The Lord will bless Zion (verse 3) but there is a requirement. The Lord is the giver of law. It is his right, as he is the God of the nation. Israel is his, and therefore it is his right to establish the law. In the Lord's case (in contrast with some earthly rulers) his laws are designed for the benefit of Zion, they are to be a "light for the people."
Translation: Gileadi's translation has one very interesting specific difference (echoed in the Today's English Version). Instead of the singular "light for the people" of the KJV, both Gileadi and the Today's English Version render this in the plural (Gileadi "peoples", TEV "nations"). The shift is slight, but important. God's law becomes a light not just for Zion, but for all.
Meaning for Jacob's audience: Following the presumption of a mixed audience, the reminder of the covenant is a reminder of their relationship to the lawgiver. Assuming that Jacob would have been citing the version that would be more explicit on peoples in the plural, this extension of divine law to multiple peoples would place this new group inside the requirements of the law, and indicate that they too receive the light from the law. They are included in the blessings of Zion.