Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: 35447-142

PROJECT APPRAISAL DOCUMENT

ON A Public Disclosure Authorized PROPOSED CREDIT

IN THE AMOUNT OF SDR 14.8 MILLION (USs21.6 MILLION EQUIVALENT)

TO THE

REPUBLIC OF AERBAIJAN

FOR A

Public Disclosure Authorized JUDICIAL MODERNIZATION PROJECT

June 5,2006

Poverty Reduction and Economic Management Unit Europe and Central Asia

Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective March 28,2006) CurrencyUnit = SDR SDR 1 = US$1.46 US$1 = SDR0.68 US$l = AzNo.90 FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS ABNCEELI American Bar AssociationlCentral ISA International Standards on Auditing European and Eurasian Law Initiative ADR Alternative Dispute Resolution JICA Japan InternationalCooperation Agency Mechanism AML Anti-Money Laundering JLC Judicial-Legal Council AZRIP Azerbaijan Rural Investment Project JMT Judicial ModernizationTeam BEEPS Business Environment and Enterprise JSC Judges Selection Committee Performance Survey CEPEJ Council of Europe’s European M&E Monitoring and Evaluation Commission for the Efficiency of Justice CIDA Canadian International Development MOF Ministry of Finance Agency CIS Commonwealth of Independent States MOJ Ministry of Justice COE Council of Europe MOU Memorandum of Understanding CPS Country Partnership Strategy NAR Nakchivan Autonomous Republic DPL Development Policy Lending NCB National Competitive Bidding ECHR European Conventionon Human Rights NCSC National Center for State Courts ECA Europe and Central Asia Region NGO Non-Governmental Organization EU-TACIS European Union Technical Assistance OM Operations Manual for Commonwealth of Independent States EMP EnvironmentalManagement Plan OSCE Organization for Security and Co-operation in Europe FIAS Foreign Investment Advisory Service PIP Project ImplementationPlan GTZ German International Cooperation PIU Project Implementation Unit Enterprise for Sustainable Development IBRD International Bank for Reconstruction PO Prosecutor General’s Office and Development ICT Information and Communications PRSC Poverty Reduction Strategy Credit Technology IBA International Bank of Azerbaijan QCBS Quality and Cost Based Selection IBTA Institution Building Technical sc Supreme Court Assistance ICB International Competitive Bidding RMS Resource Management System IT Information Technology SPA State Procurement Agency IDA International Development Association SPPRED State Program for Poverty Reduction and Economic Development IDP Internally DisplacedPersons SWAP Sector-Wide Approach IFC International Finance Corporation TAC Technical Assistance Credit IHL International HumanitarianLaw USAID United States Agency for InternationalDevelopment

Vice President: Shigeo Katsu Country Director: Donna Dowsett-Coirolo Sector Director : Cheryl Gray Sector Manager : Deborah Wetzel Task Team Leader: Waleed Haider Malik

.* 11 AZERBAIJAN JUDICIAL MODE~~ZATIONPROJECT

CONTENTS

Page A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues...... 1 2. Rationale for IDA involvement ...... 7 3 . Higher level objectives to which the project contributes ...... 9 B. PROJECT DESClUPTION ...... IO 1. Lending instrument ...... 10 2. Program objective and Phases (NA) ...... 10 3. Project development objective and key indicators ...... 10 4 . Project components ...... 11 5 . Lessons learned and reflected in the project design ...... 17 6. Alternatives considered and reasons for rejection ...... 19 C. I~LE~NTATION...... 19 1. Partnership arrangements ...... 19 2. Institutional and implementation arrangements ...... 20 3 . Monitoring and evaluation of outcomeslresults., ...... 23 .. 4. S ust ainabilit y ...... 24 5. Critical risks and possible controversial aspects ...... 25 6 . Credit conditions and covenants ...... 27

D. APPRAISAL SUMMARY ...... -28 1. Economic and financial analyses ...... 28 2 . Technical ...... 28 3 . Fiduciary ...... 28 4 . Social...... 30 5 . Environment ...... 30 6 . Safeguard policies ...... 31 7 . Policy Exceptions and Readiness...... 32 Annex 1: Country and Sector Background ...... 33 Annex 2: Major Related Projects Financed by the Bank andlor other Agencies ...... 45 Annex 3: Results Framework and Monitoring ...... 48 Annex 4: Detailed Project Description...... 53 Annex 5: Project Costs ...... 58 Annex 6: Implementation Arrangements ...... 59 Annex 7: Financial Management and Disbursement Arrangements ...... 62 Annex 8: Procurement Arrangements ...... 69 Annex 9: Economic and Financial Analysis ...... 77 Annex 10: Safeguard Policy Issues...... 78 Annex 11: Project Preparation and Supervision ...... 82 Annex 12: Documents in the Project File ...... 85 Annex 13: Statement of Loans and Credits ...... 87 Annex 14: Country at a Glance ...... 88 Annex 15: Stakeholder Issues and Social Analysis ...... 90

Annex 16: Decree of the President of the Republic of Azerbaijan N 352. January 19. 2006...... 99

iv AZERBAIJAN

JUDICIAL MODERNIZATION PROJECT

PROJECT APPRAISAL DOCUMENT

EUROPE AND CENTRAL ASIA

ECSPE

Date: June 5,2006 Team Leader: Waleed Haider Malik Country Director: Donna Dowsett-Coirolo Sectors: General public administration sector Sector Director: Cheryl Gray (100%) Sector Manager: Deborah Wetzel Themes: Judicial and other dispute resolution mechanisms (P); Other public sector governance (S) Project ID: PO99201 Environmental screening category: B Lending Instrument: Specific Investment Credit___-~

[ ]Loan [XI Credit [ ]Grant [ ]Guarantee [ ] Other:

For LoanslCreditslOthers: Total Bank financing (US$m.): 21.6' Proposed terms: Standard IDA terms of 35 years maturing including a 10 year grace period Fmancing Plan (US$m)

~ Source Local I Foreign Total BORROWEWRECIPIENT 11.00 0.00 11 .oo INTERNATIONAL DEVELOPMENT 18.70 2.90 2 1.60 ASSOCIATION JAPAN PHRD CO-FINANCING 3.00 3 .OO Financing Gap 0.00 0.00 0.00 Total: 29.70 5.90 35.6

Borrower: Ministry of Finance, Baku, Azerbaijan

Responsible Agency: Ministry of Justice, Baku, Azerbaijan Fikrat Mammadov, Minister of Justice. Azer Jafarov, Deputy Leader Judicial Modernization Team.

V Does the project depart from the CAS in content or other significant respects? [ ]Yes [X ] No Does the project require any exceptions from Bank policies? [ ]Yes [XINO Have these been approved by Bank management? t ]Yes [ IN0 [s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [X ]Yes [ ] No Does the project meet the Regional criteria for readiness for implementation? [X ]Yes [ 3 No Proiec t development objective : The objective- of the project is to assist the Azerbaijan authorities in developing, and implementing the initial phases of a long-term judicial system modernization program by building capacity to achieve incremental improvements in efficiency, citizen information, and its ability to handle future demand. Project description: The Project will assist to: (i)strengthen the management capacity of judicial institutions; (ii) upgrade court facilities; (iii)strengthen professionalism of judges and staff; and (iv) improve citizen information. Which safeguard policies are triggered, if any? Environmental Category B Significant, non-standard conditions: None Board presentation conditions: None Credit effectiveness conditions: (i)Initial deposit to the Project Account in the amount of US$50,000 will be made to ensure adequate counterpart funds before effectiveness, and replenished quarterly; (ii)Submission of an acceptable operations manual. Covenants applicable to project implementation: None

vi A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

(a) General Context

Azerbaijan has a population of about 8 million. It is’ one of the seven low income countries in Europe and Central Asia despite recent economic growth. Since its 1991 independence, Azerbaijan has experienced a territorial dispute with Armenia, a drop in real GDP of about 60 percent between independence and 1995, and the strains associated with achieving a market economy and democracy. Azerbaijan is about to experience a major oil boom and economic expansion. In 2005, GDP surpassed the level at independence. Azerbaijan has seen double-digit growth since 2000, averaging about 11 percent for the period 2000-2004. GNI per capita has increased from US$390 in 1995 to US$1240 in 2005 (Atlas Method).

The Government now faces the problem of deploying Azerbaijan’s favorable hydrocarbon resource endowment to the country’s best advantage. The immediate task is to attain growth in the non-oil sector and successful poverty alleviation before the expected peaking of the oil boom within the decade. This will be a major challenge as about 30 percent of the population still lives below the poverty line and businesses continue to view the lack of transparency of public institutions as a constraint to investment.

