Papers Relating to the Foreign Relations of the United States, 1927, Volume III

819.6156 T 61/11

The Minister in Panama (South) to the Secretary of State

Panama, May 14, 1927.
[Received May 27.]

No. 1413

Sir: Referring to my despatch No. 1333 of February 21, 1927, enclosing a copy of a note sent on that date to the Panaman Foreign Office regarding the railroad concession embodied in a contract between the Panaman Government and the Tonosí Fruit Company, I have the honor to transmit herewith a copy, with translation, of a note dated April 27, 1927, from the Acting Secretary of Foreign Relations acknowledging my note and stating that it is the opinion of his Government that the 1867 concession cannot be interpreted as having conferred the exclusive right to build railroads on the Isthmus and that the right should be understood as limited to railways between the Caribbean Sea and the Pacific Ocean under Article V of the Hay-Bunau Varilla Treaty.¹⁹

The monopoly rights of the Panama Railroad Company for the construction of railroads on the Isthmus have long been differently interpreted by the Governments of the United States and Panama and have been the subject of voluminous correspondence between the two Governments without an agreement being reached. As the subject is not covered in the memoranda on the history of diplomatic relations between the United States and Panama prepared in the Division of Latin American Affairs in 1924,^19a an outline of the attempts at railroad construction in Panama and their relation to the monopoly rights of the United States and the Panama Railroad Company has been prepared by a member of the staff of the Legation and is transmitted herewith.

I have the honor to request the Department’s instructions as to the answer which should be made to the Acting Secretary’s note of April 27, 1927. Inasmuch as a thorough exposition of the contentions of the Government of the United States was made in the notes of the Legation to the Foreign Office in 1919, 1920 and 1921 relating to the so-called Hyatt concession, as indicated in the enclosed memorandum,²⁰ and inasmuch as the note of March 3, 1921, does not ever appear to have been answered by the Foreign Office, it is respectfully suggested that I be authorized to inform the Acting Secretary that the views of the Government of the United States have not changed and to refer him to the Legation’s note of March 3, 1921.

I have [etc.]

J. G. South

[Enclosure 1—Translation]

The Panaman Acting Minister for Foreign Affairs (Morales) to the American Minister (South)

Panama, April 27, 1927.

S. P. No. 804

Mr. Minister: I have the honor to refer to Your Excellency’s courteous note No. 566, dated February 21st, last,²¹ in which you state that the fact that the Government of Your Excellency does not make any objection to the concession given to the Tonosí Fruit Company to construct a railroad in the province of Los Santos, “is not to be considered as in any way indicating that the United States Government relinquishes any of the benefits enjoyed by the Panama Railroad Company under Article 2 of its concession of 1867.”

The opinion of my Government with respect to this subject is that the concession given to the Panama Railroad Company by the Republic of Colombia in 1867 cannot be interpreted as having conferred the exclusive right to construct railroads in all directions on the Isthmus of Panama. Such concessions must be understood as being limited to railways between the Caribbean sea and the Pacific ocean, in the same terms as were accepted by the Government of Panamá in Article 5 of the Hay-Bunau Varilla Treaty.

I take [etc.]

Ricardo A. Morales

[Enclosure 2]

Memorandum on Railroad Construction and Monopoly Rights of the United States and the Panama Railroad Company²²

Monopolistic Provisions of Panama Railroad Company Concession

The contract between the United States of Colombia and the Panama Railroad Company made in 1867 to last for a period of ninety-nine years completely superseded the prior contract made in 1850. By the terms of the 1867 contract, the Panama Railroad Company was granted monopoly rights for the duration of the concession covering (1) the construction of any railroad on the Isthmus of Panama and (2) the establishment of any carriage roads across the Isthmus. These two exclusive rights were granted, respectively, in Articles II and V of the concession. These articles are as follows, in the original Spanish of the concession:

. . . . . . . . . . . . . .

