OTHER THINGS YOU MAY HAVE MISSED – AUGUST 16

The latest Covid-19 statistics have been released, for the week to 13 August. There were 10 new fatalities and 6,470 new cases reported. At the end of the week there were 25 patients in ICU and 172 in other wards. to dat, there have been a total of 966,779 reported cases to date and 8,444 fatalities.

Meanwhile, the health ministry reported the fourth case of monkeypox in Panama, a 25-year-old resident foreigner. There are also warnings about dengue still being present in the country, with the health ministry have logged more than 2,859 cases of dengue in the country so far in 2022. It urges the population to clean their surroundings and inside their homes, cover the containers with water and take into account that nebulisation undertaken by the authorities only kills the adult mosquito.

In other news, it is reported that more than 95% of the 450 small and medium pharmacy establishments affiliated to trade body Unprofa have complied with the closure threat, because the 30% reduction in a large number of medicines decreed by the Government.

16 August 2022

US: CYBERSECURITY AND INFRASTRUCTURE SECURITY AGENCY TASK FORCE LEADER CALLS FOR INCREASED GLOBAL COOPERATION ON SUPPLY CHAIN RISKS

On 15 August, FCW reported that the co-chair of the public-private task force said that global solutions are required to address some of the biggest threats impacting domestic and international supply chains.  He is quoted as saying that, “As we’re learning in the task force, no one group can really solve these things themselves”.  It is said that there is little awareness of the free-to-access range of reports the task force has produced, including an analysis on the COVID-19 pandemic and its impact on ICT companies’ logistical supply chains, and templates to provide organizations with clarity on an ICT providers’ implementation of risk management industry standards. 

https://fcw.com/acquisition/2022/08/cisa-task-force-leader-calls-increased-global-cooperation-supply-chain-risks/375867/

UK: UPPER TRIBUNAL REJECTS POINTS-BASED APPROACH TO ARTICLE 8 HUMAN RIGHTS PROPORTIONALITY ASSESSMENT

On 15 August, an article from Richmond Chambers reported that an Upper Tribunal had rejected the method whereby the proportionality of removing an appellant from the UK by scoring the pros and cons of removal out of 10.  Such a method is said to be too crude and mechanistic to account for the interplay between relevant factors and invite dangerous oversimplification.

https://immigrationbarrister.co.uk/upper-tribunal-rejects-points-based-approach-to-article-8-proportionality-assessment/

LAW ENFORCEMENT USE OF REVERSE KEYWORD SEARCHES

On 11 August, an article from Klemchuk LLP says that law enforcement in the US has increasingly used “reverse keyword searches,” also known as “keyword warrants,” as investigative tools to find which suspects to investigate.  In cites an example in an arson case in Denver, where law enforcement requested the court order Google to comply with a reverse keyword search of the house address where a fire occurred. 

https://www.klemchuk.com/ideate/reverse-keyword-searches-in-law-enforcement

HOW TO GUIDE FOR OCEAN LOGISTICS

On 15 June, HFW published an extract from The Shipping Law Review which focused on the carriage of goods by sea, but notes that other modes of transportation (inland waterways, air, road, rail), multimodal transport, warehousing and storage, and value-added services (such as consolidation, co-packing and supply-chain management) that are ancillary to these activities are all encompassed by the term ‘logistics’.  It covers such subjects as charterparties, bills of lading and the standard terms used.

https://www.lexology.com/library/detail.aspx?g=b669c62e-4888-44d5-9d1a-bd277d4b1c63&

US: DIRECTORATE OF DEFENSE CONTROLS (DDTC) ITAR OPEN GENERAL LICENSE PILOT PROGRAM APPLICABLE TO CERTAIN TRANSFERS AND RE-EXPORTS

On 12 August, an article from the Braumiller Law Group PLLC said that Open General Licenses (OGL) are used in the UK and some other countries (including the EU), and allow the export of dual-use, strategic and other controlled articles to specific destinations under certain conditions.  The DDTC, which controls exports of defence articles and technical data, has announced a pilot program under the International Traffic in Arms Regulations (ITAR) for OGL applicable to certain transfers and re-exports, and that the announcement went further and issued the first 2 OGL for specific transactions.

https://www.mondaq.com/unitedstates/terrorism-homeland-security-defence/1221068/ddtc-is-open-to-open-general-licenses

NIGERIA: PROCEEDS OF CRIME (RECOVERY AND MANAGEMENT) ACT 2022

On 15 August, Famsville Solicitors published an article about this new legislation which seeks to provide for an effective legal and institutional framework for the recovery and management of the proceeds of crime, a non-conviction-based procedure for the recovery of proceeds of crime, strengthen criminal confiscation procedure, and collaborate among the relevant organisation in tracing properties reasonably suspected to be proceeds of unlawful activity.

https://www.mondaq.com/nigeria/crime/1221592/proceeds-of-crime-recovery-and-management-act-2022