Decades of underinvestment have taken their toll on the judicial system. Low trust in the judicial system is compounded by considerable gaps in the judiciary’s effectiveness, including the lowest number of judges per capita in the region. The Business Environment and Enterprise Performance Survey (BEEPS) 2005 data show that Azerbaijan’s judicial institutions constitute an important obstacle to the country’s private sector development and movement to a more effective market economy. On average about 5 percent of businesses use courts in Azerbaijan, as compared with 30 percent in ECA, and 25 percent in CIS. Judicial institutions have achieved some important progress towards meeting market economy and democratic needs, but much more needs to be done, in particular strengthening institutional capabilities. There has been encouraging advancement with the more transparent, competitive selection of judges, and the movement towards adding more judges (about 20 percent). Still, the judicial institutions need to accelerate and deepen their capacity building efforts to bring justice closer to the people.

Azerbaijan’s President has mandated further steps for expanding the development of justice administration in a recent decree on court modernization’ that strengthens the system’s policy framework. The Presidential Decree N352 calls for creating new courts

‘Decree of the President of the Republic of Azerbaijan N 352, January 19,2006 On Modernization of the court system in the Republic of Azerbaijan and implementation of the Law of the Republic of Azerbaijan “On amendments to some legal acts of the Republic of Azerbaijan see Annex 17.

1 and upgrading court facilities, training and evaluating judges, applying new technologies, increasing system efficiency, improving legal assistance, and boosting citizen trust.

The challenge now is to develop an approach that can help Azerbaijan move towards a more modern judicial system that is efficient, transparent, and capable of meeting future demands.

(b) Judicial System Development and Challenges

Azerbaijan has made progress in adapting its legal framework (see Milestones in Chart 1 below). It established a three-tier court system, restructured its Ministry of Justice (MOJ) and reformed its Procuracy. It introduced constitutional provisions to support judicial independence, redesigned the governance structure and organization of the courts, introduced improvements in judicial personnel management, established a Judicial Council, and created an expert group to develop a judicial Code of Ethics. Further, it upgraded legal databases and introduced new criminal and civil procedure codes. Azerbaijan, for the first time in its history has recently started selection of new judges through a transparent and competitive new examination process. To improve access to services, it has created legal assistance centers in some regions, passed new laws on the operation of the legal profession, and developed human rights training and other programs.

Chart 1: Azerbaijan: Some Legal and Judicial Reform Milestones

Judicial-

Selection committee Cb -1 I

Law on Notaries

- Rules of selection of Non-Judicial on and Judges Law Courts Candidates (Amended in 2004R005J New Judge Selection pmess started New Constitution

1991 c lndepeodewe 2011 from USSR /\ 1995 * Jan. 19,2006 Feb. 4,2006 Official launch of judicial PresidentialDenee on JMT established at reforms Court System MoJ Modernization

2 In spite of these advances, confidence in the judiciary has not improved during the past few years, and perceptions of judicial corruption by the public and business sector have increased. This reflects in large part the rising public expectations and the slow implementation of the new laws in the first years of transition. Much more needs to be done to bring the judicial system in line with European Union and Council of Europe standards, and OSCE commitments.

The Council of Europe’s European Commission for the Efficiency of Justice (CEPEJ) reports that Azerbaijan is one of only three former Soviet republics that have no system for the supervision and control of the courts. Also, Azerbaijan ranks lowest among ECA and CIS countries with respect to the accessibility of draft laws for public review and comment. There are likewise no mechanisms for the publication of court decisions or the consultation of trial records, BEEPS data show that the performance of the judiciary has increasingly been regarded as a constraint for doing business from 1999-2005. User perceptions of the timeliness of court decisions have become increasingly negative, as have ratings of the fairness and honesty of the courts. BEEPS data also show that administrative corruption is ranked among the top five obstacles to business.

The World Bank‘s Judicial Systems in Transition Economies (2005) reports that the “implementation gap” in Azerbaijan is one of the widest in the region. This gap between the number of new laws and their implementation is exacerbated by the inadequate system infrastructure and its inability to respond to citizen demands. Low system funding (0.5 percent of the national budget - the lowest in the region) and an increase in the number of cases, especially economic and administrative cases, have added to the strains on the system (71,253 cases brought before the courts each year are handled by 329 judges and 1,400 support staff.) Also, as noted above the use of courts is still low. There are only 12 first instance courts of general jurisdiction per 1 million inhabitants, while the range for the region is from 10 to 25, placing Azerbaijan at the bottom of the scale. The professional judiciary is small: the ratio of judges to population is among the lowest in the region (see Annex 1). The service provided by notaries and registries is cumbersome. The enforcement of commercial contracts is expensive and bureaucratic.

Main institutional weaknesses:

P Weak management capacity of judicial institution^ impedes policy planning and implementation .

There are no major gaps in the norms and procedures that regulate the operation and administration of judicial institutions’. But there are gaps in communication, unclear division of functional competencies, weak direction and coordination of actions between different institutions, lack of planning within judicial structures, and the absence of a technology function in organization. Thus there are inadequate instruments and information for management decision-making and for responding to staff and citizen

The judicial system comprises several institutions including the Ministry of Justice (MOJ) (responsible for the administration of first instance courts, managing bailiffs, notaries, registries, and carrying out training etc.); the Judicial-Legal Council (responsible for judicial evaluation, judge selection etc.); and the Courts (general jurisdiction and specialized first instance courts, appeal courts, Supreme Court and Constitutional Court). See Annex 1 for details.

3 demands, For example, MOJ and the Supreme Court lack a basic information technology system to support operational planning and resource management decision making. Another weakness is the highly concentrated administration (there are no regional offices of the MOJ) to support the operation of courts. A further shortfall is the aforementioned lack of adequate budget resources. As a result, there are only 150 staff in MOJ to carry out its functions. The JLC has only a few staff and inadequate technical, logistical and communication support. There are also limited training or learning opportunities for professionals, These weaknesses impair the development of policies and institutional plans.

Accordingly, management capacity in judicial institutions needs to be strengthened. This should involve technical competence to formulate, monitor and evaluate judicial policies, Since MOJ has several administrative responsibilities (courts, registries, law drafting, citizen information, etc.) there is a need to upgrade its organizational arrangements, logistics, and to automate its systems, besides the definition of coordination and communication mechanisms, improvement in administrative efficiency, rationalization of processes, and development of management information system and statistical capabilities.

> Weak human capital and training deters PrQfessiQnalism, independence, integrity of the system and impedes culture change.

The absence of a comprehensive approach to judicial education and training is a key challenge even though the number of staff is small. Efforts to date have consisted of ad hoc training events developed mostly by international donors (see Annex 2). They also recognize that there is no local institution capable of consolidating the work of the donors and of developing a long-term relationship with training institutions around the globe.

The system is hurt by traditionally weak judge selection, recruitment, evaluation, and discipline. Personnel salaries have improved but competitiveness is still an issue. The lack of an evaluation system of sitting judges in the first instance courts means that oversight is also an issue. There have been encouraging steps, however, with regards to the selection of new judges. A four-phase transparent selection process for incoming judges was designed with the assistance of the Council of Europe (COE) and was implemented in 2005 (see chart 2 in Annex 1).

In Azerbaijan, it is also widely accepted that judges are subject to various forms of influence both from the public and private sector. The judiciary is seen by many as lacking effective tools to become fully accountable and, consequently, to begin to address corruption. The issue of corruption is a particularly important and sensitive issue worldwide given that attempts to address corruption by itself can negatively affect the development of a judiciary and its independence. It is for this reason that the project will address efficiency, integrity and corruption in a multi-faceted, integrated and balanced manner to contribute to the Government’s national anti-corruption program3.

In view of this the project design recognizes that the corruption in the judicial sector is not within the exclusive purview of the judiciary but also requires effective laws, change in mind-set and culture, proper investigatory techniques and the prosecution of those who violate the law, among other measures. To the extent possible, the project

4 Sector experts agree that education has a positive effect on productivity and cultural and mindset change when modern legal doctrines, the values of constitutionalism, and technical and professional standards of decision making are imparted effectively4. Also, working conditions for judges and staff (including bailiffs) need to be improved, and both entry-level and continuing education and training programs need to be developed and upgraded for support staff. To enhance integrity, there is a need to advance other actions that can build confidence in the system including support to the JLC for preparing judge evaluation proposals for first instance courts as per the Presidential Decree.