The true translations of the articles appear to be those given below:

“Article II

The Government of the Republic binds itself, during the time that the exclusive privilege which is conceded to the Company for the working of the railroad remains in force, not to construct for itself, nor to concede to any person or company, by any title whatever, the power to establish any other railroad on the Isthmus of Panama and it also stipulates that, while the said privilege continues in force, the Government shall not have the power of undertaking for itself, nor permitting any person to undertake, without the concurrence and consent of said Company, the opening or working of any maritime canal which may unite the two oceans across the said Isthmus of Panama to the west of the line of Cape Tiburon on the Atlantic and Point Garachiné on the Pacific. But it remains stipulated that the right which is conceded to the Company to give its consent does not extend to its opposing the construction of a canal across the Isthmus of Panama (except on the actual route of the railroad itself), but only to its exacting an equitable price for such privilege, and as indemnification for the damages which the Railroad Company may suffer by the rivalry or competition of the canal.

If the sum which may be demanded by the Company shall not appear equitable to the Government of the United States of Colombia, then it shall be fixed by arbitrators in New York or Panama, one to be named by the Government and the other by the Company, and in case of their not agreeing the two shall name a third, whose decision shall be without appeal.

In pronouncing their decision the arbitrators shall take into consideration the grounds upon which the Company rests, and the information which the Government shall give upon the matter, and in view thereof they shall decide without appeal as they may deem most just and equitable.

The sum, whatever it may be, which shall be finally designated, shall belong one-half to the Railroad Company and one-half to the Government of Colombia.”

“Article V

During the whole term of this privilege the Company shall have exclusive right to establish across the Isthmus of Panama within the zone indicated in Article Second, any class of carriage-roads whatever, from one ocean to the other. The Colombian Government binds itself not to undertake for itself, nor to permit any other company or person to undertake within said zone any other carriage-road, either macadamized, or of plank, or of any other class suitable for the use of wheeled vehicles, between the two oceans across the Isthmus of Panama, It being nevertheless well understood that the privilege of which this article treats cannot and must not in any manner prevent the construction of any kind of roads in a direction distinct from that expressed, nor the completing, preserving, and improving of roads already existing, or which are actually being constructed on said Isthmus.”

The contract made in 1867 was modified by contracts made in 1876 and 1880 and by amendments agreed upon on August 18, 1801, but none of the modifications affected Articles II or V.

Confirmation of Monopoly Privilege During Colombian Régime

The first question regarding the monopoly granted in Article II of the 1867 concession appears to have arisen in 1881. Under date of January 25, 1881, the Departmental Government of Panama conceded to José Augustin Arango the right to build a streetcar system in Panama City. The Panama Railroad Company protested that under the terms of its concession the Government could not concede such a right. Its contention was confirmed by the Senate of Plenipotentiaries of the Sovereign States of Colombia in a resolution dated May 14, 1884. This decision sustained the Panama Railroad Company’s monopoly right to construct railroads on the Isthmus. It may be found in 19–C–X3, 4 and 5, Old French Files, in the Legal Library of the Canal Zone but is probably not available in Washington.

Acquisition by the United States of the Panama Railroad Company

In accordance with the provisions of a Congressional Act “to provide for the construction of a canal connecting the waters of the Atlantic and Pacific Oceans” approved June 28, 1902,²³ the rights, real property, etc. of the New Panama Canal Company, including all the capital stock of the Panama Railroad Company held by the latter, were purchased by the United States in 1903. By this purchase the United States obtained possession of about sixty-nine seventieths of the Panama Railroad Company’s stock.

Relevant Provisions of the Hay-Bunau Varilla Treaty²⁴

By Articles VIII and XXII of the 1903 Treaty for the construction of a Ship Canal, negotiated between the United States and the Republic of Panama, the United States acquired all the present, future, and reversionary rights that Panama, which had succeeded to Colombia’s sovereign power on the Isthmus, might have in the Railroad concession. These two articles of the treaty are as follows:

. . . . . . . . . . . . . .

By Article V of the 1903 treaty the United States acquired in perpetuity a monopoly for the construction, maintenance and operation of any canal or railroad across the Isthmus. The wording of this article is:

. . . . . . . . . . . . . .

