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The origins of the Palatinate trace back to the year 684, when King Ecgfrith of Northumbria bestowed a significant territory upon St. Cuthbert, following the latter's election as the Bishop of Lindisfarne.

Following the upheaval caused by Viking incursions, the Community of St. Cuthbert emerged as a prominent force, gaining control over expansive estates situated between the rivers Tyne and Tees, known as the Patrimony of St Cuthbert This territorial expansion began under the leadership of Bishop Ecgred, who acquired two substantial blocks in the south-east and south-west regions of the designated area between 830 and 845

In a strategic move in approximately 883, the diocese of Lindisfarne was translated to Chester-le-Street. This relocation was facilitated by Guthred, the Viking King of Northumbria, who granted the Community of St. Cuthbert the region between the Tyne and Wear. To this end, the Community of St Cuthbert had established itself as buffer zone between the territories north of the Tyne, governed by the Anglian House of Bamburgh, and the lands south of the Tees, ruled by the Viking Kings based in York.

The Palatinate underwent another significant relocation in 995, when the diocese moved to Durham, a move that was accompanied by additional land grants.

Both the Patrimony of St. Cuthbert and the Earldom of Bamburgh remained virtually independent of the Kingdom of England. By the time of the Norman invasion, the area north of the Tees outside of the shire system and remained unrecorded by the Domesday book. Moreover, it was not subject to geld or taxation.

When William the Conqueror became the king of England in 1066, he quickly realized the need to control Northumbria to protect his kingdom from Scottish invasion. In 1075, shortly after the Norman conquest, William the Conqueror allowed Bishop Walcher to purchase the earldom of Northumbria after its previous holder, Waltheof, rebelled against the king. This may have marked the beginning of the bishops' temporal authority, with the Bishop of Durham essentially inheriting the powers of the earl.. Alternatively, David D. Hall notes that the Patrimony of St. Cuthbert between the Tyne and Tees was likely long exempt from comital and regal action, with comital lands between the Tyne and Tees administered as the separate Wapentake of Sadberge, which would contradict the aforementioned theory. Instead, Hall posits that the Bishop's temporal powers developed by the early 12th century from the emerging supremacy of the Bishop within the context of the Liberty's internal politics.

Disputes with the officials of Northumberland were not resolved until 1293, when Bishop Antony Bek and his steward failed to attend a summons by the justices of Northumberland, and the case eventually reached Parliament. There, Bek argued that "from time immemorial it had been widely known that the sheriff of Northumberland was not sheriff of Durham nor entered within that liberty as sheriff", and that Durham was independent of any other county. These arguments appear to have been accepted, as by the 14th century Durham was considered a liberty which received royal mandates direct. The jusisdiction of the bishops was also expanded during this period when the wapentake of Sadberge, another liberty within Northumberland, was purchased by bishop Hugh de Puiset in 1189. It was gradually incorporated into Durham, but retained separate assizes until 1586.