B-217769, MAY 2, 1985, OFFICE OF GENERAL COUNSEL

B-217769, MAY 2, 1985, OFFICE OF GENERAL COUNSEL

PRECIS-UNAVAILABLE

THE HONORABLE WALTER B. JONES: CHAIRMAN, COMMITTEE ON MERCHANT MARINE AND FISHERIES HOUSE OF REPRESENTATIVES

DEAR MR. CHAIRMAN

THIS RESPONDS TO YOUR REQUEST FOR OUR COMMENTS ON H.R. 729, A BILL TO AMEND THE PANAMA CANAL ACT OF 1979 IN ORDER THAT CLAIMS FOR VESSELS DAMAGED OUTSIDE-THE-LOCKS MAY BE RESOLVED IN THE SAME MANNER AS THOSE VESSELS DAMAGED INSIDE THE LOCKS, AND FOR OTHER PURPOSES.

IF ENACTED, THE BILL WOULD AMEND THE PANAMA CANAL ACT OF 1979 SO AS TO AUTHORIZE THE PANAMA CANAL COMMISSION TO PAY AND ADJUST OUTSIDE-THE LOCK VESSEL DAMAGE CLAIMS EXCEEDING $120,000 JUST AS IT CURRENTLY PAYS AND ADJUSTS OUTSIDE-THE-LOCKS CLAIMS FOR LESS THAN $120,000 AND ALL INSIDE-THE -LOCKS CLAIMS. THE BILL WOULD ALSO GRANT TO OUTSIDE-THE LOCKS CLAIMANTS THE RIGHT, CURRENTLY ENJOYED ONLY BY INSIDE-THE-LOCKS CLAIMANTS, TO SUE ON THEIR CLAIMS IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF LOUISIANA IF THEY CANNOT REACH A SETTLEMENT WITH THE COMMISSION. THE BILL WOULD SET A 2-YEAR LIMITATION PERIOD ON THE FILING OF ADMINISTRATIVE VESSEL DAMAGE CLAIMS WITH THE COMMISSION (OR WITHIN 1 YEAR AFTER THE BILL IS ENACTED WHICHEVER IS LATER) AND A 1 YEAR LIMITATION ON THE FILING OF VESSEL DAMAGE SUITS IN DISTRICT COURT (ALSO ALTERNATIVELY WITHIN 1 YEAR AFTER THE BILL IS ENACTED). THE LAW CURRENTLY CONTAINS NO SUCH LIMITATION PERIODS.

FURTHER, THE BILL CHANGES THE STANDARD FOR THE COMMISSION'S LIABILITY FOR INSIDE-THE-LOCKS VESSEL DAMAGE FROM STRICT LIABILITY TO NEGLIGENCE. THE BILL WOULD ALLOW CLAIMANTS TO INCLUDE AS AN ELEMENT OF DAMAGES COSTS INCURRED BECAUSE THE COMMISSION'S MARINE ACCIDENT INVESTIGATION EXCEEDS 24 HOURS. SECTION 4 MAKES IT CLEAR THAT MONEY APPROPRIATED FOR THE CANAL'S MAINTENANCE AND OPERATION SHALL BE THE ONLY SOURCE OF FUNDS AVAILABLE TO PAY VESSEL DAMAGE ADMINISTRATIVE CLAIMS AND JUDGMENTS. FINALLY, SECTION 6 OF THE BILL WOULD AUTHORIZE THE COMMISSION TO PURCHASE INSURANCE TO COVER EXCESSIVE AMOUNTS THAT IT MIGHT BE LIABLE FOR ON CLAIMS ARISING FROM CATASTROPHIC MARINE ACCIDENTS.

DURING THE LAST CONGRESS WE TESTIFIED BEFORE THE SUBCOMMITTEE ON PANAMA CANAL/OUTER CONTINENTAL SHELF OF YOUR COMMITTEE ON H.R. 3953. HEARINGS ON H.R. 3953 AND H.R. 4234 BEFORE THE SUBCOMMITTEE ON PANAMA CANAL/OUTER CONTINENTAL SHELF OF THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES, 98TH CONG., 1ST SESS. 190 (1983) (STATEMENT OF ROBERT HUNTER, ASSISTANT GENERAL COUNSEL, GAO). IN THAT TESTIMONY WE STATED FULLY OUR OPINION AND RECOMMENDATIONS CONCERNING THAT BILL. EXCEPT FOR TWO OF THE PROVISIONS DESCRIBED ABOVE WHICH WERE NOT IN THE EARLIER BILL, AND THREE PROVISIONS WHICH WERE IN THAT BILL BUT IN A DIFFERENT FORM, H.R. 729 IS IDENTICAL TO H.R. 3953 AS IT WAS AT THE TIME WE APPEARED AT THE HEARINGS. SPECIFICALLY, H.R. 3953 AT THE TIME OF OUR TESTIMONY DID NOT CONTAIN THE PROVISION CHANGING THE STANDARD OF LIABILITY FOR INSIDE-THE-LOCKS CLAIMS TO NEGLIGENCE AND IT DID NOT SPECIFY THAT VESSEL DAMAGE CLAIMS AND JUDGMENTS WERE TO BE PAID ONLY OUT OF CANAL OPERATION AND MAINTENANCE FUNDS. THE CLAIMS LIMITATION PERIOD IN THE EARLIER BILL WERE 3 YEARS INSTEAD OF 2 YEARS, AND THE INSURANCE PROVISIONS OF H.R. 3953 DID NOT INCLUDE AUTHORITY FOR THE COMMISSION TO PURCHASE INSURANCE TO COVER MAJOR UNPREDICTABLE LOSSES OF REVENUE RESULTING FROM MARINE ACCIDENTS. AS TO THE IDENTICAL PROVISIONS OF THE TWO BILLS, OUR VIEWS ARE THE SAME AS EXPRESSED IN OUR EARLIER TESTIMONY. ACCORDINGLY, WE ENCLOSE A COPY OF THAT TESTIMONY WHICH YOU MAY CONSIDER AS REPRESENTING OUR COMMENTS ON THE PROVISIONS OF H.R. 729 AND H.R. 3953 WHICH ARE THE SAME.