Relationship of the United States and the Panama Railroad Company

The United States has exercised close control over the Panama Railroad Company since purchasing the greater part of its stock. The Governor of the Panama Canal is also the President of the Railroad and the officers and directors are chosen by the United States and the two enterprises are accordingly coordinated. There is not, however, any formal agreement between the Government of the United States or the Canal Zone and the Railroad. None of the Acts of Congress and Executive Orders dealing with the Railroad seem to have defined the relation between the American Government or the Canal Zone and the Railroad, or to have enunciated any policy for the conduct of the latter. The Panaman Government has at various times questioned the legal status of the Railroad. For an outline of this phase of the subject see Miss Atcherson’s “Outline of the General Legal Status and the Incidental Activities of the Panama Railroad Company, Part I, General Legal Status” dated February 8, 1924, of which there is a copy in the Division of Latin American Affairs.²⁵

First Attempt of Foreign Capital to Secure Concession

The first occasion to question the right of Panama to grant a concession for a railroad without previously consulting the United States or the Panama Railroad Company apparently arose early in 1907. A bill granting a railway concession from Panama to Chiriqui to a British syndicate was introduced into the National Assembly. On being informed by Minister Squiers of the proposed concession, the Department replied on January 4, 1907 by telegraph: “Your telegram in regard to Chiriqui Railway Concession. Of course Panama cannot grant any such concession without the consent of the United States. Ascertain and report facts fully.” The National Assembly closed its ordinary session without acting on the bill and the Secretary of Foreign Relations assured the Minister orally that the President had no intention of granting the concession in question.

Construction of Tramway System

In 1910, a project for the construction of a tramway system in the City of Panama and its surroundings was formulated and discussed by the promoters with the President of the Panama Railroad Company who was also Chairman of the Isthmian Canal Commission. License for the Panama Tramways to operate in the Canal Zone was issued on December 6, 1910, and the concession of the Municipality of Panama was not made until June 21, 1911. While formal permission to construct the part of the street railway which was to be in Panaman territory does not appear actually to have been granted by the United States Government or the Panama Railroad Company, the granting of a license for operation in the Canal Zone was in effect such a grant.

Dziuk Concession

In 1910 the Balboa and Pacific Estates, Limited, a British corporation controlled by a Herr Dziuk and other German capitalists, applied for a concession from Panama for the construction of a narrow gauge railroad in the Darien region. The Department, through the Chargé d’Affaires ad interim, suggested a modification in the proposed contract. The modification was incorporated in a second draft of the concession which was formally approved early in 1911. In the final contract, the concessionary was given an option to construct any branches deemed necessary for the development of the enterprise upon written application to the Executive Power for permission to begin to locate such branches.

Shortly after the concession had been granted, the concessionaries began efforts to secure from the President of the Republic authority to extend the railroad to Panama City. When this came to the Department’s attention it directed the Legation to intimate that the President of Panama would be expected to defer granting the application pending full consideration by the Government of the United States. The President agreed to defer granting permission for the proposed extension and the matter was taken under consideration by the State and War Departments and the Canal Zone authorities.

Department’s Statement of Policy Regarding Foreign Concessions

Finally, on September 20, 1911, the Department sent the Minister an instruction to be read to the Minister for Foreign Affairs objecting to the extension of the Dziuk concession and setting forth concretely for the first time the contentions of the United States with regard to railroad concessions in Panama.²⁶ In the instruction was embodied the following statement of policy:

“As to the Dziuk railroad concession, the Department does not believe that it will ever come to anything without a branch beyond the Chucunaque River or a trans-Continental connection, and the Government of the United States is entirely unable, for fundamental strategic and political reasons in which the interests of the Government of Panama are equally involved, to acquiesce, under any circumstances, in further railway extension beyond the limits herein indicated. (i.e., the original limits of the Dziuk concession—A.D.)…”

In general, as to foreign railway or other concessions having a possible bearing upon the strategic and political interests of the two countries, while very sensible of every legitimate interest of Panama and very desirous of fostering in every way the growth and prosperity of the Republic, the Government of the United States feels that it will be more regardful of the interests of Panama to examine in advance and express itself after ample deliberation upon any project than it would be to keep silent and then perhaps be obliged at a later date to assert its treaty rights in a manner which might involve the Republic of Panama in serious financial losses.

