obligations imposed upon it by such existing contracts, merely because the sovereign with whom it contracted has been, through the vicissitudes of war or revolution, or as the result of a treaty of cession, succeeded by a different sovereign. Any individual or corporation dealing with a sovereign power does so with notice of all the necessary incidents of sovereignty, among which is the possibility that its sovereign power over the territory to which the contract relates may be transferred to another.

The substitution of the United States in the several powers and rights held successively by New Grenada, Colombia, and Panama by reason of contractual relations with the Panama Railroad Company, or its predecessors in title, does not of itself affect the rights of the sovereign power of the United States under such contract, or make a formal reaffirmation of such rights on the part of the latter necessary.

The action of the United States with regard to this railroad company amounts to a recognition of the previously existing contractual relations, which, of itself, would supply the place of a formal reaffirmation, if the same were necessary.

If the obligation of the railroad company to make the annual payment was made dependent upon the observance by the sovereign power of those agreements to be fulfilled by it and contained in the contract in question, then a failure on its part in this regard releases the railroad company from any obligation to pay the money.

If, however, such agreements are independent, then the failure of the sovereign power to observe such agreement, although it may, at least in theory, give a right of action to recover damages for such failure, does not affect the duty of the railroad company to perform its part of the contract.

The agreement of the Colombian Government not to establish another railroad, being in derogation of its rights of sovereignty, is to be strictly construed, and can not be reasonably extended to a prohibition against permitting the establishment of a pipe line. When the construction of the Panama Canal shall have caused injury to the business of the Panama Railroad, it would seem clear that the latter corporation would have, under Article 2 of its agreement with the Republic of Colombia, a legal right to a reasonable indemnity.

The agreement to indemnify the railroad from loss of business through the construction of the canal amounts to an altogether independent covenant, and a breach thereof in no way affects the duty of the railroad to pay the $250,000 per annum. The same is true with respect to the provision in Article 5 granting to the railroad company the exclusive right to establish carriage roads across the Isthmus.

X

Assuming that the government of the Canal Zone, by authority of the President, has promulgated regulations controlling and directing the use of the ports and that this is in derogation of section 1 of Article 6 of the agreement with the Colombian Government, there is nothing to show that the assumption of this duty has involved the railroad company in pecuniary loss, and there is no relation between the right of the railroad to regulate the ports under Colombian sovereignty and its obligation to pay $250,000 annually for the privileges granted.

If the United States made the abandonment, as agent of the railroad company, of the 78,357 hectares of vacant land granted by section 3, Article 9, of the concession, the act was either ineffective or else authorized by the company; and in either case, it evidently could not constitute a violation of the contract made by the United States with the railroad company through its assumption of the obligations of the previous sovereigns, as expressed in their concessions.

Even if it be conceded that Article 8 of the treaty might form the basis of a just claim for indemnity by the railroad, it could not release the railroad from the payment of the annual stipend. Officers of the railroad company are not, by virtue of that fact, officers of the United States; but they are bound to protect the interests of the United States to the same extent that officers of a corporation are bound to protect the interests of its stockholders, and the Government of the United States can not overlook the fact that in dealing with the railroad it is dealing with its own property.

DEPARTMENT OF JUSTICE,
July 24, 1908.

SIR: I have the honor to acknowledge the receipt of your letter of April 25, in which you ask me for an expression of opinion on the following two questions:

"First, whether the $250,000 per annum which the Panama Railroad Company agreed to pay the Republic of Colombia as the price of its concession, in view of the fact that the railroad company's original concession has neither been formally reaffirmed since the United States succeeded to the sovereignity of the territory to which that concession related, nor adhered to in substance upon the part of the United States, is an enforceable claim payable to the United States; and whether the railroad company may not, in view of that fact, insist upon a modification of the terms of the original contract of concession?

"Second, whether a modification of the contract of concession between the Republic of Colombia and the Panama Railroad Company may be effected by the executive branch of the Government of the United States?"

