While the UP is a nice mechanic, I don't really like it how either everybody is just a member of it or they are not. What I want is a faction system where anybody can create their own UP style faction. Here is how I suggest it be made to work:
1. After the right tech is researched, a race has the option of inviting another race into starting a faction with them. This faction is then named after the homeworld of the race that suggested the pact. For example, if the Terrans start a faction with another race then the faction is named "The Terran Pact" since the name of the Terran homeworld is Terra (we call it earth technically, but earth is a translation of Terra. Plus "earth pact" just sounds stupid).
2. The faction then works basically the same way as the normal UP, with members voting on issues every now and then.
3. Races would be much more likely to join/start factions with races that share their ethical alignment.
4. Assuming that all members of a faction share the same ethical alignment, special resolutions can be passed that otherwise would not be possible. These would include banning factions members from trading with races that don't share their ethical alignment, banning races that are of a different ethical alignment to join the faction, and other similar resolutions which purpose is to undermine the power of races that don't share their alignment.
5. If a faction doesn't have at least 2 members it is abolished.
6. A faction leader (similar to UP leader) may propose to another faction that the factions are merged. Afterward all members of both factions vote on the issue, and if both factions agree then the factions are merged into one. How likely the factions are to accept would be influenced both by the ethical alignment of factions members as well as their diplomatic relationship with the members of the other factions.
What do you think? Would this be better than the current UP mechanic?