Rule of Law

Rule of Law & Cooperative Society
Chandra Nath ∗
April 15, 2013
∗ nath@computer.org He is an Independent researcher engaged in research in information security, privacy, law & justice.
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Contents
1 Introduction 3
2 Rule Egoism 3
3 Locke and Natural Rights 4
4 The rule of law 4
5 Law should govern 4
6 No one is above the law 4
7 Rules of Recognition & Ability to change 5
8 Rule of Law v Rule of Men 5
9 Principles of supremacy of law 5
10 Will as law 5
11 Zero exploitation 6
12 Coperative & Rochdale Principles 6
A Open and Voluntary Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B Democratic member control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C Member economic participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D Autonomy and independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E Education, training, and information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
F Cooperation among cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
G Concern for community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
H Democratic operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
I People first . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
J Giving clients what they want . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
K Member-driven business enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
L Member/Customer focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
13 Conclusion 9
2

RULE OF LAW & COOPERATIVE SOCIETY
The proprietor, the robber, the hero, the sovereign for all these titles are synonymous imposes his will
as law, and suffers neither contradiction nor control; that is, he pretends to be the legislative and the
executive power at once . . . [and so] property engenders despotism . . .
1 Introduction
AWHO was established as a Society
under the Rule of Law
expressly for the welfare of
its members and NOT established as
a foray by Army Headquarters into
Real Estate business in a thriving real
estate market at this particular stage
in the country’s economy.
2 Rule Egoism
2.1 Rule egoism is the doctrine
under which an individual evaluates
the optimal set of rules according
to whether conformity to those
rules bring the most benefit to himself
The state of nature is a state of
war where everyone must fend for his
or herself and all are against all. No
one has any sort of moral obligation
to anything else except to maximize
ones own satisfaction: The action violates
the following Hobbe’s laws of
nature:
• The ninth Law is that every
man acknowledge another for
his equal by nature. The breach
of this precept is pride.
• The tenth law is that at the
entrance into the conditions
of peace, no man require to
reserve to himself any right,
which he is not content should
be reserved to every one of the
rest. The breach of this precept
is arrogance, and observers of
the precept are called modest.
• The eleventh law is that if a
man be trusted to judge between
man and man, that he
deal equally between them.
• The twelfth law is that such
things as cannot be divided, be
enjoyed in common, if it can be;
and if the quantity of the thing
permit, without stint; otherwise
proportionably to the number
of them that have right.
• The thirteenth law is the entire
right, or else...the first possession
(in the case of alternating
use), of a thing that can neither
be divided nor enjoyed in common
should be determined by
lottery.
• The fourteenth law is that those
things which cannot be enjoyed
in common, nor divided, ought
to be adjudged to the first possessor;
and in some cases to the
first born, as acquired by lot.
• The fifteenth law is that all men
that mediate peace be allowed
safe conduct.
• The sixteenth law is that they
that are at controversie, submit
their Right to the judgement of
an Arbitrator.
3
• The seventeenth law is that no
man is a fit Arbitrator in his
own cause.
• The eighteenth law is that no
man should serve as a judge in a
case if greater profit, or honour,
or pleasure apparently ariseth
[for him] out of the victory of
one party, than of the other.
2.2 Hobbes posits a primitive, unconnected
state of nature in which
men, having a “natural proclivity...to
hurt each other” also have “a Right
to every thing, even to one anothers
body”; and “nothing can be Unjust”
in this “warre of every man against
every man” in which human life is
“solitary, poore, nasty, brutish, and
short.” Rejecting Cicero’s view that
men join in society primarily through
“a certain social spirit which nature
has implanted in man,” Hobbes declares
that men join in society simply
for the purpose of “getting themselves
out from that miserable condition
of Warre, which is necessarily
consequent...to the naturall Passions
of men, when there is no visible Power
to keep them in awe.” As part of his
campaign against the classical idea of
natural human sociability, Hobbes inverts
that fundamental natural legal
maxim, the Golden Rule. Hobbes’s
version is “Do not that to another,
which thou wouldst not have done to
thy selfe.”

3 Locke and Natural
Rights
3.3 Locke turned Hobbes’ prescription
around, saying that if the ruler
went against natural law and failed to
protect “life, liberty, and property,”
people could justifiably overthrow the
existing state and create a new one.
While Locke spoke in the language
of natural law, the content of this
law was by and large protective of
natural rights, and it was this language
that later liberal thinkers preferred.
