inconsistent with the terms of the treaty. Quite the contrary, they would be implementing the terms of the treaty.

Senator ALLEN. If the treaty wipes out the unpaid equity, which testimony indicates is the case, then there would be no occasion for activating this indebtedness. There would be no power in Congress to reactivate the unpaid equity in my judgment.

Secretary COOPER. Are you talking about during the life of the treaty or subsequent to the life of the treaty?

Senator ALLEN. In either case, if the treaty wipes out the unrecovered equity of the United States, Congress could not reinstate that

sum.

Secretary COOPER. The implementing legislation to my knowledge has not been worked out in detail, but I don't think there is a suggestion that the equity as such is wiped out.

Senator ALLEN. I understood you to testify exactly that.
Secretary COOPER. During the life of the treaty, no.

Senator ALLEN. When will it be wiped out?

Secretary COOPER. When the Panama Canal as a going operation is passed to Panamanian management-and that would be in the year 2000-this particular equity item would, in effect, be passed with it. Senator ALLEN. Yes, and undoubtedly unrecovered. But where then is the provision that interest will continue to be paid on this equity investment?

Secretary COOPER. That is not in the treaty.
Senator ALLEN. That is the point.

ANOTHER AMBIGUITY

Secretary COOPER. That is not in the treaty, but I think what Mr. Hansell was saying was that neither in the treaty is it that interest will not be continued to be paid on this investment. That issue is left

open.

Senator ALLEN. That is another one of these ambiguities about which we hear.

Mr. HANSELL. I think you are looking for a provision that would not normally be in the treaty, and it is not in the treaty. That is not a subject matter that is covered.

Senator ALLEN. What about the agreement on unrecovered equity? Where is that?

Mr. HANSELL. I think you will find on analysis that this is a matter for the operation of the Canal Commission, its revenues and expenses, and whatever direction it receives as a matter of legislation.

Senator ALLEN. They apparently recognize the obligation now but there is no assurance that the obligation will be recognized after the treaty is approved.

Mr. HANSELL. That is because the Canal Company is in existence. The Canal Commission has yet to be created by legislation.

Senator ALLEN. I understand that. The treaty is silent on the continuation of this obligation. The Commission presumably takes it over but without the assumption of that payment.

Mr. HANSELL. So is the existing treaty silent on the payment of the $16 million. The existing treaty does not provide that.

Senator ALLEN. Yes, but we have full control and no obligation to pay $70 million off the top.

Mr. HANSELL. It is a matter of legislation in the implementation of the functions of the Canal Company. I think you will find there is not a difference in that respect between the existing arrangement and the future arrangement.

Senator ALLEN. It does not carry over. That is the point that I am making. That is your own statement-that it does not carry over. Frankly, the main purpose of this new Commission seems to be to stick the taxpayers with a loss of $319 million in unrecovered equity and a loss of $16 million a year in interest. Otherwise, why would you not have used the existing Panama Canal Company.

We have promised these gentlemen to release them at 12:30 for a prior engagement.

Senator HATCH. I would like to make one closing comment.

We appreciate the testimony that you have given. We will look forward to working with you on trying to solve this drug trafficking problem.

What I am additionally and particularly concerned about is that the State Department is ignoring the appropriations process, in addition to transferring property without the consent of Congress, has done so deliberately. That is what we believe has happened here. I believe the State Department has done so because it knows that it would not only complicate matters but also that it could not get these treaties through the House of Representatives. That assessment may or may not be accurate. I don't know.

What I am concerned about is that we are setting up treaties here that certainly do nothing for the United States monetarily, and maybe nothing otherwise. And we are violating the Constitution in the

process.

We are allowing this whole country to rely on what we are doing when we have not gone to the underlying cause of Panama's problem, which is economic. In the process we may be consigning Panama over the long run to the very enemies that we are fearful of. What I am also concerned about is that I think we are doing it in a back way manner. The facts are being hidden from public scrutiny.

I know you represent the State Department, and I think you both have admirably done that.

I am concerned about having a bigger problem with the treaties than we have now. I think because of the approach that has been made, not by you gentlemen but by those who have effectuated these treaties through the years, that we are in a worse problem today than we might have faced. We might have been able to have treaties that really could have been satisfactory to both countries without all the repercussions that we now have going on. That is my particular viewpoint. Any one of us could be wrong on any one of these points. But why these treaties? Why have you not brought to us something the people of the United States can in good conscience support?

All we can do is the best we can sincerely, and I think that is what you gentlemen certainly want to do and that is what I want to do. But I am deeply concerned about some of the points that have been raised, about some of the information that has managed to come to light.

We would appreciate, Mr. Beckle, as much information as we can have.

I would like you also to look over the October 26, 1976, State Department memo, Mr. Cooper, because it says they have a lot of economic problems, and the treaties that are presently negotiated will not solve those problems. We are going to be continually called upon for solutions that are in excess even of these incredible treaties, which go far beyond what I believe the majority of the Americans want us to do.

