2. If, after the year 2000, a new government were to come to power in Panama which denounced the Neutrality Treaty, is it the U.S. position that we would still have the right to intervene unilaterally to protect the Canal's neutrality?

Answer: If after the year 2000 a new Panamanian Government were to attempt to denounce the Neutrality Treaty, the situation would be no different from a legal standpoint than it would be if the Panamanian Government denounced the 1903 Treaty today. Neither Treaty provides for termination by unilateral denunciation. and accordingly the Neutrality Treaty, like the 1903 Treaty, may be terminated only by mutual agreement. Thus, any attempt on the part of the Government of Panama to terminate the Neutrality Treaty unilaterally would be without legal effect and the United States would continue to be in a position to exercise its rights under that Treaty, including its rights under article IV.

3. A key issue, of course, is the matter of sovereignty, which opponents claim we will be surrendering under the new Treaty. The exact language of the 1903 Treaty, however, grants to the U.S. "all the rights, power and authority . . . which it would possess and exercise if it were the sovereign of the territory." What is the distinction?

Answer: The question of the international legal status of the Canal Zone has of course been a matter of extensive discussion for the past several years. We have prepared a short legal analysis of this question which details the distinction between sovereignty and the rights granted to the United States under the 1903 Treaty. A copy of this document is enclosed.

4. The Treaty provides that the Canal itself is to be neutral. Is there anything in the Treaty or in international law that would prevent the United States from attacking enemy vessels either before entering or after leaving the Canal? Would the United States be able to effectively block large scale enemy use of the Canal by positioning its forces appropriately outside the zone of neutrality?

Answer: The map attached to the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal (Annex B) defines the geographical areas to which the regime of neutrality established in the Treaty applies. The waters of the Canal extend approximately 3 miles from its entrances, as they do today, and are drawn to encompass the anchorage areas for ships awaiting transit through the Canal. Article II of the Treaty includes the obligation that ships commit no acts of hostility while in these waters. Accordingly, the United States Navy would not be in a position to attack enemy vessels within this geographical area. However, vessels of enemies of the United States navigating the high seas would be fair game. for us, even if they were destined to or from the Canal. Such action against enemy vessels would not, of course, involve a general blockade of the Canal, nor would such a blockade be permissible. Our Navy has no doubt that it would be able to conduct effective action against any enemy shipping that might attempt to transit the Canal during wartime.

5. I think it would be helpful to have a clear idea of the status of the Canal Zone-as to when it is considered U.S. territory and when

it is not. I understand there is a question as to how much of the Zone's land area we actually hold title to, for instance. I further understand that the Supreme Court regarded the Zone as U.S. territory for purposes of spending U.S. funds to build the Canal, yet if a child is born in the Zone of non-U.S. parents, that child is not granted U.S. citizenship. Would you clarify the picture for us? Answer: You are correct in your understanding that the Canal Zone has been considered United States territory for some purposes and foreign territory for other purposes in connection with applying U.S. domestic legislation. However, such domestic treatment has little relevance to the question of the international legal status of the Canal Zone. This question is addressed in further detail in the enclosed document referred to in our response to question 3 above. Dept. of State File No. P78 0038-1356.

The text of the short legal analysis of the question of the international legal status of the Canal Zone reads as follows:

PANAMA CANAL TREATY NEGOTIATIONS

I. Legal Status of the Canal Zone

The legal status of the Panama Canal Zone is a question of considerable interest in the context of current negotiations with Panama for a new canal treaty. The position of the United States Government concerning this matter is as follows:

Article II of the 1903 Treaty grants to the United States "the use, occupation and control" of the Canal Zone, and article III authorizes the United States to exercise therein "all the rights, power and authority. . . which it would possess and exercise if it were the sovereign of the territory. . . to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority."

