Max Planck Manual

on

Different Forms of Decentralization



Dr. Markus Boeckenfoerde
Dr. Philipp Dann
Verena Wiesner

Heidelberg, 2007


Funded by GTZ

M A X P L A N C K I N S T I T U T E
F O R C O M P A R A T I V E P U B L I C L A W
A N D I N T E R N A T I O N A L L A W

Directors: Professor Dr. Armin von Bogdandy Professor Dr. Dr. h.c. Rdiger Wolfrum






























Max-Planck Institute for Comparative Public Law and International Law, 2007.
All rights reserved.

Applications for permission to reproduce or translate all or any parts of this publication
should be made to:
Sudan Team
Max-Planck Institute for Comparative Public Law and International Law
Im Neuenheimer Feld 535; 69120 Heidelberg; Germany
Phone: +49 (0)6221 482 1; Fax: +49 (0) 6221 482-288
http://www.mpil.de
i
Table of Content

I. The notion of decentralization................................................................................ 1
A. Decentralization as a broad concept ................................................................ 1
B. (Administrative) Decentralization...................................................................... 2
II. The legal characteristics of a confederation, a federal state and a
unitary state........................................................................................................................... 3
A. Confederation............................................................................................................ 3
1. Definition................................................................................................................. 3
2. Structural characteristics of a confederation............................................ 3
3. Examples................................................................................................................. 4
B. Federal state.............................................................................................................. 5
1. Definition................................................................................................................. 5
2. Structural characteristics of a federal state.............................................. 5
3. Examples................................................................................................................. 6
C. Unitary states............................................................................................................ 7
1. Deconcentration ................................................................................................... 7
2. Delegation............................................................................................................... 7
3. Devolution............................................................................................................... 7
D. Distinction between a confederal and a federal system........................... 8
E. Distinction between a decentralized and a federal system..................... 8
III. The wide range of federal systems................................................................. 11
A. Representation of states in the second chamber...................................... 11
1. Switzerland:......................................................................................................... 11
2. Austria: .................................................................................................................. 11
B. Involvement in the amendment of the Constitution................................ 12
1. Switzerland:......................................................................................................... 12
2. Austria (until 1984):......................................................................................... 12
IV. Genesis of Federal Systems............................................................................... 13
A. Coming together federalism.............................................................................. 13
B. Holding together federalism.............................................................................. 14
V. Dynamics of the development of federal systems within a country over
the time ................................................................................................................................. 16
VI. Asymmetric federalism / decentralization ................................................... 18
A. Introduction ............................................................................................................. 18
B. When is asymmetrical federalism / decentralization implemented?. 18
ii
C. Arguments in favour / against asymmetrical federalism....................... 19
1. Major concerns about asymmetrical federalism.................................... 19
2. Arguments in favour of asymmetrical federalism................................. 19
3. Examples............................................................................................................... 20
(a) Malaysia......................................................................................................... 20
(b) Sudan ............................................................................................................. 20
VII. Power sharing Levels of government and the distribution of
competencies....................................................................................................................... 20
A. Introduction: Two dimensions of power sharing in a federal polity .. 20
B. The horizontal separation of powers.............................................................. 22
1. Introduction ......................................................................................................... 22
2. The Legislature ................................................................................................... 22
(a) Overview: Levels of government, their legislatures and their
basic functions ........................................................................................................ 22
(b) Types of legislatures................................................................................. 23
(c) Horizontal separation of powers .......................................................... 23
3. The Executive...................................................................................................... 24
(a) Introduction: What is the executive? What is the government?
.......................................................................................................................... 24
(b) Presidential or Parliamentary System................................................ 24
(c) Composition of the Executive ............................................................... 25
(d) Civil service and proportionate representation: administrative
integration ................................................................................................................ 25
4. The Judiciary........................................................................................................ 25
(a) The role of the judiciary.......................................................................... 25
(b) Separation of powers ............................................................................... 26
(i) Institutional independence..................................................................... 26
(ii) Individual independence..................................................................... 26
(c) Administration of the judiciary & financial autonomy ................. 27
5. Electoral systems............................................................................................... 27
(a) Election law: majority rule or proportional representation....... 28
(i) Plurality / majority systems................................................................... 28
(ii) Proportional representation systems: ........................................... 30
(iii) Mixed Systems........................................................................................ 30
(b) What are the advantages or disadvantages of these two
systems?.................................................................................................................... 31
(i) Plurality or majority systems: .............................................................. 31
iii
(ii) Proportionality systems: ..................................................................... 32
(iii) Mixed systems......................................................................................... 33
6. Models of democracy: majoritarian vs. consensual ............................. 33
(i) Majoritarian Democracy: ........................................................................ 33
(ii) Consociational or Consensual Democracy.................................... 34
C. Vertical separation of powers............................................................................ 34
1. Distribution of legislative powers between federal and state level 34
2. Distribution of executive powers between the levels.......................... 36
3. Distribution of judicial powers in a federal system.............................. 38
(a) Court systems in decentralised states two models.................. 38
(i) The separated model................................................................................ 38
(ii) The integrated model ........................................................................... 39
(b) Advantages and disadvantages of both systems.......................... 40
(c) The Constitutional Court and its role in federal disputes........... 44
(i) Introduction and general questions: basis and two models of
constitutional courts ......................................................................................... 44
(ii) Federal aspects in the composition and competencies of
constitutional courts ......................................................................................... 46
VIII. Participation of states on the federal level .................................................. 48
A. The relevance of the type of federalism for the second chamber. .... 48
B. Composition of 2
nd
Chambers........................................................................... 48
1. Strictly equal representation: ....................................................................... 48
2. Weighted representation................................................................................. 49
3. Other models....................................................................................................... 50
(a) Canada........................................................................................................... 50
(b) United Arab Emirates ............................................................................... 50
(c) Ethiopia.......................................................................................................... 50
(d) Comparative Chart .................................................................................... 51
C. Selection of the Members of the 2
nd
Chamber........................................... 51
1. Different Ways of Selection ........................................................................... 51
2. Comparative Chart ............................................................................................ 53
D. Competences: ......................................................................................................... 53
1. Legislative Competences................................................................................. 53
(a) Participation in the legislative process .............................................. 53
(b) Comparative Chart .................................................................................... 54
2. Inter-Chamber Conflict Resolution in the Legislative Process ......... 54
iv
(a) Different Types of Veto Power.............................................................. 54
(i) Suspensive veto ......................................................................................... 54
(ii) Absolute veto........................................................................................... 55
(iii) The Australian model............................................................................ 55
(iv) The Sudanese approach...................................................................... 55
(b) Comparative Chart .................................................................................... 56
3. Competences with regard to the amendment of the Constitution. 56
4. Other competences........................................................................................... 57
E. Interrelationship between the way of selection and the powers of the
2
nd
chamber ..................................................................................................................... 57
IX. Fiscal Federalism.................................................................................................... 59
A. The notion................................................................................................................. 59
B. What is fiscal federalism needed for?............................................................ 59
C. The design of intergovernmental fiscal relations in a multilevel
government setting....................................................................................................... 60
1. The assignment of expenditure responsibility........................................ 61
(a) General considerations ............................................................................ 61
(b) Germany........................................................................................................ 62
(c) Nigeria............................................................................................................ 63
2. The assignment of revenue-raising responsibility................................ 63
(a) General considerations ............................................................................ 63
(b) Germany........................................................................................................ 64
(c) Nigeria............................................................................................................ 65
3. Intergovernmental transfers ......................................................................... 65
(a) General considerations ............................................................................ 65
(i) Revenue sharing arrangements........................................................... 67
(ii) Grants......................................................................................................... 68
(b) Germany........................................................................................................ 68
(i) Revenue-sharing........................................................................................ 68
(ii) Grants......................................................................................................... 69
(c) Nigeria............................................................................................................ 70
4. The control of sub-national government borrowing............................. 70
(a) General considerations ............................................................................ 70
(b) Germany........................................................................................................ 71
(c) Nigeria............................................................................................................ 71
X. Federalism as Conflict Management Device in the context of
fragmented societies ........................................................................................................ 72
v
A. Consequences of the Majority Rule in fragmented societies................ 72
B. The efficiency of federalism as a tool for peace building....................... 72
XI. Case Studies ............................................................................................................ 75
A. General Issues ........................................................................................................ 75
B. Power Sharing......................................................................................................... 76
C. The bicameral system.......................................................................................... 77
D. Judiciary..................................................................................................................... 79
E. Dispute- / Disagreement Resolution.............................................................. 80
F. Fiscal Federalism.................................................................................................... 80
XII. References................................................................................................................ 82

1
I. The notion of decentralization
In the language of lawyers, in general, every single term that is applied has its specific
meaning; synonyms are quite rare. However, in some cases, the same term is used twofold,
once in a broader, once in a narrower manner. The term decentralization provides us with
fine example of such a case.
A. Decentralization as a broad concept
Quite often, the term decentralization is applied to describe legal and political structures that
distribute power territorially within a state or beyond a state. Understood in this broad
context, the notion of decentralization encompasses confederations, federations, decentralised
unitary states, since all of those systems, in one way or the other, distribute governmental
powers to at least two levels


Confederation Federal System Decentralized Unitary
System



Central Unit
State
Central Unit
Sub Unit
State
State State
State

Central
Unit
Sub Unit
2
B. (Administrative) Decentralization
However, the term of decentralization may also be used in a more specific, legal manner. It
then describes a form of administration within a unitary state.


Centralized Unitary State Decentralized Unitary State



When one person is talking of a decentralized state, he/she may refer to a federal system
having the broad concept of that term in mind, whereby another person rather thinks of the
administrative structure within an unitary state. Hence, whether federalism is seen as a form
of decentralization, depends on the definition of the latter term.
It is therefore of outmost importance to clarify in advance, in what way that term is used.
Whenever the term decentralization is applied in this manual, it is used as the narow legal
term.
State
Central Unit
Sub Unit
State
Central Unit
Sub Unit
3
II. The legal characteristics of a confederation, a federal state and a
unitary state
In this chapter, the character of a confederation, a federal system and a unitary system are
introduced. Their typical characteristics and distinctive features are highlighted in order to
facilitate the classification of any given governmental structure in one of the mentioned
systems, e.g.: Is the European Union a confederation? Is the United Kingdom with Scotland,
Wales and Northern Ireland governed by a federal system?

A. Confederation
1. Definition
A confederation is a union for specific purposes of equal but independent and sovereign states
that retain their own international status and remain therefore in the eyes of the international
community separate states.
2. Structural characteristics of a confederation
The following features are typical for a confederation and may serve as a valuable indicator to
determine the existence of a confederation:
In a confederation, sovereignty rests with the states. The center only exercises
authority delegated by them.
In a confederation, states not people are represented. Hence, center decisions only
bind the states, but not the citizens directly. This means that confederate legislation
has to be transformed into internal legislation in its member states in order to be
binding on that state's citizens and enforceable in its national court system.
The center lacks an independent fiscal or electoral base.
Confederations are often based on agreements for specific tasks, and the common
government may be completely exercised by delegates of the states.
4

Confederal System
(Representation of States)




3. Examples
Taking into consideration the characteristics of the confederation as set out above, it becomes
evident that the Confoederatio Helvetica (Switzerland) is despite its name- not a
confederation. In Switzerland, there is a shared sovereignty between the centre and the states
(called Cantons). People directly elect both, the government of the centre and the state level.
The centre has an independent fiscal base.
The official name of Switzerland, Confoederatio Helvetica, dates back a couple of centuries
ago, when it was indeed formed as a confederation. The name remained unchanged although
in 1848 the people and cantons of Switzerland adopted a federal constitution.

Although many parts of the structure of the European Union (EU) are still of confederal
character, even the EU has surpassed the status of a confederation by now. Member states
shifted some of their sovereign rights to the EU, which they can not unilaterally withdraw. In
addition, the people within the territory of the EU are not only represented through their
respective states but also directly through the European Parliament, even if its competences
are still limited. Furthermore, some legislation of the EU effects the EU-citizens directly
without any additional transformation by a national parliament.

Well known confederations are the United Nations (UN), the African Union (AU), the North
Atlantic Treaty Organization (NATO) or the Union conomique Benelux between Belgium,
the Netherlands and Luxembourg.
State State
Central
Unit
People People
5
B. Federal state
1. Definition
Federalism is defined as an institutionalized division of power between a central government
and a set of constituent governments, variously denominated as states, regions, provinces
lnder or cantons, in which each level of government has the power to make final decisions in
some policy areas but cannot unilaterally modify the federal structure of the state
1
.
2. Structural characteristics of a federal state
Although there are many types of federalism, certain basic features are typical for a federal
state and may serve as a valuable indicator: If a state meets all those requirements, it is
considered to be a federal state. However, it does not mean in reverse that if one of the
requirements is not met, the given structure cannot be a federal one.
Two orders of government (federal level and state (sub-unit) level, each in direct
contact with its citizens (hence, citizens have to elect two distinct governments);
Both central government (the federal level) and regional government (the state level)
possess a range of powers which the other cannot encroach upon; these include a
measure of legislative and executive authority and the capacity to raise revenue and
thus enjoy a degree of fiscal independence.
2

The responsibilities and powers of each level of government are defined in a codified
or written constitution that neither level can alter unilaterally.
The sub-national level is represented within federal decision-making institutions,
usually guaranteed by the specific structure of the federal Second Chamber.
An arbitration mechanism (in the form of supreme / constitutional courts or a
referendum) to resolve intergovernmental disputes exists.



1
Nancy Bermeo, Position Paper for the Working Group on Federalism, Conflict Prevention and Settlement 2005,
2. Available under http://federalism2005.be/home/attachment/i/729.
2
A Heywood, Key Concepts in Politics, New York 2000, p. 141.
6
Federal System
(Representation of people)



3. Examples
South African Constitution:
Art. 40 states that the government is constituted as national, provincial and local spheres of
government, which are distinctive, interdependent and interrelated. Legislative powers are
distributed to all three spheres and can not be taken from the provincial one without its
consent (Art. 74). There is a second chamber, the National Council of Provinces that is
involved in the legislative process (Art. 74 / 75). Art. 41 II provides for a dispute settlement
procedure for conflicts arising between the national government and the provinces.

The Constitution of the United Arab Emirates
The Supreme Council of the Rulers is the highest federal authority, and has both, legislative
and executive powers. The emirate rulers, who are the traditional monarchs in their respective
jurisdiction rather than elected representatives, form the Supreme Council. They derive their
legitimacy from their status within their Emirates. The constitution distributes power
asymmetrically among the Emirates so that Abu Dhabi and Dubai effectively can block
decisions within the Supreme Council (Art. 49). Almost invariably federalism is associated
with democratic procedures. In the UAE however, other than the election of the President and
the Vice President by the rulers of the Emirates, there are no elections. Hence, the Emirates
form the only federal system in a non-democratic legal order. Since the federal system is not
based on peoples democracy, a chamber in which the people may be represented (parliament)
is not required. The Supreme Council of the Rulers resembles the second chamber in a
bicameral system.


Central Unit
State State
People People
7
C. Unitary states
A unitary state is a state or country that is generally governed as one single unit. In a
decentralized form of an unitary state, governmental power may well be (even
constitutionally) transferred to lower levels. However, unlike in federal systems, where
assemblies in those states comprising the federation have a constitutional existence and a set
of constitutional functions which cannot be unilaterally changed by the central government; in
a unitary state, any sub-governmental unit can be created or abolished, and have its powers
varied, by the central government. This unilateral transfer of authority is called
decentralization. There are several grades of decentralization: Deconcentration, Delegation
and Devolution

1. Deconcentration
(weakest form of decentralization)
In general, deconcentration is a geographical or locational concept. It entails the physical
dispersal of the people or offices exercising an administrative or managerial function from
one or few locations to several or many locations. These local administrative capacities
remain on the level of the one central government.

2. Delegation
(a more extensive form of decentralization)
Delegation usually entails the assignment of a defined decision making power or powers by a
superior authority to a subordinated one. The superior authority is able to override the
decisions of the subordinated and ultimately remains responsible and answerable for the
exercise of the power. However, depending on the delegated tasks, the subordinated authority
may also have some discretion in decision making.

3. Devolution
(strong form of decentralization)
Devolution also entails the assignment of decision making power by a superior to a
subordinated individual or agency, but in this case the subordinated is directly answerable to
some authority other than the superior (e.g. Local electorate). Once devolved, the power is
exercised independently of the superior, who cannot override the subordinates decision.



8
Unitary System





D. Distinction between a confederal and a federal system
In a confederation, states not people are represented. Hence, there is only a body at the
central-level in which delegates from states are representing their states. The people living
in the territory of that confederation are not represented by a distinct body. Somehow
congruously, center decisions only bind the states, but not the citizens directly. This means
that confederate legislation has to be transformed into internal legislation in each member
state in order to be binding on that state's citizens and court system.

E. Distinction between a decentralized and a federal system
A unitary state is a country that is generally governed as one single unit. In a decentralized
form of a unitary state, governmental power may well be (even constitutionally) transferred to
lower levels. However, unlike in federal systems, where assemblies in those states comprising
the federation have a constitutionally guaranteed existence and a set of constitutional
functions which cannot be changed unilaterally by the national level, in a unitary state, any
sub-governmental unit can be created or abolished and have its powers varied by the central
government. Hence, there might be decentralized systems of an unitary government that meet
all the other common characteristics of a federal system listed above beside the one requiring
that the constitutional vertical separation of powers and competences cannot be changed
unilaterally. Since those systems do not guarantee a certain independence of the sub-units but
subject their competences to the will of the national level, they are not considered to be
federal ones.
In brief, the litmus test whether or not one might consider a decentralized system of
government also a federal one is whether or not the allocation of powers can be changed
unilaterally.

