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ages, reduced by the percentage of vessel fault as is deemed by the agency to have
been a factor in the accident. If the shipowner is not satisfied with the findings de-
termination or award of the Commission, section 1416 provides that he may bring
suit on the claim in the U.S. District Court for the Eastern District of Louisiana,
where the Department of Justice will represent the Commission. Any amounts paid
to the shipowner either in settlement or as a result of such a court action are, as
provided in section 1415(a) and 1416, paid out of Commission appropriations.
Claims for $120,000 or less for damage sustained by a vessel in Canal waters out-
side the locks are also examined under section 1413 to determine which items of
damage claimed are legally payable, and to insure that all necessary supporting doc-
umentation has been provided. When that has been accomplished, the Commission's
attorneys, again relying mainly on the Board's accident report, make a determina-
tion as to whether, and to what extent, the accident was caused or contributed to by
the negligence or fault of an employee of the Commission acting in the scope of his
employment in connection with the operation of the waterway. Also, as is the case
in locks cases, the facts are examined to see whether, and to what extent, the vessel,
or her master, crew or passengers contributed to the accident. See section 1412. The
agency will then offer an award to the shipower of that proportion of its allowable
damages which is attributable to Commission negligence or fault; however, any such
award will be reduced in proportion to contributory vessel fault. Here, the vessel
owner has no recourse to the courts on his claim. This is so because the agency's
sovereign immunity has not been waived as, under section 1416, it has with respect
to accidents occurring in the Canal locks. Any settlements of these claims are paid
by the Commission, as provided in section 1415(a), out of its appropriations.
When the Commission receives a claim for more than $120,000 for damages sus-
tained by a vessel in Canel waters outside the locks, this same procedure is followed
in processing the claim, except that no offer is made to the shipower. Instead, as is
required by section 1415(b), the agency submits the claim to the Congress in a spe-
cial report containing the material facts and its recommendations with respect to it.
The differences in the manner in which vessel-accident claims are processed by
the Commission are soley attributable to the differing statutory requirements, as
outlined above, which govern the agency's liability with respect to them.
Question 8. What specific events might have required the doubling of the monthly
reserve during the first year of Canal operations under the 1977 Panama Canal
Treaties? Does the one million dollars per month reflect actual monthly accident
costs or potential liability? In other words is it the Commission's policy to set aside
for insurance against all possible risks in Canal operation?
Answer. For fiscal year 1980, the first year under the treaty, it was calculated
that a $6.0 million reserve would be adequate to cover marine accident costs that
the Commission was authorized to settle. After reconsideration and consultation
with the General Accounting Office, the Commission believed it was appropriate to
provide for all marine accident costs sustained even those outside of the locks with
claims in excess of $120,000. All accident costs in 1980 amounted to $11.3 million,
and accordingly, the accrual for marine accidents was adjusted in the latter part of
FY 1980. The total accrual for FY 1980 was $10.5 million. The reserve accrual for
marine accidents was increased to $12.0 million in 1981 and 1982.
The Commission does not reserve for all possible risks in Canal operation. The $1
million accrual each month establishes a "reserve" to account for the normal costs
arising from marine accidents only. Under this method of accounting, a reserve is
built up to cover normal losses from marine accidents by charging operating ex-
penses with a uniform amount each month. This normalizes the operating expense.
When accidents occur, the resultant losses are charged to the reserve rather than to
operations. It should be emphasized that the accrual is for "normal" accident costs.
It does not provide for accidents of a catastrophic nature for which the "reserve"
would be grossly inadequate.