Kingshead Jail...

[Marry The Night]

The jail in the video isn't used because it would cause problems. If the jail in the Keep were functional, lower-level pirates that are sent to jail on Kingshead would have to attempt to get past the Assassin, and subsequently be knocked out a second time; and if you're knocked out in a jail and you aren't revived, the game crashes.

There is, however, a second jail without any enemies inside over by Remington's catwalk. Why that one isn't functional I'm not so sure.