Private cities: Liberland, Próspera and a contract instead of a constitution

Imagine moving to a city not as a citizen but as a customer. You sign a contract that says what you get for your money: security, courts, infrastructure. It also states the price, and that price cannot change without your consent. If you fall out with the city’s operator, the dispute is not decided by the operator’s own court but by independent arbitration. It sounds like science fiction, but in recent years people have been genuinely trying it.

The idea: a real contract instead of a social contract

The state appeals to a social contract that none of us signed. The German entrepreneur Titus Gebel, in his book Free Private Cities (2018), proposes taking the word literally. A private company runs a territory and every resident signs a real contract with it. The company only makes money if people are satisfied and want to stay, much like a hotel or a residential complex. The rules bind both sides, and the operator cannot change them unilaterally.

This is not full anarcho-capitalism. It is more of a bridge towards it: one place to test whether services the state now provides as a monopoly can work on the basis of a contract.

Liberland: a state on paper

In April 2015 the Czech politician and activist Vít Jedlička proclaimed the Free Republic of Liberland on a patch of land by the Danube between Croatia and Serbia. It covers about seven square kilometres that, because of a border dispute, neither neighboring state claims. Liberland promises a minimal state with voluntary taxes.

Reality is more modest. Croatian police mostly do not allow people to settle on the territory, and no UN member state has recognized Liberland. But the project drew enormous attention and showed how many people long for such an option. Applications for citizenship ran into the hundreds of thousands.

Próspera: a law the state took back

In 2013 Honduras passed a law on special zones (ZEDEs) with their own rules. On the island of Roatán, Próspera was founded under it in 2020. Businesses there can choose which set of rules they operate under, and disputes go to arbitration.

Then the government changed. In 2022 the Honduran congress repealed the zones law, and in 2024 the supreme court declared the zones unconstitutional. Próspera points to the legal stability guarantees the state gave it for decades and is suing Honduras for billions of dollars before international arbitration. Meanwhile it continues to operate in a limited form.

Older than it looks

The idea is not new. Medieval free cities and the cities of the Hanseatic League had their own law, their own courts and often their own defense. Merchants settled disputes between them under a merchant law that grew from below, not from a ruler’s decree. For more on how societies without a central government worked, see the guide Stateless societies.

The economist Paul Romer promoted similar “charter cities” in Madagascar and Honduras. In Madagascar the project fell with the 2009 coup, and in Honduras the constitutional court stopped it in 2012. The pattern repeats: politics gives and politics takes away.

Why it matters

Private cities do not yet work the way their founders hoped. Their value lies elsewhere: they show that the questions “who would judge, who would protect, who would build” have concrete, writable answers in the form of contracts. And they show that the biggest obstacle is not economics but a state that does not like to let territory go. That is why secession, the right to leave, comes up so often. How private courts and defense could work is the subject of the guide Private law and defense.