Founded by the Institute for Competitive Governance (now the Institute for Decentralized Governance) in 2019, the Journal of Special Jurisdictions is an international, peer-reviewed, open access journal established to advance knowledge of Special Economic Zones and other special jurisdictions.
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The legal analysis piece looks at Honduras' Supreme Court decision regarding the ZEDES, and explores the constitutional amendments that enabled them, highlighting their compliance with Honduras' established constitutional reform processes. Likewise, the article discusses how the ZEDEs autonomous governance structures operate within the bounds of the country's constitutionality. It argues that the innovative legal and fiscal systems introduced by ZEDEs promote economic growth and development while adhering to national sovereignty. In doing so, this legal examination rejects claims of the ZEDEs unconstitutionality, asserting that ZEDEs neither violate constitutional provisions nor diminish the nation’s sovereignty. Furthermore, the author criticizes attempts to retroactively criminalize ZEDE-related actions, stressing the importance of legal certainty and adherence to international human rights frameworks. The article concludes by advocating for an evaluation of ZEDEs based on their practical outcomes rather than ideological or unfounded legal challenges.
Copyright (c) 2025 Journal of Special Jurisdictions https://creativecommons.org/licenses/by-nd/4.0
The Economic Theory of Special Jurisdictions and the Possibilities of the Lithium Valley
Abstract: This article analyzes a theoretical case for cost-benefit analysis of a local elite accepting the implementation of a special jurisdiction (such as a Special Economic Zone or a Charter City), in which the choice is divided between benefiting from economic prosperity (through revenue) or rent-seeking. In the second part of the text, a brief economic diagnosis of entrepreneurship and employment is made for the Lithium Valley, a region located in the north of the state of Minas Gerais, to support a discussion based on evidence about the possible creation of a special jurisdiction in the region.
The "Federated Fractal Network-State” architecture introduces a decentralized governance model inspired by the resilience and adaptability of the Armenian people. This model distributes authority across multiple layers. "Fractal" describes the self-similar patterns at each level—individual, community, state, and federation. "Federated" refers to the voluntary associations between these layers, enabling entities to operate autonomously while cooperating within a broader network. Together, this structure empowers individuals and communities. A key innovation is the "receipt-token," a cryptographic identifier that confirms membership, tracks contributions, and grants voting rights and access to services. This tokenized governance model ensures secure and scalable coordination, allowing the system to flexibly evolve. This architecture reduces barriers to adoption while fostering resilience, security, and innovation. It offers an alternative to traditional nation-states, enhancing global coordination, protecting against corruption, and remaining adaptable in an unpredictable world.
Decentralized Autonomous Organizations (DAOs)
Beyond the Public Law: A Taxonomy of Approaches to Alternative Governing
Among the most problematic realities of living together in groups larger than families and small bands is the problem of how to deal with the “bad neighbor.” In this paper we identify four approaches to bad neighbor problems and suggest that planning decisions can look beyond the traditional regulatory approaches. Zoning law and other prohibitions on human activities may make societies less rich than they could be otherwise. By “rich” we are not primarily concerned with money, but with the richness of human relations. We believe that if public officials told people to solve their problems themselves, most real problems would be solved without the force of regulation.
Copyright (c) 2023 Journal of Special Jurisdictions https://creativecommons.org/licenses/by-nd/4.0
The Future of Citizenship: State, Democracy & Participation in the ZEDEs
This paper examines the evolving concept of citizenship and the contemporary challenges it encounters by employing insights from contemporary citizenship theories. Over recent decades, the characteristics of the state, alongside the definition of citizenship, have undergone notable transformations. The dynamics of globalization and increased cross-border mobility have introduced novel challenges in our comprehension of citizenship and the role of the state. One example are the Zones for Employment and Economic Development (ZEDEs), which provide new forms of governance that transcend or bypass the traditional boundaries and functions of the nation-state. This paper discusses the emerging challenges posed by these zones, particularly in the context of democratic principles, political participation and citizenship. New Special Administrative Regions like the ZEDEs may change the way in which we understand and analyse modern citizenship – particularly the notion of nation-states as the sole providers of rights and duties towards their citizens.