ALTHOUGH ULTIMATELY H.R. 3953 WAS REPORTED FROM COMMITTEE IN A FORM WHICH IS VIRTUALLY IDENTICAL TO H.R. 729, WE OFFER A FEW ADDITIONAL COMMENTS CONCERNING THOSE ASPECTS OF THE CURRENT BILL WHICH DIFFER FROM H.R. 3953 AS DRAFTED AT THE TIME OF OUR TESTIMONY. CHANGING THE PCC'S LIABILITY FOR INSIDE-THE-LOCKS CLAIMS FROM STRICT LIABILITY TO NEGLIGENCE DECREASES THE COMMISSION'S EXPOSURE TO VESSEL DAMAGE CLAIMS. THE AMENDMENT, IF PASSED, WOULD MAKE THE LIABILITY STANDARD FOR INSIDE-THE-LOCKS CLAIMS THE SAME AS FOR OUTSIDE-THE-LOCKS CLAIMS AND THUS WOULD BE CONSISTENT WITH THE BILL'S GENERAL PURPOSE OF AMENDING THE PANAMA CANAL ACT SO THAT ALL VESSEL DAMAGE CLAIMS ARE TREATED THE SAME. DECREASING THE LIMITATIONS PERIOD FOR VESSEL DAMAGE CLAIMS FROM 3 YEARS TO 2 YEARS WOULD NOT APPEAR TO REDUCE THE COMMISSION'S EXPOSURE TO VESSEL DAMAGE CLAIMS SINCE DAMAGE CLAIMANTS PRESUMABLY WOULD FILE CLAIMS WITHIN THE 2 YEAR PERIOD.

CONCEPTS DISCUSSED IN OUR PREVIOUS TESTIMONY ARE PERTINENT TO CONSIDERATION OF THE TWO PROVISIONS NOTED ABOVE WHICH WERE NOT IN H.R. 3953. WITH REGARD TO THE PROVISIONS AUTHORIZING THE COMMISSION TO PURCHASE INSURANCE TO COVER MAJOR UNPREDICTABLE LOSSES OF INCOME RESULTING FROM CATASTROPHIC MARINE ACCIDENTS, WE DIRECT YOUR ATTENTION TO OUR COMMENTS ON PAGES 9 AND 10 OF THE ENCLOSURE DISCUSSING WHY OUR GENERAL POLICY FAVORING SELF-INSURANCE BY GOVERNMENT AGENCIES DOES NOT APPLY TO THE COMMISSION.

FINALLY, WE SUPPORT THE PASSAGE OF SECTION 4(1)(C) AND 5(1) OF H.R. 729 WHICH SPECIFY THAT VESSEL DAMAGE SETTLEMENTS AND JUDGMENTS "MAY ONLY BE PAID OUT OF MONEY APPROPRIATED OR ALLOTTED FOR THE MAINTENANCE AND OPERATION OF THE PANAMA CANAL" BECAUSE THEY WOULD RESOLVE A POINT OVER WHICH THERE WAS SOME UNCERTAINTY DURING THE HEARINGS ON H.R. 3953. IN OUR TESTIMONY WE EXPRESSED OUR VIEW THAT UNDER THE PANAMA CANAL ACT AS IT WOULD HAVE BEEN AMENDED BY H.R. 3953, VESSEL DAMAGE CLAIMS AND JUDGMENTS WOULD BE PAID WITH FUNDS APPROPRIATED OR ALLOTTED FROM TOLL REVENUES FOR THE CANAL'S MAINTENANCE AND OPERATION AND THAT THE GENERAL FUND OF THE TREASURY WOULD NOT BE AVAILABLE FOR SUCH PAYMENTS. (SEE PAGE 7 OF THE ENCLOSED COPY OF OUR TESTIMONY.) HOWEVER, DURING THE HEARINGS, QUESTIONS WERE RAISED AS TO THE CORRECTNESS OF OUR CONCLUSION. (SEE I.E., TRANSCRIPT OF THE HEARINGS CITED ABOVE AT PAGES 104, 117, 203, AND 204. ALTHOUGH WE STILL HOLD THE VIEW EXPRESSED IN OUR TESTIMONY, WE ENDORSE THE PASSAGE OF SECTION 4(1)(CAND 5(1) BECAUSE THEY REMOVE ANY DOUBT CONCERNING THE SOURCE OF PAYMENT OF DAMAGES BY THE PCC AND THE UNAVAILABILITY OF THE GENERAL FUND FOR SUCH PAYMENT. OUR ENDORSEMENT IS IN ACCORD WITH OUR POSITION GENERALLY THAT IT IS ADVISABLE FOR THE CONGRESS TO SPECIFY THE SOURCE OF FUNDS FOR WHATEVER IT AUTHORIZES.