and the Republic of Panama is spoken of as the treaty of cession, and the Zone is mentioned as the territory ceded.

The preamble to the delimitation agreement signed on the 16th day of June, 1904, between the government of the Canal Zone and that of the Republic of Panama, contains the following:

"In order that said work of construction of said interoceanic canal may be systematically prosecuted, and in order that a government for the Canal Zone created by the terms and provisions of said article 11 of said convention may be successfully organized and carried forward, it is necessary that the extent and boundaries of the territory ceded to the Government of the United States by the Government of the Republic of Panama under the terms and provisions of said convention shall be provisionally determined and agreed upon. Furthermore, in the first section of the agreement proper, which was signed by the minister of foreign affairs of the Republic of Panama, is the following:

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SEC. 1. The limits of the Canal Zone, including lands under water and islands ceded, but not including the cities and harbors of Colon and Panama, delivery of which lands, water, and islands has been made by Panama, and possession of which has been taken by the United States, are indicated and shown on the attached map, * * * and said indicated boundary or line of division between the territory ceded by the Republic of Panama to the United States for canal purposes," etc.

And in a later section is the following:

"Provided, however, That the entrance channel of the Panama Canal through the harbor of Colon to its southern boundary of the width of 330 metres on either side of the middle line or axis of said entrance channel whenever said channel may now or hereafter cross the same is hereby declared to be a part of the Canal Zone under the exclusive jurisdiction of the United States."

Seventh. Also the following appears in Mr. Arias's draft of the delimitation agreement respecting sitizenship (translation): “ In consequence no change has been made for the present in the nationality of the inhabitants of the ceded territory. As in the arrangements to be made, time will have to be given to the above-mentioned inhabitants in which to choose their nationality, Panaman citizens in the meanwhile can ask the Government of Panama the permission which is specified in paragraph 2 of article 7 of the constitution, in order to allow them to accept employment from the Government of the United States so that they will not lose their citizenship."

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Paragraph 2 of article 7 of the Panama constitution is as follows: "Panaman citizenship may be lost (2) by accepting employment or honors of another government without permission from the President of the Republic *

Eighth. In June Etienne Latour was arrested charged with assault and battery committed at Emperador on the 5th of same month. The fiscal of the court before which the case would have been heard reported that since Emperador was situated in the Canal Zone the Panaman court lacked jurisdiction, and therefore the papers should be transmitted to the secretary of justice.

That official returned the papers on June 30 to the local court with the remark," This office abstains from deciding what should be done, as it considers that you are the one that should do so, as the transfer

of the sovereignty in the district of the railroad line has been officially communicated." Thereupon, the papers in the case were sent by the Panaman judge through the secretary of justice to the minister of foreign relations, who sent them in due time to the governor of the Canal Zone. In his letter of transmittal the secretary of justice stated the reason "in order that he (the secretary of government) may transmit them to the North American authority competent to take cognizance of the case in question."

Ninth. It has been already related that on the 22d of June the governor furnished the minister of foreign affairs with a copy of the circular announcement of the Postmaster-General of the United States, dated June 2, 1904, announcing that the Canal Zone had been brought within the postal system of the United States, also that the governor asked of the minister a temporary supply of Panaman stamps until such time as the United States stamps could arrive. The solicited favor was granted and the stamps promptly supplied, the overprinting having been attended to by the minister's Government, as requested by the governor of the Zone. In due time the United States stamps were received. Later the minister was asked for a statement of account so that the bill could be paid; it was furnished and the incident was closed.

There was not only no objection offered against the installation of the United States postal system, but the Government of Panama materially assisted the United States authorities in installing it. Nor has there been, up to the present time, any objection raised to the course that was pursued, save that the United States minister to Panama has furnished a copy of an official memorandum dated the 27th of July, transmitted to him by letter from the minister of foreign affairs of Panama, in which memorandum is the assertion that "excluding from the Zone the postal tariff and postage stamps of Panama is, to say the least, improper."

The foregoing citations and quotations from official documents show that in many instances the minister of foreign relations has officially used the word ceded and cession in referring to the grant by Panama of the Canal Zone, and twice in the agreement in question the word ceded is used when referring to the said grant, which has in recent communications been spoken of as a lease or a franchise.