Private Cities, the Metaverse and the Future of Non-Territorial Governance
This paper investigates the potential of non-territorial governance, specifically virtual jurisdictions enabled by the metaverse, for lowering transaction costs of institutional experimentation. It is separated into two parts: in the first one, the author argues that more competition is needed in the sphere of governance and that emergence of cities-as-firms could accelerate evolution in governance. The paper establishes the Coasian case for private cities and provides real-life examples of “almost private” cities demonstrating that the idea of private governance is gaining momentum. The paper then outlines three types of obstacles–economic, regulatory, and political–that undermine the development of private and semi-private cities today, slowing down the quest for more optimal governance models. The second part is dedicated to non-territorial governance as a shortcut that private cities can use to circumvent the above- mentioned obstacles. Finally, the author explains how the metaverse–an emerging virtual realm that enables the peaceful coexistence of multiple societies–can act as a platform for unconstrained testing of new rules, strategies, and technologies. The paper ends by discussing the instruments that the metaverse grants to institutional entrepreneurs and the possible directions of the sector’s evolution in the coming years.
The Complex Legal Frameworks where Special Jurisdictions Nest
For the last seven years within the Startup Societies movement, there has been a surge in entrepreneurs, developers, and online communities, including Network States, that intend to create autonomous special jurisdictions. However, understanding how to create a jurisdiction, especially an autonomous one, is very different from wanting to create one. Among Startup Society types, Special Economic Zones (SEZs) are one of the models private developers seek the most. SEZs enjoy autonomy, and their jurisdictional arbitrage has led to significant economic and social transformations in some parts of the world. But getting there is hard. Zones are not created in institutional and legal isolation. This paper shows the institutional and legal frameworks Startup Society entrepreneurs need to navigate and untangle to create new jurisdictions. To achieve this, the paper uses the complex governance concept of “nestedness.” I argue that establishing a new jurisdiction necessarily entails dealing with existing, nested complex governance structures–both regulatory and institutional–which is inherently difficult. I use complexity to show why and how. The findings are extracted from research I conducted between 2017 and 2019 on an attempted Maritime Special Economic Zone (SeaZone) called the Floating Island Project in French Polynesia, based on ethnographic research methods, namely participatory observation and document analysis. This paper synthesizes multiple nested regulatory frameworks concerning immigration, real estate, taxes, blockchain, and infrastructure. These were all aspects that the SeaZone founders needed to untangle to create a globally competitive framework. This paper makes a significant contribution to the field of special jurisdictions by highlighting the challenges and complexities involved in establishing Zones characterized by autonomous governance, legal, physical, and digital extraterritoriality. It highlights the importance of approaching Zone and Startup Society creation with a practical mindset.
Floating Island Project in French Polynesia
Special Jurisdictions as Laboratories of Governance
Special jurisdictions—areas where different laws apply than those that prevail more generally—introduce a new way to put political reforms to the test. In echo of the “laboratories of democracy” label attached to states in the United States, special jurisdictions provide laboratories of governance. They have already proven their worth in teaching policymakers what works and what fails. Special economic zones in China, for instance, demonstrated how market- friendly reforms can drive economic development. Worldwide surveys of special economic zones have also demonstrated what doesn’t work: giving politicians direct control over the location, design, and operation of a zone. More successful zone programs delegate such decisions to private firms. The experiments have grown more bold of late, with special jurisdictions trying new approaches to the common law, fintech regulation, and government itself. Limits apply, of course; humans should not be treated like lab rats, forced to suffer unwelcome treatment. On that count, too, privately planned and run special jurisdictions fare better than public ones. Despite widespread discontent with traditional governments, systemic change remains difficult, risky, and ethically suspect. Special jurisdictions offer another approach, bringing the power of science to bear on the problems of governance.
