Evening star., 1936-03-29

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\A/ Panama treaty became
Wv known few days ago,
special attention was paid
in this country to the provision fixing
the so-called Canal annuity" to be
paid by the Government of the United
States at 100000 balboas, which is
more or less the equivalent of the
sum originally contracted in dollars
Of the old gold standard.
The implicit admission of the right
OF Panama to demand payment in
gold coin Of the standard of value
existing in 1908 seems to have caused
some misunderstanding. Several let
ters received by the writer inquire
whether the acknowledgment of the
Panamaian claim must be viewed as
a gesture Of diplomacy, intended to
gain Panamaian good will or whether
it can be taken as a legal precedent
to support the abrogated gold clause"
In contracts Of the United States Gov
ernment with its private citizens. A
mere restatement of the facts Of the
controversy, now settled by the new
treaty. among many others of greater
importance, will suffice to answer the
question.
The original Canal treaty stipulated
that the United States would pay in
perpetuity to Panama an annuity of
$250,000 in gold coin," in compen-
Sation for the sum from the railroad
concession which was taken over by
the United States, together with other
rights granted by Panama. also in
perpetuity, for the construction, use,
maintenance and protection of the
inter oceanic canal.
Rejected New Dollars"
When the United States Government
devaluated the dollar, changing its
gold content. making lawful currency
legal tender in all kinds of obligations,
and declaring no longer valid the old
gold clause" n contracts, the Panama
government refused to accept pay
ment of the treaty annuity in the
new dollars" For three successive
years the checks of the United States
Treasury were returned by the fiscal
agent of Panama in New York.
Starting from the premise that the
juridical relations of Panama with the
United States arising out of the Canal
treaty Of 1908 were governed by inter-
national law, the government of Pan
anna asserted that a contractual obli-
cation such as the annual payment
''in gold coin" could not be changed
diminished or impaired by the act of
only one Of the parties to the treaty.
The value stipulated as perpetual
compensation to be paid annually by
the United States was the value repre-
sented by the sum of 250,000 coins
named dollars and having a gold con-
tent of 25.8 grains, 900 thousandths
fine. This value could not be dimin-
ished, in detriment of Panama, by
reason of laws enacted by the Congress
of the United States changing the gold
content of the dollar to 1873 grains
Of the same fineness.
Would Wipe Out Pay.
The Congress of the United States
might likewise, and with indisputable
right, as the Panamaian Minister
said in the extensive memorandum
he presented to the State Department,
enact some other law reducing the
gold content Of the dollar to five or
to one grain. and, if dollars of such
a weight could be used legitimately in
discharge of the treaty annuity, the
compensation agreed upon in 1903
would be virtually wiped out.
1t had been argued that Panama
should overlook the whole matter be-
cause the Canal annuity had been for
years allocated to the service of the
Panamaian bonds in the hands of
United States investors and that,
therefore, as the money was not going