P Lack of court facilities impedes the creation of a strong, independent, modern court system

Azerbaijan inherited a portfolio of justice facilities that had deteriorated badly during the Soviet administration. The overall system operates in a space of about 50,000 square meters. About 50 percent of the 107 court buildings are unsuitable for efficient operations. Collectively, these facilities are considered unusable, or in need of renovations or major rehabilitation to fulfill requirements of a modern dignified and appropriate court system. The Supreme Court does not even have its own premises. It operates in the Court of Appeal in Baku, which lacks a waiting area for users and lawyers, cannot accommodate the increase in the number of judges contemplated in the system, and has other infrastructure and security shortfalls. First instance courts in many urban areas operate in inadequate facilities. There is a shortage of courtrooms and bailiff offices; no spaces for citizen information centers, in situ training rooms, or library rooms; no partitions to separate judges and staff from defendants. There is a lack of proper electrical cabling and IT network capabilities and security systems. In rural areas these problems are compounded by electricity and communication difficulties. There is a lack of basic working tools as well as modem support systems for such essential tasks as case processing, court recording, record keeping, citizen information kiosks and communications. Therefore, it is estimated that about US$40-50 million in capital investments is needed over the next ten years for these needs. This also presents a technical challenge as the MOJ, which is responsible for court facilities, has only constructed 7 courthouses in the last five years, and many of these do not fulfill modernization needs.

The current challenge would first require an assessment of the construction market and new courthouse designs. More modem and secure spaces, furnishings, and adequate information technologies and training in their use would support organizational and logistical capacity building and assist in enhancing efficiency, user access and the transparency of the system. New facilities could also provide pilot sites for the implementation of new work methods. will develop and address the policies and practices of the Azeri judiciary in an effort to contribute to a national anti- conuption program which effectively integrates all national resources. See The Politics of Judicial Reform in Eastern Europe, P. Magalhaes, Comparative Politics, Vol. 32, No.1 (Oct 1999) pp. 43-62, Human Capital Investments and Productivity, S. Black and L. Lynch, The American Economic Review, Vol. 86, No. 2 Papers and Proceedings of the Hundredth and Eight Annual meeting of the American Economic Association San Francisco, CA, January 5-7, 1996. (May 1996), pp. 263-267. Judicial Training and Justice Reform, L. Hammergren, 1998

5 P Luck of info~a~onlimits accessibili~,and uccountubili~of the system.

Transparency International's Corruption Perception Index for 2005 ranks the country 137th out of 158. A recent opinion survey indicates that 50 percent of respondents do not trust local courts (compared to 34 percent who do). As a result, people resort to petitioning local officials (police, ~aZZu~~yahead, Excom) and even the President's office to mediate or resolve disputes. In rural areas this includes respected members of the community such as village elders (aksakaE), teachers, etc. (for socio-economic context see Annex 16).

While there is wide public awareness of the profound changes that have taken place in governance during the transition since independence, there is frustration regarding the limited information and knowledge that people have of new laws and rights, or about the functioning of the courts under the new system. Consultations indicate that information and access gaps are particularly acute for vulnerable groups such as Internally Displaced Persons (IDPs), women, youth, low-income families, small businesses, farmers etc, Although poverty is not limited to rural areas, these are the hardest hit by deficiencies in infrastructure and basic services. Ethnic minorities are particularly affected in rural areas. IDPs lack access to social protections and stable living conditions. There is a need for greater awareness about legal protections against domestic violence and other social problems experienced by women. As 55 percent of the population is younger than 30 years of age, there is a need for targeted information outreach to build awareness about the workings of a modern judicial system.

There is widespread perception that small and medium businesses, and farmers lack awareness about how to protect their rights and enforce contracts. They also view the courts as costly. Farmers' see their supply chain relationships being affected due to contract enforcement problems. The regulatory environment for doing business is costly, time consuming and bureaucratic and the registries need streamlining. For example, it takes 61 days for businesses to register property. The time and cost required to resolve bankruptcies is 2.7 years and 8 percent of the estate value. Local and foreign firms are expected to pay the same costs to comply with regulatory requirements. The work of notaries is slow and concentrated in urban areas,

Consultations show that there is a need for information about how to take a claim to court, obtain the services of a lawyer, and the associated costs (see Annex 16). There is a need for information and public education about labor rights (e.g., protection or redress from unfair dismissal), family law (e.g. alimony and child support payments), land registration, contract law (e.g. to assist communities in implementing their development projects, and farmers in enforcing contracts), women's rights, entitlement to pensions and other social support services, and for improving notary services (or providing them where none exist). Furthermore, the development for mechanisms to deliver information needed by different groups would contribute to greater confidence in the transparency and effectiveness of the courts.

6 c) The Future-a Step-by-step Approach to Judicial Modernization

The President of Azerbaijan, in collaboration with the judicial leadership, recently set out a vision for the development of judicial administration in order to respond to existing demands for service and accountability, handle the expected future demand, and meet quality standards.

Achieving these objectives will require modernization and building institutional capacity in a broad set of areas. The current vision for the development of judicial institutions is premised on the recognition that real improvements in judicial performance require major upfront investments and time. Also, consultations are needed with stakeholders to encourage change. Moreover, an enabling environment for better court operations, enhanced ethical standards, and citizen access requires leadership and commitment to show results.

As judicial development is a long-term process, a step-by-step approach of judicial capacity building is contemplated for moving towards a modern judicial system that is efficient, transparent, and capable of responding to future demand. The milestones and priorities for achieving that long-term vision been identified in the Presidential Decree N352 “On modernization of the court system.

As an initial step, the Minister of Justice has appointed a Judicial Modernization Team (JMT) to design and implement priority capacity building activities. This team seeks to leverage local and international good practices, promote consultation with stakeholders, and mobilize local and international resources to plan and implement improvement strategies over the next five years. This Project will assist the JMT in carrying out those strategies to address issues facing the judicial sector and achieve incremental results that will be evaluated annually and at a mid-term review against progress yardsticks (see Table 1 in Part C 3 of the PAD).

2. Rationale for IDA involvement

Azerbaijan, like many other transition countries, recognized the importance of judicial reform early on and embarked on a re-orientation of its legal and judicial institutions5. This has so far focused either on relatively standardized efforts to ensure that new laws meet international standards or on narrow areas of improvement. Several donors are working with the MOJ and the courts (see Annex 2). These include: the Council of Europe (COE) for drafting laws and appropriate selection and hiring of about 100 additional judges, and the development of supervision systems; USAID and GTZ for

For the importance of well functioning judicial institutions to economic growth, social development and poverty reduction see World Bank, From Plan to Market (World Development Report, 1996); World Bank, Building Institutions for Markets (World Development Report, 2002); World Bank, Economic Growth in the 1990s: Learning from a Decade of Reform (1994); World Bank, Doing Business, 2005, Legal Empowerment of the Poor: An Action Agenda for the World Bank, 2005; World Bank, Judicial Systems in Transition Economies, 2005; etc.

7 training, and ABA CEEL16for legal education and information, judicial training on ethics and commercial law ADR and studies.

To consolidate the progress made through these efforts, and to mobilize support for the implementation of the actions outlined in the Presidential Decree, the MOJ has requested comprehensive support from the World Bank to institutionalize new codified standards and measures on a national scale. The World Bank is well suited to offer such comprehensive institution building support and technical assistance from its extensive experience in the region and elsewhere in strengthening judicial systems.

Chart 2. Tentative Financial Contributions To Government’s Medium Term Proaram

......

T TTV 10% 60% 20% 5% 5%

The Ministry of Justice, with IDA support, has prepared an outline for a medium and long-term (10 years) modernization plan, which it proposes be funded by IDA and leveraged with donors and government sources. MOJ has asked for Bank support to better mobilize and coordinate these resources. The overall financing need for judicial modernization over the next 10-15 years is about US$60-70 million. The proposal for the next five years (estimated at US$33.6 million) is designed to advance and broaden this assistance according to a framework of division of labor (see chart above showing tentative contributions over the medium term for the Government’s legal and judicial improvement programs). Under this broad financing framework shown above, COE is expected to continue to provide technical advice on the selection of judges, training and the development of a code of ethics as part of the proposed project. ABA-CEELI will co- fund training of judges in substantive law and ethics, legal clinics in law schools, study tours and studies. EU-TACIS program will fund training of bailiffs. IDA will support institutional development activities in management, information, human capital development, including training ofjudges and staff, and upgrading of facilities.

ABA CEELI, an implementer of USAID funded programs, is already seeking funding to assist with curriculum development and training at the judicial training center, and to assist in the public information component - the two components that best fit CEELI’s programming and capacity. They are also seeking funding for study programs with the CEELI Institute for judges and MOJ staff, and possibly the Judicial Modernization Team.