Energy is a fundamental instrument in nearly all things that humans find valuable. Over the past 200 years, there has been consistent growth in energy access per capita at an exponential rate of about 2% a year, mostly due to greater understanding and control over fossil fuels. However, since 1970, our growth in energy access has stagnated. This paper suggests a way to address this stagnation through a low-hanging fruit policy change: The “Energy Innovation Zone” (EIZ). This is a special jurisdiction that focuses on accelerating energy growth. This paper considers EIZs in the United States. We quantify the potential of advanced nuclear and geothermal power based on the extrapolation of historical data and the theoretical limits of each power source and then show that these sources are sufficient for accelerating energy growth. Then we summarize the current state of regulation of underutilized forms of energy production and show that this regulation explains most of the observed stagnation in energy growth. Next, we propose the idea and structure for the Energy Innovation Zone and point out specific statutes that would have the largest impact when relaxed or repealed in the special jurisdiction. Finally, we will conclude with an analysis of the political feasibility of such a proposal. We find that EIZs have the potential for large and long-term impact and are more feasible than other energy policy reform strategies.
Copyright (c) 2022 Journal of Special Jurisdictions
Non-territorial Special Jurisdictions in the U.S. Insurance Market
Like most nations, the United States heavily regulates the insurance business. Regulators focus on pre-approval of forms and rates, insurer solvency, and licensing providers. Because insurance regulation is almost exclusively the province of state governments, the U.S. insurance market is highly fragmented. In three areas, however, the federal government has preempted state regulation to a degree, creating opportunities for a law market to develop. This article discusses how the preemptions created by the US Congress for purchasing groups (PGs), risk retention groups (RRGs), and surplus lines insurance have created non-territorial special economic zones (SEZs) for portions of the insurance market. The paper backs this idea by, first, analyzing how surplus lines insurance gives insurance buyers access to insurers not licensed in the buyers’ jurisdictions for coverage not available otherwise; second, by examining how risk purchasing groups (PGs) allow buyers to band together to buy insurance despite state laws prohibiting the practice; and third, by discussing how risk retention groups (RRGs) allow groups of insurers to create their own insurer, obtain regulatory approval from a single state, and then provide insurance nationwide. The regulation of these non-territorial SEZs differs in kind from the more traditional state regulation of insurance. It is less “onesize-fits-all” and it is more focused on solving the problems of market gaps. Several states have emerged as leading domiciles, embracing a regulatory approach that sets them apart from those jurisdictions which have not. All three examples provide valuable lessons for constructing non-territorial SEZs in other areas. In this article, I argue that although these federal laws created to expand access to insurance, were not explicitly focused on creation of an SEZ, they do in fact create non-territorial SEZs. Thus there are de facto SEZs for surplus lines, RRGs, and PGs, defined by subject matter rather than geographical boundaries. This, in turn, suggests an alternative pathway to geographical SEZs, one which can expand competition among legal systems. By examining the experience with the federal government’s creation of a national “law market” for these types of insurance, the paper shows how non-territorial SEZs can be used to facilitate regulatory competition that expands the choice set for consumers.
Risk Retention Groups, Risk Purchasing Groups, Surplus Lines Insurance, Insurance, Federalism, Special Jurisdictions, Special Economic Zones
The Catawba Digital Economic Zone: A Native American SEZ
The Catawba Indian Nation recently announced the launch of a new kind of special economic zone (SEZ) on its reservation lands in the Carolinas piedmont region. The Catawba Digital Economic Zone (CDEZ) aims to provide “A Jurisdiction Built for the Fintech and Digital Asset Industry.” Federal and state law affirms that the Nation has original and exclusive jurisdiction over two categories of disputes: those arising from contracts to which the Nation or its members are a party and those arising under any civil code that the Nation issues for the conduct of businesses and individuals on its reservation. Together, these give the Nation sovereign authority over commerce, real or virtual, that takes place on Catawba lands. The Nation has invoked this power to create the CDEZ. The Catawba General Council, a democratic assembly of tribe members, recently enacted the a civil ordinance creating a legal framework specially designed to support e-banking, cryptocurrency, non-fungible tokens, and other fintech and digital asset industries. This paper, written by one of a team of coders who worked on it, describes the origins, legal foundation, and basic structure of the CDEZ, the latest and most advanced example of a special jurisdiction focused on digital assets.