State
Sub Unit
People People
Sub Unit
9
Example: Sudans Constitution of 1998 and the Sudanese Interim National Constitution of
2005 might best illustrate the tiny but decisive line between a federal and decentralized
system of government.

Common Characteristics of a federal
system
Interim Constitution of 2005 Constitution of Sudan, 1998
At least two levels of
government (federal level and
state (sub-unit) level), each in
direct contact with its citizens
(hence, citizens have to elect
two distinct governments).
(+) Art. 24 INC lists a national
level of government, a Southern
Sudan level of government, a
state level of government, and a
local level of government.
Presidential and general
elections at the first three levels
of government are stipulated for
both, the respective legislative
assemblies as well as the
respective heads of the
executive power (Art. 54 INC,
Art. 163 (1) INC, Art. 216
INC).
(+) Both, a national level of
government existed (called
federal government, see Art.
139) as well as states and state
governments. Both entities did
have legislative assemblies as
well as heads of the executive,
elected by the respective
people.
Both, central government (the
federal level) and regional
government (the state level),
possess a range of powers
which the other cannot
encroach upon.
(+) See exclusive powers in
Schedule A (national level) and
C (state level).
(+) See the list of Federal
Powers (Art. 110) and of the
quite limited State Powers (Art.
111).
An arbitration mechanism (in
the form of supreme /
constitutional courts or a
referendum) to resolve
intergovernmental disputes.

(+) Constitutional Court (Art.
122 (1) (a) and (f) INC
(+) Constitutional Court (Art.
105 (2)(c))

Designated representation of
distinct regional opinions
within federal decision-making
institutions, usually
guaranteed by the specific
structure of the federal Second
Chamber.
(+) Council of States as the
second chamber of the national
legislature (Art. 83 INC).
(-)
Responsibilities and powers of
each level of government are
defined in a codified or written
constitution that neither level
can alter unilaterally.
(+) For a constitutional
amendment, Art. 224 (1) INC
requires a majority within the
Council of States (in which
each state is represented by two
members).
(-) Neither state assemblies nor
any other body representing the
states at the national level, nor
the people of states were
involved in the amendment
process of the constitution (see
Art. 139).


The above chart identifies the vertical separation of powers as stipulated in the INC as a solid
federal system. In contrast, the Constitution of 1998 fails to meet the requirements for such a
10
system. This result might be surprising if one considers the different wording used by the two
constitutions: Whereas the constitution of 1998 praised Sudan as a Federal Republic
governed at its highest level of authority in accordance with a federal system of government
[] (Art. 2), the CPA/INC describes its system as a decentralized system of government
with significant devolution of powers, having regard to the National, Southern Sudan, State,
and Local levels of government (Art. 1.5.1 Protocol on Power Sharing). Beside the fact that
this misnaming is rooted in the history of Sudan, it underlines that headings alone do not
define a system. In other words: a blue car doesnt become red by calling it a red car and vice
versa.

11
III. The wide range of federal systems
Analyzing federal system, one realizes that a wide range of different types of federalism
exists. Some federal states include confederal characteristics, others those of unitary states. In
the following chapter we will analyse the different forms of federal systems by having a
closer look to 1) the way of representation of states on the federal level through the second
chamber and 2) the involvement of states by amending the federal constitution with regard to
federal competences.

Element of State Option to
Representation : Switzerland Austria recall power





A. Representation of states in the second chamber
1. Switzerland:
Each of the cantons (name for states in Switzerland) is represented in the second chamber by
two members, regardless its size and population (three of those cantons however are -due to
historical reasons- divided into half-cantons; each of the six half cantons is represented by one
member only. So, 20 cantons are represented by two members and six half-cantons by one
member). This approach includes a strong confederal element, since states are equally
represented (as e.g. in the United Nations, where each state also has one vote, regardless
whether it has a large territory and / or population like the USA or China or not like Andorra
(ca. 460 square kilometres and 66.000 inhabitants) or San Marino (60 square kilometres and
29.000 inhabitants).
2. Austria:
In the second chamber, the Lnder (name for states in Austria) are represented in proportion
to the number of nationals in each of them (Art. 34). The state with the largest number of
citizens delegates 12 members, every other state receives as many as the ratio in which its
nationals stand to those in the first-mentioned state. However, each Land is at least entitled to
three representatives. Hence, the power of a Land in the second chamber is rather determined
by the number of its nationals than by its quality of being a state.


Confede-
ration
Unitary
System
Federal systems
12
B. Involvement in the amendment of the Constitution
1. Switzerland:
The amendment of the Swiss constitution requires not only the majority of both chambers, but
it is also subject to a referendum in which both, the majority of voters in Switzerland and a
majority of cantons (i.e. the majority of their voters) have to be in favour of the amendment.
This means in at least 14 of the 26 cantons, the majority of voters have to approve the
amendment as well. Considering the large difference in terms of population between large
cantons and small cantons, a proposal to revise the constitution can theoretically be rejected
although 90% of the population approved it, when the rejecting 10% is evenly distributed in
the smallest cantons. In other words, when it comes to the requirement of receiving approval
in a majority of cantons, a voter of the smallest canton outweighs 40 citizens of the largest.
This result again is due to the confederal idea of an equal treatment of states.
2. Austria (until 1984):
The amendment of the Constitution of Austria required until 1984 a 2/3 majority in the House
of Representatives and a single majority of the second chamber. However, the rejection by the
second chamber only had the effect of a supensive veto, as the first chamber only had to vote
again to pass the amendment act with the required majority. Hence, at that time, the Lnder
did not have an effective remedy to prevent the depletion of their constitutional rights. As a
consequence, some scholars even questioned the qualification of Austria as a federal State at
that time.

13
IV. Genesis of Federal Systems
In general, federal states do not evolve from the scratch. Instead, federal systems are typically
coming into being as the result of a transformation process. Those processes might start from
two ends: Either former independent states are coming together, very often through the status
of a confederation (coming together federalism) or a federal state evolves from an unitary
state, as governments response to alleviate threats of secession by territorially clustered
minorities (holding together federalism).

A. Coming together federalism
The coming together federalism is the transformation from a confederation, consisting out of
several independent states, to one state, in which the former states become sub-units under
one roof, the federal state. This process is referred to as coming together federalism.

Confederal System Federal System
(Representation of States) (Representation of people)













In a coming together federalism independent states that are (mostly) already at the stage of a
confederation intending to further strengthen alliances among each other. Sovereign powers in
certain domains are ceded to the central unit for the sake of goods otherwise unattainable,
such as security, economic prosperity, strengthening of common history or geopolitical
prerequisits. These powers cannot be unilaterally revoked by the states from the centre.

A fine example is Switzerland. The official starting point of Swiss history is 1291. At that
time, three cantons concluded bilateral treaties among one another and thereby created a
defence union combined with a system of arbitration for conflict management among the
cantons (till 1315; afterwards multilateral treaty). The union was intended to prevent outside
dominance and guarantee a power balance among the cantons. Other countries joined in based
on a complicated treaty system. Over the centuries, a careful coming together took place,
simultaneously with the continuous enlargement of the confederation. This process was
interrupted by the French invasion under Napoleon for a couple of years at the beginning of
State State
Central
Unit
People People
Central Unit
or
Federal State
State
or
Sub-
unit
State
or
Sub-
unit
People People
14
the 18
th
century. In 1848, the people and the cantons of Switzerland adopted a federal
constitution that introduced some centralization but it also guaranteed, through the
institutional set-up and the limitation of competencies of the central government, respect for
cantonal diversity.

Beside other historical examples such as Germany or the United States, there is also a quite
modern one, found in the Arab world, the United Arab Emirates. Beginning with the 1820,
the British signed a series of Agreements with various rulers (sheiks) which were designed to
guarantee peace between Britain and the tribes and end the practice of piracy. Following the
signing of the 1853 Perpetual Maritime Truce, the sheikdoms became known as The Trucial
States. The British favoured greater cooperation among the Trucial States and in 1952 the
seven sheikdoms Abu Dhabi, Dubai, Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umn al-
Qaiwain- formed the Trucial State Council which provided a forum for the discussion of
issues of mutual concern and coordination. Over the years, the Council grew in formality and
administrative structure. By 1964 it included sub-committees for agriculture, education and
public health, and a development office for infrastructure projects. In July of 1971, the seven
Trucial States met again to discuss forming a union. Six of them agreed on a provisional
constitution, the seventh, Ras as-Khaimah joined the federation one year later. In 1996, the
provisional constitution was made permanent. It is a federation that mixes aspects of
traditional and modern rule. The constitution reflects a compromise between emirates in
favour of a more centralized and integrated federation and those that preferred preserving the
autonomy of the individual emirates.

B. Holding together federalism
The demarcations of many countries borders in the todays world were set at the drawing
tables of foreign colonizers. As a consequence, countries with a heterogeneous population,
differences in language, religion, cultural heritage, etc. had to arrange for a common living.
Centralized forms of government lead quite often to historic grievances of one group through
discrimination, neglect, and the deprivation of rights by another group. A holding together
federalism evolves generally from unitary states, as governments response to alleviate threats
of secession by territorially clustered minorities. A centralized unitary state might first attempt
to respond to the needs of minorities through the devolution of autonomous rights to them,
thereby creating a decentralized structure of government at the will of the central government
(1). If, however, the sub-units require a status in which the granted competences are not
dependent from the centre, the federal status serves those needs by creating second level of
government with own and unilaterally not revocable competences.
15














In India, at the time the constitution was written, the predominant concern of the founding
fathers was the preservation of the unity and integrity of India, which had more than 600
varied princely states plus the provinces of British India at the time of independence. But
holding together federalism is not only a post colonial phenomena as can be seen with a view
to Belgium, Spain etc. Some constitutions that implement the idea of a holding together
approach even guarantee a group of people who share a large measure of a common culture
the right to either form their own state within the country according to a specific procedure
(Spain, Ethiopia) or even to separate from the country (Canada, Ethiopia). Those provisions
underscore in a way the voluntariness of states being unified under one central government.

Hence, whereas in a coming together federalism independent and sovereign states decide to
cede exclusive powers to a higher level of government while coming together, in a holding
together federalism one state decides to cede exclusive powers to lower levels of government
(sub units) within the state.


State

Sub
Unit
People People
Sub
Unit
People People
State
Central Unit
or
Federal State
State
or
Sub-
unit
State
or
Sub-
unit
People People
16
V. Dynamics of the development of federal systems within a country
over the time
As seen above, different countries may apply different shapes of federalism. However, as this
chapter will demonstrate, a chosen federal system in one country is not definite, but rather a
dynamic and flexible process and hence subject to change and development. The history of
federalism in the United States is worth to be considered in this respect. Interestingly, large
parts of the dynamic development were rather initiated by judgements of the Supreme Court
than by amendments of the constitution.
1776: Confederation. With independence in 1776 the American colonies formed a confederation. However,
without a strong federal government, centrifugal forces soon began to pull the states apart. Instead of
working together, some states began coining their own money and erecting trade barriers.
1787: Hence, in 1787 a federal system of government was devised. The delegates to the constitutional
convention created a new plan for government under which power was to be shared between a national
government and the state governments. The constitution sought to build a national government on top of
the states to create a more perfect union that could ensure liberty while enforcing law and order.
1791: Bill of Rights was added to the Constitution. The Tenth Amendment, part of the Bill of Rights,
specifically has addressed the question of powers reserved to the states: The powers not delegated to the
United States by the Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.
1819: U.S. Supreme Court ruled in McCulloch v. Maryland. Chief Justice John Marshall wrote the opinion
establishing that the powers of the United States are not limited to those expressly listed in the
Constitution, thus expanding the power of the national government.
1824: U.S. Supreme Court ruled in Gibbons v. Ogden. In another important opinion, Chief Justice Marshall
broadly defined the national government's power to regulate commerce, consequently restricting the
power of the states.
1861-1865: American Civil War. The northern states' victory determined that the federal government was not a
compact among sovereign states. Rather, its authority flew directly from the people. However, the war
did not resolve the conflict between federal and states' rights.
1880s: Revival of dual sovereignty. U.S. Supreme Court increasingly ruled against federal authority and in
favour of states' rights, particularly in cases where the federal government attempted to regulate
business practices.
1933-1939: Roosevelt administration introduced "New Deal." The president expanded federal authority to
regulate the economy and provide social services, based on the federal government's constitutional right
to regulate interstate commerce (Article I, section 8, paragraph 3). Although the Supreme Court initially
declared Roosevelt's legislation unconstitutional, the Court reversed its position in the late 1930s.
1960s: Johnson administration introduced "Great Society." The administration's social and economic
programs, combined with the powers granted in newly enacted civil rights legislation, lead to increased
federal oversight of state and local government.
1980s: Reagan administration moved to define a "New Federalism." The administration moved to limit the
power of the federal government to impose its policies on state and local governments. Reagan: The
federal government did not create the states; the states created the federal government.
17
1990s: Debate over federal-state power sharing continued. U.S. Congress enacted legislation shifting
authority and control of social, education, and economic policy to the states.


Dynamics of the development of the federal system
of the USA over the time



Confede
-ration
Unitary
System
1776
1787
1791
1933-39
1990s
1819/24
1861-65
1880s
1980

1960
18
VI. Asymmetric federalism / decentralization
A. Introduction
The main purposes of creating federal state and granting autonomy to a region within a State
are quite distinct: While the former serves originally the vertical separation of powers and
thus constitutes a specific form of democracy, the latter serves the protection and self-
determination of a minority, i.e. a part of the population, within a State.
3
Where the protected
minority is not territorially concentrated, but scattered over the territory of the State, the
granting of personal instead of territorial autonomy can be considered.
The notion of federalism implies that all sub-units are equally guaranteed a certain set of
competencies by the Constitution which cannot unilaterally be revoked. That means that in
the typical federal State all sub-units have the same status and thus symmetrical rights and
duties towards the federation and each other.

The federal State model and regimes of autonomy can be combined. The type of federalism
that is created by this mixture is called asymmetrical federalism, since the autonomic status of
one or several of the sub-units means that these sub-units have special rights /more
competencies than the rest of the sub-units. Thereby the symmetry of rights and duties
between all sub-units and the federation is no longer given.

Some federal systems discriminate among constituent states on grounds of population: this
is the case where more populous units play a greater role in federal institutions. This also
creates a kind of asymmetry. However, this type of discrimination is widely accepted and
generally not focused on when discussing the issue of asymmetric federalism.

An asymmetric constitutional status with regard to sub-units does not only arise in federal
systems but appears -even more often- in decentralized states (France - Corsica; Denmark -
Greenland; Tanzania Zanzibar; United Kingdom Northern Ireland, Scotland, Wales;
Finland - Sami; etc.). There may be two reasons for that phenomenon: First, unitary states
find it easier to create formal asymmetrical arrangements than either already existing
symmetrical federations, or coming together federations. This is because unitary states do not
have sub-units in place that possess constitutional veto powers and that are likely to regard
asymmetry as conferring second-class status on them. Secondly, in unitary states, power
devolved is power retained. There may be less resistance to asymmetrical devolution when
the experiment can be revoked or mistakes corrected by the unilateral actions of the central
government. Hence, an asymmetric structure within a country is not a genuine issue of
federalism, but rather a potential answer to the question of how to accommodate a minority
group in a State.

B. When is asymmetrical federalism / decentralization implemented?
Asymmetrical structures have so far been introduced under a variety of circumstances: outside
intervention, minority military rebellion, or through democratic process.

3
Bernhardt, Rudolf, Federalism and Autonomy, In: Yoram Dinstein (Ed.), Models of Autonomy, 1981, p. 23
28.
19

Outside intervention: International alliances have occasionally established autonomous
regions in the context of post-war territorial settlements. After World War I, the town of
Danzig received autonomy in 1919; after World War II, the Paris peace conference ordered
Italy to give autonomy to South Tyrol, and this was included in the Italian Peace Treaty.
Minority military rebellion: Autonomy is correlated in several cases with the successful use
of force by minorities. Papua New Guineas decision in 1999 to grant extensive autonomy to
Bougainville was the result of a successful rebellion by Bougainvilleans, who rejected the
decentralized arrangements implemented in 1976. The decision of the Government of Sudan
to give autonomy to the South in the Addis Ababa Agreement (1972-1983) followed a
successful military rebellion, and its recent decision to grant autonomy within a federal
system reflects a military stalemate.
Democracies:
Several western democracies have agreed to asymmetrical arrangements in the recent past,
either within a federal (Belgium, Spain) or a decentralized (Great Britain, Denmark, France)
setting.

