Executive Summary

AuthorJames Anderson; David Bernstein; Cheryl Gray
ProfessionPoverty Reduction and Economic Management Department (ECSPE) in the Europe and Central Asia (ECA) Region
Pagesxi-xvii

WELL-FUNCTIONING LEGAL AND JUDICIAL INSTITUTIONS ARE CRITICAL to economic growth and poverty reduction in market economies. They define the rules by which markets function, and they provide a means to resolve disputes, protect economic and social rights, and hold governments accountable for their actions. The transition from socialism to capitalism in Central and Eastern Europe and the Baltics (CEE) and the Commonwealth of Independent States (CIS) has required a fundamental reorientation of legal and judicial institutions. During socialist times they were subordinate to the executive and the Communist Party, and their role in the commercial sphere was oriented almost entirely toward enforcing the governments' economic plans. The scope for private transactions and private law was narrow. Administrative law and institutions-including state arbitration-represented the most extensive part of the legal infrastructure. The transition from socialism to capitalism requires a dramatic change in legal and judicial institutions: heightened independence from the executive; new roles and skills for judges, lawyers, and other personnel; and a rapid increase in institutional capacity to handle legal cases efficiently and effectively.

This study looks at the experience of the CEE and CIS transition economies in their efforts to reform their legal and judicial institutions to fit the needs of a market economy. It draws on numerous sources of data- including the European Bank for Reconstruction and Development (EBRD)-World Bank Business Environment and Enterprise Performance Surveys, the American Bar Association-Central European and Eurasian Law Initiative (ABA-CEELI) Judicial Reform Index, the EBRD Legal Indicator Survey, the World Bank's Doing Business database, the World Values Survey, the World Economic Forum's Global Competitiveness Reports, and the New Democracies and New Russia Barometer surveys conducted by the University of Strathclyde-to measure specific characteristics of legal systems in various transition countries and how they have changed in recent years, and to draw lessons for future reforms.

Experience in the 1990s

The CEE and CIS countries faced a monumental transition challenge at the beginning of the 1990s. It is perhaps not surprising that domestic reformers and much of the international community initially emphasized political transformation, macroeconomic stabilization, and basic structural reforms (including privatization) over longer-term institution-building needs. In this hectic environment, the creation or strengthening of legal and judicial institutions took a back seat to passing laws and decrees to support and...

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