Thomas Jefferson, arguably
echoing Locke, appealed to unalienable
rights in the Declaration of Independence,
“We hold these truths to
be self-evident, that all men are created
equal, that they are endowed by
their Creator with certain unalienable
Rights, that among these are Life,
Liberty and the pursuit of Happiness.
According to Aquinas, to lack any
of these virtues is to lack the ability
to make a moral choice. For example,
consider a man who possesses the
virtues of justice, prudence, and fortitude,
yet lacks temperance. Due to
his lack of self-control and desire for
pleasure, despite his good intentions,
he will find himself swaying from the
moral path.
4 The rule of law
4.4 The rule of law is the
“supremacy of regular power as
opposed to arbitrary power.” The
phrase can be traced back to the
17th century, and it was popularized
in the 19th century by British jurist
A. V. Dicey. The concept was familiar
to ancient philosophers such
as Aristotle, who wrote “Law should
govern”. Rule of law implies that
every citizen is subject to the law. It
stands in contrast to the idea that the
ruler is above the law, for example by
divine right.
5 Law should govern
5.5 Plato nevertheless hoped that
the best men would be good at respecting
established laws, explaining
that “Where the law is subject to
some other authority and has none
of its own, the collapse of the state,
in my view, is not far off; but if
law is the master of the government
and the government is its slave,
then the situation is full of promise
and men enjoy all the blessings that
the gods shower on a state.” More
than Plato attempted to do, Aristotle
flatly opposed letting the highest
officials wield power beyond guarding
and serving the laws. In other words,
Aristotle advocated the rule of law: It
is more proper that law should govern
than any one of the citizens: upon the
same principle, if it is advantageous
to place the supreme power in some
particular persons, they should be appointed
to be only guardians, and the
servants of the laws.
5.6 According to the Roman statesman
Cicero, “We are all servants
of the laws in order that we may
be free.” During the Roman Republic,
controversial magistrates might
be put on trial when their terms of
office expired.
5.7 An early example of the phrase
“rule of law” is found in a petition
to James I of England in 1610, from
the House of Commons: Amongst
many other points of happiness and
freedom which your majesty’s sub-
4
jects of this kingdom have enjoyed
under your royal progenitors, kings
and queens of this realm, there is
none which they have accounted more
dear and precious than this, to be
guided and governed by the certain
rule of the law which giveth both to
the head and members that which
of right belongeth to them, and not
by any uncertain or arbitrary form
of government.... In 1607, English
Chief Justice Sir Edward Coke said
in the Case of Prohibitions (according
to his own report) “that the law was
the golden met-wand and measure to
try the causes of the subjects; and
which protected His Majesty in safety
and peace: with which the King was
greatly offended, and said, that then
he should be under the law, which
was treason to affirm, as he said; to
which I said, that Bracton saith, quod
Rex non debed esse sub homine, sed
sub Deo et lege(That the King ought
not to be under any man but under
God and the law.).”
6 No one is above the
law
6.8 In 1776, the notion that no one
is above the law was popular during
the founding of the United States.
For example, Thomas Paine wrote in
his pamphletCommon Sense that “in
America, the law is king. For as in absolute
governments the King is law, so
in free countries the law ought to be
king; and there ought to be no other.”
In 1780, John Adams enshrined this
principle in the Massachusetts Constitution
by seeking to establish “a
government of laws and not of men.”

6.9 This formal approach allows laws
that protect democracy and individual
rights, but recognizes the existence
of “rule of law” even in societies
and countries that do not necessarily
have such laws protecting democracy
or individual rights.
7 Rules of Recognition
& Ability to
change
7.10 HLA Hart’s assertion that a law
is valid if and only if it satisfies the
criteria of an accepted rule of recognition
to be the most compelling. I
believe that legal validity is necessarily
a social fact.We are now considering
the validity of entire systems of
law, rather than the validity of particular
laws based on their content.
To Hart’s definition of legal validity,
I would like to add the clause “and
the entire legal system is considered
to be valid”. According to Hart’s theory,
the system of law is governed by a
set of secondary rules, and these rules
would have to be valid. But I think
there may be additional requirements
for a legal system to be valid. I propose
that the definition of validity of a
system includes a notion of fairness.
I will not rigidly define this fairness
here, but by it I refer to a system in
which the people who are governed by
the laws have a role in making and
amending the laws. A law is valid
when it is defined as valid by a rule of
recognition which is accepted by officials.
