You should check your lore better. From what I gather, Hieron are the conquerors, while Union are just people who want to be free and don't wish to be ruled by an auto-proclaimed empire. Plus they are the directly related to their Lumen ancestors. Which Hieron also claims, because their ruler was Lumen. The Aqua Elves, where expelled from their North community because they wanted to save their queen n matter what. And so they did, but their lifetimes deteriorated and know they want to find a cure to the problem they decided to create for their species for the greater good. Its not about a Holy Faction vs a Dark Faction like Aion. Its about Monarchy vs Democracy .

This is my vision on the lore, I'm sure more people will have their own. Plus a lot of lore hasn't been published and translated.

My vision on this:

HIERON is order, civilization, empire, conquest.
UNION is freedom, revolution, union, liberation.

Hence their antagonistic posture.

I already posted an analysis of the factions on another thread, and it all boils down to the perception of morality.

What this means is that as people we all have different beliefs and that these beliefs dictate how we respond to what goes on around us. Bless uses this to their advantage when designing the two races, one is not inherently good while the other is inherently bad. To avoid directly quoting other people's statements to save space, when @Blueberry says that the Aqua Elves were expelled from the Elven empire, they aren't wrong. The Elves were expelled because their actions went against what the rest of the Elven community believed in. The exiled elves then spent years of their lives recovering, building the city of El-Lano, and eventually creating a society which they agreed with. The game uses the fact that the Aqua Elves knowingly went against tradition during (and after) the Elven civil war to force players to ask themselves: was the actions of the Aqua Elves just? Players who think it was side with the Union while those who don't side with the Heiron. This process is then repeated for every race (Mascu kind of excluded) The player choses one type of race (Elven, Human, Bestial, Otherworldly) sees the lore and then decides who they side with based on their own beliefs.

The Heiron as an entity is a multi-racial, religious, empire that values tradition, honor, loyalty and courage. Many of their practices and ideals have remained the same over the years.

The Union as an entity is a multi-racial alliance created out of necessity to survive. This alliance values independence, progress, and integrity. Almost all of the races that have joined the Union have done so because they were exiled from the Heiron.

When @Rewarding states that the Union seems antagonistic because they are seen as revolutionary they aren't wrong either. The entire reason the Union exists is because they feel like the culture promoted by the Hieron empire is dangerous as it doesn't promote future progress. Additionally, it isn't fair to only look at part of the story for each race.

Here is some more in-depth lore for every race:

• Habichts: The Habichts have a long and proud military tradition that goes back to the dark ages. Under the reign of an Habicht (then known as Altoc) king, the Lumen empire was able to defend itself against barbarian raids and began a process of exponential expansion. One they continue to this day. The Habichts have a proud military tradition and are exceptional warriors and believers in tradition.
  
• Amistad: During the dark ages the Lumen empire lost much of its territory in the south, the region became politically unstable and war-torn; however, a powerful warrior known as Aygor the Great liberated them and assimilated them back into the Lumen empire. Under this new time of peace, the Amistad pursued art and science at an incredible pace. All was well until the Northern Empire begin to interfere in the south, the Amistad believed they were being unrightfully governed, and fought (and won) their freedom from the Habichts.
  
• Sylvan Elves: The Sylvan elves are the elves who stayed in El-Gradis after the Elven Civil war. This war begain when the elven queen, Erlione died at the hands of a primeval power, a belligerent red dragon which attacked the province of the elves. With their queen dead many elves felt the need to revive their eternal ruler (elves were immortal before the tree Lilanthes was damaged in the fight) the Sylvan elves believed that reviving their queen would be taboo, instead opting to become mortal like her. The Sylvan elves joined the Hieron empire because as mortals, they feel the need to share their knowledge with those around them.
  
• Aqua Elves: The Aqua elves are the elves who left El-Gradis after the Elven Civil war. The majority of the elven exiles are those that followed archmage Barianthes and believed that the queen should have been revived after the dragon's attack. Due to the death of their queen, many of the Aqua Elves became morbidly fascinated with the ideas of death and fate and began to tirelessly to master both (work in progress by the way). They admire the Amistad's willingness to fight for their freedom and joined the Union.
  
• Lupus: The Lupus are an ancient race born from the Old-Gods themselves. They were made to be feral and savage, so when the dragons rose to fight the Old-Gods the Lupus were punished as-well. One Lupus sage known as Urgen Tenza begged for forgiveness and brought his people down a path of pacifism. Vowing to fight no more, despite this, their feral nature made it hard for them to exist this way. In a desperate attempt to survive they communed with spirits and elves to learn the ways of nature. They joined the Hieron when their tribes began being targeted by barbarians, their fierceness in battle and tempered spirits won them the respect of the Elves and the Habichts. They now reside in the forest of Vrahn and honor the traditions of their ancestors.
  
• Pantera: The Pantera are an ancient race born from the Old-Gods themselves, unlike the Lupus; however, their creators viewed them as defective and ignored them. As creatures of chaos neglected by the gods they quickly grew disorganized and fell into despair. Unable to create a civilization due to their shortcomings, the Pantera took all their strength, hatred, and suffering and perfected the art of war. One Pantera monk named Mubari saw the state of his people and vowed to improve their lives. After ten years of bettering himself, Mubari saw his opportunity to sieze the title of the Pantera chief and took it. He now serves as the king of the Panteran civilization (good for them) Mubari allied himself with the Union to prevent more Panteran blood from being spilled.
  
• Leaving out Mascu as they are neutral
  

These short-descriptions show that each race didn't just get to where they are overnight. The Amistad felt opressed by the Habichts so they revolted, the Aqua Elves felt sorrow for their queen and were exiled for trying to 'save' her, the Pantera and Lupus were made by the same gods; nevertheless, the Pantera were neglected while the Lupus were not, diverging the fate of both races. Additionally, by providing a vague timeline we get to see each race at their best and at their worst. The Habichts can be loyal protectors but also fierce conquerers, the Lupus can be zen-forest hippies but also bloodthirsty monsters, the Sylvan-Elves can be brilliant mages, but also ruthless tacticians, the Amistad can be peerless scientists, but also fearless warmongers, the Aqua Elves can be incredibly intelligent, but also unstable and dangerous, the Pantera can be peaceful mediators, but also murderous savages

Saying that the Union only exists to serve as a foil to the Holy Empire (Hieron) is technically correct; however, the Union does not exist to only oppose the Hieron just as the Hieron doesn't exist to only invade Union territory. One can not exist without the other but they are so much more to just two sides of the same coin.