The Luxan Territories were several worlds under control of the Luxans. According to Mele-On Grayza, the Luxan Worlds were wealthy and the Scarran Empire coveted their resources. ("Bringing Home the Beacon")
Though Grayza said the Luxans were warriors, not diplomats, they did have ambassadors. The Luxans initially agreed to a defence agreement with the Peacekeepers, sending Special Ambassador Kor Tosko to meet with Grayza.
The plan was to put up a show of force against the Scarrans and to give themselves the strongest possible negotiating position ("Into the Lion's Den - Lambs to the Slaughter") However, once negotiations started with the Scarrans, Grayza offered the Luxan Territories in exchange for the Scarran Empire relinquishing its claim on the disputed territories in the Uncharted Territories.
Though the size of the Luxan Territories has never been defined, they were evidently large enough for Grayza to argue that, accounting for their wealth, they were worth more than the disputed sectors. ("Bringing Home the Beacon")