In addition to Hart’s criteria,
I believe that for a law to be valid
the system of law of which it is a part
must itself be valid. For a system of
law to be valid, the rule of recognition
must be accepted, and the members
of the society must have the ability
to change the laws which will govern
them. On both this counts, AWHO
rules are invalid!
8 Rule of Law v Rule
of Men
8.11 The functional interpretation of
the term “rule of law”, consistent
with the traditional English meaning,
contrasts the “rule of law” with the
“rule of man.” According to the functional
view, a society in which government
officers have a great deal of
discretion has a low degree of “rule
of law”, whereas a society in which
government officers have little discretion
has a high degree of “rule of law”.
The rule of law is thus somewhat at
odds with flexibility, even when flexibility
may be preferable.
8.12 The rule of law has been considered
as one of the key dimensions that
determine the quality and good governance
of a country.
8.13 All government officers of the
United States, including the President,
the Justices of the Supreme
Court, and all members of Congress,
pledge first and foremost to uphold
the Constitution. These oaths affirm
that the rule of law is superior to the
rule of any human leader.
9 Principles of
supremacy of law
9.14 In 1959, an international gathering
of over 185 judges, lawyers,
and law professors from 53 countries,
meeting in New Delhi and speaking
5
as the International Commission of
Jurists, made a declaration as to the
fundamental principle of the rule of
law. This was the Declaration of
Delhi. They declared that the rule
of law implies certain rights and freedoms,
that it implies an independent
judiciary, and that it implies social,
economic and cultural conditions conducive
to human dignity.
9.15 The Secretary-General of the
United Nations defines the rule of
law as: a principle of governance in
which all persons, institutions and entities,
public and private, including
the State itself, are accountable to
laws that are publicly promulgated,
equally enforced and independently
adjudicated, and which are consistent
with international human rights
norms and standards. It requires, as
well, measures to ensure adherence to
the principles of supremacy of law,
equality before the law, accountability
to the law, fairness in the application
of the law, separation of powers,
participation in decision-making,
legal certainty, avoidance of arbitrariness
and procedural and legal transparency.
10 Will as law
10.16The proprietor, the robber, the
hero, the sovereign for all these titles
are synonymous imposes his will
as law, and suffers neither contradiction
nor control; that is, he pretends
to be the legislative and the executive
power at once . . . [and so] property
engenders despotism . . . That is so
clearly the essence of property that,
to be convinced of it, one need but remember
what it is, and observe what
happens around him. Property is the

ight to use and abuse . . . if goods
are property, why should not the proprietors
be kings, and despotic kings
kings in proportion to their facultes
bonitaires? And if each proprietor
is sovereign lord within the sphere of
his property, absolute king throughout
his own domain, how could a government
of proprietors be any thing
but chaos and confusion?
11 Zero exploitation
11.17Toward “zero exploitation”
against the consumer: Lon Walras,
economist and mathematician, found
that in a hypothetical situation of
perfect competition (or of quasiperfect
competition) prices would
approach costs, and profits would
approach zero. To ensure fairness
within a cost price network, the main
advantages of membership should be
under the conditions of: 1. cautious
deposits; 2. allowing to their customers
the complete transparency of
the business; 3. previous acceptance
to boycott whatever violator until
reparation. “Cost the limit of price”
aims to establish an equitable exchange
of labor. Incomes should not
include profits: one’s profit is always
another’s exploitation of the same
amount (“plusprice”) by pricing. In
such a “reciprocal transparent cost
price network” whatever currency
would change the real meaning itself
of money, it would become a sharp
tool just to measure only everybody’s
working time, and no more measuring
somebody’s extortion by prices.
The generalization of the “cost the
limit of price” principle (obtainable
by the “reciprocal transparent cost
price” golden rule) and its concur-
rence, makes the intrinsic “surplus”
from the productivity, without having
any form of profit, gets the form
of purchasing power per currency
unit, so that among the possible
consequences are: a lesser need of
money to live, deflation, distributed
investment power among consumers.
Money should mean and measure
only workingtime, neither violence
on wants, nor merchandization in
any humiliating sense.
11.18It stands for individual rights
tempered by considerations of justice,
equity and fair dealing as between
man and man, and its one great aim
is to prevent the exploitation of the
weaker by the stronger party.
