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The BNA ACT divided powers between the Federal and Provincial governments. Certain powers were of course held back in the British Parliament but otherwise a specific power either fell  into the jurisdiction of the Federal Government or the Provincial Governments.

The exact nature of Federal Provincial relations was shaped during this period as precedent for future was of dealing with each other. The BNA act had a notwithstanding clause built into it which allowed the Federal Government to strike down any Provincial laws after review. This was a powerful tool which placed the real power with the Federal Government. This was as a result f the recent experiences of the United States where the civil war had ripped the country apart over the question of States rights in the Union. The notwithstanding clause was added to the BNA act to make it clear that the Federal level was the superior level of government but this quickly came under attack.

The Manitoba school question brought the issue of disallowance by the Federal Government to the forefront when the Manitoba Provincial government decided to do away with Provincial backing of French Catholic schools and once this was passed in the Manitoba legislature, the Catholic minority in Manitoba appealed to the Federal Government to disallow this new law.

The Federal Conservatives, who were the party in power, realized that it would hard for them to win on this question. If they disallowed the legislation they would alienate the English Protestants in Manitoba and Ontario. If they sided with Manitoba and allowed the law to stand then they would alienate the French Catholic's in Quebec and Manitoba. The fragile Conservative coalition was built on substantial support from both these groups, so rather then make a decision which would cause them to lose support in one area or the other, they referred the question to the British Parliament which still held the right to decided on these various constitutional questions.

The British decided that the Federal Government could disallow the legislation but by that time the Federal election had been held and the Conservatives had won and decided to put a decision on hold.

Wilfred Laurier, the Liberal leader, had decided that he would support the Manitoba legislation in order to reassure the English Protestants that the Liberals could represent them and hope that he could count on the French Canadian support because he was the first French Canadian leader of a major Federal party. He also felt strongly that the Provinces should have the right to make these decisions and that was how regional rights and identities would be maintained.  

The Liberals won the next election but the position of the Federal Government and it's ability to use the disallowance power was weakened and the fight between the levels of government had finished it's first round with the forces of Federalism losing the round.