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The Libertarian approach to commerce in the Free Republic of Liberland

The Commerce Clause of the US Constitution (Article I, Section 8, Clause 3) stipulates that the United States Congress shall have power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.”

The Constitution of the Free Republic of Liberland guarantees an absolute freedom of contract. Consequently, the Public Administration (the Government of the Free Republic of Liberland) is legally prevented from regulating commerce, among other things.

Independent, responsible and voluntary trade

The freedom of contract guarantees that the Public Administration will not interfere with contents and conditions of any commercial transaction. The law of the Free Republic of Liberland restores the old principle of Caveat Emptor, which translates into “buyer beware”. Accordingly, it is for the buyer to ensure that he or she receives “good value for money”. There will be no legal protection of a consumer or any other implied terms. Any individual of age or any legal person remains at liberty to contract for whatever he, she or it wants at whatever conditions he, she or it seems fit. Any transaction which does not result from any form of coercion, such as duress or undue influence, is regarded as a voluntary exchange between the equals and as such should not be interfered with.

However, this is not to say that the Public Administration has no role whatsoever to play in commerce. Quite the contrary. Even under the libertarian approach to commerce, which is to be given a full effect in the Free Republic of Liberland, the Public Administration plays a vital role absent which no sustainable commerce could take place.

A link between the two

First of all, the Public Administration will maintain the Corporate Register which enables business entities to acquire a separate legal personality. Although no registration is required to conduct business in the Free Republic of Liberland – no formalities whatsoever are required to engage in commerce – one cannot create a corporate entity on its own. A person engaged in commerce without registering with the Corporate Register remains fully liable for any financial losses of his or her business. Such losses will be covered out of his personal assets.

On the other hand, a registration with the Corporate Register creates a separate business entity whose financial liabilities remain independent from liabilities of its members. This process is known as ‘incorporation’. A natural person cannot create an artificial legal person on its own – this is nothing more than a creation of law which cannot exist without or outside the law. The maintenance of the Corporate Register and the conducting of the process of incorporation is the first, and arguably the most important, role that the Public Administration plays in commerce. Nevertheless, it should be clarified that, unlike in other modern states, the corporate regulations of the Free Republic of Liberland do not impose any form of business following the incorporation. A person or persons registering a business is or are free to shape that business as deemed suitable without any imposed restrictions. All that is required is that a constitution of such a business is rendered available to the public, on personal request and via the Corporate Register, so that any person engaging in a commercial transaction with that business, is fully aware of its implications.

The second function of the Public Administration in commerce is to provide the legal tools indispensable for executing the freedom of contract. Accordingly, the Public Administration must pass law regulating the creation and interpretation of contracts. The content of contract is entirely up to the parties but for such parties to be able to enter into any contract, they must know what constitutes a contract, as opposed to an invitation to treat for example. Furthermore, parties must be able to understand what makes a contract binding and how its terms will be construed in case of a dispute. Simple and transparent contract law is crucial for the freedom of contract to be put into effect.

Finally, the third function of the Public Administration, closely related to the second one, is to provide a mechanism for dispute resolution. Accordingly, the Public Administration must maintain an efficient system of courts of law where contracts can be enforced and interpreted. Disputes over commercial contracts require at least one civil court with a judges or judges experienced in contract law and at least one court to which appeal can be made on the point of law or procedural irregularity. Such a system of courts, along with transparent contract law and an accessible Corporate Register, will guarantee that commerce in the Free Republic of Liberland is profitable, predictable and attractive to potential investors.

 

By Kacper Zając, Liberland's Minister of Justice.