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related to the operation, management or maintenance of the Canal could be treated as "expenditures".
The understanding of the parties with regard to the Article XIII (4) (c) payment was clarified during the Senate debate of last year. An understanding was attached to the Treaty which stated that the United States was not obligated to set tolls at a level sufficient to generate all or any portion of the payment described in Article XIII (4) (c). This understanding was specifically accepted by Panama at the time instruments of ratification were exchanged on June 16, 1978. Nothing in the Senate debate on this issue, however, would support any conclusion that the legislative intent of the Senate was to permit the United States to define as "expenditures" of the Commission for purposes of Article XIII (4) (c) items which are not reasonably attributable to the operation, management, or maintenance of the Canal.
The difficulty with Section 250 (e) of H.R. 111 derives primarily from its reference to Section 236 of the bill for the purpose of defining expenditures. Section 236 requires the GAO to report to the Congress annually on the total cost to the United States of exercising its rights and carrying out its responsibilities under the Panama Canal Treaty. Throughout the history of the Canal, the United States has never sought to finance the cost of Canal defense from Canal revenues. The cost of property transferred to Panama cannot in any sense be considered an "expenditure of the Commission"; property transferred to Panama by the Treaty is to be transferred "without charge" (Article XIII, paragraph 2).
Thle effect of Section 250(e) of H.R. 111 would be to require that in the event that the Canal were to generate a surplus of operating revenues over expenditures in any given year, such surplus would be paid into the United States Treasury rather than to the Republic of Panama as required by Article XIII
(4) (c) of the Treaty. Such action would clearly be inconsistent with our obligations under that provision of the Treaty and, it should be noted, would not in any event significantly benefit the United States. As indicated above, the United States is not obligated to set tolls at a level designed to produce a surplus of revenues over expenditures and both H.R. 111 and the Administration bill (5. 1024) would prohibit the Commission from doing so. Accordingly, it is highly unlikely that any significant surplus would ever be generated by the Commission. To the 'xtent that small surpluses might be generated on rare occasions during the life of the Treaty, Section 250 (e) of t.R. 111 would require that we withhold them from Panama in breach of our Treaty obligations and without any significant benefit to the United States Treasury.
Question. Thirdly, relative to the question of the transfer of property, if you would be so kind to give us your position in some detail it would be appreciated.
Answer. It is, and has been, the position of the Administration that property may be transferred by a self-executing treaty, i.., one which does not require the enactment of a subsequent statute in order to be legally effective. The Panama Canal Treaty was drafted so as to be self-executing with regard to the transfer of property. During debate in the Senate on the Treaty, thl Senate accepted the position of the Administration and rejected an amendment to the Treaty which would have required that both Houses approve the transfers of property required by the Treaty. The position taken by the Senate and the Administration was upheld by the U.S. Court of Appeals for the District of Columbia in Edwards v. Carter, 580 F.2d 1055, cert. denied 98 Sup. Ct. 2240 (1978). The Court based its holding primarily on the debates in the Constitltional Convention concerning the Treaty and property disposal clauses and on the large number of prior treaties which have transferred property without legislation. The Supreme Court declined to review the decision of the Court of Appeals.
Because the provisions of the Treaty which transfer property are selfexeculting, the Administration's bill. 5. 1024, has no provisions concerning propertyv transfer. Section 373 of H.R. 111i seeks to prohibit the transfer of property in Panama except pursuant to a subsequent law enacted by Congress. Section 374 of the House bill approves those transfers which are required by the Treaty on the date of bntry into force.
These sections of H.R. 111 are clearly not required by the Constitution. Althou.gh they do not necessitate a violation of the Treaty, they are inconsistent with it in a general sense since they imply that we have an option regarding transfers required by the Treaty. This is not the case. Our obligations are noalified.
If Section 373 of H.R. 111 were enacted and authorization for a required trmnsfer were refused, the implementing legislation would be in conflict with the Treaty. The effect of this conflict may be largely academic, however.