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The Rise and Fall of National Sovereignty
Alun A Preece[1]
Introduction
National sovereignty has always impacted on international trade and business. In the 20th century, sovereignty has effected commerce most significantly through the operation of sovereign risk. This article examines the development of national sovereignty, from its 16th and 17th century origins to its increasing curtailment in the latter part of the 20th century.
The rise of national sovereignty and the development of international law
The origins of national sovereignty and the major trigger for the development of international law are usually ascribed to the Peace of Westphalia. ‘The Peace of Westphalia’ refers to the series of settlements, concluded in 1648, which brought to an end the Eighty Years War, in which Spain was the notable protagonist, and the Thirty Years War, which involved mainly Holland, Germany and Sweden. The Peace was negotiated from 1644, in the Westphalian towns of Münster and Osnabrück. The Spanish-Dutch treaty was signed on 30 January 1648, and the main treaty—involving the Holy Roman Emperor Ferdinand III, the other German princes, France and Sweden—on 24 October 1648. England, Poland, Russia and Turkey, not being directly involved, were the only unrepresented European powers. In recognising the independence of Switzerland from Austria and the Netherlands from Spain, the Westphalian settlement went beyond merely securing peace amongst the warring states: it recognised that each state was protected by a principle of ‘sovereignty’.
The central proposition of Westphalian ‘sovereignty’ is the non-interference of states in each other’s internal affairs. This is generally referred to as ‘internal sovereignty’. However, sovereignty also has external aspects, such as the making of treaties or declarations of war and peace, and the use of
military force against other states. Another important principle behind sovereignty is that of equality, which holds that, while some states will necessarily be militarily more powerful that others, all are juridically equal in international law. Today, sovereignty survives in Art 2(7) of the United Nations Charter, which provides that:
Nothing contained in the present Charter shall authorize the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state or shall require the Members to submit such matters to settlement under the present Charter…
The immediate consequence of the enunciation of sovereignty in 1648 was to strip powerful international players, such as the Holy Roman Emperor, of any legal justification for intervening in the internal affairs of other states. Prior to the Westphalian settlement, the dominant political configurations in Europe were entirely inimical to sovereignty. For example, Pope Innocent X, who reigned from 1644–55, refused to recognise the independence of Portugal, then at war with Spain. Further examples are found in English legislation of the 1530s. As part of its attempts to withdraw from the common system of Papal authority, England declared itself ‘an Empire’.[2] The declaration implies that, there being no clearly accepted concept of an independent sovereign state, only ‘empires’ were exempt from external authority.
Perhaps only a catastrophe as immense as the Thirty Years War could have brought about such a fundamental change in the international system. No other war prior to that time had wreaked such havoc, and only the Black Death of the 14th century had caused greater destruction of life in Europe as a whole. The Westphalian doctrine involved the recognition that, in order to avoid perpetual conflict as a result of religious differences, states must be allowed to differ on fundamental aspects of their internal organisation. In particular, it was recognised that attempts to impose Catholicism or protestantism by force could not be pursued any further. Protestantism had to be accepted as part of the political and religious landscape of Europe, at least for the foreseeable future. Only Spain, which was supported by Pope Innocent X, remained unreconciled, continuing its war with France until 1659.
The Treaty of Westphalia is also recognised as one of the first moves towards the protection of human rights in international affairs. Enslavement of enemy soldiers, originally common, had declined in Europe during the Middle Ages, although ransoming was still widely practised. The use of mercenary soldiers tended to create a slightly more tolerable climate for prisoners, as the victor in one battle knew that he might be the vanquished in the next. In the 16th and early 17th centuries, some European political and legal philosophers expressed their thoughts about the amelioration of the effects of capture upon prisoners.[3] The idea was taking hold that, in war, no destruction of life or property beyond that necessary to decide the conflict was sanctionable. The Treaty of Westphalia, which released prisoners without ransom, is generally taken to mark the end of the era of widespread enslavement of prisoners of war. An echo of this was the declaration against the slave trade included in the settlement of the Congress of Vienna, at the insistence of the British statesman, Viscount Castlereagh.
The Westphalian settlement was also successful in preventing the widespread destruction of Europe through war. From 1648–1914, European wars were generally of limited scope and duration. They were fought over disputed border provinces, successions or commercial and colonial rivalries. Not until the activities of revolutionary and Napoleonic France, from 1793–1815, did states again seek to conquer or impose their religious, political or ideological views on their neighbours.
In 1793, the reign of terror and mass execution of the French aristocracy, following the French Revolution, proved too much for the reactionary European powers.[4] Napoleon’s orgy of conquest over other European countries in 1805–06 led to the establishment of an ‘Empire’. However, there being room for only one empire, the Holy Roman Empire was finally abolished (one might say, put out of its misery) in 1806. At the Congress of Vienna, held from 1814–15, the European leadership found no reason to question national sovereignty when drawing up the European peace. Indeed, external sovereignty was developed further at the Congress, with important principles being laid down regarding protocol, drawing up of treaties and diplomatic representation.
