26 September 1991 - 28 September 1991

The Federal State: Lessons from North America and European Experience

Chair: The Hon Donald S MacDonald

A joint conference with The Canadian Ditchley Foundation at Langdon Hall, Ontario

With the publication a few days earlier of the Canadian Government’s constitutional proposals, the virtual dissolution of the Soviet Union, the civil war in Yugoslavia and the impending Inter-Governmental Conferences on Political and Monetary Union in the European Community, an attempt to establish some general principles which might apply to a successful federation (and what needs to be done if it falls apart) was extremely timely. Needless to say there was not a little controversy.

First, what causes communities to come together, or a unitary state to separate, in a federation? A desire, it was suggested, in the one case for the greater political and economic influence of a larger unit, with the prosperity that may be expected to flow from increased trade between the federated units (variously known as states, provinces, Länder, etc), and a desire on the other to retain these benefits, while managing tensions arising from differences of history, political and legal traditions, culture, language, etc. Sheer size of territory may also be relevant, and the relative size of units within a federation is an important factor. It was possible to conceive of federations within federations (e.g. a Federal Germany in a federal Europe).

In any federation, there must be a constitution defining the relationship between the units and the federal authority. The association was dynamic however and there must be provision for amendment. Historically the tendency was towards greater centralisation: a tendency which might be reduced through clear definition of the powers of the units, residual powers being left to the centre, rather than the other way round, though concurrence was not to be ruled out. The federal powers however should include matters with cross-border implications, whether between units within the federation or beyond its borders, e.g. defence, foreign policy, international trade policy and many environmental issues. (Individual units however often maintain external relations beyond the federal borders, dealing essentially with trade and investment.)

Given the necessity of a constitution, preferably a short one, some legal arbiter to interpret it was essential and ways needed to be devised to guard against political bias in appointments to it.

Perhaps the greatest discussion, and controversy, centred on the fiscal and related arrangements and trade, including related social policies. In general, services should be provided as close to the point of consumption as possible where, it was presumed, handling would be most efficient; and the authority on whom the responsibility for provision fell, should be responsible for raising the funds to pay for it. But some units would be poorer than others. Thus equalisation funds to redistribute wealth would be necessary. The level of such subventions should be related to some criteria (e.g. population) and preferably they should be paid without strings, leaving to the electors of each unit to judge their government’s performance. Certain types of tax should be reserved to a particular level, e.g. tariffs to the federal and property tax, probably, to the unit level: income taxes and sales taxes or VAT could fall to either. Unless some measure was adopted to control spending at the unit level (e.g. the constitutional ban in most US states on deficit financing) there would have to be coordination to prevent aggregate government expenditure getting out of control. A single currency seemed to be virtually essential (although the US only came to it slowly), managed, it was agreed, by an independent central bank.

It seemed to be generally agreed that the federal authority should set minimum standards of social welfare (including pensions, health care, education, unemployment benefit, etc), but not at such a level as to remove the comparative advantages which would enable a unit to compete. There were twin dangers, of pauperisation of the recipients, and resentment among the donors, though in general the latter was less a factor than the former.

While the free movement of goods, capital and people within the federated territory should be the aim, in practice a pure common market was not essential and did not exist in e.g. the US or Canada. Moreover as with common standards, some derogations would prove necessary to protect the less well-endowed regions. There were other criteria besides pure economic efficiency, by which people might prefer to judge. International trade negotiations and multi-national companies would in any case tend to reduce the scope for individual action by the units in the area of trade. The role of the federal authority in international trade negotiations and in treaty-making generally, tended to encroach on the rights of the constituent units, since the ability of the federal authority to deliver the units was essential to successful negotiation, even if that meant overriding their rights (cf. the over-riding authority of a treaty once ratified by the US Senate).

