Why a Citizen Contract Is Better than a Constitution

When two parties conclude a service contract in civil life, they have previously agreed on the scope and cost of the service. If the service is provided poorly or not at all, the customer has the right to reduce or refuse payment. Neither party can unilaterally change the terms of the contract during the contract period.

State citizens, on the other hand, must pay all taxes without having a clear counterclaim. If they are dissatisfied because state benefits in areas such as safety, education, road construction, health and pension provision are getting worse, they have no right to reduce or withhold taxes. In contrast, the state can increase taxes to any extent. And it is precisely this constant deviation from the principle of reciprocity that is one of the main reasons for the crisis of democratic states.

Of all people, it has been a monarch who has recognized this, namely Prince Hans-Adam II of Liechtenstein. In his groundbreaking book, “The State in the Third Millennium”, he determines that in order to survive the state must develop from a demigod into a service provider. [1]

1. Government as a service

So why not enter into a service contract with the government? In principle, government is a service like any other. You expect something from it – first and foremost the protection of life, liberty and property –and you are willing to pay in exchange. True, many expect a lot more from the state and don’t want to pay for it. But they are ok if their freedom is therefore limited to large degrees. Insofar as reciprocity is generally accepted: if you want something, you have to give something in exchange.

In civil life you are not accepting if services are not performed well or if the service provider gets involved in all manner of other activities without your permission, and then expects you to pay for them. In most countries the relationship between the citizen and the government resembles the relationship between the buyer and seller of a car. However, the car dealer insists, that he will choose the model, the color, the size of the motor, the interior and he will finally decide which price you have to pay for that. And you must buy. Not really an attractive deal, is it? But this is exactly how your relationship with your “government service provider” will work in the state that you live in. Admittedly, in the real world you have several “car dealers” to choose from, namely nearly 200 countries. Unfortunately, basically all of them are of the same type, as they all make virtually all decisions for you. And even places, that look good on paper, do have the power to change all the rules overnight to your disadvantage, be it through a ruler, a monarch or a parliament.

2. Citizen Contract

In contrast to this, you as Sovereign of Yourself might, by voluntary agreement, conclude a genuine contract with a more or less ordinary service provider, the government service provider. In this Citizen Contract, both parties have the same formal rights and are therefore legally on an equal footing. The relationship between authority and subject is replaced by the relationship between customer and service provider. In conventional systems, the citizen is obliged to pay taxes without having a corresponding legal claim to certain state services. Not so in a contractual system: payment obligations and rights to benefits and services would be directly related. Both contracting parties are entitled to the fulfillment of the contract, i.e. the government service provider can demand payment of the fixed contribution from the Contract Citizen, but no additional taxes. The Contract Citizen can sue the operator for compliance with his contractual obligations, for example by ensuring security and the guaranteed liberties.

This agreement explicitly and conclusively regulates mutual rights and obligations and replaces a constitution or a fictitious social contract. In a sense, it is the personal constitutional charter of each individual. All applicable rules including the underlying private law and the ordre public and all other regulation would be part of this contract. [2] As such, they shall also be made available to the contracting parties, at least as an appendix. It is one of the weaknesses of existing systems that neither long-established citizens nor immigrants know what rules apply in their country, especially as the rules are constantly changing.

If you don’t like the contract and do not want to sign it, you have to go somewhere else, where you like the rules better. Same as today. But if you like the contract, you can rely on the fact that it will not change regardless of who is in power. For the first time in history, there would be a real social contract, not a fictional one. Last but not least, this construction has the potential to finally enable the separation of state and society.

3. How is a Citizen Contract different from a constitution?

If we are already living under the rule of law, why do we need this?  Let’s first examine what the rule of law means: all actions by the rulers are subject to the primacy and reservation of the law, and even for the simple citizen, everything is permitted that is not expressly forbidden. The primacy of the law means that the laws prevail over the ideas of those in power. The reservation of statutory power means that all acts of authority require a legal entitlement; if this is not the case, the exercise of authority is illegal. These are undoubtedly good principles to protect one’s freedom.

