In the 1907 case of Paraiso v. United States, the U.S Supreme Court ruled on a dispute involving property rights in Panama following the Hay-Bunau-Varilla Treaty between America and Panama. The treaty gave control over certain lands to America for constructing, maintaining, and protecting a canal across the Isthmus of Panama. A Panamanian citizen named Paraiso claimed that he owned part of this land before it was taken by American authorities without compensation or due process. He sued for damages under an act allowing suits against the U.S government in federal courts. The court held that while sovereign immunity generally prevents lawsuits against governments without their consent, Congress had waived this protection through legislation permitting such claims relating to property seized during military operations abroad. However, they also found that since Paraiso's claim arose from actions taken under international law (the treaty), rather than domestic law (U.S constitution), his lawsuit could not proceed as it fell outside jurisdictional limits set by Congress' waiver of sovereign immunity.

In the dissenting opinion for Paraiso v. United States, Justice Harlan argued that the majority's decision was inconsistent with previous rulings and principles of international law. He contended that under these laws, a nation has exclusive jurisdiction over its own territory and cannot be subjected to another country's legal system without consent. In this case, he believed Panama had not given such consent to allow U.S courts to exercise authority over crimes committed within its borders by non-U.S citizens against other non-U.S citizens. Therefore, he disagreed with the majority’s ruling which upheld U.S jurisdiction in Panama based on an 1846 treaty between Colombia (which then included Panama) and the United States granting transit rights across Isthmus of Panama but did not explicitly grant judicial powers or sovereignty to America. Harlan also pointed out inconsistencies in applying this interpretation only after Panamanian independence from Colombia rather than immediately after signing of said treaty.