VIII. Two schools of thought concerning the relations between International and Municipal Law, p. 38--The maxim that International Law overrules Municipal Law, p. 39--The doctrine that International and Municipal Law are two essentially different bodies of law, p. 39--The two maxims of the practice of the American Courts, pp. 40-42--President Taft's message to Congress suggesting a resolution which would have empowered the American Courts to decide the question as to whether Section 5 of the Panama Canal Act violates Article III, No. 1, of the Hay-Pauncefote Treaty, pp. 42-44. IX. The Panama Canal conflict and the British-American Arbitration Treaty, pp. 44-45--Does the term "interests" mean "advantages" or "rights"?, p. 46--_Pacta tertiis nec nocent nec prosunt_, p. 47--The exemption of the vessels of the Republic of Panama from payment of tolls, pp. 48-50. X. Why it must be expected that the Panama Canal conflict will be settled by arbitration, pp. 51-52--Mr Thomas Willing Balch's letter to the _New York Sun_, pp. 53-57. I. The Panama Canal conflict is due to the fact that the Governments of Great Britain and the United States do not agree upon the interpretation of Article III, No. 1, of the Hay-Pauncefote Treaty of September 18, 1901, which stipulates as follows:-- "The Canal shall be free and open to the vessels of commerce and of war of all nations..., on terms of entire equality, so that there shall be no discrimination against any such nation, or its citizens or subjects, in respect of the conditions and charges of traffic, or otherwise. Such conditions and charges of traffic shall be just and equitable." By Section 5 of the Panama Canal Act of August 24, 1912, the President of the United States is authorised to prescribe, and from time to time to change, the tolls to be levied upon vessels using the Panama Canal, but the section orders that _no tolls whatever shall be levied upon vessels engaged in the coasting trade of the United States_, and also that, if the tolls to be charged should be based upon net registered tonnage for ships of commerce, the tolls shall not exceed one dollar and twenty-five cents per net registered ton nor be less, _for other vessels than those of the United States or her citizens_, than the estimated proportionate cost of the actual maintenance and operation of the Canal[1]. [1] As regards the enactment of Section 5 of the Panama Canal Act that the vessels of the Republic of Panama shall be entirely exempt from the payment of tolls, see below IX, p. 48. Now Great Britain asserts that since these enactments set forth in Section 5 of the Panama Canal Act are in favour of vessels of the United States, they comprise a violation of Article III, No. 1, of the Hay-Pauncefote Treaty which stipulates that the vessels of all nations shall be treated on terms of entire equality.