Judicial Reform Needs Further Attention In Europe And Central Asia, Warns World Bank

Contacts:
Jacek Wojciechowicz (48-22) 520 80 54
jwojciechowicz@worldbank.org
Merrell Tuck, global mobil # 202 415 1775
mtuckprimdahl@worldbank.org

WARSAW, June 20, 2005 — Most countries in Central and Eastern Europe and Central Asia need to do much more to raise the efficiency of their judicial systems, improve enforcement, and create stronger incentives for the accountability of judges. They must also reduce case backlogs and tackle corruption in the region's judiciaries, according to a new World Bank report.

The report, entitled Judicial Systems in Transition Economies: Assessing the Past, Looking to the Future, reviews efforts to transform legal institutions in transition countries since 1990 and assesses their current condition. The authors base their findings on surveys of citizens, lawyers, and enterprise managers throughout the region.

"Judicial reform has not kept pace with the tremendous strides have been made in many market-oriented reforms. Indeed, less progress has been made in judicial reform and strengthening than in almost any other area of policy or institutional reform," says Cheryl Gray, an author of the report and Director of the World Bank's Poverty Reduction and Economic Management Department in the Europe and Central Asia (ECA) Region.

The launch of the judicial report coincides with a June 21-22 workshop on Contract Enforcement and Judicial Systems in Central and Eastern Europe being organized by the World Bank and the National Bank of Poland. The event will convene public officials from fourteen countries and territories as well as donors to share information and exchange experiences in the area of judicial reform and commercial contract enforcement and to lay the groundwork for future collaboration.

"As ECA countries advance beyond transition and compete in the global marketplace and firms rely ever more on the formal legal system to handle business disputes, the pressure on courts will only increase. For this reason, strengthening legal institutions is a central challenge of the next decade," notes David Bernstein, a co-author and Senior Public Sector Management Specialist in the World Bank's ECA region. Bernstein works with governments on public administration and legal reform projects in the Balkans and Caucasus.

Firms' and lawyers' views regarding honesty and efficiency of the court system

According to the report, only about one quarter of the managers surveyed thought courts were fair or honest (with the fraction even lower in some countries such as Albania, the Kyrgyz Republic, Moldova, and Russia). Less than 40 percent thought courts could enforce their decisions. Most managers said courts were slow and expensive – and getting more so in many countries. Indeed, citizens' views of the courts appear to have worsened since the mid-1990s.

The report also cites data from a survey of lawyers in the region undertaken as part of the Bank Group's Doing Business project. Lawyers reported, for example, that in most transition countries it took more than 200 days to collect on an unsecured debt in 2004, and in Serbia and Montenegro, Slovenia, and Poland it took nearly three years. Across ECA, the average length of time required to collect on a debt appears to be nearly double the average time required in higher-income OECD countries.

Diverse countries, diverse prescriptions for improved judiciaries

"We find sharp differences in the extent to which firms use the courts, and this in turn determines what reforms are most likely to be sustainable. Not surprisingly, there is a strong relationship between the extent of economic reforms and resulting demand for judicial services. Yet burgeoning demand only puts additional pressure on the courts, slowing them down and producing even more negative perceptions," explains James Anderson, a co-author and Senior Economist in the World Bank's ECA region.

A country's judicial strategy should be tailored to realities and needs on the ground. In countries such as Belarus and Uzbekistan, where capitalism is nascent at best, the first priority should be to build basic demand for impartial dispute resolution through continued market reforms. As the private sector expands, so in turn will demands on the courts. Judges, legislators and government officials should then work to build judicial accountability and independence while gradually strengthening the capacity of the judicial system.

In Azerbaijan, Georgia, Moldova, and Ukraine, among others, market reforms are further along, but judicial systems remain weak. Policymakers and judges in these countries need to focus on strengthening accountability and investing in basic capacity -- court premises, simple information technology infrastructure, and hiring of clerks or administrators to free up the time of judges.

Bulgaria, Macedonia, and Romania have strong demand for judicial services yet still only moderate judicial capacity. These countries must address complex issues of independence, accountability, court performance, alternative dispute resolution mechanisms, and the design and functioning of the bar, bailiffs, and notaries. They need to act quickly to implement the comprehensive judicial reform strategies they are developing.

In countries where both demand and capacity are relatively high – the new EU members and Croatia – efforts can focus on remaining areas of weakness, whether speed (in the Slovak Republic), ability to enforce decisions (in Poland and the Baltics), or fairness and honesty (in Hungary).

Foundations for further legal and judicial reform: What's being done?

Each country faces different challenges in reforming its judiciary, but according to the report, all share the need to:

• strengthen transparency and accountability through merit-based incentives for judges, random assignment of cases, publication of decisions, and mechanisms for citizen and media feedback on judicial performance. Armenia and Georgia, for example, are taking measures to improve the flow of legal information as a step toward greater transparency.
• build operational independence through greater judicial control over budgets, staff and procedures. Macedonia's judges received power over their budget in 2004.
• revise case management procedures to improve judicial control and efficiency in the courtroom and provide judiciaries with information technology to automate and monitor the new system. Albania, Armenia, Croatia, and Macedonia are among the countries that are now putting in place such systems.
• improve access, security and the operation of courts through capital investments in new or rehabilitated facilities. Georgia, for example, is rebuilding its courthouses with the assistance of a $13.4 million credit from the International Development Association (the Bank's soft loan window).

"Rule of law is essential to a well-functioning market economy, and leaders in many transition countries see the need to develop effective, efficient, and credible legal and judicial systems as among their highest priorities. We hope that the analysis and lessons in this report can help to guide the work going forward," Ms Gray concludes.