Two bodies rule the area controlled by Earth. The planet itself is ruled by an elected world government. The controlled areas in space with their stations is controlled and ruled by the Earth Company.
Earth's colonial enterprise, founded on a string of planetless stars, fell apart when orders to solve problems lagged a long time behind the reality of the situation. Distance made it impossible to maintain the close control Earth wanted to exercise, and Earth's ill-advised orders provoked rebellion among the colonies when the discovery of Faster-Than-Light travel suddenly brought Earth into close contact and frequent contact with the colonies.
Cyteen had outright defied Earth's visa requirements and founded a runaway colony, its population deliberately augmented by cloned-man establishments.
Pell Station attempted to stand by its allegiance to Earth. So did other colonies, fearing the strangeness developing at Cyteen. But the war between Earth and Union became a disaster. Earth and it's fleet were losing. The colonies took the heaviest losses.
Together with a renegade Fleet captain, Pell Station and the Free Merchant's decided to break away from Earth and negotiate a peace. This process led to the creation of the Merchanter's Alliance and peace between the warring factions. The Fleet did not accept his and were forced to flee into space and haven't been heard of since those times. But they are believed to act as pirates in remote parts of space.
Sources: Many books about Alliance-Union universe,