Nuzzled next to Tuscany, in northern Umbria, lies a small Italian village called Cospaia. For nearly four centuries, this territory of just over three square kilometers was an independent republic, without any government, or laws, or taxes, or anything that makes a nation.

This peculiar political situation arose during Renaissance, which makes it even more remarkable for at that time Italy was a mismatch of Papal states, family estates, and foreign kingdoms, embroiled in petty vendettas and trade feud. A lawless territory without a ruler was unheard of.

The story begins in 1431, when Pope Eugene IV, strapped for cash, took a loan of 25,000 gold florins from the Duke of Florence who ruled next door. Nine years later, unable to return the borrowed amount, the Pope pledged to transfer the town of Borgo San Sepolcro and its district in the northern Papal States over to the Duke. Both parties agreed that the new border would follow the course of a small river named “Rio” on the upper Tiber. However, “Rio” is a pretty common name for a river. It literary means “river” in Latin. There are hundreds of small streams all over Italy called Rio, and in this particular area, there happened to be two of them flowing just half a kilometer apart.

The surveyors employed by the Pope and the Duke were not aware of this, probably being unfamiliar to the region. So both parties plotted out the borders to their closest respective Rio unaware they are not the same. As a result of this, a tiny piece of land sandwiched between the two rivers was left out of jurisdiction of both the Papal States and the Republic of Florence. On this land stood the hamlet of Cospaia.

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The villagers of Cospaia jumped at the opportunity and immediately declared themselves an independent Republic. This embarrassed the surveyors, no doubt, but somehow neither the Pope nor the Duke were reluctant to go back to the negotiation table, and decided to leave things as they were. In many retellings of the story, the authors assume that both rulers were glad to have a buffer state between their borders and so did not push to have Cospaia incorporated into their respective territories. I find this argument unconvincing, because the Papal States and the Republic of Florence shared a lot more boundary, and Cospaia was a mere patch between this long shared border.

Cospaia gained independence in 1440. The people didn’t form a government, wrote no laws, raised no army and paid taxes to no one. Instead, they devoted all their time and land to agriculture and sold the produce of their land tax-free to neighboring states. The Republic saw their fortunes grow once tobacco became available in the mid-16th century, brought to Europe from the Americas. In those early days, tobacco was thought to possess medicinal properties and was recommended as a cure for everything from arthritis to headaches to epilepsy. It didn’t take long for the Europeans to discover the recreational side of tobacco too. In 1563 Swiss doctor Conrad Gesner remarked that chewing or smoking a tobacco leaf “has a wonderful power of producing a kind of peaceful drunkenness.”

The Catholic Church tried to curb the consumption of tobacco, without much success, because they perceived it as a sin. During the mid 1600s, for instance, Pope Urban VIII threatened excommunication to anyone found smoking in the church, and Pope Innocent X became concerned by the increasing use of tobacco among priests.

Cultivation of tobacco became difficult in Italy, but in the Republic of Cospaia it flourished, because the state was outside the jurisdiction of the Pope. Soon Cospaia became the center for tobacco cultivation in Tuscany and the hub of illicit tobacco trade in Italy. As the news of Cospaia’s unique statute spread far and wide it began to attract more than tobacco traders. From a harmless little hamlet Cospaia grew into a den of dishonest merchants avoiding taxes on everything from textiles, groceries, and other goods. It was the corruption of liberty and the abuse of economic freedom that eventually undid the Republic.

In 1826, after 386 years of anarchy, the Pope and the Grand Duke of Tuscany broke up the Republic of Cospaia and divided the territory among themselves, with the Papal States wounding up with the lion’s share. The people of Cospaia lost their freedom, but it wasn’t all bad news. Cospaia was given a license to continue cultivating tobacco limited to half a million plants a year, more than enough to sustain the economy of the hundred households who lived there.

Today, Cospaia is an insignificant collection of houses in a forgotten corner of Umbria. The only clue to its interesting history is a yellow sign by the side of the road that proudly proclaims “Ex-Republic of Cospaia”, and an inscription over its church door reading Perpetua et Firma Libertas, meaning “Strong and Perpetual Freedom”.