Unexpected Laboratories Within the State-Sanctioned Laboratory: Shenzhen’s Urban Villages
When Deng Xaoping announced his special economic zone “experiment” in 1979, few could have predicted the startling growth that would occur in Shenzhen. In just over three decades, the collection of fishing and agricultural villages on the border of Hong Kong grew from a population of 300,000 to 14 million (Feng, 2011). Surprisingly, Shenzhen’s growth did not come at the expense of displacement of the original population as zones in India and many other countries have (e.g., Cook, 2013). Instead of squashing the small, rural clan-based villages, the city was forced to build around them and the villagers became a rare,elite landowning class in a country in which all urban land is supposed to be owned by the government. Despite the Shenzhen government’s efforts to erase and absorb them into its own vision of city civility, the villagers resisted and held onto their lands, remaking them into chengzhongcun, or “urban villages.” The urban villages became accidental experimental enclaves within the larger planned experimental enclave of the city. Today, about seven million indigenous villagers and migrant tenants inhabit the 318 remaining urban villages. This paper argues that, in keeping with the experimental ethos of Shenzhen, the urban villages should be viewed as their own inadvertent experiments that demonstrate the ability of relaxed planning and residency regulations to promote equity, inclusion, and economic development. Part one will describe Shenzhen’s rapid growth and the formation of its urban villages. Part two willdiscuss the dominant discourses concerning the urban villages. Part three will explore the effects of the urban villages as means of economic growth and inclusion for both indigenous inhabitants and migrants
urban political ecology, Shenzhen, Chengzhongcun, urban villages, urbanization, indigenous, rural, population
Special Economic Zones: A legal framework analysis
With the increasing number and importance of special economic zones worldwide, more and more countries are thinking about establishing their own zones or improving their existing zones. This paper shows the model structure of a legal framework needed for such zones and gives corresponding recommendations. For this purpose, more than 80 laws from over 50 countries were analysed regarding to their commonalities. This results in a basic model scheme with different possibilities for individual deviation. Due to these deviations, which are adapted to the respective needs of each country, it is therefore not possible to develop a universal perfect law. Nevertheless, there are 3 points that seem essential for a successful zone law. These are the special tax incentives, the reduction of national regulatory complexity and the option of private participation in organization and operation of each zone.
Special Economic Zones, SEZ, Free Zones, legal framework, legal framework structure, SEZ law, privatization, recommendations
The legal framework of special economic zones
Governments across the globe have created special jurisdictions offering common law rules and practices imported from abroad, the better to attract foreign investment and stimulate local economic growth. Four such common law zones have launched in recent years: the United Arab Emirates’ Dubai International Financial Centre, in 2004; the Abu Dhabi Global Market, also in the UAE, in 2015; Kazakhstan’s Astana International Financial Centre, in 2018; and the first Honduran ZEDE, in 2020. Each of these common law zones has faced the challenge of transplanting foreign rules and practices into a jurisdiction set apart from that of its host government, which instead follows some mix of Napoleonic Civil Code, Sharia, and/or Soviet legal traditions. The first three zones have answered that challenge by importing the common law of England (and sometimes also Wales) and entrusting its interpretation to courts that, while set apart from the local legal system, remain under the control of government officials. The ZEDE system takes a different approach. It requires each ZEDE operator to come up with its own detailed governance plan, subject to independent review, and carefully insulates ZEDE Courts from Honduran politics. The first such plan to win approval, that of the Próspera ZEDE on the island of Roatán, collects rules from various private sources in a Common Law Code and subjects most disputes to interpretation by private arbitration services. This report from the field thus finds two species of common law zone, a burgeoning genus of special jurisdiction. The first species draws its law from foreign sovereigns and leaves its courts exposed to political interference. The more recently evolved species of common law zone, as evidenced by the Próspera, enjoys greater freedom to choose and interpret its own governing rules. In theory, that should give ZEDEs an advantage over competing zones in providing the rule of law. In practice, the contest between common law zones has only just begun.
special jurisdiction, special economic zone, SEZ, private adjudication, common law
Copyright (c) 2021 Journal of Special Jurisdictions
Special Economic Zone: a path to foster Chinese FDI in Brazil
The paper presents the creation of a Special Economic Zone (SEZ) in Pouso Alegre city (Minas Gerais state) in the Brazilian territory, as a path to attract Foreign Direct Investment (FDI) from China. The hypothesis is that Minas Gerais could be receiving more FDI should the right incentives be put into place. A SEZ is a tool to foster the economic and social development of the city and surrounding areas. Strategic planning for reviewing the micro and macro environments are analyzed to understand if the venture is viable and validate the choice of Pouso Alegre city. Also, Brazil’s and Minas Gerais’ economic backgrounds are presented to showcase the potential of opportunities already in place. This paper highlights how the economic measures necessary to implement the SEZ will reduce bureaucratic obstacles and promote international investment.
