Space is big... very big even when we are only considering a 2 dimensional abstract representation of it as we are here. ZOC is, by definition, an area that you can control by military presence; so feel free to declare war if you think they are within your borders and forcibly remove them. If you are strong enough they will sue for peace soon enough. If you are not, then maybe your ZOC was not as big as you thought it was

As mortili said, it has been established that Political borders in this universe do not extend beyond planets. Nobody controls space. And, quite frankly, the mechanics for ZoE would be ill-suited for ZoC. It is way too easy and common to overtake other people's planets, ships, and starbases. Instead I'd like a more robust set of diplomatic tools to deal with your borders. So you could "close borders" which would make you suffer a severe diplomacy hit, but the AI would know that you might declare war on them if they enter your borders. If someone did cross your borders you would get a pop-up asking if you want to declare war. If you don't, the AI would respect your borders a little less.

I noticed back in beta 6 that if I went in front of a colony ship with a fighter (cant remember which kind exactly) that the AI would turn around and leave my system after it crossed into my space (ZOI) However it did try to cut through on several occasions. Would it not be possible to engage a ship that enters your space without having to declare war. Let the attacked party declare war if it feels strong enough and if the destroyed ship is worth going to war over. I know that if I were to do something aggressive and was attacked for it I wouldn't necessarily declare war. Perhaps some diplomatic penalty or demand for reparations.....

If the Romulans or Cardassians settled in our solar system, it would be because they did not fear reprisal. As Perigrin suggested we need a more robust diplomacy system to deal with incursions. Otherwise, you can culture flip them or blow them up.

There is hope for better diplomacy in the game. There is no hope that they will establish any no fly zones or political boundaries.

Well, no offense, but this is not Star Trek (as cool as such mods may be).  And I've got two words for you: "Guantanamo Bay".  Regarding that military base, ask yourself-- who's country is it in?  Who actually owns it? & Are they historically friends?  For those playing at home, the answers are Cuba, America & No.  (Its a long convoluted history, but in essence, the Americans got there first).

What the real issue is, from a players standpoint, is that you can't express to the AI that you find it offensive.  When an AI flips an area's influence and your base is now stuck inside their territory, you'll often get a diplomacy screen with them asking you to remove it.  Saying 'no' gives a hit to relations.  I've only gone through 2 games so far, but there doesn't seem to be a way for the player to let the AI know that them gobbling up resources in your territory is offensive to you.

Going back to your Star Trek examples, if the Romulans were sending a construction fleet to Mars, even before shots flew, the Federation would be sending a message saying "Whoa, whoa whoa-- what the heck do you think youre doing?!".  This is especially annoying when the guy doing it isn't an enemy though, but an ally or a needed neutral party (to avoid a 2 front war) and you have no way to back them off.*

So, I think the mechanic is working as intended-- because as noted, in reality, possession is 9/10's of the law, and your border is not a force field in space.  I personally think this is a good thing, but players need a way to say "hey, don't do that or I'll be angry".

*There is the option of making a trade to buy that construction ship in the trade screen before it sets up base-- but that assumes you both haven't traded recently so you can make the offer before it sets up (the AI seems loath to trade actual bases, though it might) and are sure its trying to set up in your territory as opposed to just moving through.