What is meant by this, and why is it so important?

Sovereignty is one of the key concepts of the social order. Properly defining it helps one avoid a multitude of errors.

Essentially what sovereignty establishes is the ultimate right of arbitration and intervention, beyond which the only appeal is, in John Locke’s famous words, the “appeal to heaven,” i.e., armed revolt. So sovereignty establishes who or what it is in a society that has the power to impose its will with impunity, to the degree that such is possible in this world. Hence it is a power of utmost importance and relevance. Its proper delimitation is a matter of life and death.

In the lead-up to modern times, there was a great debate between those who championed a personal power of sovereignty, and those who championed a corporate power thereof. The champions of monarchy argued that only a natural person could exercise this power; a corporate body was something that existed only in the imagination. The Swiss constitutional scholar Karl Ludwig von Haller argued just such a position in the 19th century, and exercised great influence doing so (for instance, his arguments greatly influenced the Dutch statesman Guillaume Groen van Prinsterer).

But the champions of corporate sovereignty eventually won the day. Back in the early 17th century, the German constitutional scholar Johannes Althusius provided the blueprint for the future framework of sovereignty. Althusius argued that it was entire nations that held sovereignty; the state or the prince only administered that sovereignty. The nation, or the people, were sovereign. They held the sovereignty as a body, not as individuals — this is a key distinction between Althusius and later natural-rights theorists. Nevertheless, sovereignty is popular, which is the same as national — that is Althusius’s great bequest to the modern world. (For more on Althusius and his antecedents, see this article).

So much for the seat of sovereignty. In what does it consist? What power does it actually exercise? This can be ascertained by taking a look at the powers usually exercised by public authority — establishment and enforcement of laws, national defence, promotion of the general welfare, provision of a functioning means of exchange (currency).

In all of these areas, there is a guiding principle at work, and it is valuation. In each of these areas, the public authority exercises a value judgment. That value judgment has ramifications across the social order. And here we introduce the common-law principle.

For sovereignty does not exercise this power by imposition from above: sovereignty being the possession of the nation, not of the public authority, the public authority is only exercising a charge given it in order to promote the well-being of the actual sovereign, the people.

In order to accomplish this, sovereignty is exercised to establish and confirm (top-down) the resolution of a conflict (bottom-up) through an appeals process. It does this in the sphere of law, through the process of court-room adjudication (so-called “judge-made” law, which is a misnomer – court-evolved law is a better term). It also does it in the sphere of economics, by establishing the institutions of property and contract, and by maintaining a standard of value by which economic activity is conducted (money).

This is the common-law principle, and it is the essence of the rule of law, of the constitution of liberty.