In giving to the Government of Panama the reply of the Government of the United States that it cannot acquiesce in the extension of the proposed railway concession, or any other foreign railway project involving an important extension up the River Chucunaque, or in any such manner as either to approach in effect a trans-continental line or to approach at all within the vicinity of the Canal Zone, you will add that any question of railway lines deemed to be really necessary would receive the earnest study of this Government.”

The Department based its contention on the right of the Government of the United States to intervene in the granting of concessions by Panama on its treaty obligation to protect and to maintain the Republic of Panama and the corollary right to do the things necessary to such protection. It was stated that:

“It would appear that if rights or properties so needed for the protection of both countries and the control of which was at any time desired by the United States for these broad purposes should have been meanwhile made the subject of concessions by Panama to foreign capitalists, then in the expropriation and adjustment which it would fall to Panama to carry out, the Government of Panama might find itself under serious foreign embarrassment and subject to large international reclamations.

As to any question of Panama’s being a party to any concession for a trans-continental railroad, this would be in point-blank violation of the treaty.”

Eleven articles of the Panama Canal Treaty were cited but Articles VIII and XXII, by which the United States was confirmed in the rights acquired by it from the New French Canal Company and set forth in Articles II and V of the Panama Railroad Company’s 1867 concession were not included. No distinction was made in the instruction between railroad and other concessions. Apparently, the Department was not then in possession of the facts concerning the monopoly rights which had been granted in the 1867 concession.

As a result of the representations made, the right to extend the proposed Darien railroad to Panama City was refused by the President. The concessionaries appear to have abandoned their plans completely after a time.

Projects for Railroad Owned by Panaman Government

On January 6, 1909, the National Assembly approved Law 6a of that year, which provided for the construction, operation and ownership of railroads by the Panaman Government. No action under the authorization was then taken by the Government of Panama and no protest appears to have been made by the United States.

In January, 1911, the National Assembly passed Law 2 which authorized the construction of a railroad from Panama to David by contractors for the account of the Government and bids were asked for on March 6, 1911. Various bids by American and foreign firms were made but they were considered unsatisfactory by the Government and action on them was delayed until after the purport of the Department’s instruction of September 20, 1911, referred to above, was made known to the Secretary of Foreign Relations. In December, 1911, a draft contract between the Secretary of Public Works and an American firm for the construction of a section of the Panama–David Railway was submitted by the Secretary of Public Works to the Legation with the request that it be transmitted to the Government of the United States for its consideration in accordance with the suggestions made in the instruction of September 20, 1911. After consultation between the State and War Departments a board composed of the Minister, a member of the Isthmian Canal Commission and the Chief Engineer of the Panama Railroad Company was appointed to consider the technical merits of the proposed contract and it recommended certain changes. After further negotiation between the Government of Panama and the bidders the project seems to have been temporarily abandoned.

Duncan Concession

On December 30, 1912, a contract for the construction of a railway to have its eastern terminus at the Chagres River was signed by the Secretary of Public Works and Mr. B. B. Duncan, an American citizen. As soon as the Minister learned of the contract he asked that further action on it be delayed pending its consideration by the Government of the United States. The request was complied with although the Secretary of Foreign Affairs stated orally to the Minister that he understood the Department’s instruction of September 20, 1911, to refer only to foreign concessions and not to those granted to Americans. A commission similar to the one which had considered the proposed contract for the construction of a railroad from Panama to David was organized. Its report was unfavorable to the Duncan contract and after this was made known to the Panaman Government the contract was withdrawn.²⁷

In later years, Mr. Duncan applied for new concessions which were modifications of his original contract and they were considered by the Panaman Government, in one case the application being actually sent to the National Assembly. In each case, the Legation informed the Foreign Office that the United States still objected to the contract and it was quashed.

