(2)  The Canadian Founding Fathers sought to establish a strong central government. Their Australian counterparts, on the other hand, sought to establish a coordinate system with strong States. In reality, both federations have moved in the opposite direction to that intended by their Founding Fathers. Canada is one of the most decentralised federal systems in the modern world, Australia one of the most centralised.

Do you agree? What lessons are there in this development, especially for nations, such as Iraq, contemplating the introduction of a federal system?

The construction of both the Canadian and Australian Federations has digressed from the original intentions of their Founding Fathers. The Canadian Founding Fathers sought to establish a strong central government, instead Canada has moved towards a system of co-ordinate federalism. Conversely the intention to establish a coordinate federal system in Australia has been subverted in favour of a movement towards centralisation. An overview of the intentions of both nations’ Founding Fathers is necessary to establish the framework for this analysis. This sets the scene for a comparison between the Australian and Canadian constitutions and the significant impact of judicial interpretation on the centralisation of Australian federalism and the decentralisation of Canadian federalism. The realms of fiscal federalism or the ‘power of the purse’ must also be examined to assess the relative dominance of either federal or territorial governments (states and provinces) in federal relations. The powerful influence of cultural homogeneity or disparity must also be considered, with special reference to Quebec as a driver towards decentralisation. The comparison and analysis of Australian and Canadian federalism provides a point of reference through which lessons may be drawn and applied to nations such as Iraq.

The intention of the Canadian Founding Fathers to form a strong central government was the result of both internal and external dynamics. The American Civil War provided a tangible example of the dangers of fragmentation and influenced J.A. Macdonald and his fellow constitution – makers to favour a more centralised construction.[1]The cultural and linguistic duality of Canada was also fundamental in influencing the framers to conceptualise a federal system based in a strong ‘national’ identity, no doubt to counter the already distinct ‘provincial’ identity of Quebec.

The situation in Canada may be contrasted to the more pragmatic intentions of Australia’s Founding Fathers. The practical economic and defence advantages of a federal system provided a significant ‘reason’ for the States to federate.[2]The conceptualisation of a ‘decentralised’ model of federalism may be largely attributed to the desire of Australia’s Founding Fathers to maintain their colonial power bases.[3] As in the case of Canada, despite the intentions of Australia’s Founding Fathers, Australia’s federal system has centralised, especially after the Second World War and continues to do so today.

The judicial interpretation of both Canada’s and Australia’s constitutions has profoundly influenced each nation’s federal construction. The decentralisation of Canadian federalism has its basis in the ambiguity of the British North America Act 1867.[4] Particular emphasis has been placed on the federal government’s power, under section 91, to make laws for ‘the peace, order and good government’ of Canada.[5] Prior to 1949 the final court of appeal for Canada was the Judicial Committee of the Privy Council.[6] The recognition, by the Privy Council in Hodge v Queen (1883), of the equal sovereignty of provincial governments in their respective areas of jurisdiction, reaffirmed the power of the provinces.[7] The narrow interpretation of the phrase for the ‘peace, order and good government’ of Canada was further exacerbated in the Insurance Reference (1916), Board of Commerce (1922) and Sinder (1925) cases in which section 91 was interpreted as an emergency clause only.[8] The narrow interpretation of section 91 in the early years of Canadian federalism essentially fettered federal power and moved the Canadian federal system towards a more decentralised model. It is significant to note, however; that whilst the Privy Council undoubtedly influenced the nature of Canadian Federalism it did not have the ‘power’ to construe anything for which there was not already scope within the British North America Act 1867. The establishment of an autonomous Canadian Supreme Court in 1949 ushered in a period of broader interpretation of section 91 and consequently the strengthening of Federal power.[9] However, the process of judicial review, especially during the early years of federation, has undeniably influenced the direction of Canadian federalism towards a decentralised model.

