The Capellan Confederation, and its ruling family House Liao, has long been considered the underdogs of the Inner Sphere. The smallest of the Successor States, the socialistic Capellan Confederation was the last to form, created on Capella by neighboring states in 2366 as a "temporary" alliance in response to Davion aggression. Tracing their lineage back to the controversial Elias Liao, House Liao gave the Confederation its Han Chinese character and ensured the survival of the realm through strong (if frequently erratic) rule from the Celestial Throne on Sian. Although popularly disparaged as a totalitarian police state, many citizens enjoy a high degree of personal freedom and willingly serve the State in return for the generous services it provides.
During the Succession Wars, the Capellan Confederation lost three-fourths of its original territory to Davion and Marik invasions. The Fourth Succession War was particularly devastating, with parts of the Confederation seceding to form the St. Ives Compact and Tikonov Free Republic. The Confederation was untouched by the Clan invasion though, and thanks to the efforts of Sun-Tzu Liao the realm was able to rebuild and reconquer much of its former territory, including the Compact.