In the waning decades of the Galactic Republic, the Free Trade Zones functioned as commercial territories exempt from Republic taxation. The Trade Federation took advantage of trade law weaknesses to create a dominant economic position within these zones.
Approximately in 32 BBY, the Galactic Senate approved Prop 31-814D, which subjected the Free Trade Zones to taxation. In response, the Trade Federation launched an invasion of the isolated planet Naboo utilizing their privately owned droid force, a move secretly supported and orchestrated by a sinister Dark Lord of the Sith known as Darth Sidious.