Wednesday, 5 October 2016

Constitutions, Credible Commitment, and Brexit

In a famous paper, North and Weingast linked the security of property rights to constitutional government. They argue that the 17th century Glorious Revolution in England created a “credible commitment” by the English state to property rights by giving property owners’ Parliamentary representatives a veto over legal changes infringing those rights. 

For this argument, it is an embarrassing circumstance that the separation of powers between Crown and Parliament N&W described was a transient feature of English and later British institutions. Once the monarch’s role dwindled to a mere formality, the UK’s government was characterised by a hyper-centralisation of power in the Prime Minister and the ruling party, a centralisation usually known as the “Westminster model.” Especially given the absence of a formal written constitution, a British PM has extraordinary scope for discretionary action, including action damaging to property rights. The N&W argument would imply that this lack of constitutional constraint should undermine property rights, which on the contrary are generally seen as being quite secure in Britain.

The Brexit referendum and associated policy initiatives recently announced, however, go some way to rehabilitating the importance of the causal mechanism North and Weingast proposed.  N&W argued that when English property owners became secure in their rights, they were more willing to invest. The causal pathway runs from constitutional constraint to the ability to rely on a stable institutional framework, and thence to the readiness to make investments. Now, property rights don’t have to be conceived narrowly as the sort of rights explicitly specified in legal title or contractual arrangements.  In fact, an ancient common-law doctrine (known as “promissory estoppel” or “reasonable reliance”) suggests that someone who has undertaken costly actions while relying on another’s promise is entitled to legally enforced compensation if that promise is violated.

The Brexit campaign, and especially its aftermath, have shone a spotlight on many such promises made by the British state that it now proposes to violate. Immigrants from the EU, for instance, relied on the assumption they would have freedom of movement and that it made sense to pursue a career (for instance in academia or the medical profession) within Britain. Prospective university students around the world invested time, effort, and often money in study choices premised on the prospect of admission to British universities and the possibility of working here after graduation. Corporations sited operations in the UK, relying on its integration with the EU and access to the EU’s single market. Some people in Northern Ireland probably acquiesced in continued British rule because they relied on membership of the EU rendering the internal Irish border less significant.    

From the perspective of the doctrine of reasonable reliance, all these groups are having ‘property rights’ expropriated. And this is an expropriation facilitated precisely by the Westminster model and the absence of a written constitution. It was the Westminster model that made the calling of a referendum with such profound constitutional significance subject only to the internal decision of the Conservative majority in Parliament. The continuing relevance of limited constitutional constraints is shown vividly in discussions about the role of Scotland or the claim that the Government can rely on “royal prerogative” to invoke Article 50 to leave the EU without Parliamentary approval. With no-one constitutionally empowered to veto them, the Conservatives can act at will to shred what the morality embedded in common law (and what could be more English than that?) would unambiguously regard as property rights—just the sort of scenario North and Weingast describe.

One of the central arguments N&W make is that for absolute monarchs, a reputation for protecting property rights is an inadequate substitute for constitutional constraint, since monarchs’ royal prerogative always includes changing their minds. A reputation, though, is better than nothing. There’s probably little hope that the Tories will recognize how particularly dangerous it is for a government with so much legal discretion to display such contempt for promises on which so many have relied.  


Some lawyers and scholars think the present Government’s beliefs about the scope of its legal discretion are mistaken. Many interesting arguments about the bearing of the UK (unwritten) constitution on Brexit’s admissibility can be found here.

Joseph Singer wrote a great article seeking to extend the notion of property rights building on the idea of reliance.