UK: RUSSIA SANCTIONS GENERAL LICENCE RE ENEGY USE IN MONGOLIA

On 16 August, HM Treasury granted a new General Licence allowing for payments to sanctioned Russia banks for the purpose of making energy available for use in Mongolia.  It takes effect from 15 August and expires on 14 August 2023.  The provided link to the licence did not immediately work, but the list of current licences is at –

https://www.gov.uk/government/collections/ofsi-general-licences

UK: THE TRUST REGISTRATION SERVICE COUNTDOWN BEGINS

On 16 August, Kingsley Napley published an article about new rules requiring all UK trusts (subject to a few limited exceptions) and some non-UK trusts to be registered with HMRC via the Trust Registration Service (TRS).  Previously, only trusts with certain UK tax liabilities or a business relationship with a UK service provider needed to be registered.  It says that the actual registration of the trust should be relatively straightforward (albeit the online TRS process is not entirely intuitive).  The tricky part is identifying whether a trust needs to be registered and the relevant deadline. 

https://www.kingsleynapley.co.uk/insights/blogs/private-client-law-blog/the-trust-registration-service-the-countdown-begins#page=1

UK NOTICE TO EXPORTERS: THE PLAN FOR MANDATING OF EORI NUMBERS IN SPIRE

On 16 August, the Department for International Trade published Notice for Exporters 2022/24 which explains the plan to introduce mandatory Economic Operator Registration Identification (EORI) numbers on licence applications and registrations on the SPIRE system.

https://www.gov.uk/government/publications/notice-to-exporters-202224-mandating-of-eori-numbers-in-spire/nte-202224-mandating-of-eori-numbers-in-spire

US: BUREAU OF INDUSTRY AND SECURITY EXPORT CONTROLS ON 4 EMERGING TECHNOLOGIES

On 16 August, Sandler Travis Rosenberg reported on amendment of the Export Administration Regulations to implement controls on 4 technologies to reflect certain controls required by the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, to bring US controls into line with its requirements.  The technologies are 2 substrates of ultra-wide bandgap semiconductors, a specific type of electronic computer-aided design software, and pressure gain combustion technology for the production and development of gas turbine engine components or systems.

https://www.strtrade.com/trade-news-resources/str-trade-report/trade-report/august/export-controls-established-on-four-emerging-and-foundational-technologies

FRENCH CUSTOMS SEIZE 582 KG OF COCAINE IN CONTAINER FROM MARTINIQUE

On 13 August, the St Lucia Times reported that Customs Officers at the port of Marseille have seized 528 kg of cocaine with an estimated street value of €37 million in a removals container from Martinique.

https://stluciatimes.com/french-customs-seize-582-kilos-of-cocaine-in-container-from-martinique/

UK: RUSSIAN SANCTIONS, LEGAL SERVICES AND THE LAW OF UNINTENDED CONSEQUENCES

On 15 August, the Law Society Gazette published an article saying that in July the UK introduced a prohibition on Russian businesses receiving certain UK professional services, including management consulting, accounting and PR services. UK legal services, by contrast, remain exempt from these prohibitions. It warns that there is little case law and much political advantage in ensuring that the prohibitions remain ambiguous.  It says that OFSI needs to follow the example of the European Commission, which is more adept at providing comfort letters to businesses which are not caught by EU sanctions, and need to persuade their banks of this fact.

https://www.lawgazette.co.uk/practice-points/russian-sanctions-and-the-law-of-unintended-consequences-/5113400.article

AUSTRALIA: HOW ORGANISED CRIME HAS INFILTRATED THE NATIONAL DISABILITY INSURANCE SCHEME

On 14 August, the Sydney Morning Herald reported that Australia’s most senior criminal intelligence official says organised criminals involved in drug trafficking, violence and money laundering are exploiting systemic weaknesses in the NDIS on an unprecedented scale.

https://www.smh.com.au/national/the-scumbag-scale-how-organised-crime-has-infiltrated-the-ndis-20220811-p5b95s.html

INDONESIAN WORKERS ON UK FARM ‘AT RISK OF DEBT BONDAGE’

On 14 August, The Observer reported that, as farms look further afield for labour, an investigation finds Kent pickers saying they struggle to pay fees charged by unlicensed brokers.  They were initially given zero-hours contracts, and at least one was paid less than £300 a week after the cost of using a caravan was deducted, according to payslips and other documents seen as part of a Guardian investigation.  The fees they pay to secure work include flights and visas, but multiple labourers said they also faced thousands of pounds in extra charges from Indonesian brokers who promised substantial earnings although, under UK employment law, it is illegal to charge workers fees for finding them jobs.

https://www.theguardian.com/uk-news/2022/aug/14/uk-farm-workers-kent-debt-indonesian-brokers

FBI ANNOUNCES RESULTS OF NATIONWIDE SEX TRAFFICKING OPERATION

A news release from US DoJ on 15 August announced the results of Operation Cross Country XII, in which the FBI with state and local partners identified and located 84 minor victims of child sex trafficking and child sexual exploitation offenses and located 37 actively missing children during a nationwide enforcement campaign.

https://www.justice.gov/opa/pr/fbi-announces-results-nationwide-sex-trafficking-operation

