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Canal Zone in a different category from Hawaii, Puerto Rico and the Philippines where sovereignty was ceded. Although there have been instances in which Congress specifically declared that for particular purposes the Canal Zone should be treated as a territory or possession of the United States, the Court, nevertheless, gave weight to the fact that the Post Office Department and the General Accounting Office treat the Canal Zone as coming under the head of "foreign territory" when described in the United States Statutes. Relying on the interpretation given the statute by the administrative agency responsible for carrying out its provisions," the Court held that the ports of the Canal Zone are foreign within the meaning and for the purposes of the mail transportation statute."

Four years later, a New York Federal District Court took judicial notice of the laws of the Canal Zone on the ground that the Zone was not a foreign territory. The defendant's contention that the Canal Zone was a foreign territory was based on the Luckenbach case. The District Court dismissed this argument on the ground that the Supreme Court did not hold that the places there involved were in a foreign country, but only that the places named should be treated as foreign ports for a limited purpose.

2. A Brief Consideration of the Sovereignty Question

Unexplained dictum in the case of Vermilya-Brown Co. Inc. v. Conne demonstrates the confusion on the issue of Canal Zone sovereignty. The question before the Court was whether the Fair Labor Standards Act covers employees of American contractors engaged in constructing a military base on land in Bermuda leased from Great Britain for 99 years an area under the sovereignty of Great Britain and not a territory of the United States in a political sense. In holding that it did apply, a majority of the Court said: "So the Administrator of the Wage-Hour Division has issued a statement of general policy or interpretation that directs all officers and agencies of his division to

Luckenbach S.S. Co. v. United States, 280 U.S. 173, 174 (1930).

E.g., Act of Aug. 24, 1912, ch. 390, 12, 62d Cong., 2d Sess., 37 Stat. 569, extended the laws of the United States relating to extradition and the rendition of fugitives from justice and declared that for such purposes "and such purposes only" the Zone should be treated as an organized Territory of the United States.

66 Cf. Schell's Executors v. Fauché, 138 U.S. 562 (1891); United States v. Moore, 95 U.S. 760 (1877). Considering the peculiar uncertainty of the Zone's status, it might have been appropriate for the Court to face the sovereignty issue and determine the controversy on that basis, rather than relying on the past application of the statute by the agencies.

57 By limiting its decision to the narrow issue of interpreting the mail transportation statute the Court does not overrule Wilson v. Shaw, 204 U.S. 24 (1907). 58 Taylor v. Insurance Co. of North America, 9 F. Supp. 574 (S.D.N.Y. 1934). 50 335 U.S. 377 (1948).

0 52 Stat. 1060 (1938).

apply this [Fair Labor Standards] Act to the Canal Zone, admittedly territory over which we do not have sovereignty."1 [Emphasis added.] Mr. Justice Jackson did not agree with this isolated remark, and in his dissenting opinion, asserted that "Our State Department has firmly maintained that this treaty [of 1903] confers upon the United States complete power of commerce. ... To such extent, indeed, are we sovereign in the Canal Zone that Panama has been granted special commercial rights only by express and formal concession...."62 This view is clearly consistent with United States policy existing at the time. One can only speculate how the majority concluded that the Canal Zone was "admittedly territory over which we do not have sovereignty." In the course of its opinion, the Court points out that Congress has the power, in certain situations, to regulate the actions of American citizens outside the territorial jurisdiction of the United States even though the activities regulated occur within the territory of a foreign nation. The Court then explains that such legislation concerning our citizens clearly could not offend the dignity or right of sovereignty of another nation. This discussion, in the light of the Court's reference to the lack of United States sovereignty in the Canal Zone, suggests that the territorial sovereignty of Panama is not relinquished because the United States exercises "jurisdictional powers" in connection with the operation of the canal.