Similarly, the Australian High Court’s interpretation of the constitution has materially influenced the nature of Australian federalism. The genesis of Australia’s movement towards centralisation must lie in the very construction and interpretation of the constitution. The particular application of section 109 of the constitution which establishes the pre-eminence of Commonwealth legislation over inconsistent State legislation provides the basis for a centralist regime.[10]From a judicial perspective the centralist movement has its roots in the High Court’s rejection of the doctrines of implied immunity of instrumentalities and implied prohibitions. The influence of these doctrines in the early High Court was paramount in maintaining State autonomy. The principle of immunity of instrumentalities essentially entails that neither State nor Federal governments can interfere with each others ordinary exercise of power, a principle which clearly promoted a decentralised federal system.[11] This principle was expressly overruled in the Engineers[12]case of 1920 upon the basis that it expressed a doctrine of political necessity, with no constitutional basis.[13]The principle of Implied Prohibitions preserved state powers under section 107 of the Australian Constitution.[14]The implication of this principle is the necessarily narrow interpretation of federal powers to maintain the pre-eminence of the States. The doctrine of Implied Prohibitions was also expressly rejected by the High Court in Engineers. The rejection of both these doctrines by the High Court irreversibly changed the ‘balance’ of federalism within Australia. The essential consequence of which was the broader interpretation of federal powers under the Constitution. The express rejection of both implied immunity of instrumentalities and implied prohibitions meant that the States only retained exclusive power in those areas in which the High Court ruled that the Commonwealth did not have power. In many senses the ‘real’ legislative power and authority of the States was shackled by judicial interpretation of the Constitution. Thus, the jurisprudence of the High Court has been instrumental in concentrating power within the hands of the Commonwealth government and moving Australia towards a more centralised model of federalism.

The movement towards centralisation in Australia and decentralisation within Canada is directly shaped by the ambits of fiscal federalism. The essential focus of fiscal federalism is to correct vertical and horizontal imbalances. Neither the constitutions of Canada or Australia specifically stipulate a general spending power for the federal government.[15]Indeed, the decentralised nature of Canadian federalism is strongly reflected in provincial-federal fiscal relations. The ambiguity of constitutionally assigned responsibilities and the lack of intergovernmental co-ordination, in terms of fiscal adjustment, reinforces the position of the provinces to pursue their own economic policies.[16]The heterogenous nature of provincial interests, both with regard to each other and the federal government makes fiscal centralisation within Canada a fantasy.[17]The degree of vertical imbalance within Canada in itself is significantly less than in many other federations. This is reflected by the fact that intergovernmental transfers accounted for only 19.79% of provincial revenue in 1996.[18] This plainly illustrates the fiscal power of the Canadian provinces relative to the Canadian Federal government. The movement towards ‘decentralisation’ in Canada essentially turns on the principle of ‘reliance’. The more reliant a state or province is on federal revenue to equalise imbalances, the more centralised the federation is likely to be. As the Canadian provinces are responsible for raising much of their own revenue and less ‘reliant’ upon the federal government they may exercise a greater degree of autonomy.

The centralisation of the Australian federal system must in part be attributed to the States reliance upon the federal government for revenue. The high degree of vertical fiscal imbalance within Australia ensures the continuance of this reliance and the further movement towards centralisation. Although the architects of Australia’s constitution intended that the State and Commonwealth fiscal powers should be autonomous, the Commonwealth monopoly on customs and excise duties significantly reduced state revenue.[19]The Braddon Clause stands as testament to the effective dismembering of State revenue after federation and encapsulates the genesis of federal fiscal dominance within the Australian Federal System. The movement towards Commonwealth fiscal dominance and the exacerbation of vertical fiscal imbalance was solidified by the acknowledgement of the Commonwealth’s right to establish a uniform income tax in the Uniform Income Tax case of 1942.[20] This position was further validated in New South Wales and Victoria v The Commonwealth of Australia (1957) 99 CLR 575 which permitted the Commonwealth to block the States from collecting income tax.[21]These cases provide evidence of the High Court’s willingness to endorse the fiscal dominance of the Commonwealth, consequently further centralising Australia’s federal system. The dominance of the Commonwealth in intergovernmental bodies such as the Premiers Conference and the Loans Council provides further aggravation and augments Commonwealth fiscal dominance.[22]Fiscal equalisation within Australia presents a major challenge to the workings of the federal system. The Commonwealth government collects approximately 80% of the revenue within Australia and accounts for only half the expenditure.[23]The high degree of vertical fiscal imbalance within the Australian federation places the states at the mercy of the federal government. To achieve fiscal equalisation financial transfers are made at the discretion of the Commonwealth Grants Commission.[24] The issuance of special purpose grants by the Commission must be spent as stipulated by the Commonwealth.[25] Consequently the Federal government is able to encroach upon areas of state policy and administration. The reality of fiscal relations within Australia is the financial dominance of the Commonwealth over the States. The Federal government is essentially fiscally empowered. The result of this is the concentration of power within Commonwealth hands.