ALBANIANS: EUROPE’S NEW COCAINE KINGS

On 15 August, a video report from Vice said that, over the past decade, organised crime groups from Albania have taken over huge sections of the cocaine trade – particularly trafficking to Europe, which has become the biggest cocaine market in the world.  The report sets out to separate truth from fiction – showing how the Albanian crime groups maintain their power, and how they have revolutionised the cocaine trade using innovation, entrepreneurial flair and deadly violence.

https://www.youtube.com/watch?v=mXY2F9sShFk

NEPAL: THE CENTRAL BANK HAS INSTRUCTED BANKS AND FINANCIAL INSTITUTIONS TO TIGHTEN THE PROCEDURE FOR THE IMPORT OF GOODS TO DISCOURAGE AND CONTROL TRADE-BASED MONEY LAUNDERING

On 16 August, Khabarhub reported that Nepal Rastra Bank (NRB), has instructed banks and financial institutions (BFI) to tighten the procedure of import of goods to discourage and control money laundering possible through import and export business.  The Central Bank concluded that the use of black money has increased in the import and export trade.

https://english.khabarhub.com/2022/16/268053/

EU BAN ON RUSSIAN COAL IMPORTS COMES INTO FORCE

On 16 August, Hellenic Shipping News reported that Russian coal imports to the European Union are not permitted for the foreseeable future starting 10 August. 

https://www.hellenicshippingnews.com/eu-ban-on-russian-coal-imports-comes-into-force/

SOMALIA MARITIME POLICY: SHAPING A NEW SECURITY AGENDA IN THE INDIAN OCEAN

This new White paper from Risk Intelligence, published in July, says that Somalia has a new policy, shifting the focus away from piracy, regulating the maritime domain and building a “blue” economy.

https://www.riskintelligence.eu/whitepaper-download-somalia-maritime-policy

US DEBARS 10 PERSONS FOR HAVING BEEN CONVICTED OF VIOLATING, OR CONSPIRING TO VIOLATE, THE ARMS EXPORT CONTROL ACT

On 10 August, the State Department advised that these persons are now are prohibited from participating directly or indirectly in activities regulated by the ITAR.   This includes any brokering activities and any export from, or temporary import into, the US of defence articles, related technical data, or defence services in any situation covered by the ITAR.

https://www.state.gov/u-s-department-of-state-debars-ten-persons-for-violating-or-conspiring-to-violate-the-arms-export-control-act/

EU MUST MAKE PUBLIC WHO REALLY OWNS ITS FISHING FLEETS

An article from a French MEP in the EU Observer on 16 August says that illegal, unreported and unregulated (IUU) fishing constitutes one of the most serious threats to the oceans, and the lack of transparency in the global fishing sector is a key enabler of illegal fishing and associated crimes.  Despite the installation of tracking systems and other advancements aiming to improve transparency within the fishing industry, EU citizens are still able to own fishing vessels in countries that received an official EU warning for their failure to tackle illegal fishing.  Multiple vessels currently fishing under the flags of non-EU countries that have been warned for their failure to tackle illegal fishing are owned by EU citizens having profit within the EU.  For example, several Latvian vessels identified in this analysis have been reflagged to Cameroon, however, the true owners still seem to be based in the EU.

https://euobserver.com/opinion/155771

US: COURT AUTHORISES SERVICE OF JOHN DOE SUMMONS SEEKING THE IDENTITIES OF US TAXPAYERS WHO HAVE USED CRYPTOCURRENCY

On 16 August, a release on Mondo Visione advised that a federal court in California had entered an order authorising the IRS to serve a John Doe summons on SFOX, a cryptocurrency prime dealer headquartered in Los Angeles, seeking information about US taxpayers who conducted at least the equivalent of $20,000 in transactions in cryptocurrency between 2016 and 2021 with or through SFOX.

https://mondovisione.com/media-and-resources/news/us-department-of-justice-court-authorizes-service-of-john-doe-summons-seeking-t-1/

US: 9 MEMBERS AND ASSOCIATES OF GENOVESE AND BONANNO ORGANISED CRIME FAMILIES CHARGED WITH RACKETEERING AND ILLEGAL GAMBLING OFFENSES

On 16 August, a news release from US DoJ advised that 2 indictments were unsealed charging 9 defendants with racketeering, illegal gambling, money laundering conspiracy, obstruction of justice, and related offences.  It is said that arrests of members from 2 La Cosa Nostra crime families demonstrate that the Mafia continues to pollute communities with illegal gambling, extortion, and violence while using our financial system in service to their criminal scheme.

https://www.justice.gov/usao-edny/pr/nine-members-and-associated-genovese-and-bonanno-organized-crime-families-charged

SWITZERLAND TO RETURN UZBEKISTAN’S ASSETS FROZEN IN MONEY LAUNDERING PROBE

On 16 August, FX Empire reported that Switzerland has agreed to send back to Uzbekistan over $100 million which it seized during a long-running investigation in connection with the daughter of former president Islam Karimov.  The ongoing criminal proceedings against Gulnara Karimova which have involved suspected money laundering via telecommunications contracts have so far resulted in the seizure of $131 million. The Swiss foreign ministry said more funds might become available from assets that may be confiscated in future.