There was some discussion of the nature and composition of the federal legislature, but no clear principles emerged, beyond the need to reflect the rights of the units in some equitable way. The argument that a parliamentary system, the central government being directly responsible to the elected house in a bi-cameral system, was incompatible with a powerful second chamber representing the units, was rebutted by some on the grounds that conflict would not arise if there were clear limits on the powers of the second chamber (e.g. in fiscal and budgetary matters). Asymmetry between the units, both in representation in the second chamber and, more controversially, in rights (as in Spain and Canada), should not be ruled out a priori but could cause political tension.

There was discussion of the need for a bill of rights. While some federal states in the Common Law tradition have found no need for such a bill, there was, I think, consensus (with some dissent) that one was necessary. However a clear distinction should be drawn between classical rights (injunctions to the government or legislature not to do something), which entailed no direct costs and were justiciable in a court, and entitlements (e.g. to a job, to a certain standard of health care, etc) which entailed costs and where action was for the legislature, not the courts. The situation of the US, where for example some courts have ordered costly translation facilities in schools, should be avoided.

Language was an issue to which no universal solution was found. It was suggested that it was the symbol rather than the root of national feeling: and that in a multi-lingual society the solution must give no linguistic group advantage over another - hence in India, English as the official language. In a bi-lingual federation with two languages strongly entrenched in history and tradition, no such solution was possible: in the absence of a third language, each community was inevitably going to be disadvantaged in the area of the other unless true bi-lingualism could be inculcated.

Inevitably the question of secession was broached. First it was generally agreed that at this stage in history it would be wrong to prevent by force a community which wished to secede. But there were many difficulties: should such a decision, which was essentially extra-constitutional, be based on a referendum (with all the difficulties of framing the question and oversight), and, if so, within which territory, that of the federal state as a whole or of the seceding community alone? What of minorities within the seceding territory? Should they be denied self-determination? If not, how small a unit should be contemplated? Intermingled communities could only be protected through a bill of rights, but should these be individual or community rights? No final answers were possible: the decision would be political in each case.

There was disagreement over the treatment of assets and liabilities in the event of secession. In general, though with some powerful dissent, it was agreed that the difficulty of valuing physical assets and the impossibility of physical transfer, meant that they would have to lie where they fell and be written off. Debt, which carried continuing obligations, was different and would have to be divided according to some formula, probably in proportion to GNP or population, or perhaps by IMF arbitration. While the debt was the legal liability of the federal authority, there was near unanimous recognition that a seceding state (e.g. the Baltic States) ought in equity to accept responsibility for a share, if the secession was to be amicable, as it should and could be. How that responsibility could be met was a technical matter, e.g. by the seceding state servicing its agreed share, or, perhaps better, paying off the share, financing the cost by a bond issue. Either repudiation or acceptance had implications for the new state’s credit-rating. There were many other areas not addressed in this context (e.g. the division of the civil service, the armed forces, pensions, etc.), but since it was assumed that we were addressing a peaceful process to be conducted by negotiation, the complementary assumption must be that where there was a will, a way would be found.

It is impossible in a short note to reflect all the points made or all the examples cited. Each case is different and the solutions to what is essentially a political problem, albeit with strong economic implications, must be political, through negotiation. Perhaps, as one participant suggested, quoting Pope, whose profile adorns the hall at Ditchley, “Whate’er is best administered is best”.

This Note reflects the Director's personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: The Hon Donald S MacDonald
Recently retired as High Commissioner for Canada to the United Kingdom (1988-91)


Mr Donald J Markwell
Fellow and Lecturer in Politics, Merton College, Oxford

Professor Etienne Gutt
President emeritus (President, 1984-89), Belgian constitutional Cour d’arbitrage

Mr Vernon Bogdanor
Reader in Government, Oxford University; Member, Council of Hansard Society for Parliamentary Government

Mr Brian Fall CMG
High Commissioner, Ottawa

Professor Murray Forsyth
Director, Centre for Federal Studies, Department of Politics, University of Leicester

