Ah, Patroklus, you beat me to posting this here

Frank, the framework Ashcroft is proposing draws its power from the sovereignity of Neufreistadt as a self-governed community, which has indeed powers of enforcement that can be applied — namely, removal of land and money (as we all know, "banning" is a very weak method of enforcement, since anybody can come back as an alt).
While naturally these two methods of enforcement are also weak — when compared to the "powers" that, say, Linden Lab has, not to mention the powers granted to governments iRL (namely, suspension of your unalienable rights against your will) — they're the only ones that are indeed enforceable inside the framework of SL.
The agreement to those laws is the prerequisite of "citizenship" in Neufreistadt. Thus, a citizen voluntarily relinquishes his or her "absolute freedom" in SL (namely regarding total control over their land parcel, and in some cases, to money invested or placed in escrow) towards the government of Neufreistadt. If the resident decides, at a later stage, to be removed from citizen status, because they disagree with the system, they'll know that their land & investments will be forfeited as well. Of course, this is an extreme case. In the mean time, the citizen has several options — voting for a different government that will change the system more to their liking; getting elected for a government where
they are in charge — until they take the "final step".
The more the citizen is involved in the city, however, the more they are willing to do "working within the legal framework", since they're stakes are higher. In RL, this is not unlike the situation of someone who suddenly finds out that emmigration is the only remaining option, after having exhausted all others.
Thus, the legal system, as proposed by Ashcroft, fulfills two requirements. It derives power from an elected, democratic government — thus it is a just system, which can be validated and changed by the citizens that live under that system. It also can be enforced effectively — although to a much lesser degree than in RL.
I would perhaps consider an analogy of "weak enforcement" something like the Kyoto Protocols and the many Carbon Credit exchanges it implemented. The system is opt-in, and you know the rules before you join. Joining allows your country (and the companies working in your country) to participate in the Carbon Credit exchanges (which can be very lucrative!), but you have to abide by the rules. If you don't agree with them, you can try to press/lobby for a change; but if you don't get your views accepted, you have basically two choices:
1) Pay all the due fines, and expect things in the future to go better, because after a while the stakes in the exchange are so high that "pulling off" is not worthy;
2) Abandon the Kyoto Protocol, and thus be unable to participate on its CC exchange.
So, while the analogy is naturally not perfect, it's a similar example to what Neufreistadt has to offer. Citizenship is an opt-in system, where you delegate two absolute freedoms to the City (the way to do whatever you please with your own land, and, to an extent, with [part of] your money). While you are inside the system — ie. while you are a citizen — you have duties and rights, and enjoy the legal protection of the system. You also have the power to change the system — by voting and getting elected. But you can opt-out — leaving behind all that you have invested there. One could argue that a new citizen would have low stakes, and thus would leave much faster than someone who had been around for a couple years and for whom the stakes of leaving are much higher. That is certainly true for the Kyoto Protocol as well!

Note that this oversimplification should not be interpreted that you release the right to own land and/or money!! Land is indeed owned, and your private ownership of it is protected (more so than in the rest of the SL, since a notarised document of your ownership is kept on archive). Money held in escrow, or somehow paid to the city as part of an investment (ie. land sales) is fully accounted for. You can buy and sell land inside the jurisdiction of city, for a profit, like you would do in any other place in SL. You can mortgage the land, give it away, use it for any project you fancy (within the covenants for zoning). It has the same value as "normal", non-covenanted land in the mainland — but it has also attached to it a certain additional protection, by having a legal system as a means to appeal in case something goes wrong...