Another development from the Napoleonic period was the systematic use of economic sanctions as an instrument of policy to bring a country to its knees. Napoleon’s ‘Continental System’ closed the parts of Europe over which he held sway to British goods. Britain retaliated by issuing the Orders in Council, under which continental Europe was blockaded. Assertion of the right to board and search neutral ships in pursuance of this policy eventually led to the war of 1812 between the United Kingdom and the United States.[5]
Apart from the tumultuous Napoleonic interlude, the quarter-millennium from 1648 to 1914 was marked by longer periods of peace than had hitherto been enjoyed since the Pax Romana. Helped by the long peace, economic prosperity spread immensely during this period. For the first time in history, famine disappeared on a permanent basis from Europe in the late 19th century.[6] This was in marked contrast to the immediately preceding period, from the start of the reformation until 1648, in which conflicts often resulted in great suffering on the part of the civilian population, as well as great disturbance to civil and economic life.[7]
Historians generally note a fundamental transition from the Middle Ages to the modern era at around 1500. The Middle Ages and before, back to the Ancient World, is seen as an age of empires, in contrast to the domination of the modern era by the concept of nation states. Inherent in the modern formulation is the Westphalian concept of ‘national sovereignty’. Except in relation to the hereditary territories of the Hapsburg family, the 1648 Westphalian Settlement reduced the position of the Holy Roman Emperor to a largely ceremonial role,[8] albeit one enjoying great prestige. The age of European, as opposed to colonial, empires was over, except for occasional resurrections when tyrants such as Napoleon, Hitler and Stalin acquired control over other countries. Where and when such empires existed, concepts of national sovereignty were temporarily blurred.
In pre-1648 Europe, with its lack of a clear definition of national sovereignty, but rather a patchwork of rambling and competing feudal empires, there was no clear distinction between internal and external affairs. The territorial boundaries of these empires ebbed and flowed with their political and military fortunes. Consequently, interference in ‘internal’ affairs of territories was easily justified on the basis of some alleged feudal right, or, after 1517, in the name of maintaining the true universal Christian religion against allegedly heretical reformers.
Prior to the Protestant Reformation, the Pope was regarded, by himself and others, as the head of a united Christendom. The Vatican was a form of medieval United Nations in the European context.[9] In legal terms, the Vatican was the final court of appeal on matters of marriage and divorce, although in England it also controlled succession to property other than land. In addition, the Pope was an influential political player. An example of the Pope’s power was the imposition of the six-year interdict during the reign of King John.[10]
King John eventually resolved the matter by resigning his crown to the Pope and having it regranted. Once he had escaped from the influence of the Barons who had constrained him to sign Magna Carta, he appealed to the Pope, who promptly purported to release him from its terms. In 1571, Pope Gregory issued the infamous Bull, Gloria in Regnans, absolving subjects from allegiance, inter alia, to Elizabeth I as an excommunicate sovereign, and, indeed, going further in declaring it their duty to rise up and overthrow her—by violence if necessary.
In the century or more prior to 1648, a limited number of European countries succeeded in establishing the essentials of national sovereignty by breaking away from allegiance to the Pope. For example, in 1521, Sweden established Lutheranism as the state religion, on the assumption of the throne by Gustavus Vasa.[11] Similarly, Denmark adopted Lutheranism in the mid-1530s, and independent-minded Swiss cities[12] and Cantons went their own way. At the same time, Henry VIII terminated papal jurisdiction in England by securing the passage of the Act of Appeals and the Act of Supremacy.[13]
Although the major break-away from the Pope came with the Protestant Reformation in the 16th century, English kings had previously attempted to limit papal jurisdiction. In the late 13th century, Edward I had sought to curtail foreign ecclesiastical influence indirectly through the Law of Mortmain, by limiting the accumulation of ecclesiastical property upon which feudal dues would not be payable to the same extent.[14] Later, the Statutes of Praemunire, dating from 1351,[15] attempted to reduce the influence of the Pope in England.
However, the primary motivation for the enactment of the Statutes of Praemunire was the Hundred Years War, which began in 1337. The Pope was a key player, and the papal courts were of great importance in this prolonged struggle between the English and French monarchs. In order to ensure that the diplomatic processes would operate to French advantage, the French King, Philip the Fair, kidnapped Pope Boniface VIII, and forced him to march from town to town until he died of a heart attack. He then persuaded the cardinals to choose a French bishop as the new Pope, and relocated the papacy to Avignon.
Of course, it was one thing to attempt to break away from the universal world of Christendom, and quite another to succeed. Various dissident groups had been ruthlessly suppressed by the authorities at various times in the Middle Ages, one of the last being the Bohemians in the early 15th century. The crucial difference for the Protestant Reformation of 1517 was that it gained the backing of rulers who could resist immediate suppression. Either they were sufficiently powerful in their own rights, were allied to powerful nations—as was the case with the Germans and the Dutch—or were geographically situated so as to avoid conquest—as was the case with England, Sweden, Denmark and Switzerland.[16] It is significant that Germany and the Netherlands, which did not enjoy such geographic advantages, suffered the brunt of religious warfare between 1517 and 1648. There are some parallels to this in the modern era.
