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World Bank Document Document of The World Bank Public Disclosure Authorized Report No: 20820-AM Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 8.6 MILLION (US$ 11. 4 MILLION EQUIVALENT) TO THE Public Disclosure Authorized REPUBLIC OF ARMENIA FOR A JUDICIAL REFORM PROJECT August 21, 2000 Legal Department Public Disclosure Authorized Europe and Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective August 21, 2000) Currency Unit = Dram Dram 1.0 = US$ 0.002 US$ 1.00 = 547 Drams FISCAL YEAR January 1 - December 31 ABBREVIATIONSAND ACRONYMS ABA- CEELI American Bar Association's Central and Eastern European Law Institute CAS Country Assistance Strategy CCC Council of Court Chairmen EU-TACIS European Union - Technical Assistance Program for the Commonwealth of the Independent States ECU European Currency Unit FMS Financial Management System FSU Former Soviet Union IDA International Development Association JTC Judicial Training Center GOA Government of Armenia. GTZ Gesellschaft fur Technische Zusammenarbeit MOJ Ministry of Justice PAC Project Administration Council PIU Project Implementation Unit PMR Project Management Report POM Project Operational Manual SA Special Account SATAC I Structural Adjustment Technical Assistance Credit SATAC II Second Structural Adjustment Technical Assistance Credit SDR Special Drawing Rights SOE Statements of Expenditures USAID United States Agency for International Development WTO World Trade Organization YSU Yerevan State University Vice President: Johannes F. Linn Country Director: Judy O'Connor Sector Manager: Friedrich Peloschek Task Team Leader: Irina L. Kichigina ARMENIA JUDICIAL REFORM PROJECT CONTENTS A. ProjectDevelopment Objective Page 1. Project developmentobjective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 11 C. Project Description Summary 1. Project components 15 2. Key policy and institutional reforms supportedby the project 16 3. Benefits and target population 17 4. Institutionaland implementationarrangements 17 D. Project Rationale 1. Project alternatives considered and reasons for rejection 19 2. Major related projects financed by the Bank and other development agencies 20 3. Lessons learned and reflected in proposed project design 21 4. Indications of borrower commitmentand ownership 23 5. Value added of Bank support in this project 24 E. Summary Project Analysis 1. Economic 24 2. Financial 24 3.Technical 24 4. Institutional 25 5. Environmental 26 6. Social 27 7. SafeguardPolicies 28 F. Sustainability and Risks 1. Sustainability 28 2. Critical risks 28 3. Possible controversial aspects 29 G. Main Credit Conditions 1. Effectiveness Condition 30 2. Other 30 H. Readiness for Implementation 31 I. Compliance with Bank Policies 31 Annexes Annex 1: Project Design Summary 32 Annex 2: Project Description 37 Annex 3: Estimated Project Costs 46 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 47 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 48 Annex 6: Procurement and Disbursement Arrangements 49 Annex 7: Project Processing Schedule 65 Annex 8: Documents in the Project File 66 Annex 9: Statement of Loans and Credits 67 Annex 10: Country at a Glance 69 MAP(S) IBRD No. 29596 ARMENIA JudicialReform Project Project AppraisalDocument Europe and CentralAsia Region LegalDepartment Date: August 21, 2000 Team Leader: Irna L. Kichigina Country Manager/Director: Judy M. O'Connor Sector Manager/Director: FriedrichPeloschek Project ID: P057838 Sector(s): BY - Other Public SectorManagement LendingInstrument: SpecificInvestment Loan (SIL) Theme(s): Poverty TargetedIntervention: N Project FinancingData O Loan N Credit [I Grant D Guarantee O] Other (Specify) For LoanslCreditslOthers: Amount(US$m): SDR 8.6 million / US$11.4 million equivalent ProposedTerms: Standard Credit Grace period (years): 10 Years to maturity: 40 Commitmentfee: 0.50% Service charge: 0.75% _FinancingPlan: Source LOC, Foreign Total GOVERNMENT 0.80 0.00 0.80 IDA 0.00 11.40 11.40 Total: 0.80 11.40 12.20 Borrower:REPUBLIC OF ARMENIA Responsibleagency: MINISTRY OF JUSTICE AND COUNCIL OF COURT CHAIRMEN Ministry of Justice Address: 8, KhorhrdaraniStr., Yerevan,375010, Republic of Armenia Contact Person: Mr. David Harutyunian, Minister Other Agency(ies): Council of CourtChairmen Address: 6, KhorhrdaraniStr., Yerevan, 375010, Republic of Armenia Contact Person: Mr. Henrik Danielian Tel: (374-2) 58-20-93 Fax: (374-2) 582-093 Email: Estimated disbursements( Bank FY/US$M): fY | 2001 2002 2003 22.4 7005 Annual 0.5 2.3 2.5 3.4 2.7 Cumulative 0.5 2.8 5.3 8.7 11.4 Project implementation period: 2000-2004 Expected effectivenessdate: 10/30/2000 Expected closing date: 