The financial system presents much controversy. In TERRITORIAL DISPUTES, it is often the case that different parties will introduce very different financial realities. Gibraltar, the United Kingdom and Spain are a clear example. The latest financial global crisis with still visible results in Spain and Brexit in the United Kingdom paint an uncertain future. Assuming the three parties settled the dispute and decided to apply the EGALITARIAN SHARED SOVEREIGNTY, what financial system should apply in Gibraltar?
The possible choices that could be taken in relation to this financial system are many: a financial system anchored to one of the sovereign states, an independent financial system or one linked flexibly to both sovereign states. As it is highly improbable that any of the sovereign states would agree to the third territory having its financial system anchored or linked flexibly to only one of them, these options are discarded for instrumental reasons—ruling out extreme options. However, it is possible that they would accept a more conservative scenario.
The egalitarian shared sovereignty states that the allocation of sovereignty is given by: a) the equal right to participate (egalitarian consensus principle); b) the nature and degree of participation depends on efficiency of accomplishing the particular objective/area/activity at issue (principle of efficiency); c) each party receives a benefit (in terms of rights and opportunities) that depends on what that party cooperates with (input-to-output ratio principle); and d) provided the party with greater ability and therefore greater initial participation rights has the obligation to bring the other two parties towards equilibrium (equilibrium proviso).
In the case of Gibraltar, there are several differences in relation to the financial system of the parties—e.g. strength of the currency, international credit rating, international debt, Brexit, etc. As in all the previous elements and sub-elements, the shares of sovereignty are represented as bundles of rights and obligations, benefits and burdens. Therefore, all the parties have both the right and obligation to participate and support the financial system of the third territory (egalitarian consensus principle).
The EGALITARIAN SHARED SOVEREIGNTY will work in two ways: first, following the most efficient combination in relation to contributions (principle of efficiency): e.g., the currency of the third territory could be anchored to the strongest currency (input-to-output ratio principle) or anchored to a basket of other currencies. Second, as the application of the principle does not imply any investment from the two sovereign states in the third territory, the latter has no obligation to divide with them any internal or international revenues—unless a form of compensation was agreed, e.g. investments, exclusive privileges. There is efficiency in the financial system but without allowing any form of domination (equilibrium proviso).
What is specific to regulating the financial institutions is introduce next time when law as an element is analysed. It may imply either the creation of a higher financial institution that regulates Gibraltar with equal representation granted to the three parties; or a procedure in which the financial institutions of the three parties will have the opportunity to be equally involved in the creation, amendment or cancelation of financial policy.
NOTE: based on Chapter 7, Núñez, Jorge Emilio. 2017. Sovereignty Conflicts and International Law and Politics: A Distributive Justice Issue. London and New York: Routledge, Taylor and Francis Group.
Jorge Emilio Nunez
17th April 2018