Sir Philip Goodhart MP
Member of Parliament (Conservative) for Beckenham

Sir John Graham Bt GCMG
Director of the Ditchley Foundation

Professor Eric J Hobsbawm
Emeritus Professor of Economic and Social History, University of London

Ms Margo MacDonald
Television and radio presenter and reporter

Mr Jim Sillars MP
Member of Parliament (SNP) Glasgow Govan

Mr Henry Steel CMG OBE
Leader, UK Delegation to UN Human Rights Commission, Geneva; consultant on international and commonwealth law

Mrs Heather Weeks
Deputy Director, The Ditchley Foundation

Mr John Banks
Vice President, Programme, The Canadian Ditchley Foundation

Professor Allan Blakeney PC QC
Professor, College of Law, University of Saskatchewan

Mr Claude Forget
Vice-President, Laurentian Group
Mr Leighton McCarthy
Secretary-Treasurer, The Canadian Ditchley Foundation

Mr John McNeil
Chairman, Sun Life Assurance Company

Professor Peter Meekison
Vice-President (Academic) University of Alberta

Dr Sylvia Ostry
Chairman, Centre for International Studies, University of Toront

Mr Alfred Powis
Chairman, Noranda Mining; Board of Directors, the Canadian Ditchley Foundation

Mr Grant L Reuber
President, Canadian Ditchley Foundation and Chancellor, University of Western Ontario

Mr Ronald Ritchie
Chairman, Canadian Ditchley Foundation

Mr Gordon Robertson
Chancellor, Carleton University

Dr Ronald L Watts
Director, Institute of Intergovernmental Relations, Queen’s University; on leave with Department of Federal-Provincial Relations, Ottawa        

Professor Guy Carcassonne
Professor of Constitutional Law

M Roger Errera
Member: Conseil d’Etat; Board of Governors, Ecole nationale de la magistrature; Chairman, Board of Governors, Ecole nationale supérieure de la police; Member: Editorial Committee, Public Law, London; Advisory Committee, Interights, London

Dr Norwin Graf Leutrum
Head of UK, Scandinavia and Canada Section, Ministry of Foreign Affairs, Bonn

Ms Mikiko Iwasaki
Associate Professor, College of International Relations, Institute of Social Science, University of Tsukuba

Prof Salustiano del Campo Urbano
Vice President, Centro de Estudios de Politica Exterior, Madrid; Professor of Sociology and Director of the Inter-faculty Department of Sociology (the social structure and sociology of education), together with the chair of the Faculty of Political Science and Sociology of the Universidad Complutense de Madrid

Dr Giorgio Malinverni
Lawyer; President of the Department of Public Law, University of Geneva

Justice Shirley S Abrahamson
Judge of Wisconsin Supreme Court (1976-)

Mr Charles J Cooper
Partner, Shaw Pittman Potts & Trowbridge, Washington DC.

Mr Lloyd N Cutler
Partner, Wilmer, Cutler and Pickering (Attorneys), Washington, DC; Director, American Cyanamid Co, SE Bank Corporation; Member, US Group to Permanent Court of Arbitration, The Hague

Professor Otto J Hetzel
Professor of Law, Wayne State University Law School; Consultant, Urban Institute/US AID to Czech and Slovak Federal Republic federal and republic governments on housing policy

Dr Erik Hoffman
Professor of Political Science, State University, New York at Albany

Professor A E Dick Howard
White Burkett Miller Professor of Law and Public Affairs, University of Virginia

Mr John Kincaid
Executive Director, Advisory Commission on Intergovernmental Relations, Washington DC; Professor of Political Science, University of North Texas

Mr Charles W Muller
Administrative Director, the American Ditchley Foundation

The Hon David E Nething
Lawyer; North Dakota Senate

Dr James B Steinberg
Senior Research Analyst, International Policy Department, The RAND Corporation, Santa Monica, Ca.

Professor Mark Tushnet
Professor of Law, Georgetown University Law Center