Renewal of Project for Government Owned Railroad

On January 14, 1913, a copy of a draft of a new law for the construction of the proposed railway from Panama City to David for the account of the Government was transmitted to the Minister by the Secretary of the President. On being informed of the railway construction bill, the Department instructed the Minister to request the Panaman Government to delay the presentation of the bill to the National Assembly until the Government of the United States could give it consideration and the Secretary of Foreign Affairs advised the Minister that further consideration of the bill would be delayed as requested. The bill was nevertheless presented to the National Assembly. While it was under consideration there, protest against the wording of two of its articles regarding provisions for financing was made by the Legation pursuant to instructions from the Department. The bill was passed without change as Law 29 and signed by the President of Panama in the face of the protest but the latter stated orally to the Minister that the Department’s wishes regarding financing would be followed.²⁸

Hebard Concession

In February, 1914, a contract for the construction of a railroad from Pedregal to Boquete and Concepcion for the account of the Government of Panama was signed by the President of Panama and R. W. Hebard and Company, Incorporated. The method of financing the project was left open for consultation in the United States between the contracting parties and the Department. On March 20, 1914, the Panaman Minister in Washington applied through the Secretary of War to the Panama Railroad Company for its consent to the construction of the Pedregal–Boquete–Concepcion line and also a proposed line in the province of Los Santos. A resolution granting the desired consent was unanimously adopted by the Board of Directors of the Panama Railroad Company on March 25, 1914.

The financing of the construction was taken up by the Panaman Minister with the Department later. A loan to be floated in New York was, after consideration, approved by the Department under certain conditions but the contract as a whole was not submitted to it. Further negotiations between the American and Panaman Governments regarding the Hebard contract were concerned for the most part with the financing of the construction.²⁹

Branch of Chiriqui Railroad

On July 28, 1916, the Panaman Minister in Washington addressed a note to the Department asking for its approval of the construction of a branch of the Chiriqui railroad.³⁰ A bill authorizing the construction was passed by the National Assembly without awaiting the answer of the Department. Consent in principle to the construction of the extension was given by the Department in notes addressed to the Panaman Legation in Washington on August 14, 1917³¹ and June 8, 1922.³² The project to build the branch was dropped during the war period but taken under consideration again in 1922 and construction finally undertaken in 1926.

Panama Sugar Company’s Concession

Late in 1918, the Panama Sugar Company, an American Company, applied for a concession allowing it to build a short railway line in Western Chiriqui in order to bring its produce to a sea port. The application was made through the Legation and the contract was approved by the Panaman Government. Because of the form of presenting the application, formal submission to the Department was evidently not deemed necessary.

Hyatt Concession

The following year the Republic of Panama gave Mr. J. M. Hyatt, an American citizen, a concession for the construction of a narrow gauge railroad near Porto Bello. The Minister under date of November 1, 1919, addressed the Secretary of Foreign Affairs in part as follows:

“The Honorable, The Secretary of War of my Government points out that, it would appear that Your Excellency’s Government had entered into this contract without first ascertaining the views of the Government of the United States regarding the proposition.

I am instructed by the Department of State of my Government to bring this matter to the attention of Your Excellency’s Government, and to refer to the position steadily maintained by my Government respecting railroad construction in Panama, that no contract for such construction should be concluded by the Government of Panama without first submitting the proposition to the Government of the United States.”

The Secretary of Foreign Affairs replied on December 26, 1919, citing Article V of the Canal Treaty, stating that the concession was not in opposition to that article, and asking that he be informed of the part of the treaty which the projected railroad was thought by the Government of the United States to contravene.

The Minister’s reply, dated January 14, 1920, referred the Secretary to the Panama Railroad Company’s concession and to Articles VIII and XXII of the Canal Treaty.

Statement of Panama’s Interpretation of Railroad Monopoly Rights

On July 10, 1920, the Acting Secretary of Foreign Affairs replied in a note which gave a complete exposition of the contentions of the Government of Panama. The essential parts of the Acting Secretary’s note were:

“I note that the objection which your Government makes to the said concession (i. e., the Hyatt concession—A. D.) is based on the privilege given to the Panama Railroad Company by the contracts celebrated between said Company and the Republic of New Granada in 1850 and 1867, which were confirmed in subsequent modifications thereof.

I suppose that that objection has in view specially Article 2 of the contract celebrated July 5, 1867 . …

If the foregoing disposition (Article 2—A. D.) be considered by itself, there would not be any doubt that the objection of the Panama Railroad Company is in conformity with the agreement. Nevertheless, for the proper interpretation of a contract it is necessary to take account of all its clauses in order to make them harmonize. Therefore, in my opinion, Article 5 of the same contract modifies in a substantial manner the extent of what is established in Article 2 . …

Taking together, then, the two dispositions transcribed, (Articles 2 and 5—A. D.) it is clearly seen that the obligation which Colombia imposed on itself (which has passed to Panama) consists of not constructing or permitting ‘the construction of any kind of roads’ across the Isthmus of Panama.

