Enabling Private Ordering - the University of Minnesota Law School

80 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
the question of compensation for such interferences still seems
to be unsettled, 220 English common law accepts that a State
cannot contract away its power to interfere with contracts in the
public interest. A similar position is endorsed by other common
law jurisdictions, such as Australia, New Zealand and
Canada. 221
The power of the State to interfere with contracts based on
a police power exception is also accepted under the U. S.
Constitution. 222 In the Blaisdell case, the U.S. Supreme Court
held, concerning a mortgage moratorium imposed during the
Great Depression, that:
the reservation of essential attributes of sovereign power is also read
into contracts as a postulate of the legal order. The policy of protecting
contracts against impairment presupposes the maintenance of a
government by virtue of which contractual relations are worth while, –
a government which retains adequate authority to secure the peace
and good order of society . . . The reservation of this necessary
authority of the state is deemed to be part of the contract. 223
The Court further considered the State’s power to interfere
with contractual relationships as part of “the police power,
[which] is an exercise of the sovereign right of the government to
protect the lives, health, morals, comfort and general welfare of
COLIN C. TURPIN & A. TOMKINS, BRITISH GOVERNMENT AND THE CONSTITUTION 705–
07 (6th ed. 2007) (making reference to more recent case law).
220. See Rosalyn Higgins, The Availability of Damages for Reliance by a
Government on Executive Necessity, in INTERNATIONAL LAW AND ECONOMIC ORDER:
ESSAYS IN HONOUR OF F. A. MANN ON THE OCCASION OF HIS 70TH BIRTHDAY 21
(Werner Flume et al. eds., 1977).
221. Cf. Newfoundland and Labrador v. Nova Scotia, (Can. v. Can.), [2006] 128
Int’l L. Rep. 435, 446 (2001) (“As a general matter, governments cannot under
Canadian law validly contract so as to fetter their future executive action . . . .”);
Attorney-General for New South Wales v. Quin (1990) 170 C.L.R. 1, 17 (holding with
reference to earlier case law that “[t]he Executive cannot by representation or
promise disable itself from, or hinder itself in, performing a statutory duty or
exercising a statutory discretion to be performed or exercised in the public interest,
by binding itself not to perform the duty or exercise the discretion in a particular
way in advance of the actual performance of the duty or exercise of the power”);
Petrocorp Exploration Ltd. v. Minister of Energy, [1991] 1 N.Z.L.R. 641, 652 (P.C.)
(holding with respect to the relationship between contractual obligations and
statutory duties that “the contractual fetter would have been ineffective, because it
would have been quite incompatible with the proper exercise of the Minister’s
statutory powers in the national interest”).
222. See Bernadette Meyler, Economic Emergency and the Rule of Law, 56
DEPAUL L. REV. 539, 558, n.42 (2007).
223. Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 435 (1934). Cf. Energy
Reserves Group v. Kansas Power & Light Co., 459 U.S. 400, 410 (1983); East New
York Savings Bank v. Hahn et al., 326 U.S. 230, 231 (1945); Veix v. Sixth Ward
Bldg. & Loan Ass’n, 310 U.S. 32, 38 (1940).