8 In the CAS for FY 03-05 and in the PRSP', assistance for strengthening the judicial system was underlined as a key item on the Government's reform agenda. It was seen as central to redefining the role of the state so as to create the underpinnings of a more market-oriented economy, as well as advancing the growth of an emerging democratic society. The State Program on Poverty Reduction and Economic Development ' (SPPRED) 04-08 identifies judicial and legal reform as critical to reducing poverty, and includes among its objectives increasing the awareness of the poor regarding their civil rights, ensuring equal access to legal institutions, and upgrading and capacity building of the legal profession.

3. Higher level objectives to which the project contributes

Judicial reform and modernization is a central element of the country's PRSP (SPPRED). Such judicial development will be essential to redefining the role of the state so as to create the underpinnings of a more market-oriented economy, as well as advance the growth of an emerging democratic society. The SPPRED identifies judicial and legal reform as critical to reducing poverty, and includes among its objectives increasing the awareness of the poor regarding their civil rights, ensuring equal access to legal institutions, and upgrading and capacity building of the legal profession. The Bank's Poverty Reduction and Support Credit (PRSC) extended in September 2005 also emphasized the importance of improved public sector management and the rule of law. The Government's commitment to judicial reform and modernization has been recently re-emphasized by the President's Decree on Judicial Modernization issued on January 19 2006.

Improving public sector governance and management was a focal point of the FY03-05 CAS (Report No. 25790-AZ) approved by the Board on April 29 2003. While the proposed project was not specifically foreseen in the FY03-05 CAS, it is fully in keeping with the CAS objectives. The project would support the CAS goals of improving public sector management and containing corruption by upgrading the judicial system in line with international standards. It would also strengthen the environment for private investment by building capacity of courts to cater to future demand, Judicial reform and modernization will feature prominently in the new Country Partnership Strategy (CPS) which is currently under preparation. The Project is being brought in advance of the new CPS (scheduled for September 2006) in order to take advantage of the momentum and sense of urgency established by the Presidential Decree, as well as to move in lockstep with other donor support.

Strengthening the Judicial system will be an essential element in strengthening governance and reducing corruption in Azerbaijan, which will be critical to enable it to best take advantage of its growing energy resources. It will also support Azerbaijan's advancement towards greater democratic governance and movement towards international standards by improving citizen information. The Judicial Modernization Project will assist to generate a fairer society where the economic benefits of growth can be governed by the rule of law. As such it will enhance the effectiveness of other key

Judicial reform is identified in the PRSP as one of the elements for developing the institutional framework for poverty reduction (including public administration reform, decentralization and combating corruption).

9 Bank activities. The Bank and the IFC have a series of projects that provide support to the private sector and business development, including strengthening infrastructure and rural enterprises. A strengthened judicial system will be a central element in facilitating diversified private sector development. Other Bank Group activities are also expected to increase the demand for court systems, making this project that much more urgent. Finally, the Bank will continue to engage the Government of Azerbaijan on a wide range of macro-economic, structural, social and governance issues, Judicial reform and modernization should therefore be seen as one element in the Bank‘s overall engagement in building a sustainable framework for developing the non-oil economy.

B. PROJECT DESCRIPTION

1. Lending instrument

A Specific Investment Credit is contemplated for financing this project. The overall cost of the project is estimated at US$35.6 million, with IDA financing of about US$21.6 million, Government financing of about US$11.O million, and a Japan Policy and Human Resource Development (PHRD) Project Co-Financing Grant of US$3 million (the last will partially finance project technical assistance needs). The availability of additional co-financing from EU, USAID, GTZ, ABA-CEELI, CIDA, Japan (e.g. JICA) and other development partners is to be determined.

2. Program objective and Phases (NA)

3. Project development objective and key indicators

The objective of the project is to assist the Azerbaijan authorities in developing, and implementing the initial phases of a long-term judicial system modernization program by building capacity to achieve incremental improvements in efficiency, citizen information, and its ability to handle future demand.

It seeks to catalyze and deepen the institutional development of the judicial system, in line with Presidential Decree N352, dated January 19, 2006, “On court system modernization.. .” and Council of Europe and other international standards. The project also seeks to adopt a participatory process of step by step institutional development to promote change (see Chart 3 below).

Progress will be monitored through: (i)strengthened management capacity of judicial institutions (to support a planning system, judge evaluation proposals); (ii)improved court facilities and infrastructure (to better support accessibility, user confidence and demand); (iii)strengthened professionalism of judges and staff (reflected by an increase in the number of trainees); and (iv) improved availability of and access to legal and judicial information and services (reflected by an increased number of users among businesses and other target groups of pilot programs). M&E efforts would be funded under the project. A list of institutional development yardsticks for the project and baseline is provided in Part C3.

10 Chart 3. JUDICIAL REFORM AND DEVELOPMENT: A STEP-BY-STEP APPROACH . . Judicial ~oderniza~io~:. . -Management . . -Facilities . . -Human Capital . -information . .8 . 8 .8 . . . . A: c . 1995 2006 201 1 ... and forward

4. Project components The objectives of the Project will be achieved through these four inter-related components (see Chart 4 below):

Component 1: Strengthening the Management Capacity of Judicial Institutions (total cost US$4.47 million, of which IDA US$2.47 million, and of which PHRD US$l.OO million) Technical capabilities of judicial institutions for improved operations and undertaking the implementation of the Project would be supported through: (a) building the basic capacity of the Ministry of Justice (MOJ) to oversee its functions through the development and installation of an integrated information management system aimed at enhancing operational planning, statistical analysis, resource management and citizen information; (b) the design and implementation of an information network between the Judicial-Legal Council (JLC) and other public institutions for promoting communication and coordination mechanisms; (c) capacity building support for the development and implementation of suggestions prepared by the MOJ andlor by the JLC in line with the Presidential Decree on court system modernization, with special emphasis on activities that relate to the evaluation of judges; and (d) capacity building support for the MOJ’s recently established Judicial Modernization Team (JMT) to plan and implement judicial modernization programs and promote stakeholder participation. The latter would be achieved through: (i)the employment of specialists, advisors and administrators in different project management areas, including coordination, administration, procurement, financial management, social communication, monitoring and evaluation, donor relations, institutional development and technology; (ii)the provision of training, information and communication technologies, office equipment, transport, logistical support and office space for the modernization group; and (iii)the carrying out of knowledge sharing and exchange on good practices through planning and organizing technical visits to local and international locations, video conferences, seminars, carrying out empirical studies and surveys, and consultation workshops with judges, staff, lawyers, and other stakeholders in the system, including users.

11 Under this component, IDA would finance (estimated at US$2.47 million) consultant services, training, goods and minor works. The main focus of the MOJ in modernizing internal information systems and other upgrading will be its headquarters in Baku. The support for the development of suggestions on the evaluation of judges would be in partnership with the Council of Europe (COE) already engaged in the development of a code of ethics and selection process for judges. Knowledge sharing support (including research and development on ADR) would be provided with the participation of other donors as needed (e.g., ABA-CEELWSAID, GTZ, EU-TACIS, Japan PHRDIJICA). Support of the Judicial Modernization Team would be in-line and consistent with the Bank's policy favoring management of the Project within the MOJ to enhance capacity and country ownership. Stakeholder consultations already initiated during project development would be continued and expanded during project implementation to help build social facilitation capabilities in the MOJ and other judicial institutions.

Component 2: Upgrading Court Facilities (total cost US$19.63 million, of which IDA Project's InstitutionalDevelopment Components US$11.33 million, and of which PHRD US$l.OO million) Management Development of physical infrastructure and 1 introduction of court technologies to support Human the efficient provision of judicial services Capital C- Information and information would be promoted through - two subcomponents. T Physical Facilities 2.1. Court Physical Infrastructure. and Technology Courthouses would be upgraded to international standards through: (a) the

12 Box 1. Snapshot of Proiected Court Facilities Ungrading" Upgrading of courts and judicial facilities (physical and technological) will be carried out in six cities (namely, Baku, fanca, Ali Bayramli, Sumqayit, Sheki and Nackchivan) in about 19 locations. These cities have about 50 percent of the population and cater to about 80 percent of the workload. The list of courts that need rehabilitation and construction is provided in the Table below. These have been identified based on both policy (Presidential Decree) and technical criteria: (a) need for facilities for new appeal courts and training center established by Presidential Decree; (b) courts that will accommodate an increase in the number of judges in first instance courts as per Presidential Decree and COE standards to cater to future demand; (c) modernization requirements such as replacing dilapidated or unserviceable courthouses, providing support to central management, meeting requirements for introducing technologies and court proceeding rooms, accommodating new work methods and providing citizen services.

