PANAMA CANAL FINANCES THURSDAY, APRIL 8, 1976 HOUSE OF REPRESENTATIVES, COMMITTEE ON MERCHANT MARINE AND FISHERIES, Washington, D.C. The subcommittee met, pursuant to call, at 10:10 a.m., in room 1334, Longworth House Office Building, Hon. Leonor K. Sullivan (Chairman of the full committee), presiding. Mrs. SULLIVAN. The Subcommittee on the Panama Canal will come to order. Good morning fellow members, Mr. Ambassador, witnesses, ladies, and gentleman. Today we conclude 3 days of important hearings on the Panama Canal. In the first 2 days of our hearings we took testimony and discussed the financing of the canal, an important matter which has become a problem area only in recent years. Today we intend to focus on the impact of treaty negotiations on the canal operation and also on the influence of other events which have occurred on the Isthmus on that same operation. We recognize the relevance of treaty negotiations for the legislative jurisdiction of other committees in the House. But when the negotiations and other events can impact upon the canal now or in the future, and when the status of U.S. controlled territory in the Canal Zone is at issue, we would be negligent if we did not address important issues that concern the operation and maintenance of the canal or the government of the Canal Zone. As we all know, our present treaty arrangement with Panama grants to the United States all sovereign rights in the canal to the exclusion of exercise of those rights by the Republic of Panama. Since our present treaty arrangement is part of the Law of the Land, it is incumbent upon us to insure that the canal and Canal Zone are operated within the framework of that arrangement. We are resolved that what it is illegal to do visibly and en bloc, that is, transfer control of the Canal Zone without congressional authorization, it is just as illegal to do in any veiled and piecemeal fashion. In this respect, I am concerned that the present treaty talks between the United States and Panama are casting such a cloud of uncertainty and anxiety over the whole canal operation that the ultimate objective of those treaty talks may come to pass without any authorization of the legislative branch as to a new treaty or a transfer of property. We in the Merchant Marine and Fisheries Committee have long been resolved to solve the problems that relate to the canal and zone, not to promote confrontation or ill-will, but to defeat it. And we in the committee are resolved that the zone should run as the present treaty arrangement mandates it. We must be concerned about the trend in the piecemeal erosion of U.S. authority on the Isthmus of Panama. It seems incredible to me that the executive branch would proceed to foster some of the ideas which they have despite the strong convictions of the Congress expressed over many years on this matter. The House passes a resolution that the Panamanian flag should not fly in the Canal Zone and the President allows it; the Congress indicates in many ways that any land transferred to Panama should have congressional authorization and then the Executive leases an area to an agency of Panama under a spurious authority and this could be tantamount to a transfer. These are just two of the many actions that have been taken, and those actions which have occurred in the last decade to erode our authority in the Canal Zone do not hold a candle to the proposals which, if they had been approved, would have totally dissipated our tenure on the Isthmus. I would hope today that we could have some real communication on the matters of treaty negotiations, the nature of U.S. authority in the Canal Zone, and the future of the canal area irrespective of a new treaty. Due to the sensitive nature of the material that will be discussed here today, the Chair will ask at an appropriate point that this hearing go into closed session. I hope that the members of the subcommittee here would join me in an effort to close the hearing at the proper time so that we can get the information we need and get it to the proper people. I have been waiting for some of the other members to come in. There is a caucus this morning, but it should be over by now. While we are waiting, I have invited a gentleman to present a short statement concerning certain background on the question of sovereignty of the United States over the Canal Zone. At this time I will call to the witness table Franz Otto Willenbucher, retired Captain from the U.S. Navy. Captain Willenbucher is a lawver. He graduated from Georgetown University Law School for his L.L.B., and also has his Master's in Law. He served on active duty for 32 years in the Navy, throughout World War I and World War II. Captain Willenbucher graduated from the U.S. Naval Academy in 1918. The Captain has worked as a member of the Austrian Field Party, American Commission to Negotiate Peace after World War I, under Archibald Cory Coolidge. This group studied the economic, social, and political status of the Central Powers