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From the Offical Sealand Government website:

History Of Sealand

During World War II, the United Kingdom decided to establish a number of military bases, the purpose of which was to defend England against German air raids. These sea forts housed enough troops to man and maintain artillery designed to shoot down German aircraft and missiles. They were situated along the east coast of England on the edge of the English territorial waters.

One of these bases, consisting of concrete and steel construction, was the famous royal fort Roughs Tower situated slightly north of the estuary region of the Thames River. In contrast to the original plan to locate the tower within the sovereign territory of England, this fortress was situated at a distance of approximately 7 nautical miles from the coast, which is more than double the then applicable 3 mile range of territorial waters; to put it briefly, this island was situated in the international waters of the North Sea.

After WWII ended, the troops were withdrawn from all bases by the British Admiralty. None of them was ever used by the United Kingdom again, leaving the forts deserted and abandoned. Except for the aforementioned fortress, the bases were subsequently pulled down. This resulted in the portentous uniqueness of the fortress. Fort Roughs Tower, situated at the high seas, had been deserted and abandoned, res derelicta and terra nullius. From a legal point of view, it therefore constituted extra-national territory.

The Birth of Sealand
This paved the way for occupation. On 2 September 1967, former English major Paddy Roy Bates formally occupied the island and settled there with his family. After intensive discussions with skillful English lawyers, Roy Bates proclaimed the island his own state. Claiming jus gentium, he bestowed upon himself the title of Prince and the title of Princess to his wife and subsequently made the state the Principality of Sealand. Roy Bates, henceforth Roy of Sealand, exerted state authority on the island and thus was an absolute sovereign. The royal family and other persons that have declared loyalty to Sealand have occupied Sealand ever since.

Initial Challenge to Sealand's Sovereignty
By late 1968, the British navy had become aware of the new situation off the coast of England. They were interested in terminating the state of affairs brought about by an error committed by the most senior military authorities without causing too much uproar.

Units of the navy entered the territorial waters claimed by Roy of Sealand. As he was aware of his sovereignty, Roy of Sealand threatened the navy by undertaking defensive activity. Shots were fired from Sealand in warning.

Since Roy of Sealand was still an English citizen, he was thus accused of extensive crimes in Britain and was summoned to an English court. The result of this lawsuit in Chelmsford, Essex was a spectacular success for Sealand's claim to sovereignty. In its judgment of 25 November 1968, the court declared that it was not competent in Roy of Sealand's case as it could not exert any jurisdiction outside of British national territory. This is the first de facto recognition of the Principality of Sealand. English law had ruled that Sealand was not part of the United Kingdom, nor did any other nation claim it, hence Prince Roy's declaration of a new Sovereign State was de facto upheld.

Building a New Nation
Seven years later on 25 September 1975, Roy of Sealand proclaimed the Constitution of the Principality. Over time, other national treasures were developed, such as the flag of the Principality of Sealand, its national anthem, stamps, as well as gold and silver coins launched as Sealand Dollars. Finally, passports of the Principality of Sealand were issued to those who had helped Sealand in some way, though they were never for sale.

Sealand Fights Off Invaders (and Wins a War)
In August of 1978, a number of Dutch men came to Sealand in the employ of a German businessman. They were there to discuss business dealings with Sealand. While Roy was away in Britain, these men kidnapped Prince Roy's son Michael, and took Sealand by force. Soon after, Roy recaptured the island with a group of his own men and held the attackers as prisoners of war.

During the time that he held the prisoners, the Governments of the Netherlands and Germany petitioned for their release. First they asked England to intervene in the matter, but the British government cited their earlier court decision as evidence that they made no claim to the territory of Sealand. Then, in an act of de facto recognition of Sealand's sovereignty, Germany sent a diplomat directly to Sealand to negotiate for the release of their citizen.

Roy first released the Dutch citizens, as the war was over, and the Geneva Convention requires the release of all prisoners. The German was held longer, as he had accepted a Sealand Passport, and therefore was guilty of treason. Prince Roy, who was grateful that the incident had not resulted in a loss of life, and did not want to bloody the reputation of Sealand, eventually released him as well.

Extension of Territorial Waters
On 1 October, 1987, Britain extended its territorial waters from 3 to 12 nautical miles. The previous day, Prince Roy declared the extension of Sealand's territorial waters to be a like 12 nautical miles, so that right of way from the open sea to Sealand would not be blocked by British claimed waters. No treaty has been signed between Britain and Sealand to divide up the overlapping areas, but a general policy of dividing the area between the two countries down the middle can be assumed. International law does not allow the claim of new land during the extension of sea rights, so Sealand's sovereignty was safely "grandfathered" in. Britain has no more right to Sealand's territory than Sealand has to the territory of the British coastline that falls within its claimed 12 nautical mile arc.

Some nations might have tried to use this as an excuse to try to claim all of the territory of the weaker and not well recognized nation regardless of international law, however, this has not been the case. Britain has made no attempt to take Sealand, and the British government still treats it as an independent State. Prince Roy continues to pay no British National Insurance during the time he resides on Sealand subsequent to a ruling by the British Department of Health and Social Security's solicitor's branch. Also, there was another fire arms incident in 1990 when a ship strayed too near Sealand and warning shots were again fired. The ship's crew made complaints to British authorities and a newspaper article ran detailing the incident. Yet despite Britain's severe prohibition of firearms, British authorities have never pursued the matter. This is a clear indication that Britain's Home Office still considers Sealand to be outside their zone of control.

Fake Sealand Passports
In 1997, forged Sealand passports started tuning up around the world. Some of these were used to open bank accounts under false names in various countries. Since few people have ever seen a legitimate Sealand passport (less than 300 exist today) it was difficult for these to be easily detected as forgeries. The source of these forgeries was traced back to the same German man who was involved in the earlier attempt to take Sealand by force. Dubbing himself Minister of Finance, he had created a fake Sealand Business Foundation and boasts that he has sold over 150 000 fake Sealand Passports to all comers. Thus there are now unfortunately 500 times more forged Sealand Passports in circulation than real ones. Many of the forged passports were apparently sold to people leaving Hong Kong at the time of Chinese reoccupation for USD 1 000 each.

Current Views of the Principality of Sealand
The current government of the Principality of Sealand considers itself to be sovereign, and to have been recognized de facto as such on the basis of the aforementioned statements by multiple world governments. It states the following:

"The Principality of Sealand recognizes jus gentium and has undertaken to regulate any activity with a view to compliance with jus gentium and international law or to have it regulated."

The existence of the Principality as an independent State and the de facto recognition of its sovereignty has been demonstrated time and time again over the last three decades by European and other States and in particular by its nearest neighbour, the United Kingdom. Britain has stated clearly and has demonstrated on a number of occasions either that it has no jurisdiction within Principality territorial limits or that it has no interest in events that have taken place within the Principality.

Moreover, a number of independent legal experts have weighed carefully all arguments for and against Sealand sovereignty and unanimously have agreed that jus gentium applies as a basic principle underpinning the independence of the Principality. This position is further supported by de facto events which demonstrate that reality. On many occasions, other States have either left Sealand alone to deal internationally with matters critical to its National interest, or have recognised Sealand as the legal and administrative authority over all activities within its territorial limits.

Even today, the United Kingdom government recognises, inter alia, residency or work in Sealand as an overseas activity.

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