12 Coperative &
Rochdale Principles
12.19A cooperative (“coop”), cooperative
(“co-op”), or coperative
(“cop”) is an autonomous association
of persons who voluntarily cooperate
for their mutual, social, economic,
and cultural benefit.[1] Cooperatives
include non-profit community organizations
and businesses that are owned
and managed by the people who
use its services (a consumer cooperative)
or by the people who work
there (a worker cooperative) or by
the people who live there (a housing
cooperative), hybrids such as
worker cooperatives that are also consumer
cooperatives or credit unions,
multi-stakeholder cooperatives such
as those that bring together civil society
and local actors to deliver community
needs, and second and third
tier cooperatives whose members are
6
other cooperatives.“Cop” should follow
Rochdale Principles.
A Open and Voluntary
Membership
12.20The first of the Rochdale Principles
states that co-operative societies
must have an open and voluntary
membership. A “Co-operatives
are voluntary organisations, open to
all persons able to use their services
and willing to accept the responsibilities
of membership, without gender,
social, racial, political or religious discrimination.”
However, this does not
prohibit the co-operative from setting
ground rules for membership, such as
residing in a specific geographic area
or payment of a membership fee to
join, so long as all persons meeting
such criteria are able to participate if
they so choose.
B Democratic member
control
12.21The second of the Rochdale Principles
states that co-operative societies
must have democratic member
control. According to the ICA’s
Statement on the Co-operative Identity,
Co-operatives are democratic organizations
controlled by their members,
who actively participate in setting
their policies and making decisions.
Men and women serving as
elected representatives are accountable
to the membership. In primary
co-operatives members have equal
voting rights (one member, one vote)
and co-operatives at other levels are
also organised in a democratic manner.

C Member economic participation
12.22Member economic participation
is one of the defining features of
co-operative societies, and constitutes
the third Rochdale Principle
in the ICA’s Statement on the Cooperative
Identity. According to the
ICA, co-operatives are enterprises in
which Members contribute equitably
to, and democratically control, the
capital of their co-operative. At least
part of that capital is usually the
common property of the co-operative
12.23The second part of the principle
deals with how members are compensated
for funds invested in a Cooperative,
and how surpluses should
be used. Unlike for profit corporations,
co-operatives are a form of
social enterprise. Given this, there
are at least three purposes for which
surplus funds can be used, or distributed,
by a Co-operative. Members
usually receive limited compensation,
if any, on capital subscribed
as a condition of membership. Developing
their co-operative, possibly by
setting up reserves, part of which at
least would be indivisible; in other
words, the surplus can be reinvested
in the co-operative. Benefiting members
in proportion to their transactions
with the co-operative; for example,
a Consumers’ Co-operative may
decide to pay dividends based on purchases
(or a ’divvi’). Supporting
other activities approved by the membership.
D Autonomy and independence
12.24The fourth of the Rochdale Principles
states that co-operative soci-
eties must be autonomous and independent.
According to the ICA’s
Statement on the Co-operative Identity,
Co-operatives are autonomous,
self-help organizations controlled by
their members. If they enter into
agreements with other organizations,
including governments, or raise capital
from external sources, they do so
on terms that ensure democratic control
by their members and maintain
their co-operative autonomy.
E Education, training,
and information
12.25The fifth of the Rochdale Principles
states that co-operative societies
must provide education and training
to their members and the public.
According to the ICA’s Statement
on the Co-operative Identity,
Co-operatives provide education and
training for their members, elected
representatives, managers and employees
so they can contribute effectively
to the development of their cooperatives.
F Cooperation among cooperatives
12.26The sixth of the Rochdale Principles
states that co-operatives cooperate
with each other. According
to the ICA’s Statement
on the Co-operative Identity, Cooperatives
serve their members most
effectively and strengthen the cooperative
movement by working together
through local, national, regional
and international structures.
7
G Concern for community
12.27The seventh of the Rochdale
Principles states that co-operative societies
must have concern for their
communities. According to the ICA’s
Statement on the Co-operative Identity,
Co-operatives work for the sustainable
development of their communities
through policies approved
by their members.
H Democratic operations
12.28The founding principle of any cooperative
can be found in its governance
model: a cooperative belongs
to its members. It is they who decide
on the directions it will take, and who
make strategic choices for their cooperative,
in tandem with the salaried
officers.
12.29This principle echoes one of the
basic rules of continuous improvement,
which requires that people on
the ground (operators, technicians,
and so on) must be involved in the
process and be given as great a voice
as their managers when it comes to
correcting problems and choosing solutions.