C. Arguments in favour / against asymmetrical federalism
1. Major concerns about asymmetrical federalism
Asymmetric federalism is criticized on two main grounds. First, it is thought that it facilitates
break-up. By establishing a special relationship between a regions government and its
people, it is thought to encourage loyalties to that government only, thereby ultimately
leading to secession. Some states also worry about the domino effects of asymmetrical
autonomy. The fear is that autonomy for one minority region will set off a chain reaction
where others, currently quiescent, demand the same deal. Apparently, Indonesias President,
B.J. Habibie, was so concerned that autonomy for East Timor would have a domino effect
that he preferred it to become independent. Canada has often responded to Quebecs demands
for autonomy by giving federal powers to all of the provinces or by allowing all of the
provinces to opt out of federally-funded programs. Canada even has found it easier to concede
a constitutional right to secession, symmetrically enjoyed by all the provinces, than formal
asymmetry among the provinces.
The second major concern about asymmetrical federalism is that it threatens norms of
democratic equality and accountability. It is suggested that members of the legislature from
the autonomous region will be able to influence decisions at the national level that do not
affect their region, while members from the rest of the country will have no reciprocal say in
the affairs of the autonomous region.
2. Arguments in favour of asymmetrical federalism
Supporters of asymmetrical federalism argue that it is a way to prevent the break up of states,
rather than a way to facilitate it: Recognition within a state is likely to make secession less
attractive, as there are fewer gains to be won, and potentially high costs to be paid. And
indeed, evidence suggests that asymmetrical federalism does not facilitate State break-up. In
fact, virtually all of the States that experienced secession in the twentieth century were at that
time either symmetrical federations (Soviet Union, Czechoslovakia, Yugoslavia, Pakistan) or
unitary states (Indonesia, Ethiopia).
20
3. Examples
(a) Malaysia
Considerable concessions have been made to the Borneo states when they joined the
Malaysian federation in 1963. Certain matters that come under federal government
jurisdiction elsewhere in the Malaysian federation, such as native laws, communications,
shipping and fisheries were made matters of exclusive state or concurrent jurisdiction in
Sabah and Sarawak. Other matters, such as immigration, remained under federal authority,
but require the approval of the Borneo states before application to those states.
(b) Sudan
Pursuant to the Interim National Constitution of 2005, Sudan has a twofold asymmetry in its
federal structure. The Republic of Sudan is composed of one national government and 25
states. First, two of these states have a specific status according to the Protocol between GoS
and SPLM on the Resolution of the Conflict in Southern Kordofan and Blue Nile States.
Secondly, between the ten states in the south and the national government, an additional level
of governmental, the Government of South Sudan (GoSS), is inserted. Pursuant to article 162
of the Constitution, its primary responsibility will be to promote good governance,
development and justice, exercise authority in respect of southern Sudan and the states of
southern Sudan, act as the link between the National Government and the states of southern
Sudan and to ensure the protection of rights and interests of the people of southern Sudan.
The specific legislative powers of GoSS are listed in Schedule B of the Constitution.

Example of asymmetrical federalism: Sudan according to the Interim National Constitution


VII. Power sharing Levels of government and the distribution of
competencies
A. Introduction: Two dimensions of power sharing in a federal polity
Two different dimensions of power sharing in a federal polity should be distinguished:
(1) First and foremost, federalism is linked to the idea of a vertical dimension of divided
powers, that is:
division of competencies between national, regional, local level
National Level of Government
Government of South
Sudan (GOSS)
Ten States Thirteen States Two States
Local Government (up to three levels)
21
>> sharing of powers here means the division of powers between these different
levels of government; certain powers are attributed to the centre, certain to the
states, some might be shared and some might also be reserved for local level.
However, the focus is on a vertical division of powers in a federal system of
governance.

(2) There is also a horizontal dimension to the idea of sharing powers, that is:
division of competencies between legislative, executive and judicial branch of
government
>> sharing of powers here means the separation of powers between different
branches of government on the same level; this normally is known as the doctrine
of separation of powers or the idea of checks and balances.








Executive
Power
Legislative
Power
Judicial
Power



However, to fully grasp the idea of power sharing in a federal polity one has to look at both of
these dimensions of power sharing and at their interplay. Hence, this Manual does not only
look at the division of powers between the levels of government with regard to one branch of
government only (as it is usually done, by looking at the division of legislative competencies
only), but we will also look at the division of powers across the levels of government. More
specifically it is important to examine, how administrative and legislative powers are linked
across the horizontal levels of government.

Why is this linkage important?
The argument behind this is to point to the fact that both concepts federalism and separation
of powers are deeply connected. They express the same idea from two different angles, the
idea being that in order to avoid tyranny it is better to distribute powers and to let them
balance each other.
Federalism describes the confluence of these two concepts, and it is central to understand their
relation in order to understand almost every federal or decentralised system and its
governmental system.

The German example
Horizontal
separation of
powers
Vertical
separation of
powers
Sub-national
Level
Local Level
National
Level
22
As stated above, by combining both, the horizontal and the vertical powers, the question
remains to be answered in how far the horizontal separation of powers is reflected at all
vertical levels of government. In Germany for example there is no judiciary at the local level.
Local courts are administered and paid by the states. Furthermore, the local level only has
very limited legislative powers.

GERMANY Executive Power Legislative Power Judicial Power
National Level yes yes yes
Sub-national Level yes yes yes
Local Level yes limited no


B. The horizontal separation of powers
1. Introduction
This section will spell out the horizontal dimension of power sharing, i.e. the distribution of
power between different branches of government. That means the focus will be on the
relationship between the legislative, the executive and the judicial branch and the federal
aspects in their structures, procedures and interrelationships.

The program is three-fold:
firstly we look at the Legislature (2),
secondly, we analyse the Executive(3),
and thirdly, we take a look at the control of the judiciary (4).

Then, before coming to the vertical separation of powers, we will consider the different
electoral systems used worldwide (5) to get an impression of the different democratic modes
that can be used for the election of the legislature (and, as far as applicable, the executive).
Finally, we will consider two very different, but equally feasible models of democracy that
can result from the combination of different choices (6).

2. The Legislature
(a) Overview: Levels of government, their legislatures and their basic functions
In a federal system, each level of government usually has its own legislative body, i.e. a
legislature exists at the national, the state, and sometimes also at the local level. The
distribution of competences between the different levels is determined by the national
Constitution (compare C.1, page 34).

What are the basic functions of these legislatures?
(1) Approval of the budget and the allocation of resources
23
>> Perhaps the oldest and most venerable right of a parliament is to determine the
budget (no taxation without representation).
(2) Legislative powers
>> Surely the most far-reaching power of parliament is the power to make laws.
(3) Election or control of government
>> Depending on the system of government, it is one of the central powers of the
legislature to either elect the executive or at least control the executive in the exercise
of its functions.
(4) Representation of the population
>> It is the task of all parliamentarians at all levels of government to represent the
people; i.e. that they may not follow their personal interest but they are expected to
further the interest of all thereby representing the whole population.

(b) Types of legislatures
There are unicameral legislatures, i.e. only one legislative body exists at a given level, and
bicameral legislature, i.e. two chambers involved in the legislative process exist at the same
level of government. Federal States usually choose a bicameral system: Through the second
chamber, the sub-units are represented at the federal level. However, since the participation of
the sub-units at the national level does not concern directly the horizontal separation of
powers, this topic will be dealt with separately under VIII, page 48.

(c) Horizontal separation of powers
The legislature may make laws, but may neither interfere with the implementation and
administration of these laws which is the task of the executive power, nor with the
adjudication of disputes which is the exclusive competence of the judiciary.
This distinction sounds easy enough. However, difficult questions can arise in the drafting of
a constitution and in its interpretation:
E.g. What role should the legislature have in the appointment or, more importantly, the
removal of judges?
May the legislature regulate an individual case by law? What about retroactive laws? May
such laws change administrative decisions?
What should the hurdle be for the impeachment of the President or other high executive
officers?
In some cases one could argue that the task, even though not concerned with making laws,
serves the purpose of checks and balances, i.e. controlling the other two branches of
government; in others one might be of the opinion that it amounts to undue influence on
another branch of government.
How strict should the separation of powers be?

24
3. The Executive
(a) Introduction: What is the executive? What is the government?
What is the Executive? What is a clear definition of it and which criteria are used?
Perhaps a clarification of the terminology and the notions used is useful, since there are lots of
different terms used:
Government the whole governmental system; includes all branches of government, i.e.
legislature, executive and judiciary. However, sometimes government is used to refer to the
top executive, i.e. the cabinet/council of ministers only.
Executive only one branch of government, which is neither parliament nor judiciary
(negatively defined); its task is the execution of laws, their implementation. Although
executive means the whole branch, often a distinction is needed between the leading
political top, i.e. the President/Prime Minister and his/her cabinet/council of ministers and the
and the bureaucratic basis (the whole administrative hierarchy). The distinction is based on
the respective political involvement and parliamentary responsibility.
Administration is yet another word for executive. As executive, it is sometimes used to
refer to the political officials at the top of government, sometimes to refer to the whole
administrative body.
These notions are not fixed and nowhere legally defined. But a discussion should be based on
a clear understanding of the terms.

(b) Presidential or Parliamentary System
There are two systems of electing a government and thus two types of government. The
differences between these two systems are based on the relation between the executive and
the legislature/parliament:
Presidential system:
The chief-executive is the president, which is elected directly by the people, i.e. by a
popular vote. His office is thus generally independent from legislature, since it did not
contribute to his election. Being elected through a direct vote of the people, his legitimacy
is very strong.
The president can be removed only by a special procedure and qualified majority (=
supermajority) decision, in the so-called impeachment procedure. In this special
procedure, often not only parliament, but also the Constitutional Court is involved. A
qualified majority or super-majority means that two-thirds or even three-quarters of the
members of the legislature have to support the motion to impeach the president.
The president often combines the head of state function with the function of a chief
executive.
Examples: USA, South Africa

Parliamentary system:
The prime minister or chancellor as chief executive is elected by the majority in
parliament. He/she usually is the head of the majority party in parliament and most (or
all) of his/her ministers are also MPs. The legitimacy and power of the prime minister thus
rests on his/her ability to form a stable majority in parliament.
25
The parliament, having elected the prime minister by absolute majority, also has the
power to withdraw its support and remove him/her by absolute majority. Hence, the prime
minister and his/her administration are much more dependent on having the support of a
majority in parliament.
Next to the prime minister there is often a (mostly symbolic) president as head of state.
Examples: Germany, India

How can your countrys system be qualified? Who elects the chief-executive and who can
remove him/her?

(c) Composition of the Executive
Are there any federal qualifications to the composition of the national executive thinkable? In
what sense can an executive be federally balanced?
The composition of the national executive, i.e. especially the nomination of the ministers, can
follow two different models:
Composition along party lines:
The chief executive chooses his/her ministers mainly or only along party lines. Here, not
the origin of a minister, his/her ethnicity, language or religion matter, but only his/her
political affiliation at least formally.
Examples: India, Germany, USA.
Federally balanced composition:
The constitution prescribes that the government has to be composed of representatives
from different regions / provinces, from different language groups or from different
religious groups. It is not left to the political process or the wisdom of the chief-executive
to assemble a balanced cabinet / council of ministers, but the composition is prescribed by
law.
Example: Switzerland.

(d) Civil service and proportionate representation: administrative integration
You might ask yourself, whether also the civil service should be in some sense federally
proportionate.
- What provisions are there in the constitutional law as well as otherwise?
Examples: Art. 33 (2) German Constitution; Art. 136 Sudanese Constitution.
- What could be the rationale for a provision, prescribing a federal balance in the
composition of the civil service?

4. The Judiciary
(a) The role of the judiciary
The judiciary is the third branch of government, next to the legislature and the executive. Its
role in the state system is to interpret the law and to apply it to the facts of individual cases to
26
resolve disputes between citizens in civil law cases or to guarantee a fair trial to the accused in
criminal cases.

(b) Separation of powers
The notion of the horizontal separation of powers demands that also the judiciary is
independent of the other two branches of government. The idea of judicial independence is a
well-established legal doctrine. It has not only been embraced by numerous national
constitutions and laws but has also been recognized by various international treaties and legal
instruments, starting with the Universal Declaration of Human Rights in 1948
4
, which states:
Article 10 Everyone is entitled in full equality to a fair and public hearing by an
independent and impartial tribunal, in the determination of his rights and
obligations and of any criminal charge against him.

The term comprises the institutional independence of the judiciary as well as the individual
independence of the judges.
(i) Institutional independence
The institutional independence of the judiciary refers back to the separation of powers and
means that no other branch of government may interfere with the functions of the judiciary.
Naturally, the judiciary is bound to apply the statutes passed by parliament as well as certain
administrative regulations made by the Executive within its competences. However, once
these provisions stand, neither the legislature nor the executive may get involved in their
application by the courts. Encroaching on an ongoing court case or correcting a decision in
the aftermath either by the executive or legislature is hence incompatible with the institutional
independence of the judiciary. Would the judiciary receive obligatory instructions by the
executive or the legislature during a court proceeding, it would not be independent. The
executive and the legislature may influence future judgments by changing the law(s) or by-
law(s) but are strictly prohibited from ordering courts on how to decide a certain case and
from retrospectively correcting judgments due to their political inconvenience. If an intended
statute aims at changing the legal situation of a pending case this certainly infringes on the
independence of the judiciary, especially if the state itself is a party to the pending case. Laws
and by-laws or regulations need to abide by the constitution and the Constitutional Court has
the right and the responsibility, upon motion, to declare void all acts contradicting to the
Constitution.
(ii) Individual independence
Next to the institutional independence, the independence of the judiciary also requires that the
individual judge renders judgments without fear or favour. In this respect, it is relevant that
- the judge does not depend on the body that nominated it and cannot be
removed arbitrarily (here, the appointment procedure, the tenure and the
conditions of service are of great importance);
- the judge does not have a personal interest in the outcome of the case or
does not even appear to have such a personal interest in the case; and
where the judge has such an interest, that he/she disqualifies him-
/herself from the proceedings;

4
Adopted and proclaimed by General Assembly resolution 217 A (III) of 10 December 1948.
27
- The judge does not depend on bribes to secure a living (here, an
adequate remuneration for judges becomes relevant).
A look at the methods of appointment for judges shows that a variety of possibilities exists in
that regard. Different models are in place such as:
appointment by parliament
appointment by the government
appointment by the government with consent of the parliament
appointment by the government with consent of a judicial service commission,
co-option,
election by the people.
Moreover, different methods of appointment are being used for different instances within the
judiciary. What is important within any system is, nevertheless, that the elected or appointed
judge enjoys independence from the nominating body. To secure the independence and
impartiality of the judiciary, the appointment procedure needs to adhere to transparent and
strict selection criteria or have another corrective such as democratic legitimization by the
people. Appointment criteria need to focus on the appropriate training and qualifications in
law and have to disregard other factors such as race or ethnic origin, color, sex, religion,
political or other opinion, and national or social origin. To allow accountability the applicable
criteria and the procedure for appointment need to be transparent. As this selection process
directly influences a judges career these criteria should, therefore, not only be applied to the
initial appointment, but also to subsequent promotions. Hence, it is desirable to have judges
elected either by other judges or by an independent body.
(c) Administration of the judiciary & financial autonomy
The relationship between the judiciary on the one side and the executive and legislature on the
other side manifests itself also in more concrete terms with regard to the administration and to
the funding of the judiciary. Depending on the organizational structure of the judiciary (for
the options available in a federal system, see below C.3., page 38 seq.), the court system has
to be funded from the national budget and or the state budgets.
The needs of the judiciary have to be taken seriously by the other branches of government
since insufficient funding may not only result in unsatisfactory working and training
conditions but may also lead to corruption of judges. Neglect of financing the judiciary
adequately may therefore lead to impairing the independence and impartiality of judges.
Various international standards call for securing financial autonomy of the judiciary.
Since the budget is usually - prepared by the executive and then brought before the
legislature for approval, the judiciary is not involved in devising the budget. Being in a
position to limit resources for any institution always brings along the inherent danger of being
able to control this institution. To avoid insufficient funding and external control of these
resources it is important for the judiciary to communicate to the other powers their financial
requirements and to posses a body within the judiciary responsible for administering the
resources.

5. Electoral systems
In the following, we will introduce the most well known electoral systems used for the
election of parliament. They can be used at any level of government in a federal system.
Theoretically, the national parliament could be elected according to a completely different
28
system than a state parliament. The only thing to keep in mind in that respect is that it is
highly important that the voters know which system applies where and how exactly it
functions.
For presidential elections, any plurality/majority system can be used. However, in presidential
elections, many States want to ensure that the candidate receives an absolute majority.
Therefore, Alternative Vote and Two-Round Systems are more common (see below).
Sometimes a candidate also needs a certain minimum of support from different regions, i.e.
the geographical distribution of the votes matters.
(a) Election law: majority rule or proportional representation
The State system, but in particular the party system in a State are very fundamentally shaped
by the election laws that are applicable in a country. They determine in how far the formation
and strengthening of political parties are encouraged or whether individual candidates are in
the center of attention; they decide whether the forming of coalitions between different groups
or parties are favoured or whether parties can focus on a specific ethnic group for support
etc..
5

Possible goals of an election system are the following:
1. Representation
2. Proportionality of seats and votes
3. Accountability to constituents
4. Stable and efficient governments
5. Victory of the candidate most acceptable to all
6. Strong legislative opposition and oversight
7. Incentives for conciliation
8. Minority office holding
9. Respect for international standards
10. Design according to the constitutional requirements
11. Easy administration of the elections
12. Low cost of the election
13. Making it easy to vote
14. Encouragement of strong party system

Each of the different election systems favours certain goals at the expense of others: None of
the electoral systems fulfils all of them to the same degree. Therefore each State has to decide
for a system according to its own needs and preferences.

Electoral system families:
The electoral systems used worldwide can be broadly grouped into three different families.
(i) Plurality / majority systems

5
International Institute for Democracy and Electoral Assistance (IDEA): Electoral System Design: The New
International IDEA Handbook, Stockholm 2005, page 6.
29
In these systems, after votes have been cast and totaled, those candidates or parties with the
most votes are declared the winners. Depending on the specific system chosen, there may also
be additional conditions.
The easiest and most widely used plurality system is the First-Past-The-Post-System
(FPTP): There is only one winner per constituency; he/she is the person that received most of
the votes. Whether you win a simple majority (maybe only 16 % of all the votes cast, because
the rest of the votes are split between all the other candidates) or a landslide victory (over
50%) makes no difference.




Examples: India, UK, Canada, and the United States.

Majoritarian systems, such as the Alternative Vote and the Two-Round System, try to ensure
that the winning candidate receives an absolute majority (i.e. over 50 per cent). Each system
in essence makes use of voters second preferences to produce a winner with an absolute
majority if one does not emerge from the first round of voting.
6
The Alternative Vote does
that with only one election round, while the Two-Round System, as the name suggests, gives
the voter the chance to decide between those candidates that received the highest numbers of
votes in the preliminary round.
If the FPTP-system is used in a multi-member constituency, i.e. several of the candidates are
elected for parliament within the same voting district, it is called Block-Vote: Voters have as
many votes as there are seats to be filled, and the highest-polling candidates fill the positions
regardless of the percentage of the vote they achieve.