https://www.fxempire.com/news/article/switzerland-to-return-uzbekistans-assets-frozen-in-money-laundering-probe-1098140

SANCTIONS AND THE 50% RULE

Another example which presents even more challenges 

https://www.linkedin.com/posts/george-voloshin_50percentrule-sanctions-activity-6965355930523738112-jKHE

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UK STRATEGIC EXPORT CONTROLS ANNUAL REPORT 2021

The UK has published this annual report which details strategic export controls policy and export licensing decisions from January to December 2021.  Of particular interest is that it reports that the Export Control Joint Unit undertook 519 export control compliance checks in 2021; that 55% of businesses subject to their first check were compliant; 48% subject to routine checks were compliant; and 65% subject to revisits were compliant.  It also issued 81 warning letters to company directors where breaches of licence conditions were identified and 5 exporters had a licence suspended due to repeat infractions. Meanwhile, HMRC made 202 seizures of strategic goods, an increase from 160 in 2020; 12 compound settlement (a sort of out-of-court settlement available to HMRC) offers were dealt with totalling £226,701.18, down from £622,868.01 in 2020, and no strategic exports or sanctions prosecutions were brought.  HMRC also received 212 voluntary disclosures and issued 46 warning letters as a result.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1092717/united-kingdom-strategic-export-controls-annual-report-2021.pdf

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KEY TAKEAWAYS FROM HONG KONG’S MONEY LAUNDERING AND TERRORIST AND PROLIFERATION FINANCING RISK ASSESSMENT 2022

On 12 August, Mayer Brown said that in July the Hong Kong government published its second money laundering and terrorist financing risk assessment report based on an assessment completed in 2021.  The Report provides an overview of these and, for the first time, proliferation financing risks in Hong Kong. The article from Mayer Brown covers the significant risks identified and the changes to risk ratings since the 2018 Report; provides a summary of some of the key proposed amendments to Anti-Money Laundering and Counter-Terrorist Financing Ordinance; and sets out the future key areas of work for the AML/CFT regime in Hong Kong.

https://www.mayerbrown.com/en/perspectives-events/publications/2022/08/key-takeaways-from-hong-kongs-money-laundering-and-terrorist-and-proliferation-financing-risk-assessment-2022

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UK: COURT OF APPEAL TO CONSIDER CRYPTO ‘DUTY OF CARE’

On 15 August, the Law Society Gazette reported that the question of whether developers of cryptocurrencies and other blockchain-based assets owe a duty of care to investors in their products is to be examined in the Court of Appeal.  It also mentioned that a Law Commission consultation on legal assets opened last month but does not specifically address the duty of care issue.

https://www.lawgazette.co.uk/law/court-of-appeal-to-consider-crypto-duty-of-care/5113426.article

https://coingeek.com/uk-court-of-appeal-to-hear-tulip-trading-case-on-legal-duties-owed-by-blockchain-developers/

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THE POTENTIAL FOR DIRECT RULE IN THE BRITISH VIRGIN ISLANDS

On 16 August, a briefing paper from the House of Commons Library said that in April, the findings of a Commission of Inquiry into alleged corruption and mismanagement in the BVI was published by the Territory’s Governor.  The BVI is a British Overseas Territory. This means the UK retains ultimate responsibility for its good governance and has the power to intervene in its domestic affairs.  The paper sets out the Inquiry’s key findings, the response of UK and BVI officials, and the recent history of tensions between the UK and the BVI.  It points out that the last Overseas Territory to be subject to direct rule was the Turks & Caicos Islands in 2009, following an uncovering of corruption and poor governance.

https://researchbriefings.files.parliament.uk/documents/CBP-9538/CBP-9538.pdf

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YALE SCHOOL OF MANAGEMENT REPORT ON RUSSIA AND SANCTIONS

On 16 August, the Yale School published a report, saying that there remains a startling lack of understanding by many western policymakers and commentators of the economic dimensions of Putin’s invasion, and what it has meant for Russia’s economic positioning both domestically and globally.  Far from being “ineffective” or “disappointing,” international sanctions and voluntary business retreats have exerted a crippling effect over Russia’s economy.  It sets out to shed light on what is actually going on inside Russia, and says that there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia.

https://som.yale.edu/story/2022/chief-executive-leadership-institute-research-insights-business-retreats-and-sanctions

The report is at –

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4167193

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THE PANAMA CANAL ZONE ON THE EVE OF WORLD WAR 2

THE PANAMA CANAL ZONE ON THE EVE OF WORLD WAR 2

The Panama Canal Zone consisted of the Canal itself and an area generally extending 5 miles (8 km) on each side of its centreline, but excluding the Panama City (on the Pacific coast) and the city of Colon (more properly Colón) on the Caribbean coast[1] – as these cities would have otherwise fallen at least partly within the 5-mile footprint[2].  The Zone also included the territorial waters out to the 3-mile limit at either end of the Canal.  When reservoirs were created between the wars to assure a steady supply of water for the Canal locks, those lakes were also included within the Canal Zone. 