It seems that the development and long enjoyment of democracy has a close link with early attainment of national sovereignty. It is a remarkable coincidence that England, Sweden and Switzerland, of the only seven countries which enjoyed continuous democracy throughout the 20th century, are the only three that existed prior to 1776, and were, with Denmark,[17] the first to establish national sovereignty as nation states rather than as empires. After 1648, the concept of national sovereignty spread beyond Europe, as relations developed with countries in other continents, and as European and other countries gained independence by war, rebellion[18] or peaceful legal processes.[19] The independence of the United States added it to the Eurocentric world of nation states, especially once the other American states gained their independence. This process was greatly facilitated by the enunciation by President Monroe of the Monroe Doctrine, in 1823, as the fundamental principle of United States foreign policy. This stated that the United States was not a European power, and so would not take sides in European conflicts. However, it also stated that the United States would regard any further[20] colonial activity in the Western hemisphere as a threat to its security. The Monroe Doctrine placed the Americas off-limits to further European colonialism, thereby guaranteeing national sovereignty to the newly independent former Spanish colonies of South and Central America.
While colonial activity may have brought about relative peace in Europe in the period after 1648, imperial ambitions were still nascent. They eventually exploded under Napoleon, Hitler and Stalin. The desire to recreate the ‘glories’ of the Roman Empire seems to be rooted deep in the continental European psyche.[21] Even today, this can be seen in the creation of the European Union. By contrast, Britain has remained largely aloof from European trends,[22] as have Switzerland and Scandinavia. British colonisation seems initially to have been motivated by a desire to find new trading opportunities, rather than an expansion of empire. Exploration was undertaken predominantly by commercial companies,[23] or self-help initiatives of groups of individuals seeking greater religious freedom,[24] although the grandeur associated with empire became more influential later.
Eventually, the principles of international law, which had governed the relations between the European states since 1648, had become so well established in state practice that they could not be ignored by the Founding Fathers in establishing the United States of America.[25] Also, the principle of maintaining diplomatic relations is evidenced by the several references to ambassadors[26] and treaties[27] in the Constitution of the United States.
Aspects of national sovereignty
Initially, internal sovereignty—that is, the power to rule over a country—was largely untrammelled, and exercised by absolute monarchs. However, later it came to be limited by constitutionalism. For example, in the 17th century, England went through a long struggle between King and Parliament, culminating in the establishment of a constitutional monarchy as a result of the Glorious Revolution[28] of 1688. This led to the concept of parliamentary sovereignty, whereby internal sovereignty of England and Wales[29] was henceforth exercised by Parliament, although the Monarch’s assent to legislation was still required to transform a Bill passed by both houses of Parliament into law. However, these changes did not limit the internal sovereignty of England, and later Great Britain[30] and the United Kingdom;[31] they merely redefined which persons and bodies were to exercise it. This was to remain the case until British sovereignty was limited by the European Communities Act 1972, which paved the way for accession to the European Community, and finally to the European Union.
The British example demonstrates how a country may limit its internal sovereignty by adopting a constitution, or by entering indefinitely into binding treaties from which it is constitutionally bound not to deviate. In the case of the United Kingdom, this was a return to a situation somewhat akin to that of England in the medieval period, when England was subject to papal jurisdiction. Frequently, England found itself in a state of tension over attempts to expand or limit the power of the Pope over its internal affairs.
Not all constitutions limit internal sovereignty, or do so to a significant degree, however. Some permit amendment, in which case internal sovereignty will only be limited to the extent that it is transferred to the bodies empowered to amend the constitution. Accordingly, the Swiss Constitution of 1848 did not limit internal sovereignty, as amendment of any provision was permissible only by a majority vote in a referendum involving the majority of Cantons.[32] By contrast, if some provisions of the constitution are unamendable, then the adoption of the constitution limits internal sovereignty. In the United States and Australia, the amending process is only limited in that the federal government may not deprive the states of their equal representation in the Senate, nor change State boundaries, without first gaining their consent. Theoretically, amendment is not blocked entirely, although in practice a state’s consent to a reduction in representation or territory will be extremely difficult to obtain. Similarly, the American Bill of Rights, consisting of constitutional amendments passed in 1791, could be repealed on the approval of three quarters of the States’ legislatures. In both cases, ultimate sovereignty lies with the body whose consent is required under the amendment provisions.
Still other constitutions purport to debar certain changes altogether. For example, the post-war German Grundgesetz (the German ‘Basic Law’) specifically prohibits amendments to the free democratic order which it establishes. Amendments may also be practically barred where certain provisions are, by their nature, particularly difficult to restrict. For example, in Australia, it is unclear how an amendment might be drafted to change implied rights to freedom of political expression discovered by the High Court of Australia in the Australian Constitution.[33] Some courts, such as the Indian Supreme Court in the early 1970s, have gone so far as to declare some constitutional rights and freedoms so fundamental as to be irremovable by constitutional amendment.
Internal sovereignty may also be affected by a State’s entry into a treaty if this obligation cannot be unilaterally terminated, and is unlimited in time.[34] Difficult issues of sovereignty arise if a State feels constrained not to escape through threat of sanctions or under the terms of its own agreement.[35] A prime example is the United Kingdom’s entry into the European Union. It is possible that the European Communities Act 1972 may fall into the category of an unamendable act, since it is uncertain how, if at all, the United Kingdom might legally repeal the law without securing the agreement of the European Union.