6
http://aceproject.org/ace-en/topics/es/esd/esd01.
Voter
Voter
Voter
Voter
Voter
Voter
Candidate
Candidate
Candidate
elected
Voter
30
(ii) Proportional representation systems:
The share of votes is translated into share of seats in parliament. For example, a party, which
gains 10 % of the votes would receive 10 % of the seats here (whereas in a majority rule
system, it might receive none, since its candidates might not reach the majority in any of the
electoral districts).
A proportional representation system requires the use of electoral districts with more than one
member: it is not possible to divide a single seat elected on a single occasion proportionally.
The greater the number of representatives to be elected from a district, the more proportional
the electoral system will be.
7


There are two major types of proportional representation system: the List Proportional
Representation and Single Transferable Vote.
List Proportional Representation involves each party presenting a list of candidates to the
electorate in each multi-member electoral district. Voters vote for a party, and parties receive
seats in proportion to their overall share of the vote in the electoral district. Winning
candidates are taken from the lists in order of their position on the lists.

Single Transferable Vote uses multi-member districts, i.e. each district elects several members
of parliament, and voters rank candidates in order of preference on the ballot paper in the
same manner as under the Alternative Vote system. In most cases, this preference marking is
optional, and voters are not required to rank-order all candidates; if they wish, they can mark
only one.
Once the first preference votes are counted, the calculation then begins by establishing the
quota of votes required for the election of a single candidate. The quota required for election
is calculated by the following formula: Quota = (votes / (seats +1)) +1
The final result, i.e. which candidates of the district have received enough votes for a seat, is
determined through several counts. At the first count, the total number of first-preference
votes for each candidate is ascertained. Any candidate who has a number of first preferences
greater than or equal to the quota is immediately elected. In second and subsequent counts, the
surplus votes of elected candidates (i.e. those votes above the quota) are redistributed
according to the second preferences on the ballot papers. After any count, if no candidate has
a surplus of votes over the quota, the candidate with the lowest total of votes is eliminated.
His or her votes are then redistributed in the next count to the candidates left in the race
according to the second and then lower preferences shown. The process of successive counts,
after each of which surplus votes are redistributed or a candidate is eliminated, continues until
either all the seats for the electoral district are filled by candidates who have received the
quota, or the number of candidates left in the count is only one more than the number of seats
to be filled, in which case all remaining candidates bar one are elected without receiving a full
quota.
8

(iii) Mixed Systems

7
Compare http://aceproject.org/ace-en/topics/es/esd/esd02.
8
http://www.aceproject.org/ace-en/topics/es/esd/esd02/esd02d/default, International Institute for Democracy and
Electoral Assistance (IDEA): Electoral System Design: The New International IDEA Handbook, Stockholm
2005, page 71/ 76.

31
Mixed systems intend to combine a plurality/majority system with a system of proportional
representation; thus two electoral systems are used. The voters therefore have to vote for two
kinds of representatives: a first set elected under a majority system, and a second set elected
under a proportional representation system.
Two forms of mixed systems are used: Parallel Systems and Mixed Member Proportional
Systems.
In a Parallel System, the calculation of candidates elected under the proportionality system is
not influenced by the seats attributed to representatives of the first category of representatives
elected under the majority system. The calculation of seat under both systems is strictly
separated.

In a Mixed Member Proportional, on the other hand, the seats under the proportionality
system take into account any disproportionality created by the majority system; i.e. if the
majority system has resulted in members of party A getting over 50 % of the seats of the first
category despite having received only 30 % of the votes, this overrepresentation will be
balanced through filling the percentages received by other parties by the second category of
representatives. Depending on how many seats of the second category are available, party A
will end up with 30 % of all the seats (or little more).
A Mixed Member Proportional System should this generally result in proportional outcomes;
while the proportionality of a Parallel System lies in between that of a pure Majority and a
pure Proportionality system.
9


(b) What are the advantages or disadvantages of these two systems?
10

(i) Plurality or majority systems:
1. Advantages
(a) Produce clear results, either loser or winner; this normally facilitates the formation of
government.
(b) More stability, because governments are based on clearer majority.
(c) More transparency, because there is only one MP per constituency. This creates also a
stronger link between a representative and his/her constituency which may lead to the
representation of regional interests and greater accountability.
(d) Especially the FPTP-system is easy to understand for the voter.
(e) FPTP advantages broadly-based parties. Often leads to two-party system.
(f) Majority systems allow the voter to vote for people instead of for parties only.


9
http://www.aceproject.org/ace-en/topics/es/esd/esd03/default, International Institute for Democracy and
Electoral Assistance (IDEA): Electoral System Design: The New International IDEA Handbook, Stockholm
2005, page 90f.
10
Compare International Institute for Democracy and Electoral Assistance (IDEA): Electoral System Design:
The New International IDEA Handbook, Stockholm 2005.

32
2. Disadvantages
(a) Not all parts of society are represented. Especially minorities are excluded from
representation.
(b) Smaller parties are underrepresented.
11

(c) The design of the electoral districts has a decisive impact on the outcome. There is no
neutral way of designing the electoral districts.
(d) Women are usually underrepresented or excluded.
(e) It leads to a large amount of wasted votes, i.e. votes that have not resulted in
electing a candidate to parliament, and may therefore discourage political participation
and cause frustration by those constantly in the minority in their respective district.
(f) It can lead to vote splitting where two parties with similar goals run in the same
district: both might receive 25%, so that the candidate of an overall less popular party
gets elected with 28 % of the votes.

(ii) Proportionality systems:
1. Advantages:
(a) Fairer and more representative results; most groups are somehow represented in the
assembly; proportionate representation rule therefore often more appropriate in
strongly divided societies.
(b) It enhances need for consensus building, because it mostly denies clear majorities on
either side but furthers a high number of parties. These have to be bound together in
coalitions and in to compromises.
(c) More inclusive.
(d) Encourages the formation of political parties or like-minded groups for the setting up
of the lists.
(e) Votes are not wasted, but count towards electing the candidate of candidates of the
party of the voters choice.
(f) It encourages parties to campaign also in districts in which they will not gain a
majority of the votes, since also the lower percentages count towards the election of
the partys candidates.
(g) Encourages coalition governments, thereby also stabilizing a countrys politics since
power does not shift from one extreme to the other.

2. Disadvantages:
(a) On the other hand, it can be argued that coalition governments lead to gridlock and
hamper quick and coherent decision making.
(b) Proportional representation systems may lead to a fragmentation of the party system,
i.e. too many political parties are founded and are represented in parliament.
12


11
In the 1998 elections in Lesotho, the Basotho National Party won 24 % of the votes, but just 1 % of the seats.
12
One mechanism often used in political system with proportionate representation to limit the number of parties
and avoid the existence of mini-parties is to have a threshold for entering parliament: In Germany, for example, a
33
(c) No influence of the voter concerning individual candidates: lists are set up by the
political parties.
(d) Extremist parties have a chance of being represented in parliament.
(e) Small parties might receive an undue amount of influence because the larger parties
depend on them for coalition governments.

(iii) Mixed systems
1. Advantages:
They combine the advantages of both systems by on the one hand having directly elected
candidates bound to their constituencies, on the other hand they are able to ensure
representation of smaller parties, minorities, women through the candidates elected by party
lists.
2. Disadvantage:
The system is more complicated: it is harder for the voters to understand and requires
therefore good voter education programmes in order to enable the voters to use their votes in
their own best interest; it is also more complicated to prepare and to count and calculate the
results.

What would be the appropriate system for your country? What past experiences are there?
Which factors need to be taken into account?

6. Models of democracy: majoritarian vs. consensual
The combination of certain choices concerning the issues discussed so far can lead to two
different models of democracy. These stereotypes might help to understand how the
different aspects institutional arrangements, relation between legislature and executive,
election laws fit together. It should also show that these different elements complement and
depend on each other. Of course, there are no clear cut or fixed systems; every country can try
to combine elements anew. However, there are also experiences of how certain elements fit
together coherently.

These two models demonstrate that there is definitely not just one model of how democracy
works. Different societies in different times have very different needs and expectations and
possibilities. These two models show that there is room for a broad range of understanding
and practising democracy. Furthermore, they exemplify how institutional arrangements are
linked to the broader social structure.
(i) Majoritarian Democracy:
- Majoritarian election laws
- Mostly a two party system
- Majority rule as most important rule of decision making.

party has to gain at least 5 % of the votes in order to be admitted to parliament. In Turkey, the threshold is even
higher at 10 %. However, it has to be kept in mind that this mechanism leads again to a little distortion of the
proportional results of the elections.
34
This system is based on one very fundamental assumption: that there is a very high degree of
social cohesion and homogeneity. That requires a society which is rather unified, homogenous
as to race, religion, languages, or cultures.
Why? Because in this model where the majority decides, the minority has to be able to accept
the will of the majority. This is normally only possible, where the fundamental decisions and
assumptions about what a society wants and stands for (values and principles) are not
contested. Only in such a situation, the minority can accept the decision of a majority, because
it knows that it is not threatened in its fundamental beliefs (which it shares with the majority)
and that it has the chance to form the majority after the next election.
Best example: UK
(ii) Consociational or Consensual Democracy

- Often federal/decentralized systems
- Often other, rather independent institutions (Constitutional Court, Central Bank, etc.)
- Multi-party system based on proportional representation rule in election law
- Compromise and inclusion as main decision making rule

This model of democracy is much more likely to evolve and function where the society is
more heterogeneous and split into different groups, i.e. clans, races, religions, etc. It is
mainly based on the assumption that decisions have to be found by way of compromise
between most groups, and not by one majority dominating the scene.
Also, political questions are to a far greater extent than elsewhere taken out of the merely
political sphere of party politics and majority rule, by way of handing them over to expert
institutions, like courts or central banks. This helps to keep contentious questions out of the
daily political debate, which might end with an up-or down-vote.
Example: Switzerland

C. Vertical separation of powers
1. Distribution of legislative powers between federal and state level
Why should we start with looking at distribution of legislative competencies?
Modern legal and political thinking perceives law-making as the central technique to shape
society by formulating policies in law. Hence, legislative powers are the most fundamental
competencies and it is natural that their assignment is decisive for the powers and the
influence that a specific level of government has.

How can we divide competencies? What techniques are used here?
(1) Competencies are normally assigned to the different levels in schedules, tables or lists
that are in the constitutional text itself or attached in the end. These schemes list competencies
for each layer in the constitution or one of its annexes, i.e. for the national and the sub-
national, sometimes also for the local level of government.
Hence, Constitutions normally do not leave open or decide on a case-to-case basis that has
competencies in certain areas or subject matters. Instead, they determine these assignments in
35
advance. Basic understanding is that the level should have the power to legislate which is
most fitted and most appropriate for dealing with an issue.

(2) There are different forms of sharing competencies or different types of legislative
competencies. In general 4 different types of legislative competencies can be distinguished:

Exclusive powers
That means these competencies are assigned exclusively to one level.
>> Examples:
- currency, passports normally national issues and dealt with on national level only
- regional development, civil service of states - regional level and dealt with only there

Concurrent powers
That means these subject matters are not assigned to one level only, but to several levels. One
level, for example the national level, can thus regulate within these subject matters as long as
another level does not. The difficult aspect here arises, when another level wants to make use
of its powers too.
Then the question arises is how this situation of concurrence is dealt with?

Two different concepts:
(a) Priority system: here the constitution gives one level of government general priority
over the other level, i.e. in case the former level decides to regulate the issue, the
legislation of the latter is no longer applicable. Sometimes this priority is subject to
certain conditions: For example in Germany, the national level of government may
only exercise its concurrent powers and thereby override state legislation on the same
subject, "if and to the extent that the establishment of equal living conditions
throughout the federal territory or the maintenance of legal or economic unity renders
federal regulation necessary in the national interest." (Cf. Art. 72(2) German Basic
Law).
(b) Shared system: here, both levels of government can regulate at the same time. Only in
cases of a direct collision it has to be determined which legislation prevails. This
determination is made on a case to case basis according to certain principles listed in
the constitution. (Sudan Schedule D and F of the INC, South Africa)



Residual powers
Residual powers concern those matters which have not been expressly distributed in the
Constitution. For example, internet trade is a rather new problem which did not exist when
many constitutions were drafted. However, such new matters raise the question which level of
government has the power to regulate them.
Here again are different concepts possible:
36
(a) The centre, ie the national level, should always have the power to regulate such new
matters (e.g. Art. 248 Indian Constitution).
(b) The States or sub-national units should have this power (e.g. in Art. 1 Sec. 8, 10
th

amendment of US Constitution).
(c) The assignment has to be taken flexibly, according to the nature of the matter (Sudan,
Schedule E of INC; South African Constitution)
The last model of a flexible assignment is rather new. What advantages and disadvantages
does it have?
>> Advantage: flexibility, not decision either way but more leeway
>> Disadvantage: source for trouble and dispute;

Implied powers doctrine
This doctrine is normally not expressly mentioned in the Constitution but developed in the
case law of Constitutional or Supreme Courts. It reacts to the same situation as the residual
powers (i.e. when the subject matter is not expressly assigned to one level or the other).
However, here implied powers are given, when the issue in question is naturally related to the
issues for which one level already has jurisdiction.
>> example:
- seat of government should be regulated by each level (even if not spelled out);
- nuclear power plant and emission law regulated by centre, even if otherwise states
do emission law


Who decides conflicts?
One more aspect has to be mentioned here: the concept of sharing powers and assigning them
to different levels of government almost inevitably leads to debates, conflicts and quarrels
about which level has the power to regulate. Therefore it is necessary to provide in the
Constitution for an arbiter of such questions. In most constitutions a Constitutional or
Supreme Court is established and expressly empowered to settle such questions.


2. Distribution of executive powers between the levels
In a second step, the Constitution has to determine which level has the power to implement
the laws. This is also a very powerful task, since it gives the right to directly govern the
citizens and thus influence the way laws are understood.

How are administrative powers distributed? What are possible options?
>> A theoretical option would be to assign executive competences entirely independent of
legislative powers; however, this is never done; instead administrative powers are always
somehow linked to legislative ones,
>> The two options which remain are:
The level of government that made the laws implements them itself; or
37
All legislation, including national legislation, is implemented and administered by
the sub-levels.

Two concepts of power sharing in a federal polity
These two last options translate into two different concepts to describe the operation of
federal systems:

Dual federalism Levels of government are separated and act for themselves, i.e.
each level legislates, implements its own laws, and sets up its
own court structure. The term Dual (double) originates from
the first federal system, in the USA, where there were the states
and the federal level, i.e. two layers.
Cooperative / executive federalism
Legislative and administrative competencies are intertwined and
thus the levels need to co-operate with each other in the
implementation of statutes. Additionally to executing their own
laws, the execution or implementation of federal laws is also the
task of the lower level of government. (Germany, India)
Example:
Tax laws of the national level these can be handled by national
agents in every part of the country, or entrusted to state
authorities, who collect the money and send it to the central
government.
>> Both models have huge implications for how a federal system works:

In a dual federalism there is
- Most of all, it is often not easy to separate the different layers, and especially the
federal level will try to influence the states to do something.
- Somehow it seems to be the American experience that even if you separate
competencies, there still is a huge demand for coordination, hence this coordination
will just evolve anyway, but not planned.
- It can be more expensive to have a federal bureaucracy next to the state authorities,
since they basically have to be set up in every part of country.

Co-operative federalism, on the other side, avoids these problems, but has others.
First of all - a huge need for coordination, for communication between the levels about
how things are run arises.
Secondly, there is the need for compromise and taking into account the interest of
other actors. Since central laws are executed by the states, they will try to influence
these much more, since they might be more directly affected (especially with regard to
organisational, sometimes also financial aspects).
And thirdly, co-operative federalism is prone to gridlock. The need for compromise
and coordination can make decision-making very difficult.

38
3. Distribution of judicial powers in a federal system
The following pages will give an introduction into the organization of court systems in federal
or decentralized states. We will present different models of how court systems can be
organized.

(a) Court systems in decentralised states two models
In a federal system, one crucial question is how the different sets of law are to be
administered; in other words: what kind of court system should be created in order to
guarantee an effective and transparent way of adjudicating the different sets of law (national
laws / state laws).
There are two basic models of how to set up a court system in federal states: the integrated
model and the separated model. Both models describe two versions of how judicial
competencies can be shared in a federal system.
While above the distribution of competences between different levels of government were
discussed, the following comments focus on the judicial aspect of sharing competences. The
question now is: which courts exist and how are jurisdictions distributed among them?
(i) The separated model
The separated model, as applied in the USA, both, the national level and the state level each
have their own three-tier court system (Local Court, Circuit Courts of Appeal, Supreme
Court). State courts only apply only the laws of their respective states, whereas federal law is
exclusively adjudicated by federal courts. This also means that there are federal courts
everywhere in the country, which exist next to the states courts. as three layers of state courts
exist in each state, too, each of which is crowned by a state Supreme Court.


The separated model as applied in the US

state level
federal level
applying state law only
applying national law only
National
Supreme Court
Circuit Courts of
Appeal
Local Courts
Supreme Court of
the State
States Courts of
Appeal
Local Courts
39


(ii) The integrated model
In contrast, and as the name already suggests, in an integrated model, courts in general have
the capacity to deal with both, state law cases and federal law cases. Hence judges even at
lower courts are authorized and qualified to adjudicate both sets of law. In some systems that
follow the integrated model, the highest court of the country at the federal level has only
jurisdiction over federal law cases, whereas the highest court in the state is the court of last
instance for state law (Germany). In other systems, both types of cases, those involving state
law as well as those involving federal law, can be appealed before the Supreme Court (India).

