110
onstrate that the accident was caused through fault of the vessel or its crew, it will
be relieved of liability. for instance, the Canal is not going to be responsible in the
very unlikely event that the crew of the vessel independently decides to move the
ship. Furthermore, the Canal is not going to be responsible for any type of personal
injuries caused by a malfunction of ship's gear, for which the Canal has no involve-
ment.
Once the ship leaves the locks, although it is still under the total navigational
control of the Panama Canal pilot, it is under its own propulsion. Thus, there is a
greater likelihood that the ship's equipment will cause a collision, grounding or alli-
sion.
The differences in the quantum of responsibility of the Canal have been reflected
with the shift of the burden of proof between the Canal and the shipowner. This
doctrine dates back to the very early times in the operation of the Canal. This same
differential of responsibility, handled by the fault doctrines of the burden of proof,
have remained the same through the present. The 1979 Act did not change the basic
fault principles which apply in these vessel accident claims. At no times since
claims were allowed both for inside and outside-the-locks, has the Canal faced strict
liability to a shipowner making it an insurer of these claims.
Since the Canal has virtual control of the operation of the ship when it is in the
locks, those persons involved in the claims handling for the vessel accidents have
developed a "term of art" stating that the Canal is the "virtual insurer" of the
vessel when it is in the locks. However, this is merely a term of art to describe the
total control the Canal has over the vessel. In the strict legal sense, the Canal is not
an insurer of the vessel, but as described above, fault principles apply.
None of the witnesses advocated any change in the fault doctrines that have ap-
plied to these accidents for almost half a century. We simply urge providing an effi-
cient meaningful claims procedure for outside-the-locks claims, with a forum for ju-
dicial review.
No one seeks to increase the Canal's responsibility to make it an insurer for the
shipowners. Everyone wishes to have the system of fault applicable to both parties.
This is true from the shipowners standpoint as well as the Commission. If the vessel
is at fault in an accident causing damage to the Canal, it, of course, is expected to
respond for the damages it causes. And, of course, the converse is true. It is appar-
ent neither the Commission nor the users of the Canal wish to change this system.
What parties of all concern expressed at the hearing is the need for an effective,
efficient and thorough procedure for handling these outside-the-locks claims. Thus,
the Maritime Law Association of the United States respectfully request that the
claims procedure return to the system that effectively worked for twenty-eight (28)
years during the period 1951-1979.
We hope this answers Congressman Tauzin's query. By copy of this letter to him
we sincerely thank Congressman Tauzin for his intense interest in the problem with
the present procedure. We stand ready to answer any further inquiries from any of
the members of the Committee.
Respectfully,
ALMER W. BEALE II.
PREPARED STATEMENT BY THE INTERNATIONAL DIvIsIoN, U.S. GENERAL ACCOUNTING
OFFICE
Mr. Chairman and members of the committee, we are pleased to present our
views on the Panama Canal Commission's accounting procedures for setting aside
reserves for marine accidents.
MARINE ACCIDENT RESERVE
From time to time, ships transiting the Canal are involved in accidents. Ship acci-
dents are viewed as a normal and expected part of doing business in the Panama
Canal.
The Commission's marine accident reserve to pay for vessel damage claims is, in
effect, a way of insuring against this normal business risk and spreading the cost
evenly over time. The reserve is charged to current operations and is not unlike
other business practices of charging insurance premiums against current operations.
However in this case, rather than paying premiums to an outsider, an amount is
collected from each Canal user to pay for ship accident claims which occur (part of
the tolls rate). Specifically, each month the Commission records, as an expense, one-
twelfth the annual estimate needed to pay for marine accidents. Currently, the
Commission is estimating an annual need of $12 million, so the monthly expense is