The relative movement of federations towards decentralisation and centralisation has been discussed thus far in purely structural terms. The Canadian movement towards decentralisation seems a natural consequence of Canada’s linguistic and cultural diversity. Quebec represents the very heart of this diversity; a nation within a nation, Quebec has prevented the emergence of a unilateral sense of national identity.[26]The conception of a society based in ‘dualism’ has resulted in a deep-seated provincial and cultural division which has manifested itself into a decentralised federal system. Indeed the continual desire of Quebec to secede from the federation highlights the disparity that exists not only between the provinces but between the province (Quebec) and the federal government. Canada’s adoption of a Charter of Rights and Freedoms in 1982, which constitutionally entrenched bilingualism and multiculturalism, was intended to enshrine this diversity as a quintessential aspect of Canadian identity.[27] The success of such incentives must be hampered by the fact that cultural disparity in Canada is defined by provincial boarders, which undoubtedly contributes to the decentralised nature of Canadian federalism.

As a general observation culturally diverse federations tend to decentralise, whilst culturally homogenous federations tend to centralise.[28]This in part may explain the reason behind the movement of the Australian federation towards centralisation. The diversity among the colonists at the time of federation and indeed the diversity among States today is insignificant when compared to Canada.[29]This provides the very basis for the movement towards a more centralised form of federalism, establishing the foundation for the formation of a strong ‘national’ identity rather than a strong ‘state’ identity. The relative dominance of Australian ‘national’ identity results in a more centralised federal system.  

The comparative experiences of both Canada and Australia provide distinct lessons for nations seeking to adopt federal systems such as Iraq. The Iraqi population is diverse by nature, divided among Shi’a and Sunni groups in the South and Kurds in the North.[30]This ethnic and religious diversity logically pushes Iraq towards an asymmetrical co-ordinate style of federalism which has more in common with Canada than Australia. The essential aims of an Iraqi federation must rest in the desire to find a balance between unity and diversity. To achieve this primary goal an overly centralist federal construction should be avoided, which has the potential to politically and economically marginalise minority factions through the mechanisms of the executive. The power of judicial review, as detailed above in the examination of Australia and Canada, can markedly change the direction of an initial federal construction. To combat this, clear allocation of sovereignty and legislative powers within the federation must be spelled out within the constitution. There are also significant lessons to be learnt from fiscal federalism in both Canada and Australia. The question of horizontal and vertical fiscal imbalance will be paramount within an Iraqi federation. The problem essentially rests with the economic disparity of the regions or provinces, as a consequence of oil deposits.[31] Those regions which are ‘oil-rich’ will naturally have a far greater source of income. A similar situation ensues within Canada with the relative resource wealth of both Alberta and Ontario.[32]Article 108 of the Iraqi draft constitution, which deals with petroleum and gas, places ownership in the hands of the Iraqi people but then qualifies with the phrase ‘in each of the regions and provinces’.[33]The economic implication of this is a significant revenue imbalance between the provinces. Although section 107 of the Iraqi draft constitution permits the federal government to set fiscal policy it is unclear how an Iraqi federation will remedy revenue imbalance.[34]To avoid centralisation, as seems appropriate to the Iraqi situation, the financial independence of the provinces or regions should be maintained. The ‘power of the purse’, as illustrated by the movement of Australian and Canadian federalism, has the potential to directly shape the federal construction. The federal construction in Iraq, like that of Canada, must also ensure the rights and freedoms of a national minority which has a provincial majority. The rights and freedoms of the Kurdish minority within Iraq, like those of the Quebecois in Canada, must be constitutionally entrenched if the federation is to succeed. Article 3 of the Iraqi draft constitution embeds the multiethnic identity of Iraq.[35]As clearly evidenced by the Canadian example an Iraqi federation will naturally tend towards decentralisation because of its cultural heterogeneity. This is reaffirmed under Article 111 of the Iraqi draft constitution which assigns any unspecified authority to regional governments.[36] Furthermore, in areas of joint responsibility, Article 117 establishes the pre-eminence of regional law over federal law.[37] Thus, constitutionally the construction of Iraqi federalism is already tending towards a decentralised model of co-ordinate federalism. Given the lessons learnt from the Canadian and Australian experience this appears to be the most appropriate construction.

