Introduction

• Author: James Anderson; David Bernstein; Cheryl Gray
• Profession: Poverty Reduction and Economic Management Department (ECSPE) in the Europe and Central Asia (ECA) Region
• Pages: 01-06

Page 1

LEGAL AND JUDICIAL INSTITUTIONS PLAY A CENTRAL ROLE IN THE functioning of market economies. In working to define and enforce laws, resolve disputes among private parties or between citizens and the state, and oversee and counterbalance the power of the executive, they help to define the investment climate in which firms operate and the legal setting in which social and human rights take shape. Literature on economic development and socialist transition over the past decade has increasingly stressed the critical importance of well- functioning institutions to economic growth, social development, and poverty reduction.¹ While legal and judicial institutions can vary markedly among countries in their structure, functions, and degree of formality, they must be seen as legitimate and relied upon by the citizenry if they are to play an effective role in an economy and society.

One of the most momentous developments in recent world history was the end of socialism in Central and Eastern Europe (CEE) and the breakup of the former Soviet Union into independent states (most of which are loosely joined in the Commonwealth of Independent States, or CIS) at the beginning of the 1990s. The transition from socialism to market economies in this part of the world over the past 15 years has required a radical reorientation in economic and social policies and a complete rebuilding-or often building from scratch-of core institutions. Among the biggest challenges has been the reorientation or recreation of legal and judicial institutions, which in the early 1990s were ill suited to the needs of a market economy. They faced a myriad of fundamental challenges, including establishing independence from the executive, developing new means to ensure accountability given such newfound independence, creating new management tools and approaches, ensuring greater transparency and sharing of information, and building new competencies for judges and other legal...