C. Statutory Definitions

63

The apparent inconsistency disclosed by federal court treatment of the Panama Canal Zone's legal status is partly explained by the maze of statutory definitions which declare the Canal Zone as a territory of the United States for some purposes and as a foreign territory for others. For example, the law controlling imports to the United States from the Canal Zone expressly provides:

All laws affecting imports of articles, goods, wares, and merchandise and entry of persons into the United States from foreign countries shall apply to articles, goods, wares, and merchandise and persons coming from the Canal Zone, Isthmus of Panama, and seeking entry into any State or Territory of the United States or the District of Columbia.64

In David Kaufman & Sons Co. v. Smith the Supreme Court applied this section in upholding a duty levied upon goods coming from the

61 Vermilya-Brown Co. v. Connel, 335 U.S. 377, 381 (1948).

62 Id. at 402.

63 U.S. Const. art. IV, § 3, authorizes Congress to enact "needful Rules and Regulations respecting the Territory or other Property belonging to the United States...." Cf. United States v. Bowman, 260 U.S. 94 (1922).

6+ 19 U.S.C. § 126 (1958). Original statute 33 Stat. 843 (1905) unchanged. 65 216 U.S. 610 (1910).

96-949 - 77 - 43

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Canal Zone. Consistent with the view that the Zone is "foreign territory," the Attorney General declared that the Canal Zone is not one of the possessions of the United States within the meaning of the Tariff Act of 1909, but rather, "a place subject to the use, occupation, and control of the United States for the purpose of constructing and maintaining a ship canal connecting the waters of the Atlantic and Pacific oceans." In other statutes the Canal Zone is either expressly included in the term "United States," expressly excluded from the term or is considered to be in a separate category. While the inconsistent application of the terms "possession," "territory" and "United States" in reference to the Canal Zone creates what at first seems to be legislative chaos, policy considerations and convenience of administration provide ample explanation for the various distinctions.T

10

D. Recent Changes in United States Attitude

1. Panama Gets Limited Power to Tax

Although the United States Government did not abandon its claim to territorial sovereignty in the Panama Canal Zone, recent concessions have been made which increase Panamanian fiscal participation within the Zone. The Treaty of Mutual Understanding and Cooperation of 1955 gave Panama the right to levy income taxes on all of its citizens who work in the Canal Zone regardless of where they reside. In this respect Panama now has an important attribute of sovereignty. There can be no doubt that with the United States retaining its power to tax American residents and employees of the Canal the two countries now “share” sovereignty within the Canal Zone at least on this point.

2. Titular Sovereignty Recognized

In 1960, President Eisenhower issued an executive order requiring that the flag of Panama be displayed together with the American flag * The court cites the Act of March 2, 1905, 33 Stat. 843, 19 U.S.C. § 126 (1958). 7 27 Ops. Att'y Gen. 594 (1909).

...

# 18 U.S.C. § 1401 (1963) (Crimes and Criminal Procedure-Narcotics), “The term 'United States' shall include the District of Columbia, Puerto Rico, the insular possessions of the United States, the Trust Territory of the Pacific, and the Canal Zone."

18 U.S.C.5 (1958) (Crimes and Criminal Procedure-General), "The term 'United States,' as used in this title in a territorial sense, includes all places and waters, continental or insular, subject to the jurisdiction of the United States, except the Canal Zone."

70 18 U.S.C. 3183 (1958) (Crimes and Criminal Procedure-Extradition), "Whenever the executive authority of any State, Territory, District, or possession of the United States or the Panama Canal Zone.

11 E.g., for purposes of administration and collection of taxes in possessions the term "possession of the United States" includes the Canal Zone, 26 U.S.C. § 7651 (4) (1958).

16 U.S.T. & O.I.A. 2273; T.I.A.S. 3297 (1955); The Treaty of 1955 also increased the annual payment to $1,930,000.

at a designated area in the Canal Zone as visual evidence of the Republic's "titular sovereignty." Subsequently, the United States has agreed: to display the Panamanian flag wherever the flag of the United States is flown in the Canal Zone by civilian authorities,74 to permit foreign consuls to function in the Canal Zone on the basis of documents of exequatur issued by the Panama Government,75 to propose the use of Panamanian postage stamps in the Canal Zone postal system and to "deduct, withhold and remit to the Government of Panama the sums owed for income tax by employees who are required to pay income tax to the Republic of Panama . . ." and who work for the Panama Canal Company or any United States government agency in the Zone."

