Paper Tigers: Or How Much Will Courts Protect Rights in a Financial Crisis?

21 Pages Posted: 25 Jun 2018

See all articles by G. Mitu Gulati

G. Mitu Gulati

Duke University School of Law

Georg Vanberg

Duke University - Department of Political Science

Date Written: June 11, 2018

Abstract

Constitutions often contain rules that are meant to constrain the behavior of future governments during crises. Anti-discrimination rules and protections against expropriation of private property are classic examples. But when crisis hits, politicians are typically tempted by their short-run interests to try to bypass these rules. Enforcement of such constitutional constraints is therefore often placed in the hands of courts. But can courts serve as effective enforcement mechanisms in crisis times? We argue that courts, deciding in the middle of a crisis, will often be tempted to convert what are supposed to be hard rules into softer standards, effectively negating the constraining effect of these provisions on policymakers. While existing literature has argued that weak courts are particularly likely to engage in such behavior when confronted by strong executives, we argue that similar dynamics can also develop between strong courts and weak executives. Using examples from the recent sovereign debt crisis in the Euro area, we illustrate both logics.

Keywords: Constitutional Constraints, Financial Crisis, Gold Clauses, OMT, FCC

JEL Classification: K12, K22, G01, G18, H63

Suggested Citation

Gulati, Gaurang Mitu and Vanberg, Georg, Paper Tigers: Or How Much Will Courts Protect Rights in a Financial Crisis? (June 11, 2018). Duke Law School Public Law & Legal Theory Series No. 2018-45. Available at SSRN: https://ssrn.com/abstract=3194067 or http://dx.doi.org/10.2139/ssrn.3194067

Gaurang Mitu Gulati (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Georg Vanberg

Duke University - Department of Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

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