The structure of both Canadian and Australian federalism has diverged from the original conception of their Founding Fathers. The intention to establish a strong central government in Canada and a coordinate federal system in Australia has proved abortive. The movement of Canada towards coordinate federalism and Australia towards centralisation has been expressly facilitated by judicial interpretation of both the Australian and Canadian constitutions. The narrow interpretation of federal power by the judiciary in Canada and the broad interpretation adopted in Australia has decisively changed the initial construction of both federations. The ambits of fiscal federalism have also resolutely altered the structure of the Australian and Canadian federal systems. In general terms the more ‘reliant’ a state or province is on federal revenue, the more centralised a federation is likely to be. The movement of Canadian federalism towards decentralisation comes as a natural consequence of its cultural and linguistic heterogeneity. Conversely the culturally homogenous nature of Australia drives it towards further centralisation. The comparative experiences of Australia and Canada provide tangible lessons for nations such as Iraq seeking to adopt a federal system. Indeed the ethnic and religious diversity of Iraq is analogous with that of Canada and logically drives Iraq towards a coordinate federal system. The analysis of Australia and Canada illustrates the safeguards which an Iraqi federation will need to adopt to maintain a coordinate federal structure. Foremost among these is a clear allocation of legislative power between the regional and federal governments. The fiscal autonomy of the regions must also be maintained and this represents the most significant challenge to Iraqi federalism. Nevertheless, the implementation of a federal system within Iraq represents a political system which has the greatest chance of striking a balance between unity and diversity.

Bibliography.

Journals

Volden, C., 2004, ‘Origin, Operation, and Signficance: The Federalism of William H. Riker’, Publius, Vol. 34, Iss. 4.

Garnaut, R. and Fitzgerald, V. 2002, ‘Issues in Commonwealth-State Funding’, Australian Economic Review, Vol 35, No 3.

Books

Bakvis, H. & Skogstad, G (Ed). 2008, Canadian Federalism: Performance, Effectiveness and Legitimacy 2^nd ed., Oxford University Press, New York.

Burgess, M (Ed). 1990, Canadian Federalism: Past, Present and Future, Leicester University Press, Leicester.

Cairns, A. & Williams, C. 1985, Constitutionalism, Citizenship and Society in Canada, University of Toronto Press, Toronto.

Galligan, B (Ed). 1989, Australian Federalism, Longman, Melbourne.

Kenwood, G. 1995 Australian Economic Institutions since Federation, Oxford University Press, Melbourne.

Lewis, P. et al. 2006, Issues, Indicators and Ideas: A Guide to the Australian Economy, Pearson, Sydney.

Maddox, G. 2005, Australian Democracy in Theory and Practice 5^th ed., Pearson Education Australia, Sydney.

Simeon, R. & Robinson, I. 1990, State, Society, and the Development of Canadian Federalism, University of Toronto Press, Toronto.

Solomon, D. 1992, The Political Impact of the High Court, Allen & Unwin, Sydney.

Watt, R. 1999, Comparing Federal Systems 2^nd ed., McGill-Queen’s University Press, Montreal.

Websites

Brown, N., 2005 (updated October 2005), ‘The Final Draft of the Iraqi Constitution:

Analysis and Commentary’, Carnegie Endowment for International Peace, Retrieved 10 October 2007 from http://www.carnegieendowment.org/files/FinalDraftSept16.pdf