American case is sufficiently expounded in Mr. Taft's Memorandum to enable us to appreciate the main lines on which it is based. The effect of it is that there is no restriction on the United States in the matter of tolls save this that they must give to British vessels the most favoured nation treatment, or, in other words, that they cannot charge higher tolls on British vessels than those charged on the vessels of any other foreign Power; but that as between British vessels and United States vessels they can discriminate to any extent they please. Mr. Taft argues that the Treaty imposes no fetter on the sovereign rights of the United States to do what it pleases in the matter of tolls, because, as he says, the rules in Article III are a mere declaration of policy on the part of the United States in order to effect the neutralization of the Canal in time of war; in other words, that all nations who agree to treat the Canal as neutral in war are to have like treatment, but that the power of the United States with regard to their own vessels is not covered by or referred to in the Article. In the view thus presented Article III refers only to the action of foreign Powers, and the words 'all nations' in Rule 1 refer to foreign Powers only and do not include the United States.
We must agree that as a rule of construction treaties are not to be read as involving any surrender of sovereign rights in the absence of express and distinct provision to that effect, and the right to discriminate in favour of the shipping of nationals is of course inherent in sovereignty apart from Treaty or other restrictions. But this rule of construction does not apply in this case, because the United States were not sovereigns of the Canal territory at the time of the Treaty, nor was it within the contemplation of the parties that the United States would become sovereigns
