Monarchy: What’s the Point?

Monarchy: What’s the Point?

By Mark Nestmann • June 5, 2018

Thanks to the recent royal wedding, the British monarchy – the crown – is in the news again.

I didn’t watch the wedding, as I consider it a sideshow to a centuries-old system of governance that is widely misunderstood. To put it mildly, the system they call democracy in Great Britain is very different from democracy in the US.

Those differences begin with the powers of the ruling monarch, Queen Elizabeth II. According to British legal scholar Walter Bagehot, under the “royal prerogative,” the monarch:

“…could disband the army; … dismiss all the officers …sell off all our ships-of-war and all our naval stores; … begin a war … dismiss most of the civil servants, and … pardon all offenders.”

Over the last few centuries, many aspects of the royal prerogative have been devolved to an elected parliament. It’s telling, though, that in the British legal system, the prime minister is referred to as the “queen’s prime minister.” It is even more telling that even after more than 800 years as a distinct political entity, no formal constitution exists for Great Britain. In its place are only acts of Parliament, court judgments, and informal conventions.

Mainly by convention (not law), the ruling monarch’s powers are limited to:

  • Dismissing Parliament at the end of a parliamentary session and summoning it after an election. No monarch has forcefully dismissed Parliament since Charles II in 1681.

  • Assenting to legislation. This is mostly a formality; no monarch has vetoed a parliamentary bill since Queen Anne did so in 1708.

  • Declaring war. Again, in practice, this authority is generally exercised by Parliament.

  • Assenting to cabinet appointments, including the prime minister. The last time a monarch refused to appoint an elected prime minister was in 1834, when King William IV did so.

  • Issuing legislation under the royal prerogative in the form of orders-in-council and letters patent. Again, such legislation generally is issued with at least informal parliamentary approval.        

However, behind the scenes, the ruling monarch exercises far greater authority. In 2013, British news sources revealed that Queen Elizabeth II had forced Parliament to withdraw or modify more than 40 bills. The controversy following this revelation led many in Britain to call for an end to the monarchy.

It won’t be simple to rid Britain of the crown. The monarchy plays a crucial role not only in the British government but in the government of 53 other countries – the Commonwealth of Nations. As such, it’s more accurate to think of the crown as not a hereditary monarch but a bureaucracy with tentacles extending to dozens of countries worldwide. In these countries, as well as 14 overseas British territories, the crown still wields real power.

The Commonwealth is a relic of the British Empire, which once spanned the globe. When British explorers colonized a new region of the world, they did so in the name of the crown. As time progressed, the crown created a bureaucracy to administer the colonies. Administrators appointed by the crown set up elected parliaments and legal systems and tried to adapt them to the local populations.

Caption: The British empire in the Mid-19th Century

Neither the legislature nor the courts exist independently of the crown. The crown appoints all judges and ministers of government, including the prime minister. It introduces and assents to all legislation. All parliamentary acts and court actions are taken in the name of the crown. While these functions are mainly formalities today, they are markedly different from the US system with its separation of executive, judicial, and legislative powers.

One consequence of British colonization was the spread of English law, often referred to as English common law or simply common law. This ensured a predictable legal, financial, and regulatory background for international trade and business in most Commonwealth jurisdictions, as common law was widely respected. But this legal heritage has some jarring implications.

For instance, the constitutions of many Commonwealth countries require that the ruling British monarch must assent to all legislation. Many Commonwealth constitutions also give the crown the ability to override laws enacted by an elected national parliament. In 2018 alone, the Judicial Committee of the Privy Council, presided over by Queen Elizabeth II, has decided cases from Mauritius, Trinidad & Tobago, Jamaica, and Antigua & Barbuda. All of these countries are former British colonies that are now independent.

Another consequence of common law is that a law or court decision that takes effect in Great Britain can be enforced in other common law countries. An example is the English Statute of Elizabeth (1571). This ancient law stipulates that transfers of property may be voided if a creditor presents a valid claim to that property. The Statute of Elizabeth is the basis of the common law concept of fraudulent transfer throughout the Commonwealth and even in the US. 

A more modern example is the “Mareva Injunction.” This legal remedy, devised in 1975 by the English Court of Appeal, permits persons who believe they have been defrauded to obtain a global asset freeze order against the alleged perpetrator. People or institutions such as banks holding assets for the defendant are obliged to freeze them. Failure to do so may be treated as contempt of court.

A Mareva Injunction issued by a court in London will be enforced in Singapore, the Bahamas, or any other common law country in which a court consents to apply it. Typically, a court will grant a Mareva Injunction before a trial in hearings the defendant is not entitled to participate in and may not know about at all.

In jurisdictions that remain British colonies, now called “overseas territories,” the ruling monarch, acting through the Foreign Office and the governor of the territory, can issue an order in council with the effect of binding legislation in that territory. Acts of Parliament may also be extended to the dependencies by an order in council. Some of the most important overseas territories are the international financial centers of Bermuda, the British Virgin Islands, the Cayman Islands, and Gibraltar.

For instance, last month, Parliament enacted legislation which requires all overseas territories to introduce public registers of beneficial ownership of companies and trusts by the end of 2020. In other words, if you have a local company in one of these jurisdictions, by the end of 2020, its ownership will be a matter of public record. And if local parliaments refuse to enact these rules, the British government can overrule the elected legislature.

So the British monarchy is just as relevant today as it was centuries ago, even if its powers have diminished over time. Without fundamental changes to the legal systems of more than 50 countries, it’s not going away.

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About The Author

Since 1990, Mark Nestmann has helped thousands of clients seeking wealth preservation and international tax planning solutions. He is the author of highly acclaimed Lifeboat Strategy and other books & reports dealing with these subjects.

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