Internal sovereignty is also increasingly threatened by the development of international law, which purports to outlaw certain state activity irrespective of the assent of the State concerned. For example, the concern over genocide or ill-treatment of ethnic minorities led to the intervention against Serbia in Kosovo in 1999. Similar compunctions led to the outlawing of aggressive war in international law, as seen in the trials and convictions of Nazis at Nuremberg. Moreover, the United Nations Charter outlaws unilateral aggressive war by prohibiting wars which have not been authorised by the Security Council. The merits and legality of all of these action are currently the subject of heated debate.
Just as the destructiveness of the Thirty Years War was required to generate the notion of sovereignty, so it was that the next change in the international system
occurred only in the 20th century, after the violence and bloodshed of two World Wars.[36]
The first conflict of 1914–18 dictated a fundamental change towards democracy in the international system. As a political principle, democracy was non-existent in 1648, and even in 1815 Britain had not sought in any significant way to export its more enlightened political system.[37] Consequently, before 1918 international law was almost completely devoid of any democratic input. In calling upon Congress to declare war on 2 April 1917, President Woodrow Wilson invoked the need to ‘make the world safe for democracy’, so the postwar world would be fundamentally different. The League of Nations, set up by the Versailles Treaty of 1919, was designed to prevent international conflicts leading to major war. It enjoyed some success in dealing with minor conflicts, but failed when it came to those involving major powers.[38]
In 1919, the major players in the peace negotiations were, for the first time in such an event, predominantly democratic countries. Generally, the Versailles Treaty of 1919 did not seek to curtail national sovereignty. Only Germany, which had been defeated, was restricted in relation to armaments. It was still largely business as it had usually been conducted since 1648 in relation to national sovereignty. Each state, large or small had an equal vote in the League of Nations. Even the League of Nations could be argued to be only a more formalised and sophisticated version of the Concert of Europe, established in 1815.39
It took a yet more destructive war to lead to the establishment of the United Nations in 1945. The massive violation of the rights of civilians that occurred in the Second, as opposed to the First, World War sparked a much greater concern with human rights: hence, the adoption of human rights covenants, beginning with the International Declaration of Human Rights in 1948, and the spawning of a plethora of international organisations aimed at enforcing these rights.
Despite the conspicuousness of democracy in the post-1918 international order, a disturbing trend of not accepting the freedom of people to democratically choose a government of a particular political direction has recently emerged. In early 2000, sanctions were imposed upon Austria when an allegedly far-right party was included in a coalition government. There was no question that the election had not been properly conducted, or that the election result had not been a proper reflection of the will of the Austrian people. Mostly, sanctions were imposed by other members of the European Union, and, as such, were extremely questionable, given the guarantees of free trade and non-discrimination inherent in European Union membership. Similar protests were voiced during the Italian election in the Spring of 2001, with a call for sanctions from no less than the Belgian foreign minister.[40] Following the Austrian debacle, the European Union has instituted a system of inquiring into members’ internal affairs to see if sanctions are, in its view, justified. Sweden, holding the rotating presidency for the first half of 2001, offered to set this process in train in relation to Italy.
An earlier example of the pressuring of electorates was the bullying of Denmark in June, 1992, after its voters initially rejected the ratification of the Maastricht Treaty to enlarge the powers of the European Union.[41] Also, the massive selling of the Swedish kronor a few days before the referendum vote on European Union membership in late 1994 may have caused the pronounced late swing toward a ‘yes’ to accession.[42]
The establishment of the European Union has caused a particularly great loss of national sovereignty amongst its members. Perhaps we are witnessing a reversion to the pre-Westphalian domination of the Western part of Europe by an empire. Paradoxically, this is taking hold at much the same time as the Eastern part of the continent has escaped from domination by the Soviet empire.43
Customary international law is inherently vulnerable to the criticism that it is not democratically legitimate, as many of its ‘customs’ have resulted from the practice of undemocratic states. The United States and the United Kingdom, as permanent members of the Security Council of the United Nations, are two of only seven countries to have maintained unbroken democracy throughout the 20th century.[44] However, throughout the history of the United Nations, at least one of the permanent members of the Security Council has been a dictatorship.[45] Although a majority of founders were democratic countries, the prompt discarding of democracy in many newly independent colonies, combined with the spread of communist rule, has made the majority of member states undemocratic for most of the existence of the United Nations. This has brought about widespread cynicism regarding its operation in democratic countries since the early 1960s.
While the activities of the United Nations have generally been inimical to national sovereignty, through its encouragement of treaties backed by the threat of sanctions, they have not been entirely consistent. While sovereign statehood is a prerequisite for United Nations membership, this requirement has not been enforced. During the Cold War, the satellites of the Soviet Union in Eastern Europe, who clearly did not enjoy effective sovereignty, were allowed to remain members, as were several republics of the Soviet Union. Even if this were defensible on the basis that to do otherwise would have involved a highly political process of inquiry into all states’ affairs—allowing parts of the Soviet Union, such as Byelorussia, to also be members certainly was not.