The secretary of government and minister of foreign relations for the Republic of Panama, and also the attorney-general of the Republic, found no difficulty on June 17 in conceding to the United States exclusive jurisdiction over a channel or right of way through the harbor adjacent to Colon-that is to say, a strip of said harbor of undetermined length, which can not be less than a half mile and having the specified width of 660 meters; but these gentlemen now claim for their Government that the United States has nowhere in the Zone more than a partial dominion, sovereignty, or jurisdiction.

The same minister of foreign affairs on the 17th day of June, 1904, instructed the officials who had been administering the local government of the Zone that they would cease their functions, because the districts they had been governing "had been separated from the national territory."

On February 1 the committee of the provisional government, or the "Junta de Gobierno " as it is usually called, requested the minister of the United States to Panama to communicate to his Government

the hope that the fiscal system of the United States in the Zone might be harmonized with that of the Republic, and that liquors and tobaccos might be declared as not necessary or convenient for the officers and laborers employed in work on the canal, so furnishing a clear recognition of the right and power of the United States to make any desired disposition for taxation in the Canal Zone, a request that was repeated on more than one occasion to the governor and other members of the Canal Commission by the President of the Republic and his minister of foreign affairs.

It should not be forgotten that Mr. Arias, now secretary of foreign affairs, was a member of the provisional "junta " that was responsible for the special memorandum for the American Minister Buchanan.

Again it is seen that President Amador personally addressed the governor in writing, notifying him of the fact that the national assembly had given him power to increase or decrease import duties and taxes in accordance with these the United States might levy in the Zone.

Finally the minister of justice of the Republic refers an unfinished judical proceeding to the governor of the Zone because of the transfer of sovereignty of the territory where a crime had been committed, that was the subject of the judicial proceeding.

The correspondence that ensued between the minister of foreign relations of Panama and the governor of the Zone was voluminous, and much of it would be irrelevant in a report of this nature. A few of the more important communications are here noted and will be found in the appendix.

On July 16 the captain of the port of Panama informed the agent of one of the steamship companies plying to Panama that any of his vessels failing to comply with the port formalities exacted by the Government of the Republic would do so under penalty of a fine and the liability of being excluded from the waters of the Republic; also, that no vessel dispatched to the port of Panama could make use of the waters of the said port without complying with the formalities referred to and asking why the agency of the company changed the destination of a consignment of merchandise by delivering it at Ancon when it is consigned to Panama.

On August 1 the American minister to Panama furnished the governor with a copy of a protest by the Panama Government against the attitude and acts of the Canal Zone authorities in the matter of opening the ports of Ancon and Cristobal, and later in August a copy of a memorandum from the minister of foreign relations, dated July 27, was received from the American minister.

Since the minister of foreign affairs of the Republic, in his letter of protest of July 28, on behalf of his Government, expressed the belief that the opening of the ports of Ancon and Cristobal was not in obedience to orders from the American Government, but was due rather to the erroneous interpretation of the treaty on the part of the authorities of the Canal Zone, and as this amounted to a charge that the governor of the Canal Zone had acted without orders from his own Government, he felt called upon to reply to the unwarranted assertion by his letter of August 2, and the reply of Mr. Arias of August 27 will also be found in Appendix F.

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On July 15 the governor received instructions from the chairman of the Canal Commission, desiring him to confer with the authorities of the Republic to see if some plan for the use of the Panaman anchorage could not be reached, also directing that La Boca should be considered as within the Zone; also to endeavor to make a temporary arrangement of the port question. The interview was had, but the minister of foreign affairs said that since the governor was required to still continue to enter and clear vessels at La Boca, it was not thought best to enter into a discussion of that question or adopt a provisional agreement. To the governor's question as to the willingness of the minister to discuss the question of reciprocal trade, he replied that the Republic denied that the United States had any right to take any measures respecting international trade, and that there was no occasion to have any understanding on that subject.