Another issue within the integrated system is the question of which level of government is
responsible for which courts with regard to administrative and financial tasks. Whereas in
Austria, the entire court hierarchy is administered by the national level, in Germany, only the
Supreme Court level is; all other courts are financed and administered by the states.

40
The integrated model



Federal Supreme Courts are organised FEDERAL LEVEL
and financed at the national level.



==============================================================================



STATE LEVEL













__________________________________________________________________________________________

LOCAL
LEVEL





_









(b) Advantages and disadvantages of both systems
- The integrated model gives rise to fewer conflicts over jurisdiction. In two different
strands of courts (as in the separated system), different opinions regarding their respective
Federal
Supreme
Higher Regional Courts
(HRC)
The HRCs are the courts
of last instance for cases
dealing with state law and
court of second / third
instance for cases dealing
with federal law.
Other Regional / Local Courts
It is important to understand that the
term local court does not yet mean
that this court is administered and
financed at the local level. Quite often,
the lowest court at the state level is also
called local court.


Courts on the local level are organised and financed by the local
administration. They are generally courts of first instance for cases
dealing with federal / state law. However, many federal systems have
local courts which are organised at the state level. They are not
organised and financed by the local level of government but by the
states.

= National level
= State level
= Local level
41
competencies are likely to occur. Hence, during a first period the jurisdictions have to be
marked out and accepted.
- The integrated model is less expensive, since there are less courts and judges.
On the other hand:
- The separated model ensures more independence and variety. Different entities (states,
tribes, or regions) have more leeway to develop their own adjudication in respect of their
own laws; hence different laws and standards can exist at the same time, while there is
less pressure to adhere to the same concept.
- The separated model also provides for some sort of competition between states and their
laws.

Example (1): The Court System in Germany
The German Constitution, the Basic Law (Grundgesetz), regulates the judiciary in Arts. 92 ff.:

Article 92 [The courts]
The judicial power shall be vested in the judges; it shall be exercised by the Federal
Constitutional Court, by the federal courts provided for in this Basic Law, and by the courts
of the Lnder.

The term courts of the Lnder refers to the courts of the sixteen different states, called
Lnder. Thus, there are federal courts as well as state courts; there is the Federal
Constitutional Court and there are Lnder Constitutional Courts.
In general, the courts of first and second instance are trial courts, i.e. they consider a case on
points of law as well as on points of fact, whereas the competence of the Federal Courts
(supreme courts), in contrast, is mostly restricted to the review on points of law only.

The German Constitution provides for five different jurisdictions:
Below these five federal supreme courts, each jurisdiction has its own court system of state
courts. Thus, in Germany, five different branches of jurisdiction exist, these being the
- ordinary jurisdiction dealing with all criminal and civil cases,
- the administrative jurisdiction,
- the social security jurisdiction,
- the financial jurisdiction, and
- the labour jurisdiction.
All of these five jurisdictions have - at least in general one or two courts of first instance for
each state, and one or two higher regional courts, i.e. one or two courts of the second instance
for each state. These courts are state courts. At the top, every jurisdiction has its supreme
court, which is a federal court.
Within the respective jurisdiction, the competent court for a new case is one of the courts of
first instance. Higher courts are only entitled to review a lower courts decision if and to the
extent that they are seized with a legal remedy, but never ex officio.
42

Chart: Structure of the judiciary in Germany

Besides these five jurisdictions each of them dealing with the respective substantive law, there
is the Federal Constitutional Court, dealing exclusively with constitutional law. In addition,
most of the sixteen Lnder have their own constitutional court, dealing with specific state
constitutional law.

Example (2): The Court System in Sudan
The court system in Sudan is designed according to the integrated model. According to Art. 124
INC, the National Judiciary consists of a National Supreme Court, National Courts of Appeal and
other national courts as deemed necessary. Whether or not a state judiciary shall also be established
is not decided by the constitution. Art. 181 INC only offers the establishment of such state courts by
the state judiciary as necessary. The requirement of state courts mainly depends on the number of
other national courts that are to be established: The more court levels are introduced on the national
level, the less courts are required at the state level. By now, for the area of the northern states, the
national government transferred the old model into the new system. Similar to the Austrian system,
all (professional) courts are national courts.
13
Judges are recommended by the National Judicial
Service Commission and appointed by the President. Their salaries are paid from the national
budget. With regard to the jurisdiction of the Supreme Court, the Indian system was implemented:
Both, cases referring to national law and cases referring to state law can be appealed before the
Supreme Court. Considering the legislative powers of the states, it might become a specific
challenge for the Judges at the higher courts to receive appeals from 15 different state laws (e.g.
penal laws).
Within Southern Sudan, Art. 172 INC envisages the establishment of a Southern Sudan
Supreme Court (SSSC) and a Southern Sudan Court of Appeal at the GoSS-level. The SSSC
is the court of last instance for cases dealing with state law of southern states and laws of
Southern Sudan. Cases dealing with national law still can be appealed before the National
Supreme Court (Art. 173 INC). Hence, within Southern Sudan, again, the Indian model is
followed: The two sets of laws (state law and laws of Southern Sudan can be appealed before
the Southern Sudan Supreme Court which is insofar the court of last instance. However, in the

13
The only exceptions are the Town and Rural courts at the local level. However, those courts are lay-courts.
Federal
Court
of Justice
Federal
Administrative
Court
Federal
Labour Court
Federal
Social Court
Federal
Finance
Court
Higher Regional
Court
Regional Court
Local Court
Higher Regional
Court
Higher Regional
Court
Higher Regional
Court
Local Court Local Court Local Court Local Court
National
Level
State
Level
43
context of Sudan as a whole, the German approach had been chosen: National laws can be
appealed from the SSSC to the National Supreme Court.
Art. 172 INC directs the establishment of further courts on the Southern Sudan level to the
Interim Constitution of Southern Sudan (ICSS). According to Art. 127 ICSS read together
with Art. 171 ICSS and Art. 125 of the Model Interim Constitution of Southern Sudan states,
within the area of Southern Sudan, the court hierarchy looks as follows: Below the afore
mentioned Southern Sudan Supreme Court and Courts of Appeal at GoSS-level, High Courts
and County Courts are located at state level. Lower courts may either fall under the
responsibility of the states or the relevant local level.
14
Hence, the suggestion of Art. 181 INC
to establish also courts at the state level had been implemented by the drafters of the ICSS.

Fifteen Northern States Ten Southern States




14
Art. 127 ICSS: The Judiciary of Southern Sudan shall be established and structured as follows: (a) The
Supreme Court of Southern Sudan; (b) Courts of Appeal; (c) High Courts; (d) County Courts; and (e) Payam
Courts.
National Supreme Court
National Courts of Appeal
Public Courts
District Courts
Town and Rural Courts
Supreme Court of Southern Sudan
Courts of Appeal of Southern Sudan
High Courts
County Courts
Payam Courts
Boma Courts
National Level
GoSS Level
State Level
Local Level
44
(c) The Constitutional Court and its role in federal disputes

If you look at modern court systems, there is always one court, which is of special importance
with regard to constitutional issues and this is the Supreme or Constitutional Court. Why is
that so? Why is his role of importance, especially for decentralised systems? And what is the
difference between a Supreme and a Constitutional Court?
We will now take a closer look at these special courts. However, our perspective here is
mainly concerned with the federal aspects of these courts.

(i) Introduction and general questions: basis and two models of constitutional
courts
What is the basis for the special importance of constitutional or supreme courts?
The very basis of the pivotal role of these courts lies in the supremacy of the constitution over
statutory law. If constitutional law is the supreme law of the land, as it is accepted today and
usually spelled out in constitutions worldwide, the court, which has the final word about what
the supreme law of the land (i.e. the constitution) says, also shapes the interpretation of all
other statutory laws. Of course, every court has to take into account constitutional law when
adjudicating civil disputes or criminal cases. However, the decisions of the Supreme or
Constitutional Court are usually binding for all state organs. Therefore this Court is in the
position to ultimately decide what the constitution means.

Short excursus: the difference of a Constitutional Court and a Supreme court
Generally, countries that follow the common law system tend to have a Supreme Court
instead of a Constitutional Court. The Supreme Court is the highest court in the court
hierarchy and thus the last instance of appeal. Lower courts are bound by its decisions by the
common law principle of stare decisis. A Supreme Court is usually not concerned with
constitutional questions only, but appeals on any matter. However, due to the case load and
the existing court system below them, they tend to specialize in constitutional adjudication.

A Constitutional Court mostly exists in civil law countries. It is a specialized court for
constitutional questions only. As such, it is not part of the ordinary court hierarchy and cannot
be used as a court of appeal. Nevertheless, individuals that wish to address it usually have to
exhaust all other available remedies first. State organs mostly have privileged access to the
Constitutional Court.

45
Overview:
Supreme Court - diffuse system of judicial
review
Constitutional Court - concentrated system
of judicial review
The Supreme Ct. is part of the regular court
system and stands at its top. It is the highest
court of appeal.
Const. Court is a separate and special court
only responsible for adjudication of
constitutional law; it exists next to a Supreme
Court (e.g. for civil and penal law matters).
The question of constitutionality can be raised
before and decided by any court; any court
(even the lowest) can consider a law
unconstitutional and thus not apply it.
The Constitutional Court is the only instance
that may declare a statute unconstitutional and
therefore void. Once the Constitutional Court
has struck down a statute, it is not only
inapplicable but does not longer exist. Even
though all courts may review the
constitutionality of a statutory law, they are
not allowed to ignore it, but have to refer the
case to the constitutional Court.
The doctrine of stare decisis ensures that once
the S.Ct. has decided about the
constitutionality, the lower courts have to
respect it.
The decisions of the Const.C. are binding for
all state organs. Often, they have the force of
law.
Regularly lifelong tenure for justices. Only limited tenure of justices, because of the
political influence they wield.
E.g. India, USA E.g. Germany, South Africa

What advantages do you see for the Constitutional Court model and which for the Supreme
Court model?
Constitutional Court
- Political power to review constitutionality of laws (and thereby control the Parliament)
is restrained. Only the few judges of the Constitutional court have this power. In that
sense, the Const. Court model is less broadly political, since it is only one institution,
which has such powers.
- Only especially committed and well trained lawyers will be appointed to the
Constitutional Court. This can stabilise the system.
- From the perspective of the separation of powers doctrine, any court that can strike
down the laws promulgated by the legislature is problematic. However, the Const.
Court model makes this tension more transparent.

Supreme Court
- The supremacy of parliament, the elected representatives of the people, is at least
formally not compromised in the same way as in a Constitutional Court system, since
no court has the competency to declare statutes void. Statutes are only left inapplicable
in individual cases.
- Individuals do not have to exhaust all remedies AND address the Constitutional Court
before it can be found that a statute violates the constitution: already the court of first
instance can leave the statute unapplied for this reason.
46

What is the appropriate system for your country?


What now is the special federal function of a constitutional court?
To say it simply: it serves as the referee in federal disputes. In a decentralised polity there is
no hierarchy between its different levels. The central level does not have the power or the
competence to give orders to the state levels. Instead, the states take part in forming the
central law-making. In cases of conflict such a decentralised polity thus needs a referee. It is
here, that a constitutional court has its primary function for a decentralised system, because it
is here, where disputes between different entities of the decentralised polity can be settled.

(ii) Federal aspects in the composition and competencies of constitutional courts
(1) Composition
Is the appointment process federally structured?
In some countries the federal chamber of the legislature is involved in the appointment
process (e.g. in the US, Germany); in other countries a special commission whose
composition also reflects a federal balance has an important say in the process (e.g.
Sec. 178 South African Constitution, the Judicial Service Commission). Often, the
appointment process is more federally structured in concentrated systems of judicial
review, i.e. Constitutional Court systems, since here the overall political function of
the court is more obvious.

Are there any provisions as to the federally proportionate composition of the bench?
Not directly at least. Indirectly, the rules of a proportionate representation of regions in
civil service (Art. 33 II German constitution) can also apply to judges and thus to the
Constitutional/Supreme Court. It seems to be rather the appointment procedures which
ensure the federally proportionate composition.

(2) Competences
How far reaches the right of the Constitutional/Supreme Court to review the
constitutionality of laws only federal laws or also state laws?
Regularly, Constitutional Courts and Supreme Courts can review any law, national or
state. This is based on the supremacy of the Constitution which prevails over any
statutory law. Hence the constitutional court has the position to shape the whole legal
order according to its understanding of the constitution. (Sec. 122, Sec. 167 (4) f Const
South Africa, Art. 132 ConstIndia). In South Africa, the Constitutional Court also has an
oversight function as to the constitutionality of common law.
Where the sub-levels have their own constitutional courts, these are responsible of testing
the compatibility of state laws with the state constitution.

Types of competences
47
Their competence normally stretches as far as the constitution reaches, i.e. the
Constitutional Court is not only responsible for the delineation of competences between
organs and levels of government, but especially also for the protection of human rights of
the individual. However, for the federal balance the adjudication of constitutional courts
can be dramatically important (e.g. in the US the adjudication on the commerce clause; or
in Germany on the term equal living conditions).
The adjudication of human rights can be very influential too, since these are more broadly
formulated and thus open to interpretation. From a federal perspective, however, human
rights often have a unifying tendency since they are normally applied equally across the
country. In some countries, human rights have become the dominant focal point of
integration (e.g. 14
th
amendment in US Constitution).


48
VIII. Participation of states on the federal level
The participation of states in the exercise of the federal powers usually takes the form of a
structural involvement in the federal political bodies. In most federal states, the federal
parliament is organized in a bicameral system, where one of the chambers wholly or partially
embodies the representation of the states and may more or less be typified as a states
chamber. The way in which the states chamber is organized may differ considerably from
one state to another. The practical organization is always the result of various factors, such as
the current electoral system in that country (majority system or proportional system), the
origin and development of the federal structure (coming together or holding together) and the
number of states and their mutual demographic and economic relationship.










A. The relevance of the type of federalism for the second chamber.
In a coming together federalism, the second chamber, the representation of states, is a relict
from the confederal status, where the States were the only ones to be represented at central
level. While deciding to strengthen their ties, the formerly independent States wanted not only
to have exclusive powers at their state level, they also wanted to have shared powers at the
national level in order to safeguard their powers in the new federal state.
In a holding together federalism, the second chamber is freshly introduced in order to reflect
the diversity of a country at the national level of government and to allow certain minorities to
be represented at the national level.

B. Composition of 2
nd
Chambers
In general, there are two different concepts of how the 2
nd
chamber is composed:

1. Strictly equal representation:
The first one opts for a strictly equal representation of states in the 2
nd
chamber,
irrespective of the size and the population of each state. This approach reflects a strong
confederal element and resembles the approach which is applied in many international
organisations (e.g. in the General Assembly of the United Nations, China and India with each
more than one billion people have the same one vote as Andorra with only 66.0000
inhabitants).
National Legislative Power
First Chamber Second Chamber
National
Executive Power
National Judicial
Power
49
This first concept is, i.a., followed by the United States, Nigeria, South Africa, Sudan,
Mexico, and the Russian Federation.

2. Weighted representation
Some argue that the concept of equal state representation infringes the democratic right of the
individual citizen to be equally represented in a legislative decision making process at the
national level. In Switzerland
15
, for example, theoretically, 23 senators from the smallest
cantons (representing ca. 20 % of the population) might veto any decision in parliament.
As a consequence, other countries based their representation of states on population, although
relatively more seats were still given to less populous states. The most advanced system of a
weighted representation might be found in Austria: All states are represented in the 2
nd

chamber (Bundesrat) in proportion to the number of nationals in each of them. The state with
the largest number of citizens delegates 12 members; every other state receives as many as the
ratio in which its nationals stand to those in the first-mentioned state. However, each state is
entitled to at least three representatives. In India, the weighted representation of states ranges
between 86 seats for the largest and 12 seats for the smallest state.
The second concept is, i.a., followed by Austria, India, Germany.


15
In Switzerland, each of the cantons (name for states in Switzerland) is represented in the second chamber by
two members, regardless its size and population (three of those cantons however are -due to historical reasons-
divided into half-cantons; each of the six half cantons is represented by one member only. So, 20 cantons are
represented by two members and six half-cantons by one member).

Composition of the 2
nd
Chamber


2nd chamber
Equal representation
2nd chamber
Weighted representation
State


State
State


State

State


State
State


State

50
3. Other models
(a) Canada
In Canada, not the provinces (=states), but the four regions (groups of provinces are equally
represented in the second chamber).
(b) United Arab Emirates
16

The Supreme Council of the Rulers is the highest federal autonomy, and has both, legislative
and executive powers. The rulers of each of the seven Emirates (=states), who are the
traditional monarchs in their respective jurisdiction rather than elected representatives, form
the Supreme Council, each one having one vote. Insofar, the seven Emirates are evenly
represented. However, similar to the decision making process of the UNs Security Council,
each decision of the Supreme Council of rulers must not be objected by the representatives of
both, Abu Dhabi and Dubai. Hence, those two Emirates have effectively a veto power within
the Supreme Council.
(c) Ethiopia
In Ethiopia, the second chamber is not composed of representatives of states but of
representatives of Nations, Nationalities and Peoples. Each of those entities has to be
represented in the second chamber by at least one member. Although some
nations/nationalities/peoples are congruent with a state, others are not. The number of nations,
nationalities/peoples in a state therefore determines the number of members of the second
chamber coming from one state. In addition, each nation or nationality gets one additional
seat for each million of its population.