Consequently, there is extant tension between international law and national sovereignty. Countries with long democratic traditions often evince strong majority support for the maintenance of national sovereignty at the expense of international law. The latter is seen as less legitimate than the long democratic traditions expressed by the country’s own national sovereignty. Prime examples are:
with human rights. The problem is compounded by the ease with which any country can sign and ratify treaties opposed by a majority of voters. Probably only the United States and Switzerland enjoy adequate safeguards in this respect.[47] In the United States, the constitutional requirement of a two-thirds majority in the Senate for ratification[48] has meant that a very broad consensus is needed before ratification can take place. Although the Swiss appear in their new Constitution approved in 1999 to have limited national sovereignty in favour of international law,[49] it is probable that ultimate sovereignty still lies with the Swiss voters, through their control of the amending procedure via the process of initiative and referendum.50 In Switzerland, treaties which are of unlimited duration and may not be terminated provide for entry into an international organisation and involve a multilateral unification of law, which must be submitted for referendum approval at the request of 50,000 voters, or eight Cantons.[51] In the English legal tradition, ratification only requires legislative approval to alter domestic law, although this at least provides greater safeguards than exist in countries with a monist tradition, where any international obligation assumed by the state may automatically override domestic law. Dissatisfaction in the United Kingdom over European Union membership may largely be attributed to the lack of referendum approval to original membership, and subsequent variations of the European Union treaties.
Since the 1980s, Australia, which inherited the English position on the ratification of treaties, has seen acute controversy over the use of international treaties by the Federal Government to undermine State autonomy.[52] Peculiarly, the constitutional balance in Australia can be affected by ratification of a treaty. This is because entry into a treaty by the Commonwealth executive transforms a matter into an ‘external affair’, upon which the Federal Parliament can legislate, even though the States would otherwise have exclusive power to legislate in that matter.53 Accordingly, treaty implementation amounts to a backdoor method of amending the Australian constitution by ordinary legislation, without obtaining the approval of electors at a referendum.[54] The controversy is increased by opponents who see international law and treaties as devices to impose a new form of universality, in the form of political correctness, upon them.[55] Recently, the Parliamentary Treaties Committee has been much more active in publicising treaties and engaging in public consultation.
Australian sovereignty
In 1931, the United Kingdom Parliament passed the Statute of Westminster, which gave legislative form to decisions agreed to at the Imperial Conferences held in 1926 and 1930. In particular, the self-governing Dominions were to be regarded as:
…autonomous communities within the British Empire, equal in status, in no way subordinate one to another in any aspect of their domestic or external affairs, though united by a common allegiance to the Crown, and freely associated as members of the British Commonwealth of Nations.
The Royal assent was given to the Statute of Westminster on 11 December, 1931 and that date is, in constitutional terms, the birthday of Australia as a sovereign nation. However, it was not until the mid-1980s that the Australian Commonwealth and States could agree to a joint request to the United Kingdom Parliament, under the Statute of Westminster, for legislation to terminate the residual areas of the United Kingdom responsibility. The result was the Australia Act 1985, which formally removed the last vestiges of responsibility of the United Kingdom Parliament, by providing that it would not, in future, legislate with respect to Australia.[56]
Nonetheless, Australia has suffered comparatively little reduction in national sovereignty during the 20th century. It has not surrendered sovereignty to a regional grouping, such as the European Union. Also, it is—at least theoretically—able to terminate most, if not all, of its treaty obligations, should it wish to do so. Recent rejection of criticism by United Nations committees indicates a willingness to robustly defend its national sovereignty on occasion. Furthermore, its internal sovereignty is not compromised by parts of its constitution being unamendable, or by answerability to international courts, until and unless the treaty establishing International Criminal Court jurisdiction is ratified.[57]
The changing concept of sovereign risk
When considering the national and international legal framework underpinning international trade and business, national sovereignty may have been seen as a negative phenomenon through the operation of sovereign risk. ‘Sovereign risk’ may be defined as the risk of adverse and unreasonable government action targeted at international trade, or at international business projects. Traditionally, the main concerns in sovereign risk were the imposition of selective and punitive taxation on a project operator, expropriation of assets—or their nationalisation—without adequate compensation, prohibition of operations without reasonable cause, or imposition of trade sanctions. Action may be undertaken by any of the organs of government—executive, legislative or judicial—although, traditionally, sovereign risk was associated with the executive branches of autocratic regimes where there was no independent legislature or judiciary.
During the Cold War, when sovereign risk was especially great, Australia and Canada were favoured states for resource projects. Indeed, they were the only large landmasses which were both well endowed with resources and politically stable, with independent judiciaries, democratically elected parliaments, and moderate politics. By contrast, Socialist and Communist regimes could nationalise foreign assets or repudiate debt, safe from military—and, to a large extent, financial and trade—consequences under the Soviet umbrella. Military regimes in Africa and Latin America could act likewise, knowing they could use the geopolitical divide to avoid isolation. A prime example was Cuba’s expropriation of US assets in 1959–60. In the 19th and early 20th centuries, before the world was ideologically divided, countries were sometimes blockaded by European powers to coerce them into paying debts. This operated as a sanction against behaviour which flaunted accepted norms of international trade and finance
In the late 1980s, the collapse of the Soviet Empire, as well as China’s embrace of capitalism, changed the nature of sovereign risk. Now, a country that expropriates property by executive or legislative action will not only find it virtually impossible to attract foreign investment, but may face retaliatory trade measures and sanctions. No longer can states take refuge in the succour of the communist bloc. There is also a much greater appreciation of the advantages of being part of the global free market economy and trading system, and of the inability of countries to advance economically if they ‘go it alone’ and try to operate without foreign investment.58
The result is that many previous no-go areas for resource investment, particularly in South America and the former communist bloc, are now reasonably secure places to do business. Consequently, the former ‘triple A’ democracies of Australia, Canada and New Zealand face far more competition in attracting resource investment. Paradoxically, at the same time they have become areas of higher sovereign risk, through judicial activism in the area of native title. In Australia, the Mabo[59] and Wik[60] decisions, and the consequent legislation,[61] have created huge uncertainty and driven almost all mineral exploration offshore. The situation is, if anything, worse in Canada, through extremely liberal interpretations of native title rights. These moves were encouraged by the concern shown by international bodies, such as United Nations committees, in respect of these issues. By contrast, Argentina and Chile have, during the 1990s, enjoyed times of booming mining exploration.