The Panama Canal Act 1912 provided that –

“the President of the United States (through the Governor of the Zone), shall be authorized to determine or have determined which peoples shall exist in the Canal Zone, and to subdivide – and from time to time re-subdivide – said Canal Zone into subdivisions, which shall be designated by name or number, so that there is a village in each subdivision and the boundaries of each subdivision shall be clearly defined”.[3]

Until 1979, the Canal Zone territory would remain wholly controlled by the US, which had purchased the land required from its private and public owners.  The Canal Zone would be finally abolished in 1979, under the Torrijos-Carter Treaties of 1977[4]; with the Canal itself placed under joint US–Panamanian control until it came under fully Panamanian control in 1999, and the US flag was lowered for the last time on 31 December 1999[5].

There were two political-administrative entities, the district of Cristóbal and the district of Balboa.  The boundary of both entities was established by the southern shore of man-made Gatun Lake, while the marine boundary for the Balboa district would be Panama City and the Pacific Ocean, and for the Cristobal district, the Caribbean Sea[6].

The “capital” of the Canal Zone was at Balboa[7], where there was a port at the Pacific end of the Canal complex.  The town of Balboa is now a district of the sprawling Panama City (although many buildings remind one of the long-time US presence), but it was founded by the US during the construction of the Canal on land cleared, drained, filled and levelled by the US Army Corps of Engineers, and situated in the hilly area north of Panama City at the Pacific end of the Canal.  As with other places in the Canal Zone, it was served by schools, post offices, police and fire stations, commissaries, cafeteria, movie theatres, service centres, bowling alleys, and other recreational facilities and company stores, as well as several schools, all provided by the Canal Zone authorities.  To many visitors, the Canal Zone reminded them of small-town America transported to the tropics.  The author of a book on life in the Canal Zone said that when his father travelled through the Zone during World War 2, he compared it to “a small southern town transplanted into the middle of Central America”.[8]

Indeed, the Canal Zone essentially operated as an overseas province of the US.  The US citizens living within the Canal Zone were known as “Zonians”[9], and only those connected with the administration, operation, maintenance, or the defence of the Canal (and their dependants) were allowed to live within the Canal Zone[10].

The Americans also brought with them discrimination, chiefly aimed at those who were black and so particularly affecting Panama’s sizeable Afro-Caribbean community, although Panamanians were also to feel its effects[11].  Until 1945, the US authorities applied its “Jim Crow” discrimination system from the American south in the Canal Zone, with white US persons rated higher than non-whites.  The discrimination present was most obviously evidenced by the Gold and Silver Roll system, a two-tier arrangement that not only denoted different payment levels (obviously lower for non-Americans), but also extended to such things as separate waiting rooms at railway stations, separate shops and separate, and inferior, accommodation, usually in areas separate from American whites[12].  White workers, including labourers, received the better clinical care in the Canal Zone and their homes even benefited from mosquito screens[13].  The segregation even extended to at Kobbe Beach, a favourite place for bathers from the US forces and civil employees of the Canal Zone[14].  In fact, the schools in the Canal Zone were only fully desegregated in the 1970s, and the US Civil Rights Act enforced[15], some 20 years after schools had been desegregated in the Continental US[16].  As a result of this separation, and having all their needs catered for by the Canal Zone government, the majority of Zonians would have relatively limited contact with the Panamanian population.

For a long time, and certainly during World War 2, the Canal Zone was segregated between American and Caribbean workers, with everything from shops to latrines designated as “Gold” and “Silver”[17].  In 1936, as a new treaty was being agreed between Panama and the US, President Roosevelt had said he would do away with the discriminatory Gold and Silver Roll practices in the Canal Zone but nothing had happened by the outbreak of war (and things would not change until the 1950s).[18]

Housing was provided for all persons employed by the US Government, civil and military, with floor space, and the location and standard of accommodation, based on the person’s position in the hierarchy – reinforcing the sort of caste arrangement that resulted from the Gold and Silver Roll system).  Private ownership of land within the Canal Zone was prohibited[19]

An estimated 12.5% of the pre-war Panmanian workforce was employed in the Canal Zone. In 1939, there were 3,511 “Gold Roll” (US rate) workers in the Zone, and 11,246 “Silver Roll” (local rate) workers, but by 1942 these numbers would grow to 8,500 and 28,686 respectively[20]

It was said in 1939 that community and home life on the Canal Zone did not differ a great deal from that of the average town or city in the US, and when a government employee left his work he frequently pursued the same hobby or pastime which he might follow In a normal community anywhere in the US.  Social and recreational activities also followed much the same pattern as in any US community, with church, club and fraternal work, charities, and the work of patriotic organisations, all formed an integral part of Canal Zone life.  There are several churches of various denominations on the Canal Zone.

A great variety of outdoor sports were available included hunting, fishing, boating, swimming, horseback riding, motor tours, baseball, golf, tennis and a multitude of supervised games and sports for children and adults on the public playgrounds which were provided by the Canal authorities.  Fishing was one of the most popular sports and the waters of the Caribbean and Panama Bay were famous for the variety and abundance of fish.  There was also no lack of golf clubs.

