The Torah presents the setting up of courts as a sequential next step after settling in the Land of Israel, and commands people to follow the instructions of the judges and kohanim.
Ramban distinguishes between the mitzva’s application in the land as opposed to elsewhere, during the exile. Are we commanded to set up courts in Jewish communities outside of Israel?
One would expect that the rule of law is important anywhere. But in the Land of Israel, especially with the Mikdash at the center and the central court adjacent to it, the full potential of the Jewish community can be realized, and the courts can be set up as a firmly established institution, as opposed to an ad hoc basis.
Based on an audio shiur by Rabbi Ezra Bick. Follow this link for the full shiur.