Judicial activism, as a significant element of sovereign risk, has been on the increase in recent decades, and has also been triggered by environmentalism, or a desire to further other political agendas. These may bring about a de facto federal system, as with the jurisprudence of the European Court of Justice in respect of the European Union, or a strengthening of central power in the case of an existing federal system, as in the case of the High Court of Australia, particularly in the 1980s and early 1990s.[62] International tribunals seem to have been particularly prone to these activities, such as the already mentioned
European Court of Justice, and, more recently, the World Trade Organisation disputes panels and appellate bodies.[63]
The decline in national sovereignty is not necessarily as good for international trade and business as may initially be supposed. First, restrictions on sovereign power at the national level merely transfer sovereignty to the international level, where it may be exercised by officials unsympathetic to business. Where competing nation states enjoy sovereignty, they may modify their policies to vie for business and investment. States operating under an antibusiness—or anti-free trade—policy, or ideologies such as socialism or communism, or states with corrupt political systems, will generally be punished economically, and may eventually collapse for this reason.[64] There is no such in-built check where there is international regulation. John Quiggin[65] has argued that the Amsterdam Treaty, concluded in 1998, effectively entrenched ‘social democracy’ as the constitutional framework of the European Union, and would enable its members to defy the market forces that have furthered free market capitalism in recent years. Of course, such ‘entrenchment’ severely limits the scope of democratic choice in the member states, as the rules of the European Union cannot be changed except by a qualified majority of the member states, or, in some cases, by unanimity. Accordingly, socialists and social democrats were able to capitalise on their control of most European Union governments in 1998 to ‘lock in’ their political agenda indefinitely. This also occurs frequently at the international level, since most bureaucrats on these bodies share a similar set of values and political opinions on key issues which tend to oppose free market capitalism.
Also, the invasion of international law into national legal systems renders the law subject to much greater uncertainty. For example, business projects supported by a national government and/or backed by national legislation may be impeached before international bodies, or even national courts, on the basis of international conventions or treaties dealing with such matters as human rights, minorities rights or environmental protection. Finally, the expanded role of international law has led to greatly increased use of economic—and even military—sanctions, many of which are directed at, or even triggered by, economic, trade or business activity internationally and internally.
Both modem democracy and modern free market capitalism emerged and flourished under the Westphalian regime of national sovereignty. It is unclear that either can survive in a ‘post-modern’ era where international law overrides national sovereignty. It may emerge that the burgeoning international political order is more akin to the pre-modern era of imperial regulation and legal uncertainty.
[1] MA, LLB (Camb), LLM, Grad Cert Ed (Qld), Lecturer, TC Beirne School of Law, University of Queensland. This article was partly written in 2001–02 during periods when he was an academic visitor at the law program at the Australian National University, Research School of Social Sciences, but was written and prescribed in his capacity as a lecturer at the University of Queensland.
[2] See Act of Appeals 1533 (24 Hen VIII, cl12), discussed by Plucknett, T, in Taswell-Langmead’s English Constitutional History, 11th edn, 1960, 276.
[3] The most famous of these, Hugo Grotius, stated in his De jure belli ac pacis, 1625, On the Law of War and Peace, that victors had the right to enslave their enemies, but he advocated exchange and ransom instead.
[4] Many aristocrats in other countries had family links with members of the French aristocracy. In particular, the execution of Marie Antoinette was bound to have major diplomatic repercussions, given that she was of the Austrian Royal House.
[5] This curious war included several dramatic events, notably the sacking of Washington, the burning of the White House and the Battles of Lake Champlain and New Orleans. The latter Battle took place after peace had been made but before the news had arrived. It also elevated General Andrew Jackson to hero status, which propelled him to a two-term presidency half a generation later (1828– 36). Generally, the war of 1812 laid the foundation for the long periods of pax Britannica/Americana in international affairs as both countries realised that peaceful relations were essential, given the long indefensible border between the United States and Canada. Restrictions of naval forces in the Great Lakes of North America also followed.
[6] Some richly endowed settler colonies such as those in North America and Australasia had achieved
this outcome earlier. 7 Eg, the St Bartholomew’s Day Massacre in France on 24–25 August 1572. 8 Hence, enabling Voltaire’s famous quip that in the 18th century the Holy Roman Empire ‘was neither
holy, nor Roman nor an Empire’. It was certainly not an empire after 1648. 9 Perhaps a medieval version of the European Union is a more apt description! 10 1199–1216.
