Binding the sovereign

April 22, 2005 | Contracts, Finance, Government, Primer posts

How do stakeholders (citizens or copmpanies doing business with a government) assure their government treats fairly with them?  What prevents government, the enforcer of rules, from failing to enforce its own rules or changing them for its own convenience? 


Nearly 250 years ago, Rousseau first posed the question:


[P]ublic deliberation, while competent to bind all the subjects to the Sovereign, because of the two different capacities in which each of them may be regarded, cannot, for the opposite reason, bind the Sovereign to itself; and that it is consequently against the nature of the body politic for the Sovereign to impose on itself a law which it cannot infringe. 

Jean-Jacques Rousseau, The Social Contract, 1762.



Ah, for the good old days of the Enlightenment …

Actually, the problem is way older than Rousseau, as monarchs frequently went bankrupt (King Pedro the Cruel, 1368), sometimes more than once (Felipe II of Spain in 1557, and then again in 1596).



Most powerful man in Christendom, defender of the faith … and twice bankrupt


Binding the sovereign is a core problem whenever the power relationships are grossly unequal, or even if temporarily more balanced (because the strong is briefly wounded), likely to be grossly unequal over the long term. 


It’s a core question of public policy, one with implications in affordable housing.  It arises in many contexts:



In all these cases, the basic conundrum is: if you bargain with a party that also adjudicates and enforces all bargains, will you get what you bargained for?


Binding the sovereign was forefront in the minds of the U. S. Constitution’s Framers, who, having

by dint of revolution …


No, the Revolution wasn’t what drove him mad …


… just won their rights …


We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.


Still some of the most stirring words ever written …


… were consciously contributing some rights (and reserving others) back into a new government that some of them feared would become itself a usurper.  The Constitution is a legal contract that explicitly provides the United States is a party that itself may be summoned into court and adjudicated against, as famously said by Supreme Court Justice Hugo Black: 


Our Government should not, by picayunish haggling over the scope of its promise, permit one of its arms to do that which, by any fair construction, the Government has given its word that no arm will do.  It is no less good morals and good law that the Government should turn square corners in dealing with the people than that the people should turn square corners in dealing with their Government. Cf. Rock Island, Arkansas & Louisiana R. Co. v. United States, 254 U.S. 141, 143 .


But, in political/ public policy terms, using the contractual solution is ‘too easy’ — the real sovereign-binding challenges are in the political arena, where it does not avail.  Hence the conundrum: 


Absent contracts, how do you bind the sovereign?


Think about it and in a day or so I’ll give you my working list.