16
Almost invariably federalism is associated with democratic procedures. In the UAE however, other than the
election of the President and the Vice President by the rulers of the Emirates, there are no elections. Hence, the
Emirates form the only federal system in a non-democratic legal order. Since the federal system is not based on
peoples democracy, a chamber in which the people may be represented (parliament) is not required. In this
respect, the Council of the Rulers resembles the second chamber in a bicameral system.
House of Federations (2nd chamber, Ethiopia)
State

State

State


NNP NNP NNP
NN
NNP
NNP
51
(d) Comparative Chart


C. Selection of the Members of the 2
nd
Chamber
1. Different Ways of Selection
The way, how members of a 2
nd
chamber are selected varies considerably. By and large, four
different categories can be distinguished:
(1) A number of state chambers are composed of representatives of the states, who are
elected directly by the people of the states concerned (USA, Australia, Switzerland,
Nigeria, Argentina, Venezuela, Italy). Two different ways of direct elections are
applied: E.g. in Nigeria, each state is divided into three senatorial electorates. In each
electorate, the candidate with the highest vote gets the seat. In contrast, in Australia,
the six members per state are elected through a proportional method.

(2) In a number of state chambers, the representatives of the states are elected by the
parliaments of the states, whether or not from among the members of those
parliaments (India, Austria, Ethiopia). Here again, two different ways of election
might be identified: In some countries, the members of the second chamber are
elected by majority vote in the state legislature. As a consequence, parties (either
alone or as coalition) holding a majority in state parliament can exclusively send their
members. In other systems countries avoided such results by entitling political parties
represented in a state legislature to nominate persons for the state's delegation to the
second chamber (proportional method).

(3) Yet in other states, the members of the second chamber are appointed or delegated by
the state governments (Germany).

(4) Members of the second chamber can also be appointed by the federal government
based on the nominations by states governments (Canada).

All four categories have in common to represent states in one way or the other in the
process of federal decision making at the national legislative level. However, through the
different systems of selection, it is worth to have a closer look at who or what is actually
Comparative Chart on the Composition of 2
nd
Chambers
Weighted states
representation
USA, Nigeria,
South Africa
Sudan, Mexico,
Russia
Switzerland
Austria
India
Ethiopia
Canada
Germany
Strict states
representation
52
represented. With regard to category (1), the members of the second chamber serve as
representatives of the electorates in the federal entities from whom they are directly
elected. Instead, if elected by state parliaments (2) members are more representatives of
the state legislators and their political parties interests. Apparently, if appointed by or
delegated and instructed by state governments (3), members primarily represent the views
of those governments and only indirectly those of their electorates or legislators. Where
the members are appointed by the national government (4), they have the least political
credibility as spokesmen for the states, even if they are residents of the state they
represent.

In Germany and South Africa, the members in the 2
nd
chamber representing one state are
considered to be delegates of that particular state and have only the competence to vote en
bloc but not individually.


Different options of selecting the second chamber

(1) (2) (3) (4)


It might therefore not come as too much of a surprise that many countries did not restrict
themselves to one of the categories mentioned above, but preferred a mixed model (see
examples below).

South Africa: 60% according to (2); 40% according to (3).
Malaysia: 37% according to (2); 63% according to (4)
Spain: 80% according to (1); 20 % according to (2)
Russia: 50% according to (2); 50% according to (3)
2nd Chamber
on the
Federal Level
People of
one State
d
i
r
e
c
t

e
l
e
c
t
i
o
n

2nd Chamber
on the
Federal Level
State
Parliament
e
l
e
c
t
s

People of
one State
2nd Chamber
on the
Federal Level
People of
one State
State
Parliament
State
Government
appoints / sends
delegates
2nd Chamber
on the
Federal Level
Fed. Gov.
appoint
53
India: 95% according to (2); 5% according to (3)

2. Comparative Chart



D. Competences:
1. Legislative Competences
(a) Participation in the legislative process
In nearly all federal countries, the second chambers are mandatorily involved in the legislative
process of enacting laws. In some countries, restrictions apply with regard to money bills that
do not require the consideration / approval of the 2
nd
Chamber (Malaysia, Belgium,
Argentina).
The reverse, the exclusion of the 1
st
Chamber in the legislative process does generally not
apply. To the authors knowledge, a kind of exception only exists in Germany. Here, the
transfer of exclusive competences of the Laender from the German national level to the
European level does not need the approval of the 1
st
Chamber (see the Implementing law to
Art. 23 of the German Constitution).
A completely different approach is taken by Ethiopia. The second chamber is not involved in
the ordinary legislative process at all, but has other far reaching competences.
In most of the federal countries, also the 2
nd
chambers have the right to initiate the legislative
process (exception: Austria, Ethiopia). However, in some countries, money bills may only be
introduced by the lower house (Canada, Australia, Malaysia, Belgium, Argentina) and only
that legislation may be initiated by the 2
nd
chamber that in one way or the other affects an
interest of the states (South Africa).

Comparative Chart on the Selection of 2
nd
Chambers
Directly elected
by the people
of a state
Elected by state
parliament
Appointed /
delegated by state
government
Appointed by
national
government
USA, Switzerland,
Mexico, Nigeria,
Italy, Australia, etc.
Sudan,
Austria,
Ethiopia
Canada Germany
South Africa,
Russia, India
Spain
Malaysia
54
(b) Comparative Chart



2. Inter-Chamber Conflict Resolution in the Legislative Process
(a) Different Types of Veto Power
A key determinant of the power of the 2
nd
chamber is the way in which disputes with the 1
st

chamber over legislation are resolved. There are three common ways for this to happen.
(i) Suspensive veto
Here, the 1
st
chamber has the last word and might override the objection of the 2
nd
chamber.
Several models of a suspensive veto are applied:
(a) simple suspensive veto
The 1
st
chamber just needs to vote again in favor of that bill in order to pass it
(Austria, South Africa with regard to bills not affecting the interest of states).
(b) simple suspensive veto after a period of time has passed
In Spain and Malaysia a second round of voting is required but not before a certain
period of time has passed (two months in Spain, six months in Malaysia). This time
limit allows for public discussion in which new perspectives might be brought in.
(c) suspensive veto requiring a qualified majority by the 1
st
chamber
A third model requires the 1
st
chamber to override the objection of the second chamber
either with a 2/3 instead of a simple majority (Russia) or with a majority that matches
with the percentage by which the bill was rejected in the 2
nd
chamber (simple majority
or 2/3 majority of the members; Germany with regard to bills not affecting the interest
of states)
(d) suspensive veto followed by a joint sitting
In another model, the deadlock after the objection of the 2
nd
chamber is resolved
through a joint sitting where the members of the second house are less numerous
(India, Nigeria with respect to financial bills).
Comparative Chart on the Legislative Involvement of 2
nd
Chambers
(excl. Const. Amendments)
Always Occasionally involved
South Africa,
Nigeria, Germany,
USA, Switzerland,
Mexico, Italy,
Australia, Malaysia,
etc.
Sudan (INC)
Ethiopia
Never involved
55
(ii) Absolute veto
In some countries, the 2
nd
chamber has an absolute veto power and its objection cannot be
overridden by the 1
st
chamber. In those cases two options are available
(a) absolute veto followed by a referral to a mediation committee
Once the bill has been rejected by the second chamber, a mediation committee
consisting of an equal number of members from both houses is formed and tries to
hammer out a compromise bill for each house to adopt. If the mediation committee
does not find a way out of the deadlock after a certain period of time or number of
sittings, the bill will lapse (Germany and South Africa with regard to bills that affect
the interest of the states; similar in Switzerland).
(b) absolute veto followed by a shuttle system
After the rejection of the 2
nd
chamber, the disputed bill shuttles between both
chambers until each house has adopted them in the same form, or the bill fails (USA,
Canada, Italy, Nigeria).
(iii) The Australian model
Intercameral disagreement can yield drastic results in Australia: In case of a deadlock, and if
the 2
nd
chamber fails twice to pass a bill coming from the 1
st
chamber, a double dissolution
may be precipitated and national elections called for members of both houses.
(iv) The Sudanese approach










Within the ordinary process of legislation, a conflict between the two chambers cannot arise.
Once it is decided that the issue at hand affects the interests of the states and involves
therefore the second chamber, the second chamber can pass amendments to the bill with a
two-thirds majority (however, conflict may arise in the Inter Chamber Committee).

Bill from the
National Assembly
(after final
reading)
Inter-Chamber
Committee
decides
referred to
affects interest of
states
does not affect interest of states
Assent of
the
President
Council of
States may
amend the bill
with 2/3 majority
Legislative Process according to the Interim Nation
Constitution, Sudan
56
(b) Comparative Chart


3. Competences with regard to the amendment of the Constitution
Degree of Involvement
As stated above, as core element of a federal system neither level of government can
unilaterally alter the competences of the other one. The allocation of competence in a federal
system is generally enshrined in the national constitution. Consequently, in all federal
countries, the states need to have an obligatorily saying if the constitution is to be amended in
that respect. States might either get involved through the consent of a governmental body at
the state level (e.g. state parliament) or through their representative body at the national level,
the second chamber. And indeed, all federal countries require at least the consent of the
second chamber for the amendment of the constitution as far as state interests are concerned.

(1) Requirement to consent limited to specific areas of law
In Austria, the requirement of the 2
nd
chambers consent is limited to the amendment of those
constitutional provisions which affect the interest of the states. A similar approach is taken in
South Africa: Only provisions that either form the basis of the constitution or (a) relates to a
matter that affects the Council; (b) alters provincial boundaries, powers, functions or
institutions; or (c) amends a provision that deals specifically with a provincial matter requires
the consent of the 2
nd
chamber. In addition, whenever a single state or a specific group of
states are affected by the amendment of the constitution, their state parliaments have to
consent as well.
(2) General consent required
Other federal countries require a qualified majority of both chambers for each amendment of
the constitution (Germany, India, Spain, Sudan).

(3) Additional players involved
Comparative Chart on the Legislative Powers of 2
nd
Chambers
Equal
participation
(absolute veto)
Weighted
participation
(suspensive veto)
if state interests
are affected:
Germany, South
Africa
Austria Spain,
Malaysia
Russia
joint sitting:
India Sudan (INC)

Exclusive legislative competence of 2
nd
Chamber in specific areas: Sudan,
always: USA,
Italy,
Australia,
Canada,
Nigeria,
Switzerland
57
In the majority of cases, a constitutional amendment at least if it affects the interests of
states- does not only need the qualified majority of the two chambers, but does also involve
other players. To a large extent, the consent of a certain percentage of state parliaments is
required (Nigeria, Canada, USA, Mexico, Russia, Ethiopia). In Italy, unless a two-third
majority is achieved in both houses, one-fifth of members of either house may call for a
referendum. A similar provision exists in Spain. In Switzerland, the amendment of the
constitution does not only have to pass both chambers, but also requires a double majority of
the votes at a referendum. The first one focuses on the nationwide majority of votes, the
second one requires that the citizens in more than half of the states voted in favor of the
amendment. A similar provision applies in Australia. The most drastic consequences of a
constitutional amendment might take place in Belgium. There, both houses of parliament
must be dissolved, and both new houses must approve the constitutional amendment by a
two-thirds majority.

4. Other competences
Comparative Overview
As shown above, the primary role of most federal second chambers has been legislative, i.a.
reviewing federal legislation with a view to bringing to bear on it regional and minority
interests and concerns as well as taking part in the amendment of the constitution.

In Ethiopia, the 2nd chamber is not part of the ordinary legislative process. Instead, the
House of Federation has diverse and important competences that are partly of judicial, partly
of legislative, and partly of executive character, such as the power to interpret the
Constitution; the power to decide -in accordance with the Constitution- on issues relating to
the rights of Nations, Nationalities and Peoples to self-determination, including the right to
secession; the power to determine the division of revenues derived from joint Federal and
State tax sources and the subsidies that the Federal Government may provide to the States; the
competence to strive to find solutions to disputes or misunderstandings that may arise
between States.

Beside the special case of Ethiopia, the main additional functions of second chambers are
extended rights of oversight, i.a. the right to approve international treaties (USA); the right to
impeach the head of state or other government officials (Brazil, Venezuela, USA, Nigeria);
the power to dismiss the federal government (Italy, Bosnia Herzegovina), more generally, the
power to appoint members of courts or judicial service commissions (Russia, Nigeria,
Germany, Italy, Belgium, Austria, Belgium); involvement in the appointment of the head of
state (Germany); the power to consent to the nomination of Supreme Court Judges and
Ambassadors (USA).

E. Interrelationship between the way of selection and the powers of the
2
nd
chamber
Two 2
nd
Chambers (USA, Bosnia Herzegovina) have greater powers than the respective 1
st

chambers. In both cases, members of the 2
nd
chamber are directly elected by the people. This
observation supports the general tendency that strong 2
nd
chambers that have roughly equal
powers compared to the 1
st
chambers are predominantly directly elected, thereby being
equipped sufficiently with democratic legitimacy (Italy, Mexico, Nigeria, Switzerland).
58
However, considerable exceptions should not be overlooked: Members of the German and the
Canadian 2
nd
Chambers are appointed by governments (state or federal) and are nevertheless
extremely powerful without a direct democratic empowerment.

Another tendency is that 2
nd
chambers are more often directly elected in those countries in
which also the Head of the National Government is directly elected. On the other hand, if the
Head of Government is designated by parliament, second chambers are also often empowered
indirectly by state parliaments or state governments.


59
IX. Fiscal Federalism
A decentralized or federal system of government is not only a mechanism of power sharing
between the different levels, but along with the distribution of competences and thus power
the wealth of the country has to be distributed between the different levels of government to
enable all of them to fulfil their functions.

A. The notion
Fiscal federalism describes the fiscal relationships between the national level and the sub-
levels on the one hand and between the different sub-level governments on the other hand.
The system of fiscal federalism of a given State answers the questions
- which level has to pay for the exercise of specific state functions?
- which level disposes of which sources of income, including the questions
- which level is competent to enact tax laws?
- which level is responsible for collecting the taxes?
- which level receives the income generated by certain taxes?
- how are taxes distributed amongst the different sub-level
governments?
- Are there any additional transfers or grants from the federal level to those states with
lower revenue-raising capacities or higher expenditures?
- Are there any transfers between states of different revenue-raising capacity?
- Is there a control of sub-national government borrowing?

B. What is fiscal federalism needed for?
A decentralized State structure does not necessarily require an interaction of the levels of
government with regard to fiscal questions of expenditure and revenue assignments. Instead,
one could think of a separated system in which the national level of government and the sub-
levels each have their own sources of revenue and their own expenditure responsibilities.
Both levels in this system function completely independent of each other: Each level can only
spend as much as it has been able to raise in revenues.
However, this system is not very flexible and may cause concerns especially where revenue
raising capacities differ between the sub-levels.
On the other hand, a wholly joint system with common revenues and expenditure of the
national and the sub-levels often triggers conflicts about the just allocation of resources and
endangers the independence and autonomy of the sub- levels.
Therefore, especially federal states usually choose a mixed system in which on the one hand,
the national level and the sub- levels each have their own resources and expenditure
responsibilities, thereby retaining a certain degree of independence in fiscal affairs. On the
other hand, transfers and grants are used to compensate vertically between levels of
government and/or horizontally among units of the same level.

60
These systems are not necessarily linked to a certain form of decentralization: Fiscal
federalism can occur in a unitary state with a certain degree of devolution of powers just as
well as in a federal state. However, in a federal system a certain degree of revenue-raising and
expenditure responsibility is necessary: if the sub-national governments depended completely
on the resources of the national level, this would effectively thwart their independence.
Since fiscal federalism includes necessarily the decentralization of fiscal responsibilities and
the assignment of certain responsibilities to the sub-levels, it supports democratic and
participatory forms of government; it may improve the responsiveness and accountability of
political leaders to their electorate, and ensure a closer correspondence of the quantity, quality
and composition of publicly provided goods and services to the preferences of their
beneficiaries.

C. The design of intergovernmental fiscal relations in a multilevel
government setting
There are four main elements of a fiscal design in decentralized states, i.e. the assignment of
expenditure responsibility (=which level pays), the assignment of revenue-raising
responsibility (=which level has the command over the revenue sources), intergovernmental
transfers (= how revenues are shared and imbalances between lower levels equalized) and the
control of sub-national borrowing (= how public debt of lower levels can be avoided).
The design of fiscal relations reflects a balance among different objectives. The classic goals
are efficient allocation of resources, equity and stabilization, but also the achievement of
economic growth, the perseverance of regional balance, national integrity and political
stability.
17


17
R.M. Bird, F. Vaillancourt, Perspectives on Fiscal Federalism, WBI Learning Resources Series, The World
Bank 2006, p. 2.
61
Chart 1: Intergovernmental fiscal relations

1. The assignment of expenditure responsibility
(a) General considerations
Concerning the question which level of government should be responsible for which
expenditures, i.e. for providing which public services, a number of arguments are brought
forward that may argue for one or the other level:
It is argued that resources are spent most efficiently if the level of government that most
closely represents the beneficiaries of the public service is responsible for it.
18
This fosters
transparency since citizens recognize more easily who spends their money and enhances
responsibility of the politicians on this level. Therefore, the level that most closely
represents the beneficiaries of the service should have to implement and pay for it. (This
argument naturally does not always lead to the conclusion that a service ought to be
provided by the sub-level: for certain public services, such as national defence, foreign
affairs, infrastructure for interstate transport etc., the level that most closely represents the
beneficiaries of the service will be the national level. Typical lower level expenditure
responsibilities on the other hand include local police, fire prevention and sanitation.)
19

Another factor in determining which level should provide a certain public service is the
efficient size of the program: some programs might only function efficiently if provided

18
Cf. T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in:
T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 4.
19
Cf. T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in:
T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 4.