Overall, about 180 judges and 600 support staff would operate in the improved facilities (about 50 percent of the current system). These investments would cater to and help enhance the operation of about 80 percent of the workload of system. Investments will bring appeal courts closer to the population since facilities in four new locations will be added to the facility currently serving only Baku. Improvements in first instance courts would bring direct benefits to citizens where they are most needed. Construction and rehabilitation designs will be premised on operational efficiency, citizen access and integrated technologies for enhanced effectiveness and transparency.

Type of Court City&ocation No of Sites Plan Appeal Courts Baku 1 Rehabilitation Ganca 1 Construction Ali Bayramli 1 Construction Sumqayit 1 Construction Sheki 1 Construction First Instance Courts Baku Local Economic Court N 2 1 Construction Sumqayit Local Economic Court 1 Construction Sheki Local Economic Court 1 Construction AR Grave Crimes Court 1 Construction NAR Grave Crimes Court 1 Construction Baku city Khatai district Court 1 Construction Baku city Narimanov district Court 1 Construction Baku city Yasamal district Court 1 Construction Baku city Binagadi district Court 1 Construction Baku city Sabunchi district Court 1 Construction Sumgayit city court 1 Construction Gedabek regional court 1 Construction Oguz regional court 1 Construction

Baku city Sabail district Court 1 Rehabilitation Baku city Surakhani district Court 1 Rehabilitation Baku city Nasimi district Court 1 Rehabilitation Gandja city Nizami district Court 1 Rehabilitation

I Total 22 *Upgrading includes physic; and technological- immovements Note Does not include minor renovatio~reh~ilitationof courts, training center, MOJ, arid registry offices. Supreme Court construction will be financed by the Government in parallel to this Project. Source: Ministry of Justice and Supreme Court.

13 2.2 Court Technologies. Introduction of court technologies to COE standards (including for the Supreme Court and Constitutional Court) would be supported through: (a) the design and preparation of an ICT master plan for courts, including design of the technology platform, networks and communication system (LAN, WAN); (b) the design, test and implementation of automated case management systems in one location in Baku for demonstration purposes (or in Sumqayit, or Sheki, or Ganca, or Ali Bayramli) during the first year of implementation; and (c) the provision of ICT and other technical equipment for courts constructed and rehabilitated in Baku, Sumqayit, Sheki, Ganca, Ali Bayramli and Nakhchivan in the Autonomous Republic.

Under this component, IDA would finance (estimated at US$11.33 million) consultant services, training, goods and works. The first step would be the development of a strategic infrastructure plan. Construction and rehabilitation work will mainly target locations mandated by the Presidential Decree to accommodate the creation of new Courts of Appeal and Economic Courts and accommodate the increased number of judges in the first instance courts (See Box 1 for approach and selection criteria). As parallel financing the Government will fund the construction of the Supreme Court building. Information technologies would be introduced on a pilot basis in upgraded courthouses or new facilities (including the Supreme Court and Constitutional Court) after the provision of training to judges and staff in the use of technologies for word processing, document receipt, handling of archives, management of cases, recording of proceedings, decision preparation, publication of decisions, enforcement of judgments, and provision of statistics and user information.

Component 3: Human Capital -Strengthening Professionalism of Judges and Staff (total cost US$6.7 million, of which IDA US$ 4.0 million, and of which PHRD US$O.S million)

Improvements in professional training and development opportunities are closely associated with judicial system capacity and organizational change which would be supported through three subcomponents.

3.1 Institutionalization of Training Capacity. Capacity building would be supported through: (a) the design and development of organization and structure for a modern training center, and the selection and appointment of key management staff and their training in local and international training systems; (b) the development of a faculty of permanent and part-time professors, and the formalization of twinning arrangement with international training institutions (e.g., France, US Federal Judicial Center, ABA-CEELI Prague Institute); (c) the development of training programs and materials with the participation of technical working groups (including groups established for the COE programs); (d) the design and provision of physical facilities for the training center, including space for key management staff and visiting faculty, seminar rooms, information technology training rooms, video conference center, library center, in-house publishing center, moot court center, data center, and conference facility; (e) the provision of information and communication technologies (ICT) and other technical equipment for the training center for about eighty work and training stations, including

14 laptops, projectors, simultaneous translation booths, and other audio-visual equipment; (f) the provision of office equipment, furniture and materials for the training center.

3.2. Judicial Training at the Entry Level as well as Continuing Education. The development of professional skills and capabilities of new and senior judges, staff and legal professionals would be supported through a variety of targeted capacity building programs, including: (a) the implementation of training programs for new judges and judicial candidates, especially in such topics as organization and administration, drafting judgments, judicial ethics, enabling legislation and key international legal instruments, practical implementation of national legislation, information technology skills, moot court exercises, and others; (b) the implementation of continuing education training programs for Senior Judges, especially in new legislation, international instruments, international courts case-law and others; (c) the implementation of continuing education training programs for Court Chairman and Deputy Chairman, especially in administration, human resource management, data analysis and statistics, appellate rules and procedures, information technology skills, and social communication skills; (d) the implementation of continuing education training programs for Judicial Sector Staff: for Court Clerks and Legal Assistants in advanced legal research and drafting skills, case records and management, modem information management skills and techniques, administrative and court organization skills, information technology skills and others. Technical and Administrative Staff in administration and court organization techniques, case records and management, information technology skills, and modem information management skills. Ushers and Bailiffs in new regulations and administrative procedures, information technology skills and improved service delivery techniques, including scaling up ongoing TACIS training programs; and (e) the implementation of continuing education training programs for Other Judicial Sector Officials: Notaries in theoretical and practical training in new legislation and international instruments, State and Private Lawyers in local and international law, new legal and administrative procedures, and topics related to sector modernization.

3.3 Annual Conference and Evaluation of Training Programs. Capacity building support would be provided through: (a) the organization of a dissemination event to mark the commencement of the first comprehensive training course for newly appointed judges, and formalization of the annual organization of judicial modernization conference with local and international participation; and (b) the carrying out of an evaluation of impacts of training programs.

Under this component, IDA would finance (estimated at US$4.0 million) consultant services, training, goods and works. Full rehabilitation (including provision of appropriate technologies) would be carried out to the judicial office building earmarked to accommodate the needs of a modem training center at an estimated cost of about US$2-3 million. The training programs would be co-funded with other donors, especially ABA-CEELI, COE, USAID, GTZ, OSCE, France and Japan. Overall, about 1000 persons are expected to be trained during the next five years.

15 Component 4: Improving Citizen Information including strengthening of registries and notaries (total cost US$4.4 million, of which IDA US$3.4 million, and of which PHRD US$0.5 million)

Support for the development of mechanisms and opportunities for the provision of legal and judicial information to the population and target groups for responding to supply and demand of services would be provided through two subcomponents:

4.1. Citizen Information Pilot Programs. Capacity would be improved through: (a) the identification of information needs of target groups (such as IDPs, women, minors, low- income families, user groups, small businesses, and farmers) through participatory consultations and surveys and the design and development of an information strategy; (b) the development of pilot citizen information programs such as: (i)publishing basic user- friendly legal guides to inform citizens about laws and the procedures of the court system, and how to gain access to judicial services, (ii)creating a pilot legal and judicial information center in one city and one region in locations with appropriate human resources and physical and technological capabilities, including the possibility of mobile services, (iii)creating partnerships between schools and local courts, in collaboration with the Ministry of Education, to organize judges’ visits to classrooms and class visits to courthouses, (iv) creating partnerships with existing projects (eg. AzRIP, IFC Corporate Governance, FIAS, BP Azerbaijan, ARANIOXFAM) where mechanisms for channeling legal information to specific target groups exist or can be easily developed, including information campaigns in urban and rural areas through appropriate media (e,g., TV, radio, print media, billboards, etc.), (v) development of internet-based information services including design of websites to enable the publication of court decisions and related materials for citizens and legal professionals, and (vi) creation of a legal information ‘hotline’ connected to legal and judicial information centers; (c) support for information campaigns to inform citizens about the modernization program of the judicial system; and (d) support for carrying out the evaluation of pilot citizen information programs and their replicationlscale-up.

