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A governance framework for multi-sovereign clearing systems. How to embed constitutional constraints on enforcement authority within cross-border financial infrastructure — without replacing existing systems or diminishing compliance.
Cross-border financial infrastructure is one of the most consequential yet least constitutionally constrained domains of global governance.
Contemporary clearing and settlement systems rely on concentrated administrative authority — discretionary enforcement powers exercised within national jurisdictions that cascade across borders. While this has facilitated trade and financial integration, it exhibits structural vulnerabilities: unilateral enforcement, opaque decision-making, indefinite restrictions without sunset mechanisms, and limited procedural recourse.
Constitutional settlement proposes that cross-border clearing systems be designed as rule-bound institutional orders — not merely technical platforms subject to administrative control. The framework introduces four design elements that constrain enforcement authority while preserving compliance capability.
The vulnerability is not technological but institutional. The solution is not a new currency but a new governance architecture.
Cross-border settlement has become increasingly centralised within a small number of institutional networks and currency jurisdictions. This concentration has facilitated efficiency — but it has also concentrated enforcement authority.
Network concentration enhances liquidity and reduces transaction costs, but it also reduces redundancy and increases the impact of unilateral enforcement actions.
Expanding AML/CFT obligations incentivise conservative enforcement that may prioritise liability minimisation over procedural proportionality.
States benefit from integration into global settlement networks, yet their autonomy may be constrained when enforcement authority is centralised through dominant jurisdictions.
Key insight: These tensions do not imply systemic illegitimacy. But the absence of infrastructure-level constitutional constraints leaves the system vulnerable to perceptions of unilateralism, overreach, or politicisation — particularly in periods of geopolitical stress.
Constitutional settlement introduces four institutional mechanisms that can be layered onto existing settlement infrastructure — traditional clearing utilities or distributed ledger systems alike.
Enforcement authority operates within explicitly defined modes — Normal, Incident, and Emergency — each with distinct permissible actions, evidentiary standards, and temporal constraints. Mode transitions are procedural events, not discretionary escalations.
In Normal Mode, routine AML/CFT compliance proceeds continuously. Incident Mode allows temporary restrictions subject to automatic expiry. Emergency Mode permits heightened authority only under predefined systemic triggers, with mandatory post hoc review.
High-impact enforcement actions — extended access suspension, member exclusion, or rule modification — require affirmative authorisation by a quorum representing a plurality of participating jurisdictions. No single jurisdiction may unilaterally impose indefinite restrictions.
A quorum is defined structurally, not numerically. It must represent distinct sovereign participants. Supermajority approval prevents both unilateral overreach and weighted dominance by any single member.
Enforcement actions that exceed routine compliance thresholds are presumptively time-limited. Temporary restrictions imposed under Incident Mode lapse unless affirmed by quorum. Emergency declarations expire after a specified duration unless renewed through supermajority approval.
Sunset provisions shift the burden of justification onto those seeking to maintain restrictions. They mitigate enforcement inertia — the tendency for temporary measures to become permanent through administrative drift.
Due process is not external to the infrastructure — it is embedded within it. Any party subject to high-impact restriction is entitled to timely notice, articulation of the evidentiary basis, access to a defined appeal mechanism, and resolution within a specified timeframe.
Appeals are adjudicated by an independent review body operating under transparent procedural rules. The system publishes aggregate enforcement data — making systemic patterns visible and reviewable.
Constitutional settlement does not require universal adoption. It may proceed through narrowly defined corridors among voluntary middle-power coalitions — states with significant economic capacity but without hegemonic dominance.
Design principle: By constraining initial scope, the system avoids direct confrontation with dominant global settlement networks while demonstrating operational viability. Expansion is contingent on demonstrated efficiency and trust.
Critics may argue that quorum requirements, time limits, and appeal mechanisms reduce enforcement responsiveness. Constitutional settlement addresses this by structuring authority rather than eliminating it.
When enforcement follows predefined thresholds and expires absent renewal, participants can model risk predictably. Arbitrary restrictions generate precautionary withdrawal behaviour.
Multi-sovereign quorum prevents concentration of reputational and political burden within a single jurisdiction. Collective decision-making enhances perceived legitimacy.
Automatic sunset and appeal mechanisms provide structured pathways for correction. In complex compliance environments, false positives and overinclusive restrictions are not uncommon.
Multi-sovereign quorum introduces decision-making overhead. Tiered enforcement modes mitigate paralysis by reserving quorum for sustained or high-impact actions only.
A constitutional clearing utility with limited participation may struggle to achieve transaction volume. The narrow corridor strategy mitigates this by focusing on specialised flows.
Dominant monetary jurisdictions may perceive alternative clearing arrangements as encroachment. The framework emphasises compatibility and avoidance of antagonistic positioning.
Coalitions may experience internal dominance by larger members. Supermajority amendment requirements, transparency reporting, and independent audit mitigate but do not eliminate this risk.
CS addresses the cross-border enforcement dimension of coordination cost — constraining how governance overhead propagates through multi-sovereign infrastructure.
Where GIC measures the cost of non-interoperable regulation, CS proposes infrastructure-level procedural interoperability for enforcement actions.
CS embeds authority capacity at the infrastructure level — ensuring enforcement authority is structurally bounded rather than dependent on discretionary judgment.
The mode-bounded enforcement model in CS shares structural DNA with MBI — both constrain action within defined operating modes to prevent discretionary escalation.