[11] Sweden and Denmark, who at this time included the territory of present day Norway within their jurisdiction, had been ruled by a joint monarchy since the Union of Kalmar of 1389. Vasa assumed the throne after the deposition of the despotic King Christian II of Denmark. He had escaped the massacre of large numbers of leading nobles by King Christian II a few years before. The support of the Catholic bishop of Stockholm for this action was fatal to the catholic cause. For general information on the Swedish history of this period, see www.utb.boras.se/uk/se/projekt/history/ns4.htm.
[12] Notably Geneva, which was the home of Calvinism.
[13] It has been argued (by R Evans at the 11th Conference of the Sir Samual Griffith Society) that English national sovereignty was established much earlier, in 1295, when Edward I summoned the first Parliament to raise taxes, and demonstrated by the Statutes of Praemunire 1351 and 1393, passed in the reigns of Edward III and Richard II respectively. Blackstone (in volume 4 of Blackstone’s Commentaries, 103) defined the essence of the offence of praemunire as ‘introducing a foreign power into the land and creating imperium in imperio, by paying that obedience to alien process which constitutionally belonged to the King alone’.
[14] The accumulation of church property during the late Middle Ages was huge, from approximately a fifth of all property at the Norman Conquest in 1066 to as much as a third by the time of Henry
VIII. His dissolution of the monasteries and associated reforms probably reduced this to one tenth or less, releasing more property into commerce; probably the major factor in England’s leading role in economic development from this time.
[15] Under Edward in. Another Statute was passed in 1593 under Richard II Much earlier Henry II’s attempts to clip the wings of the church had ended in disaster when the murder of Thomas A Becket by four of his knights led to a major reaction which forced the King to do penance. Reaction to King John’s excesses also resulted in the privileges of the Church being entrenched in Magna Carta. There is a detailed history of the legal and constitutional relations between Church and State in England up to the Reformation by Plucknett, op cit, fn 2, 256–88.
[16] For a more detailed discussion of the close relationship between geographic remoteness, adoption and maintenance of protestantism shortly after the reformation and early development and long enjoyment of democracy, see Sampford, C and Round, T (eds), Democracy: Its Survivability, Beyond the Republic, a chapter by the author AA Preece, Federation Press, ISBN 1 86287 377 1, 111–12.
[17] Denmark only failed to enjoy continuous democracy throughout the 20th century through its conquest by the Nazis in the Second World War. The same applies to Norway, which was part of Sweden and Denmark in earlier times, and to Finland, also part of Sweden in earlier times, from its independence from Russia in 1917.
[18] The independence of the United States was recognised by Great Britain in 1783 by the Treaty of Versailles. The successful war of independence by the American colonists led to the Spanish colonies in the New World following their example in the early part of the 19th century.
[19] Eg, the separation of Norway from Sweden in 1905.
[20] It excepted existing colonies; eg, from 1815 it enjoyed peaceful relations with the United Kingdom and Canada and supported the United Kingdom in the Falklands War in 1982.
[21] Mussolini saw himself as a latter-day Caesar, and a number of European countries have described themselves at times as empires and emulated Rome by titling the ruler ‘Caesar’; eg, Russia, which saw its empire as the third Rome after the fall of the second, Constantinople, from which it had taken the Orthodox religion, was ruled by a Czar, a term derived from Caesar. The title Kaiser, used in the German ‘Empire’ after unification in the 1860s, has a similar origin.
[22] Eg, the contagion of revolution which swept most of continental Europe in 1848 and 1968 had no counterpart in the United Kingdom.
[23] Eg, the East India Company and the Hudson Bay Company.
[24] Such as the voyage of the Pilgrim Fathers to Massachusetts on the Mayflower in 1620.
[25] The Law of Nations is mentioned in Art I, s 8(10): Congress to have power to define and punish offences against the law of nations.
[26] Ambassadors are mentioned in Art II, s 2(2): President’s power to appoint ambassadors; and Art II, s 3: duty to receive them; Art III s 2(1): power of Supreme Court to try cases involving them.
[27] United States Constitution, Art I, s 10(3): no state to make a compact or agreement with a foreign power; Art II, s 2(2): President’s power to make treaties with the consent of two thirds of the Senate.
[28] So named because it involved no bloodshed.
[29] Which had been incorporated with England for purposes of law and government by the Act of Union of 1536.
[30] Through the Union with Scotland in 1707.
[31] Through the Union with Ireland in 1800.
[32] Quaere whether the new 1999 Constitution does so in its attempt to restrict changes contrary to international law. This issue is discussed below.
[33] Australian Capital Television Pty Ltd v Commonwealth [1992] HCA 45; (1992) 177 CLR 106.
[34] If it is limited in time then sovereignty is only in abeyance during its duration and not permanently lost.
[35] Some aspects of the threat of sanctions are discussed briefly below.
[36] The era of the Napoleonic Wars had led in 1815 only to a fine-tuning of the system in the development at Vienna of the concept of a comprehensive Peace Conference involving all the victors and vanquished. The ultimate success of this venture, following the near disaster occasioned by Napoleon’s escape from his exile at Elba, terminated by his final defeat at Waterloo in June 1815, led to the further concept of the Concert of Europe, whereby the major European powers would meet in conference to defuse conflicts or potential conflicts.