I People first
12.30In a cooperative business, people
are the central concern. Cooperatives
look after the well being of not just
the members, but the larger community
as well.
12.31The key to operational excellence
is that everyone does their part
to the best of their ability, and that
mistakes are not caused by a flawed
person, but by flawed, incomplete or
poorly defined processes. Every ap-

proach is based on this concept of respect
for the individual.
J Giving clients what they
want
12.32Cooperatives are very clientoriented.
Often, member and client
are one and the same. The cooperative
will strive to provide members
with the product or service they need.
The same is true in the world of operational
excellence, where decisions
always revolve around the client. To
give clients what they want, you need
to listen to them.
12.33This focus on client-members
and on meeting their needs is further
proof of how cooperatives and operational
excellence target the same values
and principles.
K Member-driven business
enterprises
12.34Cooperatives member-driven
business enterprises that put people
front and centre offered a viable and
vibrant alternative economic model,
12.35enterprises organized around cooperative
principles selfhelp, democracy,
equality, equity and solidarity
reduced poverty, created jobs and
promoted social integration, and did
so with a firm belief in the ethical
values of openness, honesty, social
responsibility and caring for others.
Cooperatives offered a memberowned
model of economic organization that
reconciled the logic of a market economy
with imperatives of social inclusion
and ownership, particularly relevant
in the aftermath of the global
economic and financial crisis.
12.36In the same vein, Deputy SecretaryGeneral
AshaRose Migiro said
that there were increasing demands
for change in the ways we live and
work for choices and values that were
sustainable, responsible and inclusive.
In confronting those challenges,
strength could be drawn from the cooperative
spirit, which balanced economic
viability with social responsibility.
12.37We must do more than simply
talk about our interdependence. It
was not antiwealth to say that wealth
must do more than serve the wealthy;
it was not anticompetition to say
that, without cooperation, competition
might not lift us up, but pull
us down. The nearly 1 billion people
driving the worldwide cooperative
movement had proved that the
human principle of cooperation could
make for a better economy.
12.38More people in decisionmaking
positions [] should know about the
size, scale and scope of the cooperative
business model, and should
acknowledge it in public policy and
regulation. Cooperatives were valuesled
businesses, and should be
given equal promotion alongside the
stockholder model. Further, cooperatives
were peopleled, and led in
particular by young people, similar
to those presently seeking a voice
in North Africa, on Wall Street and
across the world.
12.39Cooperatives and mutuals represent
a distinct and successful business
model as well as an alternative
to the prevailing business model. Cooperatives
and mutuals have shown
that they have the financial strength
and resilience to weather today’s economic
crises. They have also demonstrated
that they can remain competitive
while staying true to their
mission of meeting their members’
8
needs and adhering to their governance
practices. How have they managed
to stand out from the dominant
business model? What are the
growth levers at the disposal of cooperatives
and mutuals given the need
for sustainability?
12.40To promote their unique features,
cooperatives most often refer to
the statutes that define their business
ownership system, surplus distribution
mechanisms and mode of governance
that make them more resistant
to cyclical economic downturns than
shareholder-based companies. But,
aside from this, they present themselves
as traditional enterprises that
are fully integrated into product and
labour markets like other businesses.
Because of this, they seriously underestimate
their market regulation influence.
Yet a growing number of
macroeconomic studies show that the
rules and organizational structure of
cooperatives affect their behaviour,
which could be described as sociomarket
because of the specific features
of the cooperative social compromise.
L Member/Customer focus
12.41Cooperative banks have a strong
customer focus, take into account
the interests of many different stakeholders,
have a moderate risk profile
and are well-capitalized. They
must cherish their governance structure
with member ownership and influence,
which can be employed as
key differentiator. At the same time,
they must be entrepreneurial, costeffective,
efficient and businesslike organizations,
providing adequate and
innovative products and services at

fair prices and via state-of-the-art distribution
concepts. Moreover, member
influence and involvement must
be firmly institutionalized. Finally,
the attitude and behavior of all employees
should be in line with the
original Cooperative principles, thus
putting the customer interests first.
13 Conclusion
13.42This paper elucidates how the
social orientation in business model
helps the financial cooperatives to
achieve business success through the
perpetual loyalty and patronage of
service, thereby making membership
meaningful. And in every aspect of it,
AWHO has violated each of the principles
of co-operatives created for the
welfare of its members!
9