The Enemy of the State mechanic is the PvP event we know the least about. What we know is the Mayor of a Node can declare any foreign citizen as an Enemy of the State. That individual becomes a legal combat target for all citizens of the Node. Where combat can occur, if it is just inside that Node’s borders or the whole world, that is one piece of information we do not have.
A Mayor cannot declare one of his own citizens as an enemy of the state, this mechanic is reserved for foreign citizens only.
One mechanic we are waiting to find out about, is can an individual transfer their citizenship to a Node if they are an enemy of the state of that Node.