In the letter of Mr. Richard Reid Rogers, general counsel for the Panama Railroad Company, which you inclose, some facts are stated at length to show the practical importance of these questions, notwithstanding the ownership by the United States of the entire capital stock of the Panama Railroad Company. Mr. Rogers suggests that, in passing upon these questions, the last-mentioned circumstance should be "overlooked," and the railroad company "treated as a separate and independent legal entity." For the purpose of a reply to your questions I will adopt this suggestion, although, as hereafter appears, there is at least one aspect of the problem in which the Government ownership of the railroad stock is, in my opinion, material. You state in the first question as a "fact" that "the railroad company's original concession has neither been formally reaffirmed since the United States succeeded to the sovereignty of the territory to which that concession related, nor adhered to in substance on the part of the United States." It is obvious that both of these statements may involve, in some measure, conclusions of law, and an examination of the facts set forth in Mr. Rogers's letter, and in the report of Mr. Joseph L. Bristow, special Panama Railroad Commissioner, to the Secretary of War, bearing date June 24, 1905, kindly furnished by you to me, at my request, leads me to the conclusion that such is the case with regard to both of them in the present instance. It is true that the United States has never, by any act of Congress, proclamation of the President, or other public declaration of the like nature, avowed its intention of recognizing and respecting the rights of the Panama Railroad Company, under the several concessions granted to that corporation by previous sovereigns of the territory where it is located, but the facts stated in Mr. Rogers's letter show that the United States, through officers duly authorized to take such action, has dealt with the railroad company as an existing corporation,

and demanded of it compliance with some or all of the obligations it had assumed in its contract with the said previous sovereigns, and I feel justified in inferring from the said letter, and, indeed from the terms of your inquiry, that the appropriate officers have claimed from the company this very sum of $250,000 per annum, to which your question relates. Such a claim would, of itself, imply a recognition by our Government of the contracts previously entered into by the railroad company, and would render, in my judg ment, any formal reaffirmation of the company's concession unnecessary on its part.

Independently, however, of these considerations, I think it is clear that, when a new sovereign succeeds to the rights of one disposessed of a territory in which concessions of this character have been granted, it must be presumed, in the absence of express action on its part indicating unmistakably a contrary intention to adopt and ratify such acts of its predecessor, and I can not assent to the proposition that the other party to the concession or contract has a right to repudiate its terms and thus release itself from the obligations imposed on it by its existing contracts, merely because the sovereign with whom it contracted has been, through the vicissitudes of war or revolution, or as the result of a treaty of cession, succeeded by a different sovereign in the territory to which these particular contracts relate. In my opinion any individual or corporation dealing with a sovereign power does so with notice of all the necessary incidents of its sovereignty, and among these is the possibility that its sovereign power over the territory to which the contract relates may be transferred to another. ' I hold, therefore, that the substitution of the United States in the several powers and rights held successively by New Granada, Colombia, and Panama by reason of contractual relations with this corporation, or its predecessors in title, does not of itself affect the rights of the sovereign power under such contract, or make a formal reaffirmation of such rights on the part of the United States necessary; and I further hold that the action of the United States with regard to the railroad company amounts to a recognition

of the previously existing contractual relations, which of itself would supply the place of such formal reaffirmation, if the same were necessary.

It is appropriate next to consider the alleged failure of the United States to "adhere in substance " to the terms of the concession made to the railroad company, as a ground justifying the repudiation by that company of its obligation under the said original concession to pay the $250,000 annually. In the letter of Mr. Rogers, he says: "If the contract has not been observed by the Government, then either the annual payments thereunder are not due or should be modified to conform to the old privileges taken away from the railroad company by the United States or to the new burdens imposed." To determine whether this is true we must decide whether the provisions of the contract between the railroad company and the United States, supposed to have been violated by the latter, and the agreement to pay the $250,000 constitute dependent or independent covenants. If the obligation of the railroad company to make the annual payment has been made dependent upon the observance by the sovereign power of those agreements to be fulfilled by it and contained in the contract in question, then a failure on its part releases the railroad company from any obligation to pay the money; but, if these agreements are independent, then the failure of the one party, although it may, at least in theory, give a right of action to the other party to recover damages for such failure, does not affect the duty of the said other party to perform so much of the contract as is to be performed on its part.

In Loud v. Pomona Land and Water Co. (153 U. S. 576, 577, 579), the Supreme Court says:

"The question whether covenants are dependent or independent must be determined in each case upon the proper construction to be placed on the language employed by the parties to express their agreement. If the language is clear and unambiguous it must be taken according to its plain meaning as expressive of the intention of the parties, and under settled principles of judicial decision should not be controlled by the supposed inconvenience or hardship that