711F.1914/8–345
The Department of State to the Panamanian Embassy
Memorandum
Reference is made to the Department’s memorandum of May 12, 1945 to the Embassy of Panama64 regarding charges being made by the Panama Canal, subsequent to the enactment by the Congress of [Page 1254] the United States of Public Law 48, approved May 3, 1943,65 for amortization and interest on the Panama water and sewerage systems.
The Department concurs with the Secretary of War, to whom the Panamanian memoranda of February 27 and April 18, 194566 were submitted for study, that at the present time there is no authority of law for the discontinuance of the imposition and collection of water and sewerage rates, or for the discontinuance of the payment of amortization and interest prior to the transfer of the systems.
The agreement reached between Panama and the United States in the exchange of notes on May 18, 1942 stated that:
“When the authority of the Congress of the United States shall have been obtained therefor, the Government of the United States will transfer to the Government of the Republic of Panama free of cost all of its rights, title and interest in the system of sewers and waterworks in the cities of Panama and Colon.
“At that time the United States will renounce the right which it obtained in the first paragraph of Article VII of the Convention between the United States and the Republic of Panama signed at Washington, November 18, 1903,67 as modified by Article VI of the Treaty between the United States and Panama signed at Washington March 2, 1936,68 to acquire lands, buildings, water rights or other properties necessary for purposes of sanitation such as the collection or disposal of sewage and the distribution of water in the cities of Panama and Colon. The United States, likewise, will renounce the authority contained in Article VII of the above-mentioned Convention of 1903 to impose and collect water rates and sewerage rates in those cities which shall be sufficient to provide for the payment of interest and amortization of the principal of the cost of said works. It is understood that there will be no refund to Panama of amortization and interest payments or charges of any kind based on the Convention of 1903 and on the contracts of September 30, 1910.”
The Act of May 3, 1943 included the following language:
“Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, that the President of the Unittd States be and is hereby, authorized to transfer to the Republic of Panama all the right, title, and interest of the United States in and to water sewerage systems installed by the United States in the cities of Panama and Colon:…;
It will be noted that in the exchange of notes on May 18, 1942 it was agreed that when so authorized by the Congress the United States would transfer the water and sewerage systems and would renounce the authority to impose and collect water rates. The Act of May 3, 1943 merely authorized the President to accomplish the transfer which it was understood by all parties concerned at the time would be effected through an Executive Order followed by a negotiation by the two Governments of an appropriate formal transfer instrument and so-called operation contract. With this understanding in mind, the proposed instrument of transfer and conversations with the authorities of the Republic of Panama relating thereto have been based on the assumption that at the date of the transfer the United States would renounce the authority contained in the 1903 Convention to collect water and sewerage rates for the payment of interest and amortization.
By Executive Order 9551 of May 16, 194569 the President of the United States authorized and directed the Governor of the Panama Canal to transfer to the Republic of Panama the water and sewerage systems in accordance with the terms of the May 18, 1942 agreement and “upon such further terms respecting incidental and related matters as may be agreed upon between the authorized representatives of the Government of the Republic of Panama and the Governor of the Panama Canal.”
The actual transfer to this date has not been effected in as much as the terms of the formal instrument by which the transfer will be made have not been agreed to by the Republic of Panama. It is understood that the draft of the proposed transfer instrument is in the hands of the Panamanian authorities where it has been under consideration for some time.
In expressing its regrets that it can find no obligation or legal means for complying with the request of the Panamanian Government prior to the date of the actual transfer of the water and sewerage systems, it might be of interest to point out, however, that this Government agrees that any surplus funds, over and above amortization and interest payments and authorized operating expenditures, which may have accumulated through collection of water rates in Panama subsequent to the enactment of Public Law 48, will be added to the surplus of the water funds collected prior to that date and which this Government has stated will be held by the Panama Canal for use after the transfer on major repairs, replacements and extensions of water works, sewers and payments in the cities of Panama and Colon.
- Not printed.↩
- 57 Stat. 74.↩
- Neither printed; according to these memoranda, the Panamanian position was that the debt incurred by Panama for the water and sewer works was cancelled at the time that the Congress of the United States authorized their transfer to Panama, and the sums collected subsequently for interest and amortization should be turned over to the water fund and used for street repair (711F.1914/4–1845).↩
- Foreign Relations, 1904, p. 543.↩
- Department of State Treaty Series No. 945; 53 Stat. (pt. 3) 1807.↩
- 10 Federal Register 5709.↩