But only after Mitchell got all hypocritical about it.In which case the Feds would never have had a basis for preventing the Empire coming after NMLA in one of their systems. Feds were the first to claim "moral highground" here, and look where it got them; wholesale massacre of their citizens.
The NMLA didn't attack Federal space until the Federation started arresting refugees as terrorists. Had the Federation not drawn a very big distinction between "Federal mercenaries who blow up Imperial facilities" (get a medal) and "NMLA members who blow up Imperial facilities" (get arrested and sent to Serene Harbour) then the NMLA would probably still be confining their attention to Imperial space.