I recall reading about that place somewhere. It was sort of a 'interesting' place to live, the same lack of regulation that made it dangerous to live also gave the people living there a pretty strong sense of community, taking care of each other as best as they could.
It seems like its formation originated from being an abandoned military base, then ceded to/taken by the British, who didn't care enough about it to govern it. That's when the city became most populated. Eventually the Hong Kong gov. said 'alright that's enough of that' and evicted everyone and demolished it and turned it into a park (although it seems like at least some people were compensated financially).
So because the order isn't competing with any other population or nation or armed force, it seems less likely that a similar settlement would even be able to form. But if there was a city that was far enough from better controlled settlements, especially if any soldiers located there suddenly decided "fuck this shit", then maybe a city could develop into those conditions. It still might struggle to be self sufficient.
If we were to assume the city was able to form, and just wanted to know how the order reacts, they of course want to squash it. It's a bad look if word gets out about a territory that's totally ungoverned. Tear it down, execute or jail everyone, build it into a good and proper order settlement. The only issue would be how many soldiers they could allocate, and where it's located.
Monsters might greatly enjoy such a place, imagine a city where they could walk around freely right in the middle of order territory. This could also greatly aid the residents in surviving. Monsters would also like to see the people living at a high standard. If they got a lilim, or maybe even a wight or vampire, they could very likely develop the city into a proper place for people to live. This would also give them huge leverage to expand their territory. If the city was far east of lescatie, they could send envoys to the north or south, then further east. They could carve out a massive section of order territory and expand until they reached monster or neutral territory. Or the ocean.