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2.4.4 Top level definitions First para following the rules for formal EBNF, second sentence: "In the case of a complex type, or a simple type derived by list or union, derivation indicates if the type is derived by extension or restriction from its base type." But: a union type does not have a base type, so the reference to them appears out of place here.
The joint XQuery/XSLT F2F meeting will resolve bug 1622 by clarifying the spec. There is a base type for types derived by list or union which is xs:anySimpleType. We will clarify the paragraph to clearly separate complex types derived by restriction from simple types derived by list or union. Please reopen the bug if you disagree with the resolution, or close it otherwise.