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are incurred, while the reserve itself is maintained through an annual expense pro-
vision calculated to approximate the yearly cost over time.
Aside from normalizing marine-accident costs, the reserve procedure provides the
basis for ensuring that integrity over the use of funds collected for this purpose is
maintained with canal users. If the reserve balance indicates over a period of time
that costs have been less than collections, the overrecovery is returned to shipping
prospectively through the tolls-setting process, that is, if the Congress determines
that these claims will not be honored-the Commission has in place an accounting
procedure whereby the moneys collected can and will be returned to shipping pro-
spectively through the deferment or minimization of future toll increases.
The result of these procedures is that the canal is self-insured against the risks
normally associated with recurring and reasonably predictable marine casualties.
One consultant has advised the agency, however, that there is clear and distinct
possibility that an accident of catastrophic proportions could occur under circum-
stances which would make the Commission liable. Such an eventuality could entail
the multi-million dollar loss of the vessel, its cargo, and/or the loss of multiple lives
which could produce claims far beyond the self-financing capability of the canal. He
concludes that it would be appropriate to consider the purchase of catastrophe in-
surance to cover the risk of such an eventuality. The Commission is in accord with
that recommendation but recognizes that authorization for it to acquire such insur-
ance would have to be set forth in statute.
Turning to another aspect of the vessel-accident provisions of the Panama Canal
Act, there exists a gap which the subcommittee may, as a part of this amendatory
process, wish to fill. It is presently unclear if there is a statute-of-limitations which
governs court actions brought against the Commission on claims arising out of
vessel accidents occurring in the canal locks. In addition, there currently is no stat-
utory limitation on the time in which vessel accident claims-whether they arise
out of locks or non-locks casualties-must be presented to the Commission.
If the subcommittee considers that a statute-of-limitations, which addresses both
the time in which an administrative claim may be filed with the agency, as well as
the period in which suit may be brought in those cases where judicial review is per-
mitted to be meritorious, the Commission would be prepared to work with the sub-
committee in preparing necessary legislative language. A provision could be drafted
in such a way that it would have the effect of prohibiting stale claims while, at the
same time, allowing that the majority of timely claims be settled without the need
of trial.
The final subject which the subcommittee has asked to be addressed is the status
of those vessel damage claims awaiting submission to the Congress under section
1415 of the Panama Canal Act, that is, non-locks cases where the amount of the
claim exceeds $120,000. Let me preface my remarks here by stating that the first
two such claims (involving the vessels Swan Arrow and Texaco Connecticut) were
forwarded to the Office of Management and Budget (OMB) earlier this year. Clear-
ance by that agency was obtained last month and those claims, along with the Com-
mission's report and recommendation concerning them, are now before the Con-
gress.
In addition to these two, the Commission has received 13 more claims for vessel
damage sustained outside the canal locks in which more than the statutory limit of
$120,000 has been demanded. Three of these appear to have been adequately docu-
mented and are undergoing review in the agency. We expect that review to be com-
pleted soon and the claims to be forwarded to the Congress, through OMB, in the
near future. The remaining ten claims did not contain the necessary supporting do-
cumentations required to be submitted to the agency by the Panama Canal Act. The
owners have been requested to provide the missing evidentiary material and, upon
its receipt, the claim-analysis process will be resumed. Since the Commission cannot
predict when the necessary documentation will be provided, we cannot estimate
when these claims will be ready for transmittal to the Congress.
Although we have not yet received claims concerning them, there have been 21
more vessel accidents outside the locks where we consider that the agency may have
some fault for damages which are estimated to be more than $120,000.
As a related matter, it is our understanding that there has been concern ex-
pressed by some shipping interests that settlement by the Commission of vessel-acci-
dent claims is a time-consuming affair. While we make every effort to process these
claims expeditiously, vessel-accident claims, by their nature, are generally not sus-
ceptible of prompt settlement and payment. This is so because, except in the most
serious cases, vessel owners will ordinarily defer repairing damages sustained at the
canal until the period of their ship's next regularly scheduled drydocking, which
may be months or years after the accident. The collection and presentation of docu-