However, the rule of law has a problem that Bastiat pointed out as early as 1850: [3] Anyone who controls the legislative power can assemble any law. Every group in power can arbitrarily make its own rules as long as it complies with the formal procedures. But even a constitutional band of robbers would remain a band of robbers. In order to solve this problem, attempts have been made to limit such arbitrariness through the adoption of unalterable constitutional articles and the creation of independent supreme courts. These efforts have been met with moderate success. If the law or the constitution stands in the way of government action, it will be amended or interpreted accordingly. Especially the courts often play an inglorious role, because they assume a regulatory competence theoretically reserved for the legislator, while only supposed to supervise the observance of the rules. Hence, we observe a constant political struggle for the occupation of seats on national supreme courts. Of course, even jurisprudence is shaped by subjective attitudes and every constitutional article is interpreted by every judge according to his own political convictions. [4] Even constitutions can therefore in fact be changed or interpreted almost arbitrarily. The Basic Law of the Federal Republic of Germany, passed in 1949, has been amended 62 times since it came into force. The harder-to-amend US constitution has only undergone 18 changes in over 200 years. But the judges have often come up with “contemporary” interpretations, often contrary to the clear wording of the document. The philosopher Anthony de Jasay puts it this way:

“The constitution is like a chastity belt whose key is always within the wearer’s reach.” [5]

In short: You as a citizen are not in charge of the constitution. However, if there was a bilateral contract between you and the state, you would be in charge of its content and possible violations.

4. The main advantages

Now with a Citizen Contract, the key difference from traditional systems is that the government service provider, or even a majority elected body, cannot increasingly take on more powers and interfere with citizens’ lives. Constitutions can be changed, even against the will of the people concerned, provided there is a (qualified) majority. Contracts, on the other hand, only if the contracting party agrees. That is why the contract with each individual and the corresponding legal position are so important. It is all about the greatest possible self-determination, not the greatest possible co-determination.

After all, any citizen with a contract can sue or withhold payments from the government service provider if they believe that the contract is not being properly fulfilled. In constitutional systems, the individual citizen usually does not have the right to bring an action if the state does not fulfill its tasks properly and certainly not the right to withhold tax. The Contract Citizens pay their contribution, but also acquire a right to the services specified in the contract, such as safety for life and limb. If a Contract Citizen nevertheless becomes a victim of a crime, this constitutes a poor performance on the part of the provider. The affected party has a claim for damages against him (he may have insurance for such cases). If criminal gangs roam around the city, the Contract Citizen has a claim on the provider to prevent this. This is a completely different situation than in existing states, where there is neither a claim for damages because of poor performance of state services nor a legally enforceable right to security.

However, the most important difference is that third parties would not be able to interfere in this contractual relationship. Citizens would know that they couldn’t change the content of the contracts of fellow citizens, neither through government nor parliament, and therefore would respect each other’s different views and assessments. By this fact alone, the political struggle would be significantly reduced.

5. Dispute resolution

While the state offers a court system for the conflicts amongst the residents, a separate procedure should apply to the disputes between the state and the Contract Citizens. One of the understandable points of criticism of current systems is that disputes between citizens and the state are also mediated by the very courts that are established by and paid for by the state. An example might be if individual clauses of the Citizen Contract are interpreted differently or the meaning of the contractual provision was not clear in a certain case. Conflicts of interest are also possible, for instance, because Contract Citizens are dissatisfied with the services of the operator or deny the facts relevant for a measure, like lockdowns in cases of an alleged pandemic.

Disputes in such cases should be heard before independent arbitration tribunals, as is customary in international commercial law. So far, this has been a privilege only for large companies and it is also costly. But times are changing; today there are international dispute resolution providers who are offering trials for anyone, with fees starting at a few dollars. [6] Another option is the possibility to call in an ad hoc arbitration, where each party nominates one judge and the nominees then agree on a chairperson. [7]

6. Amendments and adjustments

Even the best contract cannot foresee all possible future contingencies. But a contract that can be changed at any time by the operator or contains vague language is of no real use to the residents. That is what we already have with current systems under which citizens are constantly exposed to changes in the legal situation. The question of amending the Citizen Contract is therefore one of the central questions of this concept. Is the contract kept relatively vague and open in order to cover as many unforeseen developments as possible, or are subsequent unilateral changes categorically excluded? In one case, legal uncertainty and thus the unattractiveness of the concept would be the result. In the other case, it may lead to the insolvency of the operator. Things might develop in such a way that he cannot afford to fulfill his contractual obligations on the basis of current citizen fees. There are different approaches to solving this problem.

The operating company may propose an amendment to the contract to any individual, but it only becomes valid to those who accept it. This is probably unproblematic in cases that benefit the contract citizen, such as a reduction in contributions or an extension of services. However, if the position of the contracting citizen is worsened, many will reject any revision to the contract. Still, it is possible to offer new citizens different contracts than the existing residents and thus successively create a new order without disenfranchising anyone.

