Legal and Judicial Reform in Europe and Central Asia

Between 1990 and 2001, 95 projects for US$ 10.8 billion in 21 European and Central Asian (ECA) countries included legal and judicial reforms. (Note that all dollar amounts in this paper are U.S. unless otherwise stated.) The Bank supported legal reform of commerce, the financial and other sectors, privatization, and property rights; support was also provided for legal education and assistance with legislative drafting. In 89 projects, legal and judicial reforms were designed as components of larger projects; the remaining 6 projects, at a cost of $113 million, were stand-alone. Commercial and financial sector legal reform, comprising 56 percent of legal reform interventions, emphasized bankruptcy, company, banking, and securities market laws. Privatization, sectoral regulation, property rights, legal education, and assistance for legislative drafting encompassed the remaining 44 percent of interventions. Judicial reform was addressed in 17 of the 95 projects and focused on improving the management capability of judges through the provision of training and equipment. This preliminary assessment report found that many of the laws subject to reform were important to the development of a market economy, as determined by the Bank's research and other analytical work. Bank interventions also responded to the changing needs of transition countries. By 1998, Bank attention had shifted from bankruptcy law toward legislation for foreign direct investment, taxation, licensing, and from banking regulation toward microcredit and pensions. Country Assistance Strategies (CASs) for 21 out of 26 transition countries produced in the 1998-01 period identified deficiencies in specific laws in contrast to the earlier CASs. Since 1997, the Bank has also directed more attention to judicial reform. However, the Bank might have provided similar laws (concerning bankruptcy, company, banking, and securities markets) for a number of countries without a prior review of country-specific conditions, on the assumption that these laws would eventually be needed by any modern market economy. Evaluations and fieldwork suggest that when supporting these laws, the Bank might not have addressed key questions, such as: Is there demand for a particular law? If there is no demand, does the Bank expect to create demand through supporting the law? How appropriate is law change as a tool, given the state of legal institutions and governance environment within a country? How would a particular law fit into the overall framework of laws, and societal understandings? Is Bank action needed in the field chosen, or are other actors with a comparative advantage in that area already working on the same thing? How is the law drafted, who is consulted, which branch of the government should pass the law, and is additional implementing legislation needed? In designing judicial reform interventions, the Bank has focused too narrowly on training and supplying equipment.download