So that idea may or may not have been suggested already but I didn’t follow the forums any way and just returned when the game went to 1.0 . Sorry, if it already was, but I believe that idea is worth posting. You may agree or disagree 
Basically (also for those who love to tell TL;DR) this is about adding factions and appropriate reputations. I know that this was already suggested quite a few times however the next things hopefully will be new. For those that know the game, think about the “Freelancer”-reputation-system, I’ve got some ideas from it. I’m ignoring Fort Muerto for the Pirates, the system could be easier when using that one as a central hub for them. Also I’m under the impression that Empire, Federation and Jericho are at war. However the timeline doesn’t mention anything like that. If that presumption is wrong the rest of the text could read funny 
Bold italic underlined text states the main topic of a paragraph, Bold text marks a larger sub-theme.
First of all 8 factions are added. The first 3 should be obvious, Empire, Federation and Jericho. There will be criminals as well (the next 3 factions), Empire Pirates, Federation Pirates and Jericho Pirates. Because those names sound dull, let’s call them Pirates (Empire), Corsairs (Federation), and Rogues (Jericho). Essentially these Criminals are fighting against the faction mentioned in their name. The last 2 “factions” should be “lawful” and “unlawful”. They are not exactly factions but need to exist for players (reason see below).
All factions are available for players, however no NPC may fly under “lawful” or “unlawful”-tag.
The 8 factions all have relations to each other, Friendly or Hostile.
Empire, Federation and Jericho are Hostile to each other, hostile to “their” pirate-faction and Friendly to the other criminals. So e.g. the Empire is Hostile to Federation, Jericho and Pirates, Friendly to Corsairs and Rogues.
This already defines the relationships of the criminals as Hostile against their faction and Friendly to the other factions. E.g. the Pirates are Hostile to the Empire and Friendly to Federation and Jericho. Criminals are Hostile to each other.
Lawfuls are Friendly to Empire, Federation and Jericho, Unlawfuls are Friendly to the criminals (and vice versa).
The existing Invasion-maps would have to be updated so the currently either lawful or unlawful NPCs would earn their factions’ reputation and attack valid targets (in particular criminals shouldn’t attack pirating players however mining ships should). Having mentioned those mining ships, they have to be part of one faction, not lawful. Players will get their own reputations as well, Neutral, Friendly or Hostile towards those factions.
When starting the game, players choose one of those factions. They’ll gain the appropriate reputation for the faction they choose. However it won’t have any impact in the game apart from the Invasion mode. In the invasion mode their reputation will decide on by whom they are attacked and by whom they aren’t. The first change of a faction should be free of charge. Players who are neutral to both criminals and main faction (e.g. neutral to Corsairs and Federation) can choose to which faction they want to belong.
Gain and Loss of Reputation is done via the Karma-system that’s already in place. By killing an enemy the factions will react appropriately. Let’s say you are an Empire-pilot and attack and kill a Pirate. You’ll lose Karma for Federation and Jericho and gain Karma for Corsairs and Rogues. While NPCs have fixed Reputations according to their alignment, players who stand between -1 and 1 in Karma are considered Neutral, above 1 they are considered Friendly, below -1 they are considered Hostile. Note that the Reputations of a faction and its counterpart should be mirrored, so RepEmpire equals minus RepPirates etc. This prohibits that a player achieves a -2 Karma on both Empire and its enemy.
Lawful and Unlawful players don’t go the same route. A lawful player will gain reputation with all three factions when killing any pirate or unlawful player no matter what criminal faction these belong to. They lose reputation if they kill any lawful citizen with all three factions. E.g. killing a Rogue will improve your reputation towards Federation as well as Jericho, while killing an Empire military ship will result in a reputation penalty for Empire as well as Federation and Jericho. You are lawful, act like it.
Pirate Stations need to be added because it isn’t possible to enter the station-system of a hostile faction, you would be killed nearly instantly without the chance to dock. However I consider the Criminal-factions to be more PvP-orientated, also they can’t have their main base in the same sector as their enemy’s starbase, e.g. the Pirates can’t have their main base in Ontregos, home of the Empire. Instead Pirates get their home base in Felony, Corsairs in Velorum (swapping Velorum and Erebus-sectors could make sence, it’s not necessary though) and Rogues in Solaris. However these stations wouldn’t bring station protection to the entire sector but only to the system of the base itself.
For players the pirate-factions are only chooseable from R7 onwards, as every mentioned sector only consists of R7- or R10-systems. Thus the reputation of players is locked between Ranks 4 and 7 in that they can’t have a Karma lower than -1 to Empire, Federation and Jericho. As soon as they promote to R7, this restriction is not valid anymore, meaning they can join a Pirate faction.
Missions and Vouchers get some slight changes. You still need to change hangars to be able to earn other Vouchers, however, Vouchers of one faction are available from the respective criminals as well (e.g. you can earn Jericho-vouchers from Rogues). To fit this into the story, the criminals have been able to hack into the factions’ database and create an own profile, gaining vouchers for “accomplished” missions. These missions are instead given out by the pirates and are only slightly changed (e.g. you have the task to destroy 4 pirates in Ontregos Pass; pirates change it so you have to destroy four military ships. Mission rewards stay the same). The requirements for vouchers remain untouched.
PvP get’s a little bit more complicated. When two players are in radar range of each other, the game checks for the factions these players belong to, checks the reputations of both players towards the factions and takes the worse of them (e.g. an Empire pilot meets a Corsair; that corsair however has started to attack Empire-targets and is neutral to the Empire, while the Empire pilot is friendly to corsairs; they appear Neutral for each other). This may cause some players to see hostile players of factions that they are normally friendly to. To stop them from losing Karma in PvP-combat only the one with the worse Karma towards each other will lose Points, the other persons’ Karma will stay at the same level.
Buffs and Heals are changed so they work on every person who is friendly to one player. Neutral players can’t gain an advantage of those Buffs, Hostile players obviously have to be excluded. This makes the only (HUD-wise) improvement of premade squads over normal friendly players the squad-window to the left where the player can check the status of his teammates.
So I hope I didn’t forget anything that would be important to mention regarding gameplay. The second post below contains unimportant suggestions for HUD-changes which would be necessary if this idea was implemented. However I want to visibly divide these parts, the above is the one important for gameplay.
I’d love to hear your feedback, the only thing I don’t want to read is that you are sending me a mail bomb. Apart from that you are obviously free to rip my idea into pieces (though I hope you don’t).
Greetings
Silverman