The question is often posed as to whether this grant of rights had the effect, under international law, of transferring the territory comprising the Canal Zone from Panamanian sovereignty to that of the United States. In other words, is the international legal status of the Canal Zone that of Panamanian or of United States territory? It is clearly established under international law that a state may grant to a foreign state the right to exercise exclusive sovereign powers within portions of its territory without effecting a cession of its own sovereignty over that territory. For example, during the latter part of the 19th Century China's leases of naval bases to France, Germany and Russia included grants to the lessees of rights to exercise sovereign powers within the leased areas. (I MacMurray, Treaties and Agreements with and Concerning China, 1894-1919, at 112, 119, and 128.) Similarly, article III of the U.S.-Cuba Agreement of February 16, 1903, relating to Guantanamo Naval Station provides:

While on the one hand the United States recognizes the continuance of the ultimate sovereignty of the Republic of Cuba over the above described areas of land and water, on the other hand the Re

public of Cuba consents that during the period of the occupation by the United States of said areas under the terms of this agreement the United States shall exercise complete jurisdiction and control over and within said areas. . . . (TS 418; 6 Bevans 1113.)

A more recent example of one nation being granted sovereign rights within the territory of another is found in article III of the Treaty of Peace with Japan (3 UST 3169; TIAS 2490) which authorized the United States to "exercise all and any powers of administration, legislation and jurisdiction over the territory and inhabitants of (the Ryukyu and Daito islands)" while Japan retained what Secretary Dulles termed "residual sovereignty" over those areas. (The rights of the United States under article III were terminated by the U.S.-Japan Treaty of June 17, 1971.)

With respect to the Canal Zone, the United States has consistently recognized that Panama retains "titular" sovereignty over the area.

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. . . . (Letter from Secretary of War William H. Taft to President Theodore Roosevelt, January 12, 1905.)

In essence, while the United States required extensive treaty rights to use the Canal Zone and to exercise sovereign powers within it, the area technically remains part of the territory of the Republic of Panama.

The rights of the United States in the Panama Canal Zone offer an example of the most complete transfer of jurisdiction over a territory without its being a cession in the technical international law sense. . . . (Vali, Servitudes of International Law, 2d ed., 1958, 254.)

This distinction between the right to exercise jurisdiction within the Zone area and its international status was recognized in article III of the Treaty of Friendship and Cooperation of March 2, 1936 (53 Stat. 1807; TS 945), which refers to the Zone as "territory of the Republic of Panama under the jurisdiction of the United States."

Perhaps the most clear description of the nature of the rights the U.S. acquired in the 1903 treaty is that of M. Phillipe BunauVarilla, the principal drafter of the document:

I decided to grant to the United States, in the interior of the zone, all rights, power and authority that she would have if she were sovereign, to the entire exclusion of the use of any such rights, power and authority by the sovereign Republic of Panama.

The United States, without becoming the sovereign, received the exclusive use of the rights of sovereignty, while respecting the sovereignty itself of the Panama Republic. (Italics in original.) (Bunau-Varilla, From Panama to Verdun (1940; 158).)

*Conference for the Conclusion and Signature of the Treaty of Peace with Japan: Record of Proceedings 78 (Department of State Pub. 4392, 1951).

With respect to the domestic law of the United States, the Canal Zone has been treated in various ways for the purpose of defining the applicability to the Zone of specific legislative provisions. For example, the Canal Zone is considered to be an organized territory of the U.S. for purposes of extradition (37 Stat. 569, 48 U.S.Č. 1330). On the other hand, it is treated as foreign territory for purposes of customs duties (33 Stat. 843, 19 U.S.Č. 126) and its ports are considered foreign ports for purposes of the transportation of mail (Luckenbach Steamship Co. v. U.S. 280 U.S. 173 (1930)).

Thus, U.S. domestic legislation and court decisions would not appear to provide a basis for any definitive conclusions with respect to the international status of the Canal Zone, nor are they intended to. Rather, such definitions are made for the sole purpose of extending the effect of a specific provision of U.S. law to the Canal Zone or of exempting the Zone from its application.