back in 1918 and 1919. Captain Willenbucher has performed much active Naval Service in the Caribbean Sea area, including some at the Naval Station at Guantanamo Bay in Cuba, and he participated in the preparation of war plans for that area in 1929-30. I think the Captain is qualified to be heard on the question into which we will go into this morning, and I have asked him to give us about a 10 minute specification of his knowledge of this subject. I believe we should limit the questions to the Captain to no more than 10 minutes. After the Captain is finished, then I am going to ask unanimous consent that the meeting be closed, if Ambassador Bunker requests it, so that he can talk more freely about the negotiations with Panama. After the Ambassador's testimony and subsequent questioning has been completed, the meeting would then be opened up again to hear the other witnesses. If Ambassador Bunker does not want the meeting closed, then we will leave it open. Captain, we welcome you. STATEMENT OF FRANZ OTTO WILLENBUCHER, CAPTAIN, U.S. NAVY (RETIRED), ACCOMPANIED BY MILES P. DuVAL, JR., CAPTAIN U.S. NAVY (RETIRED) Captain WILLENBUCHER. Madam Chairman, I am to have with me here Miles P. DuVal, Jr., who is well known as a noted historian, particularly on the canal question, and who has written two books on this subject. I would like to indulge the committee for just a second, and let me say that I am very pleased to be here. I want to say that this is not my first occasion of appearing before this committee, but the last time I appeared was quite long ago, during World War II, when Hon. Schuyler Otis Bland was chairman, whom I held in very warm respect, and it was on a subject dealing with the security of the United States on legislation which I had the pleasure of drafting, which later went before Senator Wheeler and Senator White over in the Senate. I shall address myself to the question of sovereignty. First, the U.S. Sovereignty over the Canal Zone is complete, and was granted to the United States in perpetuity. In articles II and III of the Hay-Bunau Vavilla Treaty of 1903 in clear terms by Panama. The rights, power and authority of the United States to exercise sovereignty over the zone are so clear, and so unambiguous that there never was any necessity of judicial interpretation to define their nature or scope. It is well established that in the absence of fraud where language is clear and unambiguous there is no necessity for judicial determination as to the extent or the right or the scope or duration of any such matters as this when the language covers them. Notwithstanding this, there have been three U.S. Supreme Court considerations of the grant of sovereignty to the United States over the Canal Zone under special circumstances, and on narrow questions, none of which dealt squarely on the question of whether and to what extent the U.S. possessed all of the rights, power and authority to exercise sovereign power in perpetuity over the Canal Zone. There have also been innumerable opinions by Attorneys General, the General Accounting Office, and other administrative agencies, and by Presidents, and Secretaries of State. These latter fully recognized the completeness of the sovereign rights, power and authority to govern the Canal Zone, although some 79-367-77—26 of them made some distinctions for special purposes not in contravention of the basic sovereign powers of the United States to govern the Canal Zone. The language of the 1903 treaty in these respects is so clear that in article III it clearly states that the exercise of the sovereign powers by the United States is to be "with entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority." The Canal Zone Government on May 12, 1959, rendered a memorandum opinion on the legal aspects of this matter entitled "Sovereignty Over the Canal Zone." This is very complete as to the subject from the date of the 1903 treaty to the date of the opinion in 1959. Madam Chairman, I ask leave to file a copy of that opinion in the record at this point. Mrs. SULLIVAN. We shall accept it. [The following was received for the record.] HON. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House Representatives Washington, D.C. JUNE 15, 1959. My dear Mr. Bonner: Reference is made to your request for a report on H. Con. Res. 33 concerning the sense of Congress that the United States should not surrender jurisdiction or control over the Panama Canal or the Canal Zone. This office concurs in the substance of the proposed declaration. Whether it is necessary or desirable for the Congress to take the proposed action is an important policy question for the Congress and one in which the Department of State has a primary interest. While I submit no specific recommendation on the question, the enclosed summary may be pertinent in that it records the long-established official position of the United States that the exclusive sovereign rights, power and authority of the United States in the Canal Zone do