Unrecognised territories: documents that work in one place and nowhere else

A number of territories function as states without being recognised as such by most of the world. Documents they issue — passports, title deeds, marriage certificates, company registrations — work inside them and frequently nowhere else. It is a distinct category of risk and it is not fixed by the document being genuine.

Where the problems appear

• Travel. A passport most states do not recognise is not a travel document for those states, whatever it looks like.
• Property title. A registry another state does not recognise produces a title that state's courts will not enforce — and where that other state claims the territory, it may treat the transaction as unlawful.
• Civil status. Marriages, divorces and birth registrations may not be recognised, with consequences for inheritance, custody and immigration applications.
• Banking and insurance. International institutions generally do not operate there, and cross-border transfers are difficult by design.
• Enforcement in the other direction. A judgment from the recognising state's courts may reach your assets elsewhere, which is the risk that turns a property purchase into a personal exposure.

What to establish before anything

• Which state's law the recognised international community regards as governing the territory.
• Whether a purchase there would be treated as lawful by that state, and whether its courts have taken cases.
• Whether your own country recognises documents issued there, for your marriage, your children's births and your title.
• Who would buy it from you, and under which title, and whether the pool is anything other than people in the same position.

The honest position

These places are cheaper for a reason that is legal rather than economic, and the discount is the price of a title that a substantial part of the world does not accept. That can be a rational purchase for someone who understands it precisely. It is never a rational purchase made on a comparison of price per square metre.