Hi Hurri just limit it to actual countries so that the Viagra is 99% fat free.. a fair wood is a good effort!
I Think the Point is, Switzerland, by itself, doesn't have much of a chance to beat Germany, and Luxemburg would have hard time in a competition against Belgium. So the idea of some formations is to allow smaller countries to join with a bigger country.
And I hope you don't want to prohibit Team Tibet either
What would have an impact would be if two strong nations, like Dach and Benelux, would be allowed to form a Team Central-Europé or if USA, England/GB and Australia would form a team New British Empire.
And, on the other hand, while the tornament leader can make rules about team name, there is (as I know) no check that (for instance) Team Benelux have an Italian listed in main team. Or that Spain and France could join into "Team Andorra".
I'd leave the desicion to allow or disallow a certain "union" of countries to the main judge and allow for some complaint process if it's unfair.
I should add, the above is my personal Point of view, and that historically WoF Team Sweden is a single-nation team.