Medical Countermeasure Manufacturing Zones
Widespread and lingering shortages of medical countermeasures (MCM) continues to hinder the COVID-19 pandemic response. Shortages of personal protective equipment (PPE) have placed healthcare workers, emergency responders, and members of the public at inordinate risk of contracting the disease; a lack of medical supplies has crippled some hospitals’ abilities to provide necessary care. The source of these shortages is a failure to invest in public health resiliency, including an overdependence on the global supply chain. To help solve this problem, this paper proposes the creation of a new special jurisdiction--Medical Countermeasure Manufacturing Zones (MCMZ). Industries operating in, or reshoring production of MCM to, these zones would 1) benefit from special tax incentives and 2) gain priority consideration in public purchases, including for the Strategic National Stockpile (SNS). Priority purchasing consideration provides the strong demand signal industry requires in order to reshore production. Lastly, these producers would be required to sell to U.S. purchasers before exporting their goods during a declared public health emergency. Making products in the United States and guaranteeing sale of that PPE to U.S. purchasers would help to strengthen the MCM supply chain and ensure that supplies are available in times of public health crisis.
A Follow-Up on the Economic Impact of Special Economic Zones in Honduras
This is a follow-up to a study, published in 2019, on the economic impact of so-called Zones for Economic Development (ZEDEs) in Honduras, a special type of special economic zone (SEZ). As the inner workings of the ZEDE have become clearer (especially with the recent launch of Honduras’ first ZEDE, Honduras Próspera) and its governance structure is now evident, its potential is reassessed. We review the new elements that have come to light over the past year, what their impact will be on the Honduran economy, and how this affects our initial projection of the ZEDE’s economic potential. We conclude that the Honduran ZEDE, although scarcely touted, could set a new standard for special economic zones not only in the Central American region, but in the world.
The Honduran ZEDE Law, from Ideation to Action
Honduras has struggled to attract the investment needed to spur sustained economic growth in recent decades, and as a result remains one of the poorest countries in Latin America and the Caribbean. To attract greater foreign investment, the Honduran government passed a groundbreaking special economic zone (SEZ) law in 2012 creating Zonas de Empleo y Desarrollo Económico (Zones for Employment and Economic Development) or ZEDEs. Among the most innovative special jurisdictions in the world, ZEDEs grant sweeping legal and regulatory autonomy to allow for improved governance and economic competitiveness, in order to attract greater investment in Honduras. In this paper, we detail the political and legislative history of the ZEDE law, offer a textual analysis of the ZEDE statute, discuss the principal objections to the ZEDE law and responses to those objections, and provide case studies of the first two ZEDEs.
Zones for Employment and Economic Development
Creating the First Honduran ZEDE: Lessons in Political Economy, Institutional Design, and Governance Systems
This paper is a case study of the creation of the first ZEDE (Zones for Economic Development and Employment) in Honduras, the Próspera ZEDE. We provide a detailed accounting of the process by which the first ZEDE was formed, how its governance structures came to be, and what challenges and difficulties it faced. We draw from this experience lessons about institutional formation, political economy in the process of special jurisdiction formation, errors made in the formation process, and generalized lessons for future efforts. While the authors led the effort described in the case study, we focus on an objective factual accounting of what occurred as well as the internal reasoning processes by which decisions were made in an effort to transparently highlight lessons learned and contribute unique insights to the institution-building literature.
