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.

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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.

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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.

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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.

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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.

The report is at –

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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:

[3] 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.


[5] and


[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.  


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


[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.



[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:


[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:


[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..



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



[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.


[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.


[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.