The sandy beaches in and near the Canal Zone were always crowded on sunny afternoons and holidays, and clubhouse swimming pools were also popular.  Sports facilities provided included nine gymnasiums and play sheds; 11 baseball and 16 soft ball diamonds; three modern swimming pools; 17 tennis courts – and, strange as it might seem, five cricket pitches. 

In addition to the facilities by the Canal authorities, there are many others which were organised by individuals or private groups, and all of these were said to have had the cooperation of the Canal administration. 

There were five civic councils in the larger Canal Zone communities of Balboa-Ancon, Pedro Miguel, Gamboa, Gatun and Cristobal.  The centres for much of the recreation were the clubhouses and public playgrounds.  Restaurants were operated in all of the clubhouses and all of the nationally-known magazines and newspapers from many cities of the US were on sale.  The cinemas were operated in conjunction with the clubhouses and the latest Hollywood productions are shown within a few weeks after their New York premieres.  These movie theatres are open on all sides to provide the maximum ventilation and coolness.

There were two prominent social clubs in Panama itself, the membership of which was said to be divided between the US residents of Panama and Panamanians.  They were the Union Club of Panama City, and the Strangers Club in Colón[21].  These were also popular meeting places for Panamanians and Americans.  Of course, one would expect to only meet the “better” sort of Panamanians there, and not the typical local resident.

Operating as it did as a sort of “little America” overseas, the Canal Zone had its own police and courts system, the latter including a federal court with ties to those in the US.  The Division of Police and Prisons was first organised in June 1904, with Canal Zone Police uniforms based on those of the “Rough Riders” in Cuba during the Spanish-American War, and remaining essentially unchanged until 1941[22].  Like other elements of the Canal Zone regime, the police force adopted the two-tier Gold and Silver Rolls employment system.  By 1940, responsibility for the police and fire departments[23] had been merged under a Chief of the Police and Fire Division.  By 1 May 1944, the police force had 54 officers of rank, together with 213 Gold Roll and 48 Silver Roll staff.[24]  The Canal Zone Police Force would be disbanded on 31 March 1982, when law enforcement responsibilities for the former Canal Zone passed to Panama. 

As a US territory, the US Marshals Service also operated in the Canal Zone, with just 10 marshals appointed to the Canal Zone between 1914 and 1982[25], and did so until its office closed in 1982, as the jurisdiction of the US District Court (a federal court) in Panama ended.

The Panama Canal Act 1912 had created a US Federal District Court for the Canal Zone within the appellate jurisdiction of the US Court of Appeals for the Fifth Circuit in New Orleans[26].  From 1914 until its formal closure in 1982, the federal territorial court was presided over by several judges from the US.  These jurists were not what are termed “Article III judges”[27], but were rather appointed for a term of years, as were the judges in the federal courts in the US Virgin Islands, Guam, and the Commonwealth of the Northern Marianas.  However, the principal courts performing functions in the Zone were he Magistrates’ Courts, with there being two, one in Balboa and the other in Cristobal.

The pre-existing Panamanian civil law, developed through Spanish, Colombian and Panamanian origins and use, was replaced in the Canal Zone in 1904 by a common law system. The Canal Zone courts were to also apply US federal law, as dictated by the Panama Canal Title of the US Code and Executive Orders, with the latter being abrogated by the new 1977 treaties in 1979.[28]

In 1934, the Canal Zone Code[29] was enacted by the US Congress.  This consolidated all the previous laws that had applying in the Canal Zone, except those general laws of the US that related to, or applied in, the Canal Zone.  Its derivations were found in previous Acts of Congress, in certain Acts and Ordinances of the former Isthmian Canal Commission (which were ratified and confirmed as valid and binding by Congress in the Panama Canal Act 1912) and, in respect of a limited number of sections, Executive Orders of the President (which had also been ratified and confirmed by Congress). 

One quirk of the Canal Zone’s unincorporated legal status, had originally been that individuals who were born in the Canal Zone were not automatically entitled to US citizenship, even though born on what was considered to be US soil.  Under the Naturalization Act of 1795, children born of two US citizen parents were regarded as statutory US citizens, but others held the legal status of “US nationals” and were not full citizens (in the same way as for those born today in American Samoa).  In 1937, Congress amended the law so that any children born in the Canal Zone after 1904 with at least one parent with US citizenship were considered natural-born US citizens by virtue of their birth in the Canal Zone[30]

In peacetime, the US-appointed Governor of the Panama Canal was responsible for the operation and maintenance of the Canal, as well as the administration, sanitation, and government of the Canal Zone.  He was also the President of the Panama Railroad, which ran along the eastern side of the waterway to connect the ports of Cristobal on the Caribbean and Balboa on the Pacific, as well as providing an essential passenger service (useable roads in Panama in the pre-war period, outside the major cities, being few).  The Panama Railroad Company also operated the Panama Line, with its three ships which had been specifically designed for its needs – and each of which have an active and important wartime role (as would one of their predecessors, the original SS Ancon, famous for making the first transit of the Canal in 1914)[31]

The Governor was by custom a retired US Army Engineers officer, and reported directly to the Secretary of War[32].  On 5 September 1939, as war broke out in Europe, the Canal Zone was placed under the jurisdiction of the Commanding General of the Panama Canal Department (as the Army command in the Canal Zone was called – it was the Army that was responsible for the defence of the Canal and Canal Zone[33]).  However, the general’s authority over operation of the Canal and governmental functions in general continued to be exercised through the Governor[34].