I think these issues are important issues. Maybe you fellows might be able to help your cohorts there at the State Department wrestle with them *** for the benefit of our country.

I appreciate your testimony today.

Senator ALLEN. Thank you very much. Secretary Cooper and Mr. Hansel, you have both been most cooperative. You have been forthcoming and most helpful to this committee. We appreciate your indulgence.

The subcommittee will recess to reconvene subject to the call of the Chair.

[Whereupon, at 12:35 p.m., the subcommittee recessed to reconvene at the call of the Chair.]

[The following information was subsequently supplied for the record:]

QUESTIONS SUBMITTED BY SENATOR ALLEN TO HERBERT J. HANSELL, LEGAL ADVISER TO THE SECRETARY OF STATE AND ANSWERS BY MR. HANSELL

Question 1. Your duties as Legal Adviser to the Secretary of State are quite wide-ranging, but would you briefly summarize those responsibilities and state how long you have been in your present job?

Answer. Mr. Hansell is the principal legal officer of the Department of State. He acts as legal adviser to the Secretary of State and to other Departmental officers. He was sworn in as Legal Adviser on April 8, 1977.

Question 2. Were you employed at the Department of State prior to that time? Answer. Mr. Hansell was not employed at the Department of State prior to that time.

Question 3. Did you give legal advice to our negotiators during the conduct of the negotiations which led to the present proposed Panama Canal treaties? Did you give legal advice in prior negotiations?

Answer. Mr. Hansell did give legal advice on a number of occasions to the U.S. negotiators during the negotiations of the Panama Canal treaties. Two lawyers on his staff served as members of the U.S. negotiating team throughout the negotiations. Mr. Hansell did not give advice during treaty negotiations prior to 1977.

Question 4. Mr. Hansell, are you familiar with a memorandum dated April 8, 1955, prepared by one of your predecessors in the Office of the Legal Counsel, Mr. Herman Phleger, in which Mr. Phleger described the practice on the part of the United States with respect to the annuity then paid to the Republic of Panama, as follows:

"At the present time, the annuity payments made to Panama are pledged to service Panamanian bonds. For many years the payments by the United States have been made, under irrevocable instructions from the Government of Panama, directly to New York Banks."?

Answer. Mr. Hansell was not familiar with the 1955 memorandum prepared by Mr. Phleger, but he is and has been aware of the arrangements under which Treaty payments are made directly to various fiscal agents for the Government of Panama in connection with certain issues of Panamanian Government bonds. Question 5. The same memorandum reports that the Secretary of State on April 14, 1950, advised the Government of Panama, with respect to the hypothecation of the Panama Canal annuity, as follows:

"[The United States] would have no objection to the pledging of the Canal annuity as security for a new loan, provided it is determined that the refunding

plan assures full protection to the holders of the present external debt of the Republic of Panama to the payment of which this annuity is presently pledged." Additionally, shortly prior to the signing of the Panama Canal Treaty of 1955, Mr. Phleger advised the Secretary of State by memorandum dated May 3, 1955, as follows:

"As the treaty is drafted, I see nothing that would prevent the hypothecation of the monies to become due to Panama under the 1955 treaty."

Please state to the Committee if similar advice has been given in connection with these proposed treaties?

Answer. Mr. Hansell has not given similar advice in the form of a memorandum to the Secretary of State, as was done in 1955. However, the Office of the Legal Adviser has advised both the treaty negotiators and other Department of State officers that the payments to be received by Panama under the Panama Canal Treaty could be assigned by Panama to its fiscal agents as security for these bonds in the same fashion as the 1955 Treaty payments are currently pledged. Moreover, the Department of State has discussed this matter with both representatives of bondholders and Panamanian officials, and it is understood that Panama intends to hold discussions in the near future with the bondholders and fiscal agents to work out appropriate technical adjustments to their existing arrangements in order to continue the security for these bonds after the new treaties are ratified. The U.S. does not expect to be directly involved in those discussions, however.

Questions 6 and 7. Twenty million dollars is proposed pursuant to these agreements (Note Regarding Economic and Military Cooperation) to go to Panama as loans or loan guarantees to the Panamanian development bank, COFINA. Please state where you find statutory authority for the Overseas Private Investment Corporation to make loan guarantees on interbank transactions of the sort obviously contemplated by this executive agreement. Have such interbank loan guarantees ever before been permitted? If so when and to whom were the guarantees extended?

Answer. OPIC promotes development of private enterprise in the developing countries in various ways including the financing of Intermediate Credit Institutions which, in turn, finance private projects in such developing countries. OPIC's authority to finance ICI's is found in its general guaranty authority under Section 234 (b) of the Foreign Assistance Act of 1961, as amended to further the general corporate purposes of OPIC set forth in the Act specified in Section 231.

Section 231 provides that OPIC shall undertake "(b) too utilize private credit and investment institutions and [OPIC's] guaranty authority as the principal means of mobilizing capital investment funds In the case of COFINA, OPIC would mobilize the funds of a U.S. lender by guaranteeing its loan to COFINA.