4.2. Upgrading the functioning of registries and notaries. Capacity enhancement would be achieved through: (a) the review of and adjustment to information collection, automation, cataloging and archival services of registries (for legal entities-businesses, NGOs) in Baku, the central office located in the MOJ headquarters and all regional locations, including the provision of information and communication technologies, equipment and development of knowledge strategies; and (b) the review and update of the organization and functioning of notaries, automation and adjustment to the certification and information collection services, including provision of information and communication technologies.

Under this component, IDA would finance (estimated at US$3.4 million) consultant services, training, and goods. The cost of this component would be adjusted based on final costing during the negotiation mission. The main focus would be on piloting citizen information programs, evaluating them before possible scale-up. Partnerships (e.g. with AzRIP, IFC, FIAS, ARANIOXFAM, and BP Azerbaijan) for setting up information centers and developing mechanisms for citizen information would be explored during

16 implementation as part of the consultative process to promote sustainability and cost effectiveness of pilot programs.

5. Lessons learned and reflected in the project design Judicial institutional development matters. Judicial institutional development is a long- term process, requiring a step-by-step approach of judicial capacity building to move towards a modern judicial system that is efficient, transparent, and capable of responding to future demand (also see Chart in Part B 3). The gap between legal extensiveness (number of new laws) and legal effectiveness (implementation) is exacerbated by the inadequate geographic coverage of the judiciary’s infrastructure and its inability to respond to citizen demands and expectations generated by the political, economic and social changes of recent years’. Institutional reform affects many stakeholders with different perceptions, objectives and expectations. As a consequence, there is a need for an evolving consensus on objectives and how to reach them. Institutional development is complex and requires informed analysis and diagnostics to support change. The project has benefited from sector diagnostics and analysis carried out by the COE and the MOJ (e,g., CEPEJ, ABA-CEELI assessments, Investment Climate Surveys, BEEPS and other reports) and the project team’s assessments and reviews in the last months. It has also benefited from initial community level consultations and discussion with judges and staff on needs and priorities, and lessons from other Bank and IFC projects in Azerbaijan, namely AZRIP, IBTA-II, IFC-Corporate Governance TA. This consultative process would be continued during implementation. The project would support a range of capacity enhancement activities to support a long term vision of institutional development of judicial institutions such as the development of management information and planning system in the MOJ, support for JLC in communication and coordination, knowledge sharing and training for judges and staff, upgrade in operational support systems for courts, bailiffs and others, improvements in services provided by notaries and registries, and construction of courthouses that meet international standards.

Good dialogue and an appropriate policy framework for inve~~entsmatter. A good policy dialogue between the Bank and the Government is critical to the success of the investment credit operation. Some of the Bank’s investment projects in the legal and judicial sector in the region have failed because they were not supported by a policy framework and dialogue laying the ground for sustainable reforms. In the case of Azerbaijan, the recent Presidential Decree on “Court system modernization.. ..” provides the modernization framework and lays out the parameters for an increase in the number of courts and the introduction of technologies to meet future demand and increase citizen trust in the system, The Bank has an on-going dialogue with the Government through the PRSC (which has supported measures aimed at upgrading the legal entity registry and citizen information) and the present CPS process, in which assistance to the judicial sector has high level backing. There are existing policy commitments by the authorities with the Council of Europe (e.g., in judge selection processes and training) that the project seeks to leverage and strengthen under the project. (See Annex 4)

Institutional problems include: low funding (0.5 percent of the national budget - the lowest in the region) and an increase in the number of cases as a result of new commercial and civil legislation (See Part 1 for details).

17 Ownership and support for im~lemen~ationmatters. Past projects in the public sector have shown that the best intentions, tight resources and sound project design will not alone deliver good results if ownership and implementation capacity are not adequate, The analysis of the conditions on the ground has enabled the design of the project to involve an in-house team of multi-disciplinary experts, many of whom have experience working with COE and other donors. The Judicial Modernization Team of the MOJ that was recently appointed (Ref MOJ Decree dated Feb 4, 2006) will be responsible for the preparation and implementation of the project. Under Component 1 of the project the JMT will be assisted by technical specialists for stakeholder participation, consultations and knowledge sharing, thereby promoting ownership, mobilizing implementation support and contributing to sustainability of institutional development efforts. Stakeholder consultations have already commenced (see Annex 16). Component 1 also includes assistance for resource mobilization, M&E, and development of core staff skills in judicial modernization to directly help address capacity needs (see Annex 6).

Judicial acco~ntabili~and citizen info~ation matters. Attention to judicial accountability and professionalism should be central to judicial development and reform programs. Analysis of lessons in the ECA Region indicates that independence and accountability must go hand in hand to ensure integrity and confidence in the judiciary.’ Analysis indicates that reforms that might strengthen one dimension (e.g., independence) may weaken another (e.g., accountability), at least in the short run, if they are not supported together. This is particularly important in Azerbaijan, where citizen trust in the system is low and the perception of corruption is high. The very small size of the judiciary compounds the current problem: although independence safeguards exist, the Judiciary may not be able to cater to future requirements unless performance improves. The project contemplates mobilizing citizen information and evaluation of judges as a means to enhance judicial accountability and transparency, essential for building confidence in the citizenry. The project will support evaluation of judges, re-designing court facilities and introducing technologies to improve public access to court services, decisions and records, strengthening training and professional development of judges, staff, notaries, bailiffs and others, conducting court users’ survey and promoting citizen information programs (e.g., mobile services to meet the needs of target groups such as IDPs). Collectively, such measures would help improve citizen perception of the courts among the target groups in pilot locations.

Eficiency of and access to judicial service matters. Investor and firm trust in the system are closely associated with the time it takes to obtain court decisions and have them enforced. Businesses and other users want courts that are fair and honest, and strong enough to enforce their decisions, in a fast and affordable manner. Although the demand for courts is still low by international measures, there is some indication that the workload of the economic and appeal courts is increasing. These courts are all concentrated in Baku and users have to travel long distances to access them. Enforcement of decisions is slow and non-transparent according to the TACIS report, which indicates that in family cases it takes extended periods to enforce “child support” payments. The project places a strong emphasis on increasing efficiency and accessibility of the courts.

World Bank, Judicial Systems in Trunsition Economies: Assessing the Past, Looking to the Future (2005)

18 To this end, it will support actions aimed at upgrading the performance of judges and bailiffs, and providing technological support and facilities to the existing economic and appeal courts in Baku and to the ones being set up in other main cities per the new Presidential Decree for greater civic accessibility.

6. Alternatives considered and reasons for rejection Specific Investment Credit (SIC) versus Development Policy Lending (DPL). The DPL was rejected on the grounds that there already are several legislative changes in the sector that have been approved in recent years which offer opportunities for improvements. These have not been fully implemented due to weak capacities in the judicial sector. It therefore makes sense to take advantage of these opportunities and address current difficulties through pilot programs to satisfy public needs and demands for improved services, particularly for target groups such as IDPs, women, and small businesses. The project is mainly oriented towards helping the MOJ and the courts accomplish these service improvements, rather than further refine the policy framework. In addition, Azerbaijan's growing energy revenues reduces the need for budget support.

Targeted ~ode~izationversus SWAP. Experience indicates that the multifaceted challenges of legal and judicial systems require an integrated perspective and holistic approach. For example, the quality of legal services provided by licensed attorneys has an impact on the effectiveness of the judicial system. Investments in training might not yield required results if in-house capacities are not built and basic legal education fails to provide future judges with fundamental knowledge and skills. However, Bank-financed legal and judicial reform projects with a wide agenda (e.g., law reform, support to bar associations, legal education and court modernization) have not had a high degree of success. Such projects often involve too many institutions and experienced coordination problems. Therefore, it has been decided to focus modernization and judicial capacity building mainly in the courts in the six main cities, for which the recently approved Presidential Decree and Council of Europe standards provide the framework, and which require financial and technical support that the Bank is well positioned to provide. Financial assistance to other key sector actors such as law schools and the bar association has been provided by other bilateral donors. Overall, in developing the investment credit we have followed a comprehensive approach to assessing the needs of the sector as a whole, defining a program which will support the main modernization actions over the next several years, and we are working in very close coordination with the other main donorslproviders of technical assistance to the sector (e.g. COE, ABA-CEELI, GTZ).

C. I~LE~NTATION

1. Partnership arrangements There are no mixed financing arrangements at this stage for the Project, except the Japan PHRD co-financing grant. However, technical collaboration in sector analysis and knowledge sharing has been initiated during preparation and would be encouraged under the proposed Credit with the Council of Europe, At the Bank's institutional level collaboration and information sharing experiences exists with Council of Europe. Efforts will be made to leverage these experiences and seek additional co-financing for the project. COE and OSCE at the country level have already expressed interest in expanding

19 collaboration for this Project. Also, in support for the judicial system, efforts are being made to enhance participation by ABNCEELI, USAID, GTZ, CIDA, Japan and other donors.

