The state and the law seem to be inextricably intertwined: The state is often identified with its legislative and adjudicative capacities. Law and legal institutions are likewise associated with public authority, conjuring the image of public courts and state law. But technological and social transformations, characterizing the modern age, pose a growing challenge to the connection between these two institutions. One type of challenge is posed by globalization, especially in this age of new information, which paves the way for legal transactions that traverse territorial boundaries and/or that occur in the stateless realm of cyberspace. Legal institutions whose jurisdictions are delineated according to geopolitical lines cannot adequately regulate behavior in a world in which physical-geographic location is gradually becoming irrelevant.

When we think about “regulation” – that is, a sustained and focused control mechanism over valuable activities, using rule setting, rule monitoring and rule enforcement – the first image that comes to mind is a public administrative agency. However, over the past three decades, private entities have gradually assumed greater and greater regulatory roles. When we send our children to schools, the quality of education as well as their safety and health are often monitored by private auditors. When they are sick and must be taken to an emergency room, the standards of treatment are in many hospitals determined by a private organization. When we buy them a toy, it is usually a product made by workers in developing countries whose labor conditions are evaluated by a nonprofit organization, and in factories whose environmental standards are defined by a private industry association.