Originally, that was the plan--it may be that is a remnant as I don't know if it's part of the exe but at one time they did have factions begin that way.

I think there may have been some issues with it so it may be broken now.

This is how declare faction works...

The "Declare" technology sets your faction ID...in theory, you could have as many of these as you want...

Technologies can be set to have a certain faction ID as a prereq...so, the "Declare as Rebel" and "Declare as Loyalist" techs would need to require a neutral faction ID, so once you researched a declare tech (and therefore changed your ID away from neutral) you could not research the other declare tech...

Then, "Loyalist" techs would require the loyalist faction ID (and could only be researched after you got the loyalist declare technology)...

In general, this system is inferior to what we have in regards to Loyalists and Rebels...because the declare faction would require all Loyalist and rebel techs to be in the tech tree (including titan prototypes), the techs trees would look a mess...having separate player files is much cleaner...

However, because declare faction requires a technology to be researched, it allows decisions to be made in-game...there are lots of other things you can do with this...you could set it up so that there are declare "paths" where the player could make choices throughout the game, specializing their faction for whatever that particular game requires...expect to see this used in upcoming mods (hint hint)....