When OPIC supports an ICI, OPIC carefully reviews the investments made by it to determine that they promote private enterprise in such countries. In fiscal 1975 OPIC guaranteed a loan to the ICI Confederation of Latin American Credit Unions ("COLAC") in Panama for relending to credit unions throughout Latin America. In the past OPIC has made loans from its direct investment fund ("DIF") to such ICI's as ADELA in Latin America, and PICA and Korea Capital Corporation in the Far East. In fact, OPIC's legislative history evidences consistent Congressional interest that OPIC work closely with ICI's. OPIC's legislation contains no restrictions that prevent it from guaranteeing loans from U.S. lenders to ICI's wholly-owned by a government.

COFINA is an example of an ICI which supports private enterprise in Panama. Before OPIC would approve the proposed loan guaranty, COFINA's operations would be carefully investigated and the guaranty would require approval by OPIC's Board of Directors.

Questions 8 and 9. I was interested in the comment in your prepared statement to the effect that the executive agreement providing for all of these various loan programs is not, in any sense, legally binding on the United States. I would note that the SALT Accord in Vladivostok, the Final Act at Helsinki, the Sinai Accords, the Nixon-Thieu letters, the Soviet oil and grain agreements, and the Paris Agreement on the War in Vietnam were all also handled as executive agreements permitting our negotiators to wheel and deal free of Congressional constraint and that in each case the Department of State found it convenient to avoid characterizing these documents as legally binding, but they have certainly embodied

major foreign policy decisions and have had a significant effect on our country and indeed on world history. If this particular executive agreement (Note Regarding Economic and Military Cooperation) is not legally binding, it does promise something to Panama, does it not? In legal parlance, is this executive agreement somewhat akin to a promise which cannot be enforced against the promisor because of lack of consideration?

Do you think that Panama should be specifically advised in writing that this document (Note Regarding Economic and Military Cooperation) has no legal effect?

Answer. The United States Note Regarding Economic and Military Cooperation is a unilateral statement to Panama that the United States "is prepared to agree," within the limitations of U.S. legislation and subject to the availability of appropriated funds, to certain economic and military cooperative projects with Panama. It is not legally binding and is not an agreement between the two Governments. The text of the Note stipulates that the United States undertakings "will enter into force upon an exchange of Notes to that effect between our two governments." There will be a legally binding international agreement between the two Governments upon the exchange of Notes, although that undertaking would be fully subject to the qualifications set forth in the Note.

The Government of Panama is completely familiar with the legal status of each of the agreements and other documents related to the Panama Canal Treaties. Question 10. One of the problems of non-binding executive agreements is that frequently the other side does not understand that these agreements are, in fact, non-binding or at least asserts a lack of understanding to that effect. A perfect example is the Russian position on the SALT Accord signed by President Ford in Vladivostok. Since that Accord was not legally binding, the negotiators for the United States did not put much stock in it one way or another, and President Ford did not seek the advice and consent of the Senate, but the Soviet Union has kept insisting all along during the recent renewed SALT negotiations that the United States has deviated from its word. Don't you think that it would be a good idea for the United States either to have legally binding executive agreements or no agreements whatsoever, or at a minimum to disclaim legal effect in precise language in the document itself? Don't the dangers of misinterpretation otherwise outweigh the advantages of promised but non-obligated performance? Answer. All executive agreements are legally binding under international law. There are occasions upon which the United States enters into a political or moral commitment that is not legally binding, but in such cases the legal status of such commitment is clearly understood by the parties thereto. For example, at the concluding session in Helsinki of the Conference on Security and Cooperation in Europe, all of the parties, including the United States, agreed that the Final Act of the Conference was not legally binding, and this was reflected in the language of that document. However, the fact that there is no specification in an agreement does not normally lead to misunderstandings or misinterpretations concerning its status.

It is United States practice to have the legal status of its international arrangements clearly understood by all parties to them, including whether they are legally binding agreements or some other kind of arrangement. In any event, specification that a document is not legally binding, or is not a formal agreement, does not preclude governments from asking for compliance with whatever political or moral commitments have been undertaken. This is perhaps best illustrated by the Helsinki Final Act and the practice thereunder.

Question 11. I note again from your response to the questions of the committee that you do not consider this Note Regarding Economic and Military Cooperation to be legally binding. Has this agreement nevertheless been reported to the Congress under the terms of the Case Act?

Question 12. Do you assert that the Case Act requires the reporting only of "legally binding" executive agreements?

Answer. The Note Regarding Economic and Military Cooperation has not been transmitted to the Congress under the Case Act because it is not a legally binding agreement.

The Case Act requires the transmission to the Congress of international agreements other than treaties (executive agreements). The legal view and practice of the United States, as well as of the world community, it is to consider as international agreements commitments that are legally binding.

Question 13. Mr. Hansell, you are undoubtedly familiar with the Department of State Circular #135. As you know, Circular #135 defines the difference be