not present an open or doubtful question, and that the United States is not disposed to alter these basic rights in the Canal Zone. The Bureau of the Budget has advised that there is no objection to the submission of this report. Sincerely yours, 1. The treaty provisions bearing on the question of sovereignty over the Canal Zone are few and brief: (a) By Article II of the Convention of November 18, 1903, the Republic of Panama granted to the United States in perpetuity the use, occupation and control of the zone of land and water now known as the Canal Zone, for the construction, maintenance, operation, sanitation and protection of the Canal to be constructed. (b) Article III of the aforesaid treaty, which is the sole existing provision dealing comprehensively with the matter of sovereignty, reads as follows: "The Republic of Panama grants to the United States all the rights, power and authority within the zone mentioned and described in Article II of this agreement and within the limits of all auxiliary lands and waters mentioned and described in said Article II which the United States would possess and exercise if it were the sovereign of the territory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority." (c) The 1936 and 1955 treaties do not even cite Article III of the 1903 Convention and contain no provision affecting sovereignty, other than paragraph 4 of Article V of the 1936 Treaty granting Panama limited rights to maintain two customhouses in the Canal Zone for specific, restricted purposes involving persons, merchandise and baggage arriving at Canal Zone ports destined to Panama. This and other concessions in effect emphasize U.S. sovereignty, being actions that necessarily and inherently depend upon a legal and factual status of the United States as the party having the right to exercise sovereign jurisdiction. Article XI of the 1936 Treaty confirmed that, without prejudice to the full force and effect of that treaty's provisions, they should not affect, nor be considered a limitation, definition, restriction or restrictive interpretation of, the rights and obligations of either party under the treaties then in force between them. U. S. CONSTRUCTION OF THE TREATY PROVISIONS 2. There have been numerous constructions and applications of Article III of the 1903 Convention by the Courts, the Attorney General, the Department of State, and the Comptroller General. Certain of the principal and representative constructions are briefed below. It is not practicable to attempt to collect all such constructions, and it is likewise not necessary, because (a) the constructions all reach the same basic conclusion, and (b) "the sovereignty over the Canal Zone is not an open or doubtful question" (26 Att'y Gen. 376, hereinafter briefed). 3. In a decision dated July 26, 1904 (II C.D. 36), the then Comptroller of the Treasury, after quoting Articles II and III of the 1903 Convention, said: "The United States has thus become vested in perpetuity with the use, occupation, and control of the Canal Zone, and is now authorized to exercise all the sovereign powers in and over said. zone which were inherent in the Republic of Panama prior to the release, waiver, and transfer thereof to the United States by the terms of the treaty." 4. In the early construction of the 1903 Convention a very important role was played by John Hay, Secretary of State, who as United States plenipotentiary had represented the United States in the negotiation and conclusion of that convention. Mr. Hay's views respecting the nature of the grants to the United States in that convention, and with reference to sovereignty in the Canal Zone, are represented in his well-known letter of October 24, 1904 to Jose Domingo de Obaldia, then Panamanian Minister to the United States which was in reply to a communication from the latter dated August 11, 1904. The entire letter appears in Senate Document No. 401, 59th Congress, 2d Session (Volume III, beginning at page 2378). The following extracts from that letter are sufficient to disclose Mr. Obaldia's contentions and Mr. Hay's principal views thereon: * * * * "I have read with the care and consideration its importance required the argument set forth in your communication in support of the contention that the United States is acting in excess of its authority (1) in opening the territory of the Canal Zone to the commerce of friendly nations; (2) in establishing rates of customs duties for importations of merchandise into the Zone; (3) in establishing post-offices and a postal service in said Zone for the handling of foreign and domestic mailable matter. "The right of the United States to adopt and enforce the provisions of said orders is dependent upon its rights to exercise the powers of sovereignty as to the territory and waters of the Canal Zone, and whether or not the United States is authorized to exercise sovereign powers in that territory is to be determined by the terms of the convention of November 18, 1903, between the |