Glen E Edgerton was Governor for most of the war (1940-44).  He was a US Army engineer officer who had previously served as Panama Canal maintenance engineer 1936-40 – and his eventual successor as Governor, Major General John C Mehaffey, had also succeeded him in that post. 

Edgerton had been preceded in 1936 to 1940 by Clarence S Ridley, another Engineers officer, who was most notable for having supervised the construction of the Lincoln Memorial in Washington DC. 

Major general John C Mehaffrey, again an Army engineer, was Governor from 1944 to 1948.  As mentioned, he had already served in the Canal Zone, during 1911-12, and had been assigned to the Canal Zone once more in 1941 as maintenance engineer, succeeding Edgerton.  Whilst Governor, Mehaffey conducted the Isthmian Canal Studies in 1947, producing what was known as the Mahaffey Report.  This report was to propose dispensing with the existing locks and constructing instead a sea-level canal at a cost of $3.5 billion. 

The Canal Zone operation was a considerable one, encompassing not just the obvious passage of vessels through the Canal.  Even in activities directly connected to the Canal operation, there were a multitude of harbour-related activities – ship inspections, boiler services, towage and salvage, accident investigation, installation and maintenance of navigational aids.  Balboa would also be the terminal for all Pacific Ocean tanker operations, and for any required dry docking and repair.  At its peak during the war there would be some 300 tankers using the facilities at Balboa[35].

The harbours also boasted dry docks and other repair facilities.  The Mechanical Division operated four dry docks, which were in constant use.  In June 1945, a US Navy floating dry dock would transit the Canal and be installed in Balboa to augment existing facilities there.  The number of ships using the dry docks would rise from 185 in 1941 to a peak of 546 in 1945.  The US Navy relied on the Division for the maintenance and repair of its vessels.

In addition to the trans-isthmus Panama Railway, there were also two marine railways in the Canal Zone and servicing the docks.

The Canal’s Municipal Engineering Division would see its number of employees rise from 1,500 employees in 1939 to a peak of 7,600 during the war, and would be involved in construction of airports[36], docks, bridges, pipelines and tanks, sewers, drains, highways and a variety of military installations.  It would also take over construction of the highway to Rio Hato airbase from the American Bridge Company and the Public Roads Administration, building 14 steel and concrete bridges of varying dimensions.  It also handled municipal utilities, water, sewers and roads needed to meet the expanded requirements following the expansion programme[37].

The Canal’s Supply Department was responsible for the acquisition, storage and distribution of materials and supplies for the Canal and the railroad; as well as maintenance and construction of buildings, living quarters and care of associated grounds, storehouses, fuel oil plants and even a printing plant.  It was also responsible for the supply of motor transport to the various other departments and division, and the mess facilities for contract labour.

There was a Building Division which was heavily involved in the new construction required in the lead up to and during the war – for example, over 100 12-family apartment blocks were built in the first 18 months of the war.  Additional units were built for almost every department and division, ranging from retail commissaries, club houses, movie theatres, to gymnasiums, ball parks, and tennis courts etc.  A large hospital was built at Margarita, with the existing Gorgas Hospital expanded and Colón Hospital renovated and enlarged.

The Motor Transportation Division ran services which supplemented transport provided by official vehicles and used to ferry labourers to and from construction sites.  It would provide a public service with 175 privately-owned buses on contract to the Canal Commission in early 1943 (and by doing so, also relieved some of the pressure resulting from wartime petrol and tyre rationing).

Both the Commissary and the Health Departments saw substantial expansion before and during the war, with the latter Department having to supply complete medical services both onshore and on ships, as well as serving as a supply source for merchant shipping passing through the Canal.

Ray Todd

Panamá City

Republic of Panamá

15 August 2022


[1]  The end of the Canal on the country’s Caribbean coast is also referred to as the Atlantic end.

[2]  The Panama Canal Zone was designated by an Act of Congress in 1914 as a strip of land “and land under water” 5 miles wide on either side of the Canal: https://ufdc.ufl.edu/AA00022175/00001/pageturner#page/25

[3]  https://www.laestrella.com.pa/nacional/210306/historia-organizacion-politico-administrativa-zona On 1 January 1950, Executive Order 1001 provided that government functions previously performed by the Canal authorities were transferred to the new agency designated as the Canal Zone Government.

[4]  https://history.state.gov/milestones/1977-1980/panama-canal

[5]  https://archive.defense.gov/news/newsarticle.aspx?id=42234 and https://cms.uflib.ufl.edu/pcm/timeline/americaneraends.aspx

[6]  https://www.laestrella.com.pa/nacional/210306/historia-organizacion-politico-administrativa-zona

[7]  The Balboa is also the name of the national currency of Panama, which is tied to, and is interchangeable with (in Panama) the US Dollar.  

[8]  https://www.bbc.com/news/magazine-28594016

[9]  In Spanish, zoneíta or zoniano, or zoneítas in the plural.