That this is the correct interpretation of the agreement is shown, furthermore, by the fact that the ‘Panama Railroad Company’ did not oppose the construction of the urban railroad between Panama and Balboa, Canal Zone, and between Panama and Las Sabanas.

On the other hand, in the Canal Treaty there are various stipulations which show, if said treaty be interpreted in a spirit of equity, that your Government obligated itself to subrogate the rights and obligations contained in the agreements with the Panama Railroad Company, as they were modified by the said treaty. Article V of that treaty provides that the United States has only the monopoly of the construction of any system of communications across the Isthmus, ‘between the Caribbean Sea and the Pacific Ocean.’ According to this, the United States could not oppose itself to the construction of a railroad between Boqueron and the Atlantic coast.”

Contentions of the United States

On March 3, 1921, the Minister answered the Foreign Office in a note, the vital portions of which were as follows:

“Even a cursory reading of Articles II and V of the Railroad Company’s concession indicates that Article II grants the Railroad Company the exclusive right of building, owning and operating railroad lines on the Isthmus of Panama, which phrase comprises the whole of what is now the Republic of Panama, excepting the Canal Zone. The monopoly is absolute and includes the building, owning and operating of railroads wholly or partially crossing the Isthmus or running at any angle from a direction taken by an ocean to ocean railroad. On the other hand, Article V of the concession relates exclusively to wagon, cart, or carriage roads,—roads for wheeled vehicles, in general,—and whereunder there is granted to the Railroad Company the exclusive right to construct such a road from ocean to ocean on the Isthmus of Panama; the grant under this article of the concession, however, distinctly stipulates that such exclusive right to build highways across the Isthmus from ocean to ocean does not prevent the construction of wagon roads by the grantor or some other person or company in a direction other than across the Isthmus from ocean to ocean.

The two Articles quoted by the Foreign Office for Panama cover distinct matters, and the provisions of one of said Articles, it is represented, can not and does not modify or limit the provisions of the other. The fact that Article V of the concession reserves to the Panaman Government the right to itself to build and the power to grant to another person or company the right to build wagon roads in any direction distinct from that which would be followed by a highway running across the Isthmus from ocean to ocean does not justify, we believe, Your Excellency’s Office in its argument that such reservations justified the Panaman Government in having granted to Mr. Hyatt the right to build a railroad from the headwaters of the Boqueron River to the Atlantic coast.

The second point raised in the note from Your Excellency’s Office is that by inference the Panama Railroad has previously accepted the interpretation placed by the Panama Foreign Office on Articles II and V of the concession as the correct interpretation of those Articles, for the reason that the Panama Railroad Company did not oppose the construction of the Panama Tramway Company’s line from the City of Panama to Balboa and to Las Sabanas.

The Panama Tramways Company is operating a street car system in the City of Panama under a concession which was granted that corporation by the Municipality of Panama on June 21, 1911. The system was extended, and now extends into the Canal Zone under authority of a revocable license granted the Tramway by the President of the United States under date of December 16, 1910, or more than six months prior to the date of the Tramway Company’s concession from the Municipality of Panama. It might be added that prior to the boundary convention between the United States and Panama of September 2, 1914,³³ more than one-half of the Tramway Company’s line of railroad was within the Canal Zone. The United States was the sovereign within the Canal Zone and also owned all shares of stock of the Panama Railroad Company, which facts were known to the Republic of Panama. No other inference can be drawn from the known relationship between the United States and the Panama Railroad Company and the fact that the Tramway Company had already been granted the aforementioned license by the United States at the time the Tramway Company obtained its concession from the Municipality of Panama than that the Panama Railroad Company had given its tacit consent to the granting by the Municipality of Panama of the aforementioned concession to the Tramway Company. The view of Your Excellency’s Office, as expressed in said note, can not be accepted by my Government, as justified.