Intergovernmental fiscal relations
Assignment of
Expenditure
Responsibility
Assignment of
Revenue-Raising
Responsibility
Intergovern-
mental
Transfers
Control of
Sub-national
Government
Borrowing
62
for the whole country by the national level of government. The weather forecast provides
an example for such a public service.
20

Regional preferences also affect the question which level should deliver a certain public
service. For example, many sub-levels and their respective population might favour
primary education to include the teaching of local language(s) and/or culture. Here, a
nationwide program for primary education might not serve them well.
21

To some public services, citizens should have equal access regardless of their origin for
reasons of equity. Such programs (e.g. old age pensions, unemployment benefits) would
have to be provided by the national level.
In order to avoid that expenditure responsibilities of the sub-levels cause instability or
imbalances, the national government should retain responsibility for expenditures that
have a particularly strong impact on demand or are particularly sensitive to changes in the
cycle, such as unemployment benefits.
22

The demand for minimum standards throughout the country concerning certain public
services (e.g. health, education) might call for national regulation of policy guidelines for
the implementation of public service programs at a lower level, but does not require the
central administration of these services.
23

(b) Germany
Firstly, for the assignment of expenditure responsibility, the principle of separation of
expenditures between the national level and the sub-national levels applies according to Art.
104a (1) of the German Basic Law.
24
Secondly, the expenditure responsibility always lies
with the level of government that is assigned the executive competence by the Constitution,
meaning that the level responsible for the administration and implementation of a certain task
also bears the costs. This is called the principle of connectivity of competence and
expenditure. That also means that where the Federation has the legislative competence and the
states have to execute the federal law, the states also bear the costs of execution. However,
they are reimbursed for their expenditures partly by the Federation: Also in these cases, the
expenditure responsibility lies with the states because of the assigned competence of the states
to execute national legislation. The national level in these cases bears all additional costs
arising from the new law, e.g. increased wages for the armed forces, but does not pay for the
costs arising from the administration and implementation of the respective law. This reflects
the principle of connectivity mentioned above and is justified because the national level
decides on the contents of the law and has the indirect supervision over its implementation by
the states.

20
P. Boothe, A Short Guide to Fiscal Arrangements in Federal Countries, p. 5, Publication by the Forum of
Federations: http://www.forumfed.org/publications/pdfs/FR-Guide.pdf, last visited 06/06/2007.
21
P. Boothe, A Short Guide to Fiscal Arrangements in Federal Countries, p. 6, Publication by the Forum of
Federations: http://www.forumfed.org/publications/pdfs/FR-Guide.pdf, last visited 06/06/2007.
22
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 5.
23
E. Ahmad, D. Hewitt, E. Ruggiero, Assigning Expenditure Responsibilities, in: T. Ter-Minassian (Ed.), Fiscal
Federalism in Theory and Practice, IMF 1997, p. 25.
24
Art. 104 of the German Basic Law:
(1) The Federation and the Lnder shall separately finance the expenditures resulting from the discharge of their respective
responsibilities insofar as this Basic Law does not otherwise provide.

63
As to the distribution of executive competences and thus expenditure responsibilities the
German Basic Law assigns foreign service, the federal financial administration, the
administration of federal waterways and shipping, the Armed Forces, Air transport
administration to the federal government.
The states are responsible for all the remaining areas including culture, education, public
order, environmental and health policies as well as regional economic policy, but also subject
matters regulated by federal law and executed by the states such as the administration of
federal highways.
Municipalities are responsible for communal services, local health facilities, sports and
recreation, school building, housing and road construction.
(c) Nigeria
In Nigeria, the national government is responsible for the military, passports, external affairs,
defence, regulation of international and interstate trade and shipping and navigation on
international waterways. These are typical fields of politics with the above-mentioned nation-
wide character which call for an expenditure responsibility of the national level.
As we have seen, another reason why expenditure responsibility should be assigned to the
federal level is to avoid that expenditure responsibilities of the lower levels cause instability
or imbalances within the centralized system. In Nigeria, the existing disparities in natural
endowments and in the level of economic development among the states have tended to create
cost and quality differentials in the delivery of public services. Therefore, for the purpose of
ensuring minimum standards the federal authority began to finance all education outlays.
25

The state governments have responsibility for health services, agriculture and public utilities,
whereas the local level is assigned town planning, sanitation and veterinary care.

2. The assignment of revenue-raising responsibility
(a) General considerations
Arrangements that assign all or most taxing powers to sub-national governments would
deprive the national government of tax instruments for macro-economic management and
hinder it in redistributive policies. Arrangements that assign all or most taxing powers to the
national government are undesirable as well: By separating spending authority from
revenue-raising responsibilities, these arrangements obscure the link between the benefits of
public expenditures and their price, namely, the taxes levied to finance them. Thus, they do
not promote fiscal responsibility for sub-national politicians and their electorate.
26

For the aforementioned reasons, it is mostly recommended to provide each level of
government with own sources of revenue and to additionally use intergovernmental transfers
to overcome remaining gaps between the revenue sources assigned to a certain level and its
expenditure responsibilities.

Two principles are recommended for the assignment of revenues to sub-national
governments:

25
M. Mered, Nigeria, in: T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 601.
26
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 8.
64
1. The revenues assigned to the sub-national governments should suffice for at least the
richest sub-national government to finance all locally provided services that primarily benefit
local residents from its own resources.
2. The sub-national revenues should be collected from local residents and should be related to
the benefits they receive from local services.
27
By establishing this link, the acceptance of a
certain tax in the local population and the accountability of the sub-national government to its
population for service delivery are strengthened.

Taxes with the following characteristics should be assigned to the national government
because sub-level competences in these fields typically cause imbalances between the sub-
national governments of a federal state.
28

That is the case for
29

aa) taxes levied on the more mobile tax bases, such as income taxes on enterprises
which may easily move from one state to the other in order to avoid the heavier tax
load in the first state. In this case the idea is to avoid tax-induced movements of
factors of production and tax competition driving down revenues. In contrast, an
example for an immobile tax which could easily be assigned to the sub-level
governments would be property tax since real estate cannot be moved from one state
to another.
bb) taxes that are especially sensitive to changes in income, such as income tax. This
is to provide the national government as the protector of the federal state with
stabilization instruments and to shelter the sub-national governments from fluctuations
in their income base.
cc) taxes that are levied on tax bases that are distributed unevenly across regions,
such as taxes on natural resources. By assigning this type of taxes to the national
government, it is avoided that sub-national levels differ greatly in income and thereby
in their standards of living. On the other hand, where the exploitation of natural
resources causes damage to the environment of the state of origin, much can be said
for a sharing of revenues between the national government and that state.
In other words: the national government is assigned those tax raising responsibilities that
could easily turn out to cause imbalances at or between the sub- levels if these responsibilities
were assigned to them.
(b) Germany
In Germany, the power to legislate for taxes has to be seen as totally distinct from the right of
each layer of government to receive the revenue from these taxes.
30

The power to make tax laws is regulated in Article 105 of the Basic Law:

27
R.M. Bird, F. Vaillancourt, Perspectives on Fiscal Federalism, WBI Learning Resources Series, The World
Bank 2006, p. 3.
28
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 9.
29
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 9.
30
P.B. Spahn, W. Fttinger, Germany, In: T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice,
IMF 1997, p. 228.
65
(1) The Federation shall have exclusive power to legislate with respect to customs duties
and fiscal monopolies.
(2) The Federation shall have concurrent power to legislate with respect to all other taxes
the revenue from which accrues to it wholly or in part or as to which the conditions
provided for in paragraph (2) of Article 72 apply.
(2a) The Lnder shall have power to legislate with respect to local taxes on consumption
and expenditures so long and insofar as they are not substantially similar to taxes imposed
by a federal law.

As already explained, this determines only which level of government is in charge of the tax
legislation. Which level finally receives which tax-income is regulated in the following
Article: According to Art. 106 Basic Law, the Federation receives, amongst others, all
consumption taxes, income and corporation surtaxes, and taxes on capital transactions,
insurance, and bills of exchange. The revenues from property tax, inheritance tax, the motor
vehicle tax, the beer tax, the tax on gambling establishments accrue to the states, just as any
other tax that the Constitution does not specifically assign to the Federation. The revenues
from income taxes, corporation taxes, and turnover taxes accrue jointly to the Federation
and the states, and belong therefore already to the revenue-sharing arrangements (see below).
Municipalities may influence the rates of property taxes and local trade. Furthermore they
receive a share of the revenue of the turnover tax, a share from the income tax based on
derivation, and an overall percentage of the states share of total revenue from joint taxes.
Germany is by virtue of its constitution a tax State. That means that the funding of State
expenditures is primarily accomplished by raising taxes. The idea of the tax State is derived
from the Basic law, which primarily foresees taxes as the source of State revenue. Therefore,
the constitutional court decided that levies other than taxes may only be charged under very
strict conditions.

(c) Nigeria
The national level of government has the exclusive competence to legislate amongst others
on Taxation of incomes, profits and capital gains, excise, export and stamp duties, mining
rents, petroleum profit taxes. However, the proceeds of these taxes are shared by all levels of
government (see below).
The states depend mainly on the national government for their income. They may legislate
themselves on property taxes, motor vehicle taxes, and entertainment taxes.
Local government revenues outside the revenue-sharing arrangement are small and include
market and trading-license fees, motor parking dues and motor vehicle taxes.
3. Intergovernmental transfers
(a) General considerations
Having distributed the public spending responsibility and the revenue raising responsibility
between the levels of government according to the abovementioned criteria, typically certain
imbalances arise: Due to the tax bases assigned to the national level which usually account for
the majority of the revenue raised on the one hand and the substantial spending
responsibilities typically assigned to the sub-levels on the other hand, the sub-level
governments have to spend more than they are able to raise in revenues. Pre-transfer fiscal
deficits, so-called vertical imbalances, arise. Additionally, horizontal imbalances, i.e.
66
imbalances among sub-national levels, usually exist: The sub-level governments usually have
neither the exact same capacity to raise revenues in their jurisdiction, nor do they all face the
same costs for their expenditure responsibilities.
31


These imbalances make intergovernmental transfers, i.e. payments between the national
government and the sub-national governments (vertical transfers) or between sub-national
governments (horizontal transfers), necessary.
The aim of these payments is on the one hand to redistribute resources in order to remedy
horizontal and vertical imbalances and on the other hand to ensure that effective limits can be
set for the borrowing of sub-national governments.

31
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 11.
67
Chart 2: Intergovernmental Transfers

Intergovernmental transfers comprise revenue-sharing arrangements and grants.

(i) Revenue sharing arrangements
Sharing of tax revenues can be arranged on a tax-by-tax basis or be applied to the entire pool
of revenues raised by the national government.
In the first case, the sub-level governments each receive a certain percentage (coefficient) of
the income generated by a certain national tax. However, this system might discourage the
national government from focussing on such shared taxes and provide it with an incentive to
concentrate on taxes which it will not have to share with sub-levels. Therefore the second
Different
capacities to
raise own tax
revenues;
Different costs
of expenditure
responsibilities
Revenue
responsibilities
are with
national level
while
expenditure
responsibilities
are with sub-
level
Horizontal
imbalances
Vertical
imbalances
Transfer payments
(horizontal and vertical)
Reasons
Consequence/
problem
Solution
68
option, the sharing of a part of the entire pool of taxes collected by the national government is
generally preferred.
32

Revenue-sharing of nationally collected taxes between sub-national governments can also be
made to a certain extent on a derivation basis, with each jurisdiction getting the share of the
revenue collected on its territory
33
: The personal income tax collected from the inhabitants of
state A will be handed over to state A.
However, this method does not serve to correct horizontal imbalances since those states with a
higher taxing capacity will thereby receive again more revenues than a state with a low taxing
capacity. Thus the existing imbalances between sub-level governments will remain the same.
To counterbalance these differences in taxing capacity, other formulas based on redistributive
criteria are necessary. Such criteria are, for example, the population of a state, per-capita
income, backwardness and the states own tax efforts.
34

(ii) Grants
Grants are intergovernmental transfers from higher to lower levels, especially from the
national level to the state level. There are different kinds of grants: general purpose grants
are not subject to specific conditions and seek to redress vertical and horizontal imbalances.
Specific grants are only accorded if specific conditions regarding the use of the funds are
met. On the one hand, such conditions can infringe the autonomy of sub-national
governments; on the other hand, the imposition of conditions may be justified by
distributional considerations, e.g. to ensure that sub-levels provide an adequate minimum
standard of primary education and health care.
In contrast to the revenue sharing arrangements (see above) which need to be regulated
statutorily, the national government may exercise discretion in allocating grants. Therefore,
grants are a very flexible instrument for the national level to equalize imbalances arising or
existing between states.
35


(b) Germany
(i) Revenue-sharing
As already mentioned, the most important revenue sources are shared in Germany. The
income taxes, the corporation tax and the VAT, which yield almost three quarters of total tax
revenue, are all appropriated jointly to the Federation and the states. A part of the revenue of
the federal mineral oil tax is granted to the state governments in order to subsidize their
regional public transportation.


32
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 11.
33
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 12.
34
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 13.
35
T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in: T.
Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 13.
69
The vertical distribution of income and corporation taxes, i.e. the distribution between the
national level and the states, is determined by the constitution itself, allocating one half of
these revenues to the national level and the other half to the states.
VAT revenues are allocated inter alia on the basis of a fair balance. This sounds like the
flexibility that is typical for grants. According to the German Constitutional Court, this VAT
allocation is nevertheless part of the fixed statutory revenue sharing, while at the same time
taking into account the needs of the specific states.
Any adjustment to the vertical distribution of public funds can only be made by the allocation
of the shares of the VAT that can be renegotiated between federal and state governments
whenever revenue-expenditure relativities for the Federation and the states diverge. The result
of this bargaining is then cast into a federal law requiring the consent of the upper house of
Parliament which represents the states (Bundesrat).

The horizontal distribution of income and corporation taxes, i.e. the horizontal allocation
among the states of their entire part of the vertical distribution, is based on the derivation
principle whereas the distribution of the VAT is mainly (i.e. 75 percent) carried out on a per-
capita basis, which implies a strong implicit equalization effect.
36
Up to one quarter of VAT
revenues can be allocated to states whose per capita revenue from certain taxes is below the
average of all the states combined (Art. 107 (1) GG).
37
Municipalities get their share from the
states.

(ii) Grants
There are vertical grants that imply federal co-financing of specific state projects. These
grants are conditional and operate within a complex network of interstate cooperation. The
two most important examples are:
joint tasks (that imply joint decision making and responsibility sharing in combination with
joint planning and financing, Art. 91a and Art. 91b of the Basic Law),
and specific grants-in-aid (Art. 104a (4) of the Basic Law) that are assigned to the poorer
states for regional or local investments within certain policy areas.

Horizontal distribution of revenues among states in order to equalize imbalances takes place
through three main processes
38
:

36
P.B. Spahn, W. Fttinger, Germany, In: T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice,
IMF 1997, p. 230.
37
Article 107 of the Basic Law
(1) Revenue from Land taxes and the Land share of revenue from income and corporation taxes shall
accrue to the individual Lnder to the extent that such taxes are collected by revenue authorities within their
respective territories (local revenue). Details respecting the delimitation as well as the manner and scope of
allotment of local revenue from corporation and wage taxes shall be regulated by a federal law requiring the
consent of the Bundesrat. This law may also provide for the delimitation and allotment of local revenue from
other taxes. The Land share of revenue from the turnover tax shall accrue to the individual Lnder on a per-
capita basis; a federal law requiring the consent of the Bundesrat may provide for the grant of supplementary
shares not exceeding one quarter of a Land share to Lnder whose per-capita revenue from Land taxes and from
income and corporation taxes is below the average of all the Lnder combined.
38
P.B. Spahn, W. Fttinger, Germany, In: T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice,
IMF 1997, p. 234.
70
First, the allocation of shared revenue to individual states in particular the distribution of
the VAT with a share to support weaker states, Art. 107 (1) of the Basic Law.
Secondly, there is a particular feature of German federalism, the Lnderfinanzausgleich,
which is a horizontal scheme of interstate equalization without central government
interference. Preconditions for this Lnderfinanzausgleich are laid down in a federal law that
regulates the standards by which this interstate equalization is conducted.
Thirdly, there are federal supplementary grants (which are, naturally, again vertical grants)
as a follow-up action to the horizontal grants. Those grants are on the one hand given to the
financially weak states to shore up the shortfall of revenue, after interstate equalization, of 90
percent of average fiscal capacity per capita. On the other hand, there are grants given to the
western states in order to offset losses they suffer as a result of the inclusion of the eastern
states in the interstate equalization scheme.

(c) Nigeria
The Constitution of Nigeria orders that all revenues collected by the Federal government
(apart from minor exceptions) have to be pooled in the Federation account. The allocation of
these revenues from the Federal government to the states has to be determined by legislation
of the National Assembly. In its decision on distribution among the states, the National
Assembly shall take into account, the allocation principles especially those of population,
equality of States, internal revenue generation, land mass, terrain as well as population
density;
Provided that the principle of derivation shall be constantly reflected in any approved
formula as being not less than thirteen per cent of the revenue accruing to the Federation
Account directly from any natural resources. (Cf. Art. 162(2) Constitution of the Republic
of Nigeria).

Interestingly, the National Assembly is also responsible for determining the amount of
revenues that the states have to pass on to the local governments and how revenues have to be
distributed among the states.
Besides the revenue sharing, there is a system of non-statutory and discretionary transfers.

4. The control of sub-national government borrowing
(a) General considerations
Countries approach the control of sub-national borrowing in one of the following four ways or
use a mix of them
39
:
aa) Sole or primary reliance on market discipline: the approach uses means like transparency
and exchange of information instead of governmental supervision to control sub-level
borrowing. However, the conditions for the effective functioning of this approach are not
given in many countries. Therefore, the market discipline approach usually only complements
other approaches.