The often cited case of Wilson v. Shaw (204 U.S. 24 1907) must be considered in this context. That case was taken to the Supreme Court by a taxpayer who maintained that the Federal Government could not continue to expend funds lawfully for the construction of an interoceanic ship canal in Panama. He sought an injunction against any further expenditures on the grounds that the U.S. did not have a sufficient legal interest in the Canal Zone to authorize the expenditure of tax money there. The Supreme Court held that the Federal Government did have broad enough power to encompass expenditure of funds for the construction of the Canal and refused to issue an injunction. In speaking of the legal interest of the U.S. in the Zone, the Court said,

It is hypercriticial 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.

Thus, the Supreme Court did equate the Canal Zone with territory belonging to the United States, but in the context of establishing the authority of the Federal Government to expend funds and to engage in construction work in the Zone. As noted above, the Court has subsequently held the Zone to be foreign territory for other purposes (Luckenbach Steamship Co. v. U.S. (280 U.S. 173 1930)), and such interpretations of the status of the Canal Zone under domestic U.S. law for the purpose of determining the applicability of specific statutes therein are not determinative as to its international status.

Dept. of State File L/ARA.

The agreement between the United States and Cuba for the lease to the United States of lands in Cuba for Coaling and Naval Stations was signed on Feb. 16, 1903 (TS 418; 6 Bevans 1113; entered into force on Feb. 23, 1903).

The Treaty of Peace with Japan was signed on Sept. 8, 1951 (TIAS 2490; 3 UST 3169; 136 UNTS 45; entered into force for the United States on Apr. 28, 1952, subject to a declaration).

The Agreement between the United States and Japan concerning the Ryukyu Islands and the Daito Islands with related arrangements was signed on June 17, 1971 (TIAS 7314; 23 UST 446; entered into force on May 15, 1972).

The General Treaty of Friendship and Cooperation between the United States and Panama, accompanied by sixteen exchanges of notes embodying interpretations of the Treaty or Arrangements pursuant thereto was signed on Mar. 2. 1936 (TS 945; 53 Stat. 1807; 10 Bevans 742; entered into force on July 27, 1939). For the map attached to the U.S.-Panamanian Neutrality Treaty of 1977 (Annex B), see 77 Dept. of State Bulletin 501 (1977). For other related information concerning the U.S.-Panamanian Canal and Neutrality Treaties of 1977, see passim 77 Dept. of State Bulletin 481–545 (1977).

$8 Ports

Deepwater Ports

Louisiana Offshore Oil Port (LOOP)

On August 1, 1977, Secretary of Transportation Brock Adams announced that the directors of Louisiana Offshore Oil Port, Inc. (LOOP), had agreed to accept the license offered on January 17, 1977. by former Secretary of Transportation William T. Coleman, Jr., to own, construct, and operate a deepwater port in the Gulf of Mexico 18 miles south of Grand Isle, Louisiana. In his announcement that the LOOP consortium was able to provide owners' guaranties which meet the license requirements, Secretary Adams expressed the following support for the development of deepwater ports:

These ports will be cheaper to operate because they can handle much greater quantities of oil than conventional ports. They also should provide greater environmental protection to our vulnerable coastal areas.

Because of their importance, certain conditions have been built into the deepwater port licenses to guard against anti-competitive abuses of the ownership, control or operation of these facilities. LOOP's acceptance makes it apparent that the Federal Government's efforts to protect consumer interests can be compatible with the interests of deepwater port operators.

Dept. of Transportation News (DOT 88-77), Aug. 1, 1977.

LOOP, a consortium composed of Ashland, Inc., Marathon Pipeline Company, Murphy Oil Corporation, Shell Oil Company, and Texaco, Inc., plans to build a deepwater port capable of unloading oil from supertankers, which draw too much water to be able to dock at existing east coast ports, and transfer the oil to shore via underwater pipeline. The first phase of LOOP construction consists of a $350 million terminal capable of handling about 1.3 million barrels of oil a day. When completed, the port is scheduled to cost $735 million and have an unloading capacity of 3.4 million barrels a day.