2. Institutional and implementation arrangements The implementing agency under the project will be the Ministry of Justice (MOJ) through the Judicial Modernization Team (JMT) (established under MOJ Decree Dated February 4, 2006). This seven member multi-disciplinary JMT will be supported through the provision of experts, training and logistics in accordance with fully integrated good practice management model of Bank projects". (See organizational Chart 5 below.) JMT will directly report to the Minister. As such, the oversight of all project activities will be led by the Ministers office and managed and evaluated by the entire team. It will closely work with the Supreme Court, JLC, MOF and others in planning and programming investments.

Prior to the beginning of implementation, special emphasis will be given to providing the required infrastructure and tools to the JMT to permit proper project development, M&E and fiduciary oversight. Japanese PHRD grant is expected to fund some of these efforts. Given that a large portion of the project will entail construction and renovation of new facilities, the JMT in will be supported through hiring of accounting, procurement and technical advisors to help oversee the development of these activities and maintain fiduciary oversight given the high procurement and financial management risks. Special training has already been initiated for this team during project preparation by FM and Procurement Specialists and it is envisioned that a special targeted training program will be required to provide the proper orientation in IDA procedures required to effectively implement all construction and renovation work and other capacity building activities. To further enhance implementation planning, procurement plan for the first year is already drafted and is available in Annex 8.

Chart 5. Implementation Arrangements: Judicial Modernization Team

CABINET OFMINISTERB ~ONST~TUTIONALCOURT MINISTRY OF FINANCE f- i.rnnacai SUPREMECOURT MINISTRY OF ECONOMIC DEVELOPMENT - UDICIAL. LEGAL COUNCIL

loFor different PIU typologies and good practice guidance see Guidance Note for Project Management: Strengthening Institutional Capacity During Project Implementation, OPCS, World Bank, October 2005.

20 Strategy for I~plementution.As institutional development is a long and learning process, a step-by-step approach to modernization is contemplated. Knowledge sharing and stakeholder consultations are planned to promote change and learning.

The project design calls for concentration of activities in a manageable geographic area and with technical support. As noted above, management capacity enhancement (Component 1) under the Project would basically target MOJ and the Judicial Legal Council (JLC) operation in central headquarters. It will also support JLC for carrying out the evaluation of judges. This component will also provide institutional support to the Judicial Modernization Team (JMT) responsible for project implementation. Upgrading of court facilities (Component 2) will target courts in the six main urban centers (Baku, Sumqayit, Sheki, Ganca, Ali Bayramli and Nakchivan) (see Box 1 in Part B4 above). Professional development of judges and staff and legal professionals (Component 3) will be broad and comprehensive, given the very small size of the judiciary. The project work on improving citizen information (Component 4) would be focused on target groups such as IDPs, women, poor and small businesses (see Annex 16). Pilots would be tested before scale-up.

The Project would be implemented in three overlappingphases over afive year period,

1. ~o~ilizutionand knowledge for impzementution (years 1-2). This refers to the buildup of institutional capabilities to plan and implement improvement programs, carry out consultations and organize knowledge sharing programs for key stakeholders. The activities would be intensive in the initial years and level off as capabilities develop. The activities are principally oriented towards the development of proposals for the evaluation of judges and their training in topics related to modernization. This will include identification and training of a core group of judges and staff who would be responsible for developing pilots for improved information services. In parallel, there would be contracting of consultancies for the development of the strategic infrastructure plan, ICT master plan, citizen information plan, and initiation of space refurbishing and renovation.

2. Development of court environment to “demonstrate ” mode~ization(years 2-4). This will consist of stocktaking and initiation of capital investments in physical infrastructure and technologies, and launch of citizen information pilots. Support will begin for the introduction of staff training, and the provision of ICT platform for the judicial training center.

3. Sustainab~li~of institutionul development egorts (years 3-5). Continuation of the preceding phase, with further emphases on training functionaries and users in the new work methods, modem tools, and in the evaluation of the achievement of the objectives and the impacts of the modernization efforts. This also implies the scale-up of citizen information programs and development of follow-on improvement efforts.

21 The Chart 6 below provides the implementation phases, and the Project's key institutional development activities. It highlights the sequence, and timing of pilot activities. The scope of the pilots would be manageable and basically limited to one of six cities identified as target areas for the Project.

CHART 6: IMPEMENTATIONPERIOD AND SEQUENCE

~ implementation Period and Sequence I

Year 1 Year 2 Year 3 Year 5 I1 I1 I1 II

9. Impkmontation Arrangement* Judlolal ModernizationTeam ' M&Erupport

The creation and approval of the Project Operations ManuaE will be a condition of effectiveness. In addition to administrative arrangements, the OM will include arrangements for the following: Coordination and communication. Procurement and financial management under the project, annual reviews and IDA credit audit requirements. M&E and fiduciary oversight, including the supervision of construction and oversight. Strengthening capacity of JMT, with specific training for procurement and financial management, including testing of e-procurement and e-financial management, and for the hiring of specialists for preparation of key TORS, procurement documents, I;ILI reports and audits. Provision of education to potential local bidders and the general public on modernization project procurement processes. Environmental management plan and safeguard measures Annual publication of modernization progress report with technical and citizen information, and public dissemination of procurement data and contract awards.

22 Table 1: Project Performance Yardsticks

Component Overall Indicators Baseline Target A. Strengthening the Professional staff Less than 5% of staff At least 50% of professional staff accessing Management enhancement has access to and using IT based resource management Capacity of Judicial integrated system (RMS) Institutions information systems.

No judge has been At least 150 new judges selected using new appointed using new selection procedures enhancing system selection procedures accountability and transparency

B. Upgrading Court Accessibility, Insufficient physical At least 17 courts constructed and 4 Facilities adequacy, user infrastructure rehabilitated confidence, and 64% of users At least 20% improvement in overall demand perceive judicial satisfaction with judicial services in at least services as two or more agreed pilot locations inadequate Inefficient bailiff At least 20% reduction in time of court services and court decision enforcement with organizational management streamlining and automation in Baku C. Human Capital Judicial Academy to Insufficient Comprehensive training programs established Strengthening raise level of formalized training for judiciary and number of twinning Professionalism of professional program for judges arrangements Judges and Staff performance and sector staff Ad hoc training At least 80% of new and current judges receive professional training courses organized systematically Public awareness, No regional citizen Developed information strategy and at least support and legal information three functioning regional centers understanding of center functioning Program No existing survey At least 60% of users surveyed recognize mechanisms improved technical capacity including

3. Monitoring and evaluation of outcomeslresults Monitoring and evaluation of judicial modernization activities would be the responsibility of the Judicial Modernization Team (JMT). In conjunction with the phased implementation outlined above, there will be an ongoing monitoring and evaluation of the project activities by the JMT, with periodic consultation with donors, and facilitation of stakeholder participation.

An annual comprehensive evaluation of progress will be implemented using project indicators and conducted in coordination with the Council of Europe and other key donors. A mid-term review of the Project will also be carried out at the end of year two of Project implementation. The JMT will be responsible for the collection and consolidation of information required to track progress against the monitoring plan as described in the Results Framework (ref. Annex 3), keyed to the Project Performance Yardsticks set out in Table 1, as well as its regular submission to IDA. These yardsticks would help measure progress in addressing some of the institutional weaknesses of the sector described in Part 1 of the PAD (sector context). Monitoring and Evaluation consultants would be hired to provide support to the JMT and the IDA task team throughout project implementation. The experts will be responsible for the refinement and development of

23 baseline data, the review of progress made meeting intermediate level results and indicators, the preparation of annual progress reviews, the preparation of user and other stakeholder surveys, the drafting of a mid-tern Project review, the preparation of judicial modernization process annual progress report, the consolidation of lessons of experience, and the elaboration of suggestions for corrective measures for project improvement. The results of the monitoring and evaluation activities will be publicized within the judicial community and disseminated to the public. The project contemplates the development of an MOJ website and print media to enable the wide public dissemination of project results including the publication of reports, such as the judicial modernization annual progress report [See Table 1 on yardsticks above and Annex 3 for details.]