[37] This echoes the end of treating prisoners of war as slaves at Westphalia in 1648.
[38] The same may be arguably true of the United Nations.
[39] Indeed it is questionable whether it enjoyed as much success. The Concert of Europe only functioned as designed for seven years until 1822, but was essentially resurrected at various times of crisis. The League of Nations did not function effectively after 1933.
[40] One of the grounds for outrage was the inclusion in the prospective governing coalition of the Forza Nationale, described as ‘neo-fascists’ or derived from the pre-1946 fascists and so supposedly ‘undemocratic’, although the talk is generally more of possible violations of ‘human rights’, particularly those of foreigners or minorities, rather than of democracy. Interestingly, no similar outrage is expressed when former communists take office.
[41] A similarly undemocratic attitude is currently on display in the defeat of the Nice Treaty at referendum in Ireland on 7 June 2001, with representatives of the European Union stating categorically that the European Union could not be held up by one country. This approach renders nugatory in practice the provision in the European Union Treaties that changes must be approved by countries in accordance with their respective constitutional requirements; a provision that has historically always been highly emphasised when the voters of a country are deciding whether to enter the European Union.
[42] Norway still voted ‘no’. Perhaps, it is significant that large oil revenues make the Norwegian currency less susceptible to manipulation.
[43] Umberto Bossi, the leader of the Northern League, a small part of the Right coalition triumphant in the May 2001 Italian elections, is in the habit of describing the European Union as the ‘Soviet Union of the West’!
[44] The others being Australia, Canada, New Zealand, Sweden and Switzerland.
[45] At first Russia and later China.
[46] Recent examples are the proposal to establish an International Criminal Court and the Kyoto Agreements on action to counter emissions of ‘greenhouse’ gases.
[47] Ireland has also been constrained by its constitution to hold a referendum with each amendment of the European Union Treaties, most recently in connection with the ratification of the Nice Treaty, when it was defeated at referendum on 7 June 2001. Ireland was the only member of the European Union to hold a referendum as an element of the ratification process. Denmark held a referendum in connection with the Maastricht Treaty, which was defeated intitially in June 1992. The Norwegian voters have twice rejected at referendum proposals for membership of the European Union: in 1972 and 1994.
[48] United States Constitution, Art II, s 2(2): President’s power to make treaties with the consent of two thirds of the Senate.
[49] See Swiss Constitution, Art 5(4), which provides: ‘The Confederation and the Cantons shall respect international law.’ See also Arts 139(3), 193(4) and 194(2), which provide that the constitution may not be amended so as to violate ‘mandatory principles of international law’. This would not seem necessarily to preclude a three stage process of proceeding first by removal of Art 139(3), then by removal of the other two provisions.
[50] See Swiss Constitution, Art 139–41.
[51] In February 2003, the Swiss voters approved constitutional amendments extending the need for approval of treaties by referendum.
[52] It is able to do this by virtue of the external affairs power in the Australian Constitution, s 51(xxix) as expansively interpreted in The Commonwealth of Australia v Tasmania [1983] HCA 21; (1983) 158 CLR 1 (the Tasmanian Dam case).
[53] Tasmanian Dam case [1983] HCA 21; (1983) 158 CLR 1.
[54] As required by s 128 of the Constitution.
[55] See ‘Upholding the Australian Constitution’, Proceedings of the Eleventh Conference of The Samuel Griffith Society, Rydges Carlton Hotel, Melbourne, 9–11 July, 1999, vol 11.
[56] A similar provision was included in the Canada Act 1982, which patriated the Canadian Constitution, which had remained in the British North American Act 1867, as amended, owing to a 50-year impasse between the Provinces and the Canadian Government over terms.
[57] It is true that Australia is subject to the jurisdiction of the World Trade Organisation (WTO). However, the only sanction that can be awarded for breach of WTO rules is authorisation of retaliatory customs duties, which is precisely the action that the other State involved would be most inclined to take unilaterally in the absence of the WTO structure.
[58] An example is Fiji after the 1987 coup. In 1997 they adopted a new, more moderate constitution, abandoning many of the original objectives of the coup, after the coup leader Rambuka had become convinced that it was essential for economic reasons.
[59] Mabo and Others v Queensland [1992] HCA 23; (1992) 175 CLR 1 FC 92/014.
[60] The Wik Peoples v The State of Queensland and Others; The Thayorre People v The State of Queensland and Others Matters Nos B8/B9 of 1996.
[61] Native Title Act 1993 (Cth).
[62] See, eg, the Tasmanian Dam case [1983] HCA 21; (1983) 158 CLR 1.
[63] See reports in the Financial Review, 16 January 2002, on the rejection of a US provision designed to relieve double taxation, on the one hand, and the introduction of environmental considerations as wholesale justifications of trade restrictions on the other.
[64] Economic failure is widely regarded as the main underlying cause of the sudden collapse of Soviet-led communism in 1989–91.
[65] John Quiggin, of the Queensland University of Technology, and a Research Fellow at the Australian National University, Research School of Social Sciences, in an article in the Financial Review, 17 January 2001, p 46.
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