Clause 2: Free Trade is to be fully open between Liberty, Bretonia, and the Crayter Republic. Any act considered to represent an Obstruction to Free Trade shall be considered a criminal offense in the eyes of Liberty and Bretonia. Obstruction to Free Trade shall carry an attached fine of two hundred thousand credits per offense, collectable by any lawful agent of the Liberty, Bretonia, or Crayter Republic Government, payable to the government of each nation.
It seems to me that this is the main stickling point. What LSF did was technically not wrong, though in bad taste.
It's the decision of the Republic of Liberty which is an obvious violation of the Treaty of Curacao that has gotten people upset.
If CR as a whole, including clearly civilian vessels designated as such, are effectively banned from Liberty, that openly goes against "Free Trade is to be fully open between Liberty, Bretonia, and the Crayter Republic."
Libgov should consider either clarifying who they consider "foreign nonallied military", or acknowledge that they are scrapping the treaty.