12/31/2004 C0SPAD %n P, .M20,2000 A. Project Development Objective 1. Project development objective: (see Annex 1) The development objective of the proposed project is to assist in the development of an independent, accessible and efficient judiciary in the Republic of Armenia, which is essential to govemance, rule of law, and investment climate. More specifically,the project aims at: (i) strengtheningjudicial self-governancethrough support to the Council of Court Chairmen (CCC); (ii) improvementof court administration and case managementprocedures; (iii) development of a comprehensive institutional base for continuing education for judges and court personnel; (iv) strengtheningthe service for enforcementof court decisions; (v) development of a comprehensivelegal information system accessible to judges, legal professionals, business communityand citizens; and (vi) promotion of public awarenessof laws and legal institutions. Progress towards these objectives would be monitored using the following set of indicators: (i) development within the CCC of the capacity to manage efficiently and effectively the first-instance and appellate courts (i.e. effective governance of the judiciary by the CCC); (ii) adoption of new court administrationand case managementprocedures by courts; (iii) development of new professionals within the court system including court administrators, judicial assistants and financial officers; (iv) more consolidated and rationalized court structure (judges and other scarce judicial resources are allocated appropriately; staffing levels are determined to allow the courts to discharge their assigned functions); (v) a well-functioning Judicial Training Center (JTC) resulting in better trained and more competent judicial system professionals; (vi) improved court decisions enforcementmechanism; (vii) improved access by judges, legal professionals, business community and general public to more reliable, comprehensiveand up-to-date legal information;and (viii) establishmentof a comprehensivepublic education program to overcome the widespread distrust and suspicion of the judiciary. 2. Key performanceindicators: (see Annex 1) B. Strategic Context 1. Sector-relatedCountry Assistance Strategy (CAS) goal supported by the project: (see Annex I) Documentnumber: 16988-AM Dateof latestCAS discussion: August 26, 1997 The objectives of the Bank Group's country assistance strategy for Armenia are to: (i) foster the rapid development of the private sector by promoting further structural reforms, strengthening the financial system and the legal and regulatory framework, and alleviating key infrastructure bottlenecks in energy, transport and water; and (ii) support social sustainability and the alleviation of poverty through the -2 - strengtheningof the social safety net, and through improvements in the quality of and access to basic health and education services.A legal frameworksupporting a market-basedeconomy includes laws, statutes, and regulations that consistently protect the sanctity of property and contracts and the rights and obligations associated with them. Equally critical is a properly functioningjudiciary capable of resolving disputes in a timely, impartial and reliable manner. The proposed project would assist in the Government's agenda to "strengthen the legal and regulatory framework" by enhancing a judicial system that is independent, effective and accessible. 2. Main sector issues and Governmentstrategy: 1. Background During the Soviet era, judiciaries throughout the Soviet Union were reduced to roles as obedient executors of the instructionsand policies of the Government and the CommunistParty. The Procuracy and the Ministry of Justice (MOJ) dominated the nominally separatejudicial system. Armenia is aspiring to break with the past and establish an independentjudiciary where judges would issue decisions based on the law and exercise discretionwithin its limits. Taking into account the legacy of the Soviet times, it is important to balance the power of the three branches of government.The institutional guaranteesfor the independence of the Armenian judiciary from the other branches of governmentare therefore of paramount importance. The Government of Armenia (GOA) has recognizedthe need for a reform program that would pave the way to economic recovery. It has launched an impressive program of reform combining stabilization policies, structural adjustment and privatization. Economicreforms, however, cannot flourish and private investors and entrepreneurscannot prosper without a legal and judicial system which can effectivelyprotect private property, enforce
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