The United Nations Convention on the Law of the Sea of 1982. introduced a new specific legal regime on the sea – the exclusive economic zone. Each coastal state reserves a right, granted by the Convention and customary international law of sea, to declare its exclusive economic zone in which it can subsequently maintain certain sovereign rights as well as jurisdiction in certain aspects. Third parties maintain the right of free passage, be it by maritime of aerial means, as well as the right to lay underwater cabels and pipelines. The Convention also grants said third parties the right to exploit local recources to a degree if certain conditions are met. This paper aims to explain how the exclusive economic zone came to be, what were the reasons and circumstances that necessitated its introduction as well as analyse the issue of setting boundaries between exclusive economic zones of coastal states. It will also consider issue of overlapping legal regimes at sea. In addition, all the authorizations and restrictions that arise from the Convention will be analysed. This paper will also present examples of creative solutions to aforementioned difficulties of setting boundaries between zones. Finally, the process of declaring exclusive economic zone in the Republic of Croatia will be specifically explored.