[10]  https://ufdc.ufl.edu/AA00022175/00001/pageturner#page/25

[11]  There were also problems with discrimination in Panama itself, particularly also affecting Afro-Caribbeans and the Chinese community, and being exacerbated by the nationalist policies of the Arias Madrid government, with a 1941 Constitution that denied citizenship to these races under the category of “prohibited immigration”.  During the war, the Panamanian Government would also raise objections to the deployment of US Puerto Rican troops and the Japanese community would be harshly treated.

[12]  Pre-war, and in the name of public health and disease prevention, “sanitation zones” were created to exclude Panamanians and contain West Indians.

[13]  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1497783/

[14]  https://www.elistmopty.com/2020/04/la-playa-de-kobbe-o-kobbe-beach-club-un.html

[15]  As one black woman born in the Canal Zone after World War 2 said, “I was born in the same hospital as John McCain, but he walked out an American and I walked out a Panamanian”; and she did not come into contact with white Zonians until the schools were desegregated in the 1970s.  Instead, she was raised separately, in a culture that drew from her Panamanian and Caribbean roots: https://www.bbc.com/news/magazine-28594016

[16]  https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1497783/

[17]  These terms were replaced by “US rate” and “local rate” for the 1950s.  The terms originated from the time of the construction of the original Panama Railroad in the middle of the 19th Century, when Americans were paid higher wages in gold and imported West Indians received lower salaries in silver.

[18]  US-Panamanian Relations Since 1941 by Lester D Langley (Journal of Interamerican Studies and World Affairs, Vol. 12, No. 3, July 1970), Cambridge University Press: https://www.jstor.org/stable/175020?read-now=1&seq=1#page_scan_tab_contents

[19]  https://ufdc.ufl.edu/AA00022175/00001/pageturner#page/25

[20]  The influx of workers to the Canal Zone, and to Panama City and Colón in the Republic, would be so great that the Panamanian Government would complain about the scarcity of teachers and other skilled employees.  It did, however, try to take advantage of the situation by “strengthening” English language education in schools and emphasising vocational training in commercial and business administration so as to encourage the development of small businesses and to provide skilled employees for the increased number of commercial enterprises.

[21]  The Strangers Club operated from 1920 to 1970.  The Union Club still exists, albeit relocated to an upmarket, newer district of Panama City.

[22]  In 1945, the uniform was changed, from khaki to steel grey, with service-style hats and Sam Browne belts, short-sleeve shirts and tie.  They also wore jodhpur trousers, boots and leather puttees

[23]  The Canal Zone Fire Department had been established in 1905, initially being manned by volunteers, with the first paid company established at Cristobal in November 1906..

[24]  https://www.czbrats.com/Articles/czp.htm

[25]  https://www.usmarshals.gov/history/panama/index.html

Notably, the closure of the office in Panama marked only the second time in the nearly 200-year history of the Marshals Service that a Marshal’s office has been deactivated

[26]  This was said to be logical, given the that court’s familiarity with maritime law issues.

[27]  Article III of the US Constitution governs the appointment, tenure, and payment of Supreme Court justices, and federal circuit and district judges. These judges are nominated by the president and confirmed by the US Senate

[28]  https://www.nyulawglobal.org/globalex/Panama1.html

[29]  https://www.govinfo.gov/content/pkg/GOVPUB-W79-c71e6edf8aa4a19cd93a379d8cf9d972/pdf/GOVPUB-W79-c71e6edf8aa4a19cd93a379d8cf9d972.pdf

[30]  Perhaps the best-known case of such an individual having been born in the Canal Zone came to light in 2008, when Senator John McCain, born there in 1936, ran for President.

[31]  https://media.defense.gov/2013/Sep/16/2001329866/-1/-1/0/AFD-130916-006.pdf

[32]  Until 1947 the US had a Secretary of War, heading the War Department, and a Secretary of the Navy, heading the Navy Department.  In 1947, the Secretary of War was replaced by a Secretary of the Army, with a Secretary of the Air Force added (the US Air Force having then just been created as a separate arm).  From 1949, all 3 came under the new Secretary of Defense and the Defense Department.

[33]  Despite the Canal’s obvious naval and maritime importance, the Army remained responsible for land, air and seaward defence, in the same way as it was responsible for coastal defences in the Continental US.

[34]  https://media.defense.gov/2013/Sep/16/2001329866/-1/-1/0/AFD-130916-006.pdf

[35] In 1944, the Mechanical Division was established as the operating repair base for the 300 War Shipping Administration tankers of the US Navy Pacific Fleet. 

[36]  Airfields were built in record time.  For example, in just 2½ months, in rough jungle country at Casa Larga, a complete airport was provided, with access roads, taxiways, bridges, barracks and other quarters, in addition to the necessary runway (including 4,000 feet – 1,219 metres – asphalt paved portion).

[37]  For example, during the war, water filtration capacity expanded from 16 million gallons (60.6 million litres) to 26 million (98.4 million litres) daily on the Pacific said, and from 9 million (34 million litres) to 14 million gallons (53 million litres) daily on the Atlantic side.