This paper argues that the traditional binary federal theory, which distinguishes between concepts of confederation and federation, is not adequate for explaining the legal nature of various unions of states. In reaching such conclusion the paper first defines what the traditional federal theory is. It presents how both the concepts of a federation and a confederation, with all their associated characteristics, derived from the old absolute understanding of sovereignty. The unitary constitutional theory, which is the only compatible constitutional theory with this notion of federalism, is explained as well. Afterwards the legal structures of two very different integrational projects, the EU and ASEAN, are examined in the light of the traditional federal theory with an aim of concluding whether these entities are confederations or federations. It is presented how and why ASEAN easily fits into a confederal category, while the EU defies both the federal and confederal box. From the results of such analysis the conclusion on why the theory is inadequate to explain the legal nature of certain unions, such as the EU, is drawn. It is ascertained that the theory, which is based on the idea of absolute sovereignty, failed to readapt itself to the existence of unions of states in which absolute sovereignty is completely absent. The paper concludes with a brief discussion on how the theory should be reformed to better fit the legal reality. It is suggested that more spectral view on federalism is needed, either some brand new one or the one conceptualised by James Madison back in the 18th century.