the United States acquired from the Republic of Panama, in 1903, the territorial rights to the strip of land through which the canal is cut. Under this treaty (Article XVIII), the canal has to be opened in conformity with the stipulations of the Hay-Pauncefote Treaty. It is true that this treaty in itself throws little light on the true construction of the treaty-rights of Great Britain. It however is clearly a convention (dealing, as it does, with the title to a portion of territory) within the cognisance of the Supreme Court of the United States.

The Hay-Pauncefote Treaty of 1901 was "to remove any objection which may arise out of the convention. "of the 19th April 1850, commonly called the Clayton"Bulwer Treaty, to the construction of such canal under "the auspices of the Government of the United States, imposing the general principle of neutralisation estab"lished in Article VIII of that convention." The pro

visions of the treaty may be summarised as follows:Article I supersedes the convention of 1850 in any event.

for the purposes of the proposed canal, and possibly altogether. Article II provides that the United States shall construct, at its own cost, the canal, having the exclusive right of providing for the regulation and management thereof. Article III provides that the United States should adopt as the basis of the neutralisation of such canal the following rules, substantially as embodied in the Convention of Constantinople, signed the 28th October 1888, for the free navigation of the Suez Canal: (1) 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, so that there shall be no discrimination against any such nation or its citizens or subjects in respect of the conditions or charges of traffic or otherwise-such conditions and charges of traffic shall be just and equitable. (2) The United States is to be at liberty to maintain military police for the protection of the canal. (3) Provisions are added regarding the vessels of war of a belligerent. (4) No belligerent shall embark or disembark troops. (5) Waters adjacent or within three military miles of the canal shall be regarded as within its ambit. (6) The plant, and so forth, part of the canal shall enjoy immunity. Article IV. No change of territorial sovereignty or of international relations of the country or countries traversed by the canal shall affect the general principle of neutralisation.

The "general principle of neutralisation" established by the Clayton-Bulwer Treaty has been found to be the maintenance of the status quo of the conditions of commercial rivalry. The essence of the difference between the treaty of 1850 and the treaty of 1901 is to be found in the fact that, following out the analogy hazarded above, it is no longer an instance of a combination of shipowners-regarding a private canal undertaking-but an agreement between two individual shipowners that one of them shall construct the canal

and maintain the existing conditions of commercial rivalry without detriment to the other or to other shipowners, even though not parties to the contract, for the time being making use of the canal, and consequently observing the above rules.

It can scarcely be said that the wording of the HayPauncefote Treaty is happy. The unfortunate incorporation in the Preamble of the provisions of the Suez Canal Convention is an instance of the evil of the process of legislation by reference. The scheme of that convention has reference to an agreement between parties in the nature of sovereign States external to the actual ownership and control of a canal owned by a commercial company, whereas the Hay-Pauncefote Treaty implies the plan of a State-owned undertaking.

The present controversy has been too much the subject of recent controversy to make it necessary to set forth the exact words of the actual provision of the Legislature of the United States which are said to violate international agreement. Shortly, the main ground of objection is to the proposal to grant immunity from tolls to the coasting vessels of United States' nationality passing through the canal.

It seems clear that one attractive argument used by those who take exception to the action of the United States must be ruled out. It is sought to be said that, by reason of the concession to unduly favoured vessels, the expense of the undertaking must of necessity be borne in a larger proportion by the vessels using the canal. This is upon the assumption that the canal dues paid by vessels. passing through in any one year are at least in their totality to amount to a sum representing the whole annual burden, including repayment of capital construction expenditure by means of a sinking fund, as well as the actual expenses of maintaining and working the canal.

It is of course possible that the canal dues to be levied are to be calculated on this basis, but there is no treaty obligation on the part of any international parties that the canal shall be in the nature of a self-paying concern. So long as the canal dues fall within the condition of the Hay-Pauncefote Treaty that they are to be "just and equitable," it seems that the United States may elect to treat the canal as a losing or as a profit-making commercial speculation.

The Panama Canal, however, will have cost in construction some £80,000,000, and this sum with its consequent annual burden increased by all the liabilities of maintenance, working, police and protection, is wholly a charge falling upon the finances of the United States.

Granted that the highest tolls commercially possible are levied upon ships passing through the canal, it is not reasonably probable that the undertaking will be other than a losing one from the point of view of administrative profit and loss. The real question, therefore, is whether there is any interference with the "general principle of neutralization," which involves an infringement of existing conditions of commercial rivalry.

It must be conceded that direct competition upon an unfavourable basis cannot arise. The nationals of no State other than those of the United States can own vessels employed in the coasting trade of the United States. Naturally this does not conclude the question, because an extension of the coasting trade might conceivably be detrimental to ocean-borne traffic. Is such an interference with the conditions of commercial rivalry forbidden by convention? Now the rules to be applied to the interpretation of treaties -as laid down by William Edward Hall (Int. Law, 5th edition, p. 335)—are few and clear. They must be construed according to the plain and reasonable sense to be attached to the ordinary meaning of words; when terms used in a