A confederation is an association of sovereign member states, that by treaty have delegated certain of their competences to common institutions, in order to coordinate their policies in a number of areas, without however constituting a new state on top of the member states. Under international law, a confederation respects the sovereignty of its members and its constituting treaty can only be changed by unanimous agreement among all member nations.
A confederation in modern political terms is a permanent union of sovereign states for common action in relation to other states. Usually created by treaty but often later adopting a common constitution, confederations tend to be established for dealing with critical issues such as defense, foreign affairs, or a common currency, with the central government being required to provide support for all member nations.
The nature of the relationship among the states constituting a confederation varies considerably. Likewise, the relationship between the member states and the central government, and the distribution of powers among them, is highly variable. Some looser confederations are similar to intergovernmental organizations, while tighter confederations may resemble federations.