An essential part of the Bank’s mandate is to deliver law- and justice-related products and activities in support of the Millennium Development Goals, in the context of client countries’ poverty reduction strategies and the Bank’s Country Assistance Strategies. The Bank is proactive and strategic in providing a disciplined, consistent approach to legal and judicial reforms, while working closely with partners in both public and private domains. (See www.worldbank.org/legal.)

In the law and justice sector, the Bank analyzes country and sector conditions, including legislative and related institutional regimes. It formulates diagnostic assessments, advises on policy reforms, reviews client-country policy statements and draft legislation, and assists in capacity building in public sector institutions to improve enforcement of contractual obligations, laws, and regulations. (See box 4.9.)

During fiscal 2003 the Bank has been focusing greater attention on the legal aspects of its work in investment climate and finance, environmental sustainability, the promotion of gender equality (see box 4.10), infrastructure), and trade).

INVESTMENT CLIMATE AND FINANCE

The Bank is actively engaged in improving the climate for investment and finance through its work in the areas of legal and judicial reform and financial systems improvement.

The first step toward improving the investment climate is to assess the current situation. Legal advisers appraise the results of country-specific investment climate assessments produced by the regions, and then assist in country dialogues aimed at prioritizing, mainstreaming, and implementing needed legal and judicial reforms.

During the past year the Bank has expanded its capacity to assess weaknesses in legal and judicial systems and to assist in promoting the rule of law. Legal and judicial reform is now one of the key structural and institutional development competencies of the Bank. Work in this sector has contributed to improving the investment environment in client countries. (See www.worldbank.org/legal.)

Predictability, transparency, effectiveness, and adherence to the principles of due process by judicial institutions are all factors that contribute to a secure investment climate. During fiscal 2003 the Bank trained judges in commercial law in Ecuador and Sri Lanka, in bankruptcy in Croatia, and in effective and efficient court management in El Salvador and Mongolia. The promotion of alternative dispute resolution mechanisms, such as commercial mediation in Albania and Sri Lanka, is also being carried out.

In the broader law and justice sector, the Bank assists law-enacting bodies, law reform commissions, bar associations, legal educational institutions, civil society, and the media. In the area of law reform, the Bank recognizes that many of our client countries still lack transparent legal frameworks that encourage appropriate market incentives and equitable and affordable access to enforcement remedies that are essential to a secure investment climate.

Well-functioning financial systems are essential for private sector–led growth, without which poverty alleviation will not be possible. They also help prevent or mitigate financial crises that would otherwise burden countries with crippling costs and increased poverty. The Bank encourages financial system reform and the strengthening of individual financial institutions and markets. As part of this effort, in conjunction with other international organizations and in accordance with its mandate and specific competencies, the Bank assists client countries in their anti-money-laundering efforts and is actively involved in assessing the legal and regulatory environments for combating money laundering and terrorism.

In response to a need for standards in the area of insolvency and creditor rights, the Bank, in collaboration with the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, IFC, IMF, OECD, the United Nations Commission on International Trade Law, INSOL International, and the International Bar Association, has developed the World Bank Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. The Principles form the basis for Bank-led assessments of insolvency and creditor rights systems under a joint program with the IMF to develop Reports on the Observance of Standards and Codes (ROSCs). To date, 14 insolvency ROSCs have been completed and another 7 are in progress. These ROSCs support diagnostic and strategic work, underpin policy dialogue and lending operations, and provide input for technical assistance and capacity-building efforts (e.g., in Argentina, Bolivia, Brazil, Croatia, the Czech Republic, Slovakia, and Turkey). Notably, the Principles have been used by countries to assess ongoing law reform efforts even where no ROSC has been undertaken (e.g., in Kosovo, Poland, and Serbia). In the Slovak Republic, insolvency reform has been a core component of the Bank’s overall work on strengthening the financial sector.

The Bank is also working to develop principles on the insolvency of financial institutions, in collaboration with the IMF, the Bank for International Settlements, and a core consultative group of experts.

In January 2003 the Bank convened a Global Forum on Insolvency Risk Management to discuss standards and strategies for the next decade. (See www.worldbank.org/firm.) One of the main objectives of the forum was to explore ways to address institutional and regulatory capacity-building challenges to promote more reliable investment systems. This led to collaboration with the International Association of Insolvency Regulators in developing a compendium of regulatory practices and experience that can assist legislators and policymakers. The Bank also sponsored a Global Insolvency Judges Forum in May 2003 at which judges from some 90 countries considered ways to expand the understanding of insolvency issues by the international community through the use of distance learning tools and the Bank’s Global Insolvency Law Database. (See www.worldbank.org/gild.)

SUSTAINABLE DEVELOPMENT

The World Summit on Sustainable Development held in September 2002 identified the key role of law in achieving sustainable development. During this past year the Bank has made significant efforts to protect the global environment through the use of legal and institutional reform as well as other legal instruments, including those it pioneered for the purchase of independently verified reductions of greenhouse gas emissions. Through workshops and a fellowship program the Bank has also provided legal capacity building for developing countries and countries with economies in transition, which has helped them participate actively in the emerging carbon market.

The latest titles in a series of monographs on Law, Justice, and Development include The Legal and Regulatory Framework for Environmental Impact Assessments, and Conflict and Cooperation on South Asia's International Rivers. Legal studies concerning public participation, land titling, and the flexible mechanisms of the Kyoto Protocol are also in preparation.

Integral to the Bank’s day-to-day business are the 10 environmental, social, and legal safeguard policies that provide templates for sustainable development at the project level. (See www.worldbank.org/safeguards.)

Other policies are being reviewed as part of the effort to achieve sustainable development. For example, Bank funds may not be used to purchase land, a policy that reflects earlier concerns about serious distortions common in client-country real estate markets and frequent legal uncertainties with respect to purchases of land. The Bank, however, has come to recognize that land markets in many countries are now more stable and reliable. As a result, in this past year the Bank has begun testing a new model of large-scale land reform for application especially in poorer countries. To date, one community-managed project in India has been approved by the Bank’s Executive Directors for oversight by a cross-sectoral Community Land Purchase Committee. In addition, the Bank is in the process of preparing a further project in Malawi for consideration by the Executive Directors.