Another possibility is to completely exclude certain contractual elements from changes, such as civil rights, the whole section about breach of contract or the annual cost of citizenship. These areas might be subject to explicit legal stability clauses. Other, less critical areas, however, may be left to the discretion of the operator, e.g. the definition and amendment of traffic regulations.

Finally, it is possible to make certain amendments to the contract subject to the approval of qualified majorities or to grant them the right of veto. [8] However, such changes should be strictly limited. If this principle is abandoned and any contractual and rule changes are left to the collective decision-making of the residents or the shareholders of the operating company, then sooner or later all the problems that characterize contemporary democracies will return. Then the political struggle to raise the standard of living by gaming the system begins anew. Instead of producing goods or services for which others will voluntarily pay something, a steadily growing part of the population will turn to those political forces that promise the “human right” to live at the expense of others by revising the contract.

But there is another, better way. If the contract leads to disputes of interpretation due to missing or vaguely formulated clauses in certain areas, then courts can develop the contents of the contract further without changes to the written contract becoming necessary. Over time this means that the contracting parties will have to observe these judicial developments, but in principle all legal systems which are based on case law, such as common law, function in this way. The development of contracts in such a mechanism takes place exclusively through binding court judgments and arbitration awards, not through new rules or amendments to contracts. It should also be possible for arbitration tribunals and courts to decide on new types of matters by recourse to the legal principles that have been in force for centuries and a balanced, reasonable reconciliation of interests. [9]

In many new areas of life there will presumably be provisions in line with the interests of the people involved without the intervention of case law or contractual amendments, as has happened, for example, in the credit card industry to regulate cases of fraud. [10]

Practice will show which model or combination of different approaches is successful. In any case, the operator only provides rules for safety and order as well as a few other matters. All other areas are thus always accessible to a voluntary, tailor-made solution by those affected.

7. Citizen Contracts in the real world

A Citizen Contract gives you a better legal standing, better rights protection, and more legal stability and predictability than any constitution. And you can hold your counterparty liable. The idea is not new per se. Contracts have been a well-known instrument for balancing interests for thousands of years. It is now just being applied to “the market of living together”.

Citizen Contracts are no longer just a fancy idea. The first attempts at implementing this contractual model have found their way into the Honduran ZEDE law and are called “Agreements of Coexistence”. [11] The ZEDE project, Próspera, has adopted that model. [12]

In common law systems, there might be the option of creating a voluntary community based on a Citizen Contract. It might, for example, be applied to a real estate development through the incorporation of such contracts into property deeds.  The system of governance created by the Citizen Contract might then “run with the land”, making it applicable to the real property regardless of a particular owner’s preference. Of course, all of the state law still applies in such cases, but the introduction of Citizen Contracts could represent a first step toward creating a contractual regime in the market of living together.

References

1. Liechtenstein, Hans-Adam II. von: The State in the Third Millenium, Bern 2009, p. 196.
2. Gebel, Titus: Free Private Cities – Making Governments Compete For You, Walldorf 2018, Chapter 14 Ordre Public, p. 186.
3. Bastiat, Claude-Frédéric: La Loi, Paris 1850.
4. Hasnas, John: The Myth of the Rule of Law. Wisconsin Law Review 199 (1995).
5. Jasay, Anthony de: Against Politics, London 1997, p. 3.
6. For example at the Próspera Arbitration Center: https://pac.hn/calculator/
7. Bell, Tom W.: Your Next Government? From the Nation State to Stateless Nations, Cambridge 2018, p. 146.
8. Gebel, Titus: Free Private Cities – Making Governments Compete For You, Walldorf 2018, Chapter 11, p. 156.
9. Chisholm, John: Drones, Dangerous Animals, and Peeping Toms: Impact of Imposed vs. Organic Regulation on Entrepreneurship, Innovation, and Economic Growth in: International Journal of Entrepreneurship and Small Business 35 (3), Januar 2018.
10. Stringham, Edward Peter: Private Governance – Creating Order in Economic and Social Life, New York 2015, p. 106, 107.
11. LEY ORGÁNICA DE LAS ZONAS DE EMPLEO Y DESARROLLO ECONÓMICO (ZEDE), La Gaceta, REPÚBLICA DE HONDURAS, TEGUCIGALPA, M.D.C., 6 DE SEPTIEMBRE DEL 2013, No.33,222, p. 57; Article 10 ZEDE LAW: “…the Zones of Economic Development and Employment (ZEDE) are authorized and required to: 1) Establish agreements of coexistence with people who wish to live or reside freely within their spatial ambit of competence, consistent with universal moral principles…”
12. https://prospera.hn