4. Sustainability Borrower commitment and ownership of the Project are clear in the Judicial Modernization Framework set out in Presidential Decree no. 352 dated January 19, 2006 “On modernization of the court system in the Republic of Azerbaijan ...” The MOJ has taken the lead in laying the groundwork for its implementation by appointing a Judicial Modernization Team (JMT) responsible for the implementation of the Modernization Framework and the Project and has appointed senior officials and technical staff for the implementation and coordination of the Project components. The Government’s prospective economic and financial resources should be sufficient to sustain the Project’s investments and their future products. The Project is in line with the objectives of the CPS and the SPPRED (State Program for Poverty Reduction and Economic Development) and will help the authorities meet Council of Europe and other international standards for judicial institutions.

The Project development process has been fully collaborative and participatory with inputs from the highest level judicial authorities as well as judges and staff. The project will contribute to the sustainability of investments in the judicial sector in the following ways: (a) judicial institutions (MOJ, JLC, SC) will have better capacity development of judicial policies, and use of statistical analysis for institutional planning; (b) the project will build in-house capacity at MOJ to implement capital investments and large judicial projects, through support of JIMT: Project implementation will be carefully sequenced to ensure that the necessary capacity is established before initiating major operations or procurements; and (c) appropriate assurances will be obtained from the Government to provide adequate funding in sector budget for increases in number of judges, IT staff and operation, maintenance of renovated court buildings and IT equipment, and other Project outputs. Knowledge sharing and improved management of statistics and information under the project would help develop appropriate benchmarks and annual targets for budget management and projections.

24 5. Critical risks and p ssible controversial aspects Risk Risk Mitigation Measure Rating Managing multiple and The project incorporates a long-term vision of S sometimes unrealistic judicial reform and development, where the first expectations step is designed to modernize and raise standards progressively. Expectations regarding actual level of progress that can be achieved in the judicial sector over the next few years will be managed through a realistic monitoring and evaluation system with the participation of the COE, other donors and local authorities. A mechanism will be established to regularly disseminate results, for example, through the publication of an annual report on judicial modernization activities. Transparency and Annual audit mandated for IDA credits will be corruption in contracted out for the full length of the project. H procurement and Special emphasis will be placed on the financial management development of synergies with other World Bank- practices financed projects (e.g AzRip), especially those that are financing infrastructure, so as to share experiences and develop country-level safeguards with respect to fiduciary arrangements. Specialists will be hired to supervise construction and provide fiduciary oversight support (reference Component 2.1 part d). Adequate funds will be allocated under the credit to conduct annual financial management and procurement reviews and fulfill audit obligations. Capacity-building will be provided to the MOJ and the JMT for procurement, including for: o developing an acceptable procurement plan o testing e-procurement and e-financial management o engaging technical specialists to prepare key TORS, procurement documents, FM reports, and audits. Special emphasis will be given to public dissemination of Procurement data and contract awards by the MOJ. Provisions for the education of potential local bidders and the general public on modernization project procurement processes will be supported, Operational review on the internal controls and key operations would be carried out every two years. Intensive smervision bv IDA is envisaged.

25 Risk Risk Mitigation Measure tating ludicial independence Further implementation of the transparent selection S and ethics process for incoming judges initiated in 2005 Capacity building support for the development and implementation of activities related to the evaluation of judges in partnership with COE, supplementing the latter’s development of a code of ethics and process for further improvements in the selection ofjudges. The COE is currently leading donor efforts in this area which the IDA project plans to support. Capacity building support for the Supreme Court and Judicial Legal Council Complementary design and development of the modern training center, appointment of its faculty, provision of equipment and materials to help expand the supply of skilled judges. All these should help upgrade members of the judiciary for whom higher professional standards would be needed to meet COE standards (e.g. ethics and integrity) Limited institutional 0 Capacity building will be provided to the MOJ, H capabilities of the MOJ JMT, JLC and Supreme Court for resource and JMT with management, M&E, assessment of the operation implementation of a and maintenance needs of new and refurbished large-scale project and facilities. capital investments 0 Project implementation will be carefully sequenced to ensure that the necessary capacity is established before initiating major operations or procurements 0 Stakeholder consultations and social facilitation and analysis would be supported. 0 Close supervision by IDA during implementation. Sustainability of project 0 Provisions in ICT Master Plan for development and M investments installation of the technology platform and communication system, to include planned arrangements for their future maintenance and continuation. Provisions in strategic infrastructure plan for future maintenance and continuation of the upgraded courthouses and new facilities. 0 Provision for obtaining assurance of adequate government financing for ensuring the sustainability of the IT systems, renovated court buildings and other project outputs. Significant project delays 0 The project scheme calls for contracting of S consultants in years 1-2 for the mobilization and design of project implementation actions including the development of the infrastructure and ICT plan: and the initiation of refurbishing and renovation activities. In addition the project activities will be concentrated in a manageable geographic area and

26 Risk Risk Mitigation Measure Rating with adequate technical support. Timely ICT procurement will be facilitated by (i) training of JMT procurement staff in IDA procurement procedures in LO, and (ii)presence of consultants in IDA supervision missions to overcome procurement delays. The project plan also calls for pilot activities to be tested and verified before scale-up. Specialists will be hired to support implementation of the infrastructure master plan. Donor coordination A coordinated effort, initiated during preparation, H to map out donor assistance in the sector, will be continued during implementation to assist the JMT avoid overlaps in the sector. Coordination meetings with other donors in the sector to promote activities (e.g. COE, USAID, GTZ, ABNCEELI, Netherlands, and EUITACIS.) Overall risk rating H

6. Credit conditions and covenants

(i)Initial deposit to the Project Account in the amount of $50,000 will be made to ensure timely availability of adequate counterpart funds before effectiveness, and replenished quarterly. (ii)Submission of an acceptable Project Operations Manual before effectiveness (see Part C 2 for details). (iii)MOJIJMT will ensure that the EMP will be carried out in a timely manner. (iv) Adequate funding in the sector budget will be provided to support increases in number of judges, IT staff and operation and maintenance of renovated court buildings and IT equipment. (v) For supervision of construction of courts under Component 2(a)(ii) of the Project, the JMT will maintain an architect, whose qualification and terms of reference are acceptable to the Association until the completion of the Project. (vi) Progress report on the judicial modernization process will be published annually. (vii) The MOJIJMT will maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Association (International Financial Reporting Standards), to reflect operations, resources and expenditures related to the Project. (viii) The MOJIJMT will prepare and submit to the Association un-audited Interim Financial Reports for the Project 45 days after end of each calendar quarter, as part of the Project Report. (ix) The MOJ/JMT will have the financial statements audited annually by independent auditors under terms of reference acceptable to the Association, in accordance to consistently applied auditing standards (International Standards on Auditing). The audit report will be submitted to the Association no later than six (6) months after end of each calendar year audited.

27 D. APPRAISAL SUMMARY

1. Economic and financial analyses The benefits from improvements in judicial performance will be both economic and social. Implementation of the project is expected to increase the capacity and efficiency of the judiciary. It is difficult to precisely quantify the social and economic benefits of an improved justice system but a review of available data suggests that they would be significant.

The project will support a number of measures to increase the efficiency of the court system. Specifically it will support improved functioning of judicial institutions by strengthening the management capacity of the Ministry of Justice and the Legal-Judicial Council; upgrading court facilities, including rehabilitation and construction and provision of technology and equipment; strengthening the professionalism of judges and justice sector staff, including provision of training and upgrading of training facilities; improving access to information, including the strengthening of registries. The project will also contribute to a more efficient use of public resources allocated for the judicial system, which although currently the lowest in the region are expected to increase as a result of the authorities’ support for the Judiciary’s Modernization Program.

2. Technical The Project will support capacity building, citizen information, training and upgrading of court facilities. MOJ has experience with court construction and rehabilitation which helps implementation readiness. International good practices on courthouse design standards were shared with MOJ and the Supreme Court during preparation. As a result Supreme Court building designs now reflect international good practices and guidelines. However, infrastructure and ICT master plans would be prepared to better target investments and sequence results. Knowledge sharing on modernization planning and infrastructure investments started during project preparation will be continued to enhance capacities and promoted ownership (see Annex 4 for details).

3. Fiduciary (a) Financial Management. An assessment of financial management systems of the Ministry of Justice Financial Affairs Department-including accounting and financial reporting, staffing and internal controls, disbursements and auditing arrangements for the implementation of the Project-found that existing financial management systems meet minimal IDA financial management requirements. Review of staff and their activities clearly indicate proper safeguarding of assets, and well-managed accounting and administration oversight by the Finance Director. The Department follows appropriate accounting procedures and internal controls including authorization and segregation of duties. These procedures, rules and regulations are documented in various Manuals. Although the existing accounting system is capable of accounting and financial reporting that provide accurate and timely financial information, it requires further updating of