Early in September the American minister to Panama furnished the governor of the Zone with a copy of a dispatch dated August 11, from the Panaman minister to the United States to the Secretary of State of the United States in Washington, in which the position of Panama on the questions pending between the two countries respecting ports, customs, taxation, and posts are very fully stated.

If this document is read in connection with the memorandum of Minister Arias, dated July 27, the position of the Government should be very clear. There is one discrepancy between the two officers of the same Government-Mr. Obdalia admits that the United States may maintain a postal system in the Zone for purely local purposes, but may not presume to send and receive mail to and from foreign countries, while Mr. Arias claims that to have displaced the Panaman postal system and postage stamps from the Zone "was very improper, to say the least."

The points of objection raised by these two officials are assembled for convenient reference in the following synopsis of the statements and arguments:

POINTS OF MR. ARIAS'S PROTEST JULY 27.

(P. 2.) Panama, when approving the canal treaty of the 18th of November, 1903, observed with pleasure that the United States had waived in favor of the Republic of Panama that which was neither needed by the United States nor by the canal enterprise, but which, for the Republic, constitutes the most effective guaranty of its existence the fiscal and economical sovereignty within and without the

Zone.

(P. 3.) It is the opinion of the undersigned that the citizens of Panama and Colon and the ports adjacent thereto are separate and distinct from the Canal Zone, virtually leaving the Zone without jurisdictional ports.

(P. 4.) The Republic claims the acknowledgment of its economical and fiscal sovereignty within the Canal Zone, not alone because it considers the Government as having been vested with that right, according to the treaty, but for the more potent reason that its future and its existence depends upon it. Panama will stead

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fastly claim all that has been by it clearly reserved and will yield nothing that it has not expressly surrendered.

(P. 4.) The sovereign right of levying taxes within the Zone does not appear to have been surrendered to the United States by any of the stipulations of the treaty. That right is implicitly acknowledged by Articles X and XIII of the treaty, wherein are specified the goods that can not be subject to be taxed. It follows that other effects are liable to taxation. In other words, national taxes and contributions take effect in the Zone in so far as not expressly excepted by said. Articles X and XIII.

(P. 4.) Excluding from the Zone the postal tariff and postage stamps of Panama is, to say the least, improper.

POINTS IN MR. OBALDIA'S DISPATCH OF AUGUST 11.

(P. 1.) The agreement concerning the isthmian canal does not imply cession of territory and absolute transfer of sovereignty. (P. 1.) The legal relation I would be that which exists between a lessor and a lessee.

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(P. 5.) Authority is conferred on the United States of establishing in the Zone a restricted judicial power.

(P. 5.) The treaty stipulates that the United States shall possess the land and exercise in it rights, powers, and authority over the Zone conceded to it by the Republic of Panama as if it were sovereign in the territory, but this expression implicitly conveys the idea that it is not sovereign.

(Pp. 5 and 6.) From the stipulation contained in Articles X and XIII it is declared that Panama preserves the right to levy contributions on property of persons not comprised in the list contained in these articles.

(P. 7.) If there should exist any discrepancy between the terms of the third article and the above reasoning it is obvious that the subsequent provisions should prevail, because they are more specific and more clear, and because they are more in conformity than that one with the remaining clauses of the treaty and with the external policy of the United States with regard to Central and South American nations.

(P. 9.) The idea of the contracting parties is obscure in everything relating to these delicate questions of dominion and sovereignty, but the conclusion is, however, justified that the two countries exercise conjointly the sovereignty over the Canal Zone. In the cases expressly specified in the treaty the use of such right belongs to the United States by virtue of delegation from the Republic of Panama, but in respect of all other matters not mentioned the rights of the Republic remain unaltered and complete.

(P. 7.) Such a situation necessitates the conclusion of an explanatory convention, and this Panama proposes.

(P. 8.) The establishment of a port and its opening to commerce is a right inherent in the sovereign. The United States does not enjoy absolute sovereignty, and such authority does not reside in the United States.

(P. 9.) The port of Panama includes the whole coast that surrounds the city, the neighboring islands, and all the waters that wash the port of the Canal Zone. This power, like that relative to the ports, is vested in the sovereign of the territory, and the United