39
See T. Ter-Minassian, Intergovernmental Fiscal Relations in a Macroeconomic Perspective: An Overview, in:
T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice, IMF 1997, p. 18.
71
bb) Cooperation between different levels of government in the design and implementation of
debt controls. Enhanced involvement of the sub-national governments in formulating and
implementing medium-term fiscal adjustment programs should result in greater responsibility
of these governments in the conduct of their budgetary affairs, facilitate the recognition of any
need for reforms of the existing system of intergovernmental fiscal relations and help muster
adequate political consensus for such reforms.
cc) Rule-based control: This approach has the advantage to be transparent and certain. By
this rules-based approach all borrowing can for example be limited to investment purposes.
This so-called golden rule serves government purposes best if it is linked to investments that
have adequate rates of economic and social return. Other types of rules prevailing in different
countries stipulate limits to the absolute level of sub-national indebtedness, or allow new
borrowing up to a level of debt consistent with maximum debt services ratio, or ban or restrict
certain types of borrowing that involve greater macro-economic risks.
dd) Administrative control is only an option in a unitary state: in a federal state, the sub-
levels are not part of the administrative hierarchy of the national administration and thus
cannot receive instructions be them.

(b) Germany
Art. 115 of the Basic Law regulates borrowing that may lead to expenditures in future fiscal
years. The provision sets up the so-called golden rule that restricts federal government
borrowing to the amount of projected outlays for investment purposes in the budget. This
seems to be clear and strict but the interpretation of investment is as contentious as the
preconditions for the exception to the golden rule: Art. 115 (1) of the Basic Law states that
exceptions [to the golden rule] shall be permissible only to avert a disturbance of the overall
economic equilibrium.

(c) Nigeria
The Borrowing of moneys within or outside Nigeria belongs to the exclusive competences
of the National level of government. Thereby, the national government can automatically
control the borrowing of the states.

72
X. Federalism as Conflict Management Device in the context of
fragmented societies
A. Consequences of the Majority Rule in fragmented societies
In a democratic society, the inherent majority rule might cause some challenges for the
minorities. As highlighted in the following example
40
, the implementation of a federal system
might support the avoidance of conflicts.
Please assume that there are two (fictional) countries, one is a centralized one, and the other
one is federal. In both countries there are four areas, each containing 100 voters who vote on
the issue of Friday cinema, considering that Friday is the weekly holiday reserved for prayers.
The results of the vote are identical in both countries: two of the four areas have voted in
favor of the cinema and two against with a total of 201 votes cast against Friday cinema and
199 in favor.
In the centralized country, there will be no Friday cinema; by this decision, 201 of the 400
citizens are satisfied. In the federal country, the two areas which favored the cinemas will be
able to have them, if cultural issues belong to the competences of the sub-units. The federal
model thereby contains the possibility of satisfying the wishes of a greater segment of the
populace as more people (308 instead as opposed to 201) are able to obtain what they voted
for.




40
See Frances Kendall / Leon Louw, Let the People Govern, Johannesburg 1989, p. 148.
201 against Friday cinema
(contra)
vs.
199 in favour of Friday
cinema (pro)
83 contra
vs. 17 pro
no
Friday
cinema
69 contra
vs. 31 pro
no
Friday
cinema
17 contra
vs. 83 pro
Friday
cinema
32 contra vs.
68 pro
Friday
cinema
83 contra
vs. 17 pro

69 contra
vs. 31 pro


17 contra
vs. 83 pro


32 contra
vs. 68 pro
201 contra
vs. 199 pro
Country A
(centralized system)
Country B
(federal system)
No Friday cinema = 201 are happy
Friday cinema in two states = 308
are happy
73
B. The efficiency of federalism as a tool for peace building
41

As illustrated at the beginning of the Manual, federal systems are formed for a variety of
reasons. The units of a federation may decide to join powers in order to maximize their
common defence or for political or economic interests in a wider world. However, todays
popularity of federalism is due to its ability to contain regionally concentrated demands for
autonomy within an existing State.
When discussing the efficiency of federal systems one should also recognize the stage, at which
Unitarian governed, multi-ethnical, multi-religious or multi-cultural States truly consider the
federal system as an option. Some degree of autonomy may also be provided by a unitary
government that devolves authority for decision-making, finance, and management to quasi-
autonomous units. But a policy of devolution differs from federalism in that the devolved
entities derive their autonomy from central government legislation, which the central
government can choose, unilaterally, to reverse, and not from the constitution. This distinction
is important, especially for those countries where there has been some history of conflict and
mistrust between and among ethnic communities. For those countries in crisis, federalism is
often the least bad option i.e. better than any of the alternatives that present themselves. As
everyones second choice, federalism is typically built on hard-won compromise, where no
party is in a position to win absolute victory. All groups might seek the assurance that only
constitutional arrangements can provide.
Scholars who have studied a range of federalist cases have generally found that federalism (as
well as political decentralization) has decreased the likelihood of rebellion and ethnic violence
significantly.
42
Especially minorities in federalist States were significantly less likely to
engage in violence, since federal systems provide more layers of government and thus more
settings for peaceful bargaining. They also give at least some regional elites a greater stake in
existing political institutions, thereby turning losers at the national level to winners at the
regional level. Becoming a regional majority in its area, a national minority is able to enact
laws supporting its culture and language.
43
Such an authority within a state might be likely to
make secession less attractive as there are fewer gains to be won.
44
Two countries, Canada
and Ethiopia, even permit their sub-national levels to initiate a process of secession. Although
the success of such a separation also depends on other factors beyond the authority of the
entity at the sub-national level, both cases are documenting that the central governments rely
on the attractiveness of staying together.
Others argue that decentralization increases conflict mainly out of two reasons: Allowing
regionally dominant groups to produce sub-national legislation, it often occurs that those
groups misuse their power to discriminate against regional minorities. Thereby the issue is not
solved but rather transferred to a sub-level. Furthermore, the opportunity to reinforce ethnic
identities might be seen by some ethnic groups only as an intermediate stage to complete
independence.
In order to prove their respective positions, each side offers a range of examples supporting
their arguments. And although statements such as every single long-standing democracy in a

41
This chapter is mainly based on: N. Bermeo, Position Paper for the Working Group on Federalism, Conflict
Prevention and Settlement.
42
D. Horowitz, A Democratic South Africa?: Constitutional Engineering in a Divided Society, Berkeley 1991.
43
D. Brancati Decentralization: Fueling the Fire or Dampening the Flames of Ethnic Conflict and
Secessionism?, in: International Organization (2006), 651 (659).
44
J. McGarry, Asymmetrical Federalism and the Plurinational State, Position paper for the 3
rd
International
conference on Federalism, Brussels 2005, 7.
74
territorially based, multi-lingual and multi-national polity is a federal state
45
might be an
overstatement, the list of so called success stories outweighs the negative examples
considerably. In Canada, federalism is credited with keeping the Quebecois separatist
movement entirely peaceful. In Spain, a semi federalist arrangement is credited with ensuring
that the number of citizens with exclusive identities was never high enough to fuel a
credible push toward either secession or mass supported violence. In Russia, federalism
(albeit flawed and inchoate) is credited with containing separatist movements in Tartastan and
elsewhere, and with ensuring that the violent conflict in Chechnya is not representative of
centre-periphery relations in the rest of the Russian Federation
46
. The Russian Federation
embraces eighty-nine potentially problematic autonomous units and over one hundred
different ethnic groups. Yet, so far only a single republic half the size of Rhode Island has
launched a secessionist struggle. Forty-six regions negotiated bilateral legal arrangements
with the central government, instead, and avoided violence. And although the experiences of
India and Nigeria are far from peaceful, they still may be better off with federalism than
without it. Despite the challenges of governing a huge territory with 250 minorities and three
major ethnicities, federalism may have helped to contain divisiveness within relatively
manageable limits and sustain a broad elite commitment to the preservation of Nigeria as a
unit.
47

In an attempt to identify the appropriate parameters that increase the chances of a stable
federal system, scholars have focused on the obstructive effect of strong regional parties
48
or
on whether federal states contain a core ethnic region that enjoys dramatic superiority in
population.
49
Those effects are, inter alia, made responsible for some failures such as Pakistan
(1970-71), Yugoslavia, the Mali Federation, and Czechoslovakia.

45
A. Stephan, Federalism and Democracy: Beyond the U.S. Model. In: Amoretti/Bermeo, Federalism and
Territorial Cleavages, Baltimore 2004, p. 441.
46
K. Stoner-Weiss, Russia: Managing Territorial Cleavages under Dual Transitions. In: Amoretti/Bermeo,
Federalism and Territorial Cleavages, Baltimore 2004.
47
R. T. Suberu, Nigeria: Dilemmas of Federalism. In: Amoretti/Bermeo, Federalism and Territorial Cleavages,
Baltimore 2004.
48
D. Brancati (note 43), 28.
49
H. E. Hale, Divided We Stand, Institutional Sources of Ethno federal State Survival and Collapse, in: World
Politics 2004, 165, 166.
75
XI. Case Studies
Questions and answers on federal issues with regard to the Interim National Constitution of
Sudan (S), the Constitution of Switzerland (CH), the Constitution of the United States (USA),
the Basic Law of Germany (G), the Constitution of South Africa (SA), the Constitution of
Nigeria (N) and the Constitution of Ethiopia (Eth).

A. General Issues

1. Is the term of federalism / federal system etc. explicitly mentioned in the Constitution?
If yes, where?
S (-).
CH (+)Art. 45.
USA (-).
G Art. 20 1.
SA (-).
N (+) part I (1+2)
Eth:(+) Art. 1; Chapter 4.

2. What are the legislative body and its chambers called?
S: Art. 83 INC, National legislature = National Assembly + Council of States.
CH: Title 5, chapter 2: Federal Parliament = House of Representatives+ Senate.
USA: Art I, section 1 : Congress= House of Representatives + Senate.
G: Chapter III. : Bundestag + Chapter IV: Bundesrat.
SA: Section 42: Parliament= the National Assembly+ National Council of Province.
N: Chapter I, part II., 4(1): National Assembly for the Federation= House of Representatives/
Senate.
Eth: Art. 53 The Federal Houses=Part one: The House of Peoples Representatives +Part
two: The House of the Federation.

3. Is the principle of cooperation between levels of government enshrined in the
Constitution
S: (+), Art. 26 INC
CH: (+), Art. 4.
USA: (-).
G: (+) Art. 35.;
SA: (+) Chapter. 3 cooperative government.
N: (+) Art. 5 ( 3+4).
Eth: Art. 50 (8).
76


B. Power Sharing

4. Which level owns the residual powers? What expression has been used?
S: Schedule E: Residual powers.
CH: Art. 3: The Cantons exercise all rights which are not transferred to the
Confederation.
USA: 10th Amendment: the powers not delegated to the U.Snor prohibited to the States,
are reserved to the statesor to the people
G: Art. 3: Except as otherwise provided or permitted ..., the exercise of state powers is a
matter for the Lnder.
SA: Section 44 (1), (a), (ii) any matter, including a matter within a functional area
listed(national competences), but excluding a matter(province- competences)
Art.1252 (b)+(c).
N: Art. 4 7: House of Assembly of the State a) any matter not included in the exclusive
list;
Eth: Art. 52 1 All powers not given expressly to the Federal Government (F.G) alone, or
concurrently to the (F.G) and the States are reserved to the States, with the specification in
Art. 99 about the Undesignated Powers of taxation a joint session of the House of Peoples
Representatives and of the House of the Federation decides upon them.

5. How is the application of concurrent powers regulated?
S: Schedule F.
CH: e.g.: (The Confederation and the Cantons) Art. 70 encourage understanding and
exchange between the linguistic communities. ; Art. 73 sustainable development.
USA: Amendment XVIII (to enforce the prohibition of alcohol) (abolished)
G: Art. 72 (definition of the term), ; Art. 74 e. g (subjects of concurrent legislation)
SA: Section 44 2;
N: Art. 4 (4.a) ;(7.b); Second schedule, Part II :concurrent legislative list.
Eth: Art. 62 (5) (concurrent powers of the House of federation and of the House of Peoples
Representatives?) ; e.g. Art. 98 (concurrent power of taxation)


77
6. Does the Constitution adhere to the concept of a cooperative federalism (instead of
dual federalism)?

S: (-)
CH: Art. 46; Art. 52 .
USA (-).
G: Art. 83; Art. 84; Art. 37 in the case of failure by the Lnder to comply with under its
obligations; Art. 91 b Cooperation between the Federation and the Lnder pursuant to
agreements.
SA: chapter 3 cooperative government; Section 125 2 (b)+(c), Section 154.
N (-);
Eth: Art. 52 2, (d); Art. 50 9 + Art. 51 (delegate powers); Art- 51 14 at the request
of a state administration; Art. 80 4 concerning the judiciary: State high courts also federal
first instance court.

7. Are competences given to communal / local authorities by the Constitution?
S: (-).
CH: Title 3 confederation, cantons and municipalities; section 3: Municipalities, Art. 50. ;
Art. 129 +Art. 134 mention of municipal taxation.
USA (-).
G: Art. 28 2 (the federal guarantee for the municipalities to regulate local affairs)
SA: Section 151; 152 objects of local government ; Section 154; Section 156.
N: Art. 7 ; Fourth Schedule.
Eth: Art. 50 4: Adequate power shall be granted to the lowest unit of government to enable
the People to participate directly in the administration of such units.


C. The bicameral system

8. How are the seats in the second chamber distributed per sub-unit?
S: Art. 85(1) INC.
CH: Art. 150 2
USA: Art I., Section 3.
G: Art. 51 2.
N: Art. 48
Eth: Art. 61 2.
SA: Art. 60.

9. How are the members of the second chamber chosen?
78
S: Art. 85(1): state parliaments.
CH: Art. 150 3.
USA: Art. I section 3.
G: Art. 51 2.
SA: section 60 + section 61 2.
N: Art. 71 et seq.
Eth: Art. 61 3.

10. Does the Constitution provide for means to resolve a disagreement between the
chambers during the process of legislation?
S: Art. 91(5).
CH: (-).
USA (-).
G: Art. 77, Art. 78.
SA: Art. 75 ; Art. 76.
N: Art. 59 esp. 2 seq. only about money bills.
Eth (-).


11. What competences does the second chamber have beyond being involved in the
legislative process?
S: Art. 91(4) Impeachment; approval of appointments of judges, supervise reconstruction
fund, decide on objections against decisions of National Petroleum Commission.
CH (-). (if they exist, these competences are given the Federal Parliament as a whole).
USA: Art. I, Section 5, Art. 2, Section 2 :consent in Treaty matters, Advice (the president)
and Consent in the nomination of Ambassadors; Art. I, section 3 Impeachments.
G: Art. 50; Art. 61; Art. 231+;Art.94 1; Art. 108 sep. participation in the financial
administration.
SA :Art. 42 4; Section 100 (2),( b)+(c)review of the national supervision of provincial
administration.
N: Arts. 143, 144: removal of the President of the Federation: The Senate exercises this
competence with the House of Representatives, but the President of the Senate plays a central
role in this procedure; Art. 231; Art. 261: Confirmation of the Appointment by the President
of the members of the Supreme Court and of the Grand Kadi of the sharia Court of Appeal of
the Federal Capital Territory of Abuja.
Eth: Art. 62 1+ 6+ 9 ; Art. 70 2; Art. 83.

12. How is the Head of State involved in the legislative process?
S: Art. 58(1)(h), Art. 108: may initiate constitutional amendments and legislations and assent
to laws.
CH: (-).
79
USA: Art. I, section 7 veto-signing.
G: 82 1.
SA: Section 79.
N: Art. 58 1, 5; Art. 59 4.
Eth: Art. 57.

13. How is the Constitution to be amended?
S: Art. 224.
CH: Title 6, Arts: 192-195.
USA: Art. V;
G: Art. 79.
SA: Section 74.
N: Art. 9.
Eth: Art. 104; Art. 105.


D. Judiciary

14. Does the Constitution regulate the appointment of Justices of the highest court in the
country?
S: Art. 120, 130(1).
CH: Art. 168 (1).
USA: Art. 2 Section II (by the President with advice and consent of the Senate)
G: 94 (1).
SA: Section 174.
N: Art. 231 (1)+ (2).
Eth: Art. 81.


80
E. Dispute- / Disagreement Resolution

15. Does the Constitution envisage the settlement of disputes between sub unit(s) and the
federal entity by other means before going to the court?
S: Art. 72(f).
CH: Art. 44 (3).
USA (-)
G (-)
SA: Section Art. 41 esp. (3).
N: (-)
Eth : Art. 83-84:

16. Which law prevails in the case of a conflict between federal and state/sub-unit
statutory law?
S: Art. 3 regulates the supremacy of the Constitution only; otherwise the system established
by the Schedules applies (cf. Schedules D, E, F).
CH: Art. 49.
USA: Amendment X = only in the framework of federal competences, the federal law
prevails.
G: Art. 31.
SA: Section 146.
N: Art. 4 (5).
Eth: No explicit regulation.

F. Fiscal Federalism

17. Where are the revenue-raising responsibilities regulated? Do the states have their own
revenue sources?
S: Art. 193 195, yes.
CH: Art. 128 -134, yes.
USA: Art. I Section 8,9; Amendment XVI; federal government has only those powers
delegated to it by the Constitution all other powers remain with the states (cf. coming
together federalism). It may levy taxes only for federal purposes and as long as they do not
discriminate among the states.
G: Art. 105, yes. See also Art. 28(2) for the municipalities.
SA: Art. 228, yes. See Art. 229 for the municipalities.
N: Art. 162; Second Schedule Part 1 (national taxing powers), Second Schedule Part II
(concurrent taxing powers), residual powers for states alone.
Eth: Art. 96 99, yes.
81

18. Are there any provisions for intergovernmental transfers in the Constitution?
S: Arts. 196, 198-200.
CH: Art. 135.
USA: (-).
G: Art. 107.
SA: Art. 227(1) (b).
N: Art. 164 (1).
Eth: Art. 94(2).
82
XII. References
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Responsibilities, in: T. Ter-Minassian (Ed.), Fiscal Federalism in Theory and Practice,
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Watts, Ronald L. Comparing Federal Systems, 2
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edition, Montral 1999.
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