Honduran ZEDEs: From National Politics to Local Democracy
Special Economic Zones (SEZs) are generally lauded for their potential to increase economic growth, foster private investment, and create new jobs by introducing business-friendly institutions such as competitive tax and regulatory frameworks. However, a new generation of special zones is also being used to introduce democratic institutions into poorly governed countries. The economic success of the Dubai International Financial Center, Singapore, Hong Kong, and the Chinese SEZs inspired Honduran policymakers to amend the country’s Constitution in 2013 to allow for the creation of special Zones for Employment and Economic Development (ZEDEs), a new political subdivision of the State of Honduras with a constitutionally granted autonomy to adopt their governance structure and substantive law. However, unlike the Asian SEZs, Latin American special jurisdictions are bound by international law commitments to democratic governance and respect for human rights. This paper provides an overview of the democratic governance framework adopted by Próspera, the first Honduran ZEDE while comparing it to the mechanisms for political participation available at the national level. This paper explores the ZEDE regime’s potential to foster democratic change by introducing new and more effective legal mechanisms for Hondurans to exercise their civil and political rights through semi-autonomous local governments.
Ulex: Open Source Law for Non-Territorial Governance
Communities that stretch across international borders struggle to resolve their members’ disputes. It is not a trifling problem. Distributed protocols such as Ethereum, EOS, and Dash host hundreds of billions of dollars in assets and handle transactions worth millions daily. Their members likely number in the tens of millions, scattered in unknown locations across the globe. Even the most successful of these communities have fractured over questions of how to interpret, apply, and amend their rules. The resulting “governance by hardfork” has generated skepticism about all things crypto-, from currencies, to economics, to governments. Distributed protocols need a comprehensive, trustworthy, independent set of rules for resolving disputes. Ulex, the open source legal system, offers a solution. Its substantive and procedural rules can resolve the disputes of communities stretching across international borders. Its flag-free rules, drawn from tested and trusted private and non-governmental sources, define a wide range of legal claims and the procedures to follow in resolving them. This paper explains how Ulex can upgrade the governance of distributed protocol communities, describes current efforts on that front, and paints an attractive future of open source, non-territorial law.
non-territorial governance, Ulex, open source, blockchain, distributed protocol, private law
Copyright (c) 2020 Journal of Special Jurisdictions
Cryptodemocratic Governance of Special Economic Zones
An underappreciated challenge for special jurisdictions, both in their founding and their ongoing operation, are the mechanisms for making collective choices. Collective decisions must be made under uncertainty and between dynamic stakeholders. In this paper, we outline the potential applications of blockchain technology in special jurisdictions as new collective choice infrastructure. In a cryptodemocracy, voters are given property rights in their own votes that are recorded on decentralized blockchain ledgers, and those votes are contracted between voters and delegates (Allen et al. 2019). Compared to existing democratic structures, a cryptodemocratic structure has the potential to integrate more knowledge into collective decisions and be more responsive and accountable to the governed through stronger incentive alignment, perhaps ameliorate some collective choice problems. In this paper, we introduce the collective choice problems underpinning special jurisdictions, outline the potential for cryptodemocractic systems to facilitate jurisdictional competition as new infrastructure for special jurisdictions, and propose a new interdisciplinary research program at the boundaries of institutional economics, political science, and innovation economics.
Entry Barriers and Competitive Governance
Existing arguments for competitive governance have for the most part considered the free movement of people among many jurisdictions as necessary and sufficient conditions for competition. This paper argues for the importance of entrepreneurial entry and suggests that barriers to entry should be seen as the primary impediment to robust and effective competition in the market for governance. Competitive entry allows for many policy and institutional ideas to be tested in parallel, leading to perpetual innovation in the market for governance. Low-cost entry also protects against the risks of centralization, collusion, and institutional inertia. This argument provides support for proposals aiming to create new jurisdictions or enable the creation of new non-territorial governance providers, as well as providing insight into the desirability and feasibility of each such proposal.
This paper explores why and how Shenzhen has become, by far, China’s most successful Special Economic Zone. By conducting thorough background research and employing qualitative research methods during a six-day trip to Shenzhen in 2018, we identified underlying drivers of the SEZ’s rapid economic growth and urban agglomeration by testing three different hypotheses for Shenzhen’s success vis-à-vis China’s other early SEZs. Our research confirmed the importance of Shenzhen’s geographical proximity to Hong Kong and superior institutional environment as key factors for the relative success of its SEZ.