The third point raised by Your Excellency’s Office is that Article V of the Treaty between the United States and Panama of November 18, 1903, if fairly interpreted, indicates that it was intended to subrogate to the United States all the concessionary rights and obligations obtained by the Panama Railroad Company under its concession from Colombia and that under the provisions of Article V even the United States itself could not protest against the granting by the Panaman Government to Mr. Hyatt of the right to construct a railroad running only part way across the Isthmus. …

The argument here advanced by Your Excellency’s Office again is not well founded, we contend. The United States by virtue of the treaty was not subrogated to all the concessionary rights of the Panama Railroad Company on the other hand, Articles VIII and XXII of the Treaty subrogate to the United States any property rights in the Panama Railroad Company which the Republic of Panama theretofore had or would in the future acquire under the terms of the Railroad Company’s concession from the Republic of Panama. The concessionary rights of the Panama Railroad Company were in no manner affected by the Treaty between the United States and Panama except to the extent that Article V granted to the United States the exclusive right to construct, operate, and maintain a railroad across the territory of the Republic of Panama from ocean to ocean. Article II of the Railroad Company’s concession had previously granted to the Panama Railroad Company the same exclusive right and to which extent there is seemingly a conflict between the rights of the United States under its Treaty with Panama and the rights of the Panama Railroad Company under Article II of its concession. The interests of the United States and of the Panama Railroad Company being identical, neither our Government or the railroad company nor the Panaman Government is or can be prejudiced by such seeming conflict. The grant to the United States under Article V of the Treaty in no way limits the Railroad Company’s right, acquired by virtue of Article II of its concession from Colombia, to insist upon being protected by the Panaman Government against the building by the Panaman Government, or the building by any other person or company, by any title whatever, of any other railroad on the Isthmus of Panama, excepting from the right to such insistence for protection, the grant to the United States by Panama of the exclusive right under Article V of the Treaty, to build a railroad across the Isthmus from ocean to ocean. …”

No answer to the note of March 3, 1921, appears to have been received. Construction of the railroad was not, however, undertaken.

Hurtado Concession

On September 15, 1922, the Panaman Government granted Mr. Enrique L. Hurtado a concession giving him the right to construct a railroad from Calidonia Bay to the Chuquenaque River. The concession was amended on February 17, 1923, by the addition of a provision concerning the rights of the United States as follows:

“There are excepted the rights arising by concession to the Panama Railroad Company in Colombian times and recognized by the Republic of Panama.”

The effect of this provision was to put the concessionary in the position of having received notice of the rights of the United States. It did not, however, absolve the Panaman Government from the duty of consulting with the proper authorities of the United States before granting such a concession.

Acting under the instructions of the Department, the Minister, in a note dated February 18, 1924, pointed out that the Government of Panama had entered into the contract without first consulting the Government of the United States and referred to the position maintained by the United States that no contract providing for the construction of a railroad in Panama should be concluded by the Panaman Government without first submitting the proposition to the Government of the United States. No answer to this note was found in the files of the Legation. No railroad construction has been carried out under the concession.

Concession of the Tonosí Fruit Company

. . . . . . . . . . . . . .

Existing Railroads Not Discussed Through Diplomatic Channels

Several small plantation railway systems existing in Panama, including those of the United Fruit Company in Bocas del Toro, the Henriquez plantation in Code and the San Bias Development Company at Puerto Nicuesa do not appear to have ever been made the subject of diplomatic enquiry.

19. Foreign Relations, 1904, p. 543.
20. Not printed.
20. See post, pp. 512 ff.
21. Ante, p. 502.
22. Prepared by Allan Dawson, third secretary of the American Legation in Panama.
23. 32 Stat 481.
24. Foreign Relations, 1904, p. 543.
25. Not printed.
26. Foreign Relations, 1912, p. 1171.
27. See Foreign Relations, 1913, pp. 1081 ff.
28. See Foreign Relations, 1913, pp. 1094 ff.
29. See ibid., 1914, pp. 1028 ff.
30. Ibid., 1917, p. 1179.
31. Foreign Relations, 1917, p. 1183.
32. Not printed.
33. Convention between the United States and Panama defining the boundary line of the Panama Canal, signed Sept. 2, 1914, Foreign Relations, 1915, p. 1123.