Did they? They controlled its borders, air space, water, power, trash, money, trade, food, etc. They still occupied the space. They had guns pointed into it and would snipe people who walk near the edge or throw things into it. Every now and then soldiers would go in for some reason or another. They had policies to control the number of calories that went in to keep it down to the bare minimum. It was an open air concentration camp, not sovereign territory.