3. The Flag Suit

78

In the case of Doyle v. Fleming, the United States District Court for the Canal Zone District" dismissed a complaint which prayed for a temporary restraining order and a perpetual injunction to restrain the Canal Zone Governor from displaying, on or about any public building in the Zone on a daily or permanent basis, any national flag or banner except that of the United States. Since the complaint was invalid on procedural and jurisdictional grounds,80 it was unnecessary for the court to pass on the substantive issues presented. However, Judge Crowe declared that raising the Panama flag in the Zone on a daily basis, using stamps supplied by Panama and recognizing exequaturs issued by the

73 N.Y. Times, Sept. 18, 1960, § 1, p. 1, col. 4; Recognition of Panama's titular sovereignty at this point was not an isolated act nor was the United States acting in the abstract. Rather, the concession was a reaction to the condition of riot and unrest in Panama which occurred on November 3, 1959, N.Y. Times, Nov. 7, 1959, p. 7, col. 1; Recognition of titular sovereignty appeared to be an insignificant price to pay for restoration of Panamanian confidence. President Eisenhower expressed disappointment with the attitude of some Americans who viewed such recognition as an abdication of American sovereignty in the Canal Zone, N.Y. Times, Feb. 4, 1960, p. 13, col. 1.

74 48 Dep't State Bull. 171 (1963).

75 Id. at 172, permission, however, is limited to consular offices from governments recognized by the United States and to consular offices which, in the opinion of the United States, do not amount to a security risk.

76 Ibid.

77 49 Dep't State Bull. 246-47 (1963).

78 219 F. Supp. 277 (D.C.Z. 1963).

79 The United States District Court for the District of the Canal Zone is not a United States district court within the meaning of 28 U.S.C. Ch. 5. Congress therein has defined "district courts" to be those enumerated in §§ 81-144 and the Canal Zone is not included. A further distinguishing feature is that the Canal Zone district court is a "legislative" rather than an "Article III" tribunal, 1 Moore, Federal Practice ¶ 0.4[3] (2d ed. 1961). While the legislative courts have “judicial power" their judges are not protected by the tenure and salary provisions of Article III of the United States Constitution and the legislative courts can be given non-judicial business, Hart and Wechsler, The Federal Courts and the Federal System 49, 348-49 (1953).

80 The Canal Zone Code is specific in denying injunctive relief to a petitioner against a public officer who is exercising that office in a lawful manner, Č.Z. Code tit. 5, § 322(b)(4) (1963), 76A Stat. 298 (1962).

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Republic of Panama may well be against the interests of the United States and its citizens. He concludes that:

such actions are confusing and not understood. The flying of two national flags side by side in a disputed territory for an undeclared purpose is a position of weakness that can lead but to further misunderstanding and discord.

The people living in the Canal Zone are entitled to police protection, adequate courts, orderly government, health programs and all of the things that stem from the sovereign. When the sovereign is uncertain and in doubt these fundamental rights are of necessity weakened and may be lost.

After sixty years of debate and controversy during which time the United States has accepted nothing less than its total sovereignty within the Canal Zone it would appear that concessions to Panama are consistent with the conduct of a nation acting "as if it were the sovereign." Arguably, if we accept the premise that the United States is the "sovereign power" in the Canal Zone the rights of its citizens are not in danger of being lost, so long as the sovereign maintains its power to enact and enforce the laws. This critical attribute of sovereignty is in no way affected by the existing agreements with Panama. For Judge Crowe to suggest that sovereignty in the Zone is uncertain at the present time is, arguably, an admission that the status of United States power in the Canal Zone was always subject to suspicion because of the ambiguous character of the Treaty of 1903. On the other hand, by accepting. Panama's interpretation of the Treaty, we would be able to explain the present agreements not in terms of concession but as a better-late-thannever attempt to conform to the provisions of the basic Convention. Insofar as the recent accommodations can be adequately tailored to suit the traditional arguments of both countries the structure of the accord is basically weak; the question of who has sovereignty is still unsettled.

III. THE NATURE OF SOVEREIGNTY

Lying at the base of a good deal of the confusion is the unfortunate fact that after centuries of use the meaning of the term "sovereignty" is still lacking in scientific precision, and its application-witness the history of the Canal episode "is attended with many inconsistencies." A discussion of the concept of sovereignty is therefore vital to any adequate analysis of the legal status of the Canal Zone.

A. The Classical Doctrine

Essentially, the concept of sovereignty developed by the early writers on the subject was based upon the need for a principle of social order.

81 Doyle v. Fleming, 219 F. Supp. 277, 284-85 (D.C.Z. 1963).

as Fenwick, International Law 88 (2d ed. 1934).