The Federal Republic of Yugoslavia adopted a new constitution, reestablishing itself as a loose confederacy between its two main republics, Montenegro and Serbia. This change came at a time when the political dynamics within the region were shifting significantly, following a series of conflicts and a tumultuous breakup of the former Yugoslavia throughout the 1990s. The new constitution aimed to create a framework that allowed for cooperation while respecting the autonomy of each republic, reflecting a compromise amidst rising nationalist pressures and the desire for self-determination. The constitution was a pivotal step in redefining governance, emphasizing federal principles while ensuring that both Serbia and Montenegro retained significant powers in their regional affairs.

This development was significant given the backdrop of the Yugoslav Wars and the international community's increased interest in stabilizing the Balkans. The constitutional reforms were primarily designed to promote stability and cooperation, reducing tensions between the two republics. The agreement intended to address the aspirations of various nationalist groups while embedding the concept of unity through a federal structure, a challenge given the diverse identities within the region. The political atmosphere was delicate, and the implications of this new constitution extended beyond the immediate benefits of governance, as it signaled a broader attempt to reconcile conflicts and foster collaboration between the historically rival factions.