takes will be discussed with the Panamanians, assuming those investments carry on beyond the life of the treaty, and we will reach an understanding before undertaking new, major obligations on how those obligations will be disposed of when the passage of authority from the Commission to the Panamanians takes places around the turn of the century. NO KNOWLEDGE OF INFORMAL STATEMENT THAT LOANS NEED NOT BE REPAID Senator HATCH. Do you know if any of the negotiators, or anyone for that matter, has ever advised the Panamanians that they would not have to pay back these debts which are described in your statement? Mr. COOPER. Which debts are you talking about? Senator HATCH. I am talking about the $75 million in AID, the $200 million in Export-Import Bank loans and guarantees, and the OPIC. Mr. COOPER. The assumption on both sides is that those are debts of exactly the nature that they are with any other country and they are fully expected to be repaid. That is our understanding, and that is our understanding of the Panamanian understanding. Senator HATCH. Yes; but one of the previous witnesses before the committee testified that he understood that the Panamanian negotiators had been advised by our negotiators that they needn't worry about paying back these long-term loans. Do you know anything about that? Secretary COOPER. I know nothing about that, no. Senator HATCH. In fact, there have been reports that Ambassador Linowitz may have testified to that effect before the Senate Committee on Intelligence. Did you or anyone else in the State Department, to your knowledge, ever advise the Panamanians that it would not be necessary to pay back these loans? Mr. COOPER. No. Senator HATCH. Have you ever heard anyone at the State Department say that former Ambassador Linowitz or any negotiators ever advised the Panamanians that repayment of these loans could be ignored? Mr. COOPER. No. THE CASE ACT Senator ALLEN. Which of these executive agreements, if any, were filed with the Senate under the Case Act? Mr. HANSELL. Senator, all the agreements will be submitted when they become effective. Senator ALLEN. Including the unilateral agreement? Mr. HANSELL. All those are in fact agreements-and I cannot speak to which ones were so regarded, but I know that we were in close touch with the Senate Committee on Foreign Relations with respect to these documents. We can identify for you which ones were submitted. Senator ALLEN. Obviously we can get the information from the Secretary of the Senate, but I would like for you to supply the information as to whether the unilateral agreement about which you spoke, providing for the $345 million in loans and guarantees, was filed or not filed with the Senate under the Case Act and, if filed, the date submitted. Mr. HANSELL. We will be glad to give you a list of everything that is submitted.1 Senator ALLEN. If you would do that for the record, we would appreciate it. Assuming your premise that the Congress can set the terms for the operation of the canal and the various payments that the Panama Canal Commission could make, legislation presumably could be the place where this $16 million a year interest payment might be continued. I might point out to you that you state that sometimes the company has not been able to pay the $16 million even though the annuity to Panama is only $2.3 million. What chance do you think there would be of paying the $16 million assuming Congress can require that to be done? What chance do you think there would be of getting the $16 million paid when it came in back of sums of $60 million or $70 million a year in payments to Panama? If the Treasury could not get it when the payment was $2.3 million, what chance does the Treasury have of getting it when the payment to Panama is 35 times that much? Mr. HANSELL. It would be a function, of course, of future circumstances which I cannot predict, including toll revenues, costs and expenses, canal traffic. I just could not begin to guess what all those would add up to as a net figure in any given year in the future. NO INCONSISTENT STATUTE Senator ALLEN. Could the Congress pass any statute in implementation of the treaty inconsistent with the provisions of the treaty? Mr. HANSELL. I would not think so. You say "inconsistent with." The legislation, of course, that Congress will pass can supersede the terms of prior treaties. Senator ALLEN. Let's get that again. You say that Congress can pass a law that supersedes the provisions of the treaty? Mr. HANSELL. Yes, sir. The treaty, of course, as you know, is law under the Constitution. Subsequent legislation enacted by Congress is also law. Within some limitations that I think we would want to articulate in a written response Senator ALLEN. I believe you would want to reconsider that answer. Mr. HANSELL. It is the power of the Congress to enact, subsequent to a treaty, legislation that can affect the domestic legal effect of the treaty. Senator ALLEN. No, sir, I think you will find that Congress cannot pass a statute which unilaterally would change the terms of a treaty because a treaty under the Constitution becomes the supreme law of the land. It cannot be varied by statute. So the Congress in my judgment could not pass any law inconsistent with the provisions of this treaty. That is where I think your premise that we could work out something through legislation on this interest payment would fall. Mr. HANSELL. Let me say that I was not contemplating anything that would be inconsistent with the terms of the treaty. I would not regard the kinds of arrangements we were discussing previously to be 1 See page 467. 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. 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. 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 indul gence. 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 |
