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safety of vessels passing through the waterway must always be foremost in the
minds of our pilots, tugmasters, locks operators, and the other hundreds of persons
involved in the transit function. That we are succeeding is borne out by our safety
record. Over the three fiscal years which ended this past October, we have averaged
one accident for just over every 261 oceangoing transits, which reflects a downward
tend. I might also point out that this figure includes those accidents which are due
to steering or engine failure aboard the vessel or to other causes not attributable to
commission employees or equipment. With the canal operating day and night and
the number of vessels with beams of 80 to 106 feet using the canal increasing almost
daily, we feel we can be very proud of this record.
With regard to the specific provisions of law which govern the Commission's lia-
bility for marine accidents, I am concerned that confusion exists concerning that lia-
bility for accidents occurring in the Panama Canal outside the locks. This is a
matter of financial importance both to the canal and its users and we welcome the
opportunity to explain the situation as it currently exists.
PROVISIONS OF PUBLIC LAW 96-70
Section 1411 of Public Law 96-70 prescribes the extent of the Commission's liabili-
ty to pay damages as a result of accidents to vessels which occur while they are
passing through the canal locks. There is no statutory limit on the amount of liabili-
ty which the agency may incur in these cases, and claimants who are not satisfied
with an award offered by the Commission may bring suit on their claims in New
Orleans. That provision is abundantly clear.
Section 1412, which is the provision governing the agency's liability for vessel ac-
cidents occurring outside the locks, is quite different, however, and it is with respect
to that section that some confusion exists. Section 1412 limits the Commission's au-
thority to adjust and pay claims for injuries occurring outside the locks to those not
exceeding $120,000. Claims in excess of that amount must be submitted to the Con-
gress with a special report containing the material facts and the recommendation of
the Commission concerning them. Unlike the situation where damage is sustained
in the locks, claimants in non-locks cases have no recourse to the courts, regardless
of the amount of their claims. Because the law does not specify whether the Con-
gress will honor such claims, it leaves an open question as to whether legitimate
claims will be paid. Hence, the eventual liability of the United States with respect
to them is unclear. An outside consultant who has looked at the question for the
Commission has been unable to give a definitive opinion as to how that liability
should be determined in light of the statutory provision.
This ambiguity in the law required the Commission to determine, at the outset of
the treaty period, whether this category of marine accident would become a liability
of this agency so as to require the inclusion of an expense provision in the tolls
base. A decision on this question was particularly important in view of the require-
ment-which is clear both in the statute and from its legislative history-that the
canal be operated on a self-sustaining basis (that is, at no cost to the U.S. taxpayer).
From the statute's requirement that non-locks claims of over $120,000 be submit-
ted to the Congress with a special report containing the Commission's recommenda-
tions, it appeared to the agency more likely than not that meritorious claims would
be honored-with the Commission's ultimately being directed to make the pay-
ments. The General Accounting Office was consulted on the question and agreed
with the conclusion that the Commission should recognize in its books the liability
for such accidents. On that basis, the Commission has included in the tolls base a
provision to recover costs of all marine accidents which occur at the canal, regard-
less of whether they occur inside or outside the locks and regardless of their
amount. By so doing, the agency has set aside in the Panama Canal Commission
fund, moneys sufficient to cover its estimated liability for non-locks vessel accidents
in excess of $120,000.
It would be extremely helpful if the Congress acted now to remove this ambiguity
which has existed in the law now since October 1979.
Before moving to my next point, I would like to spend a few moments on our ac-
counting procedure.
Recovery of marine accident costs from tolls poses a special problem because both
the occurrence and the severity of accidents will vary from year to year. For exam-
ple, marine-accident costs in 1979 approximated $15 million, as compared with $6
million the previous year and $11 million in 1980. To accommodate these annual
cost fluctuations in the tolls process, the Commission has established a reserve to
provide for the normalization of marine-accident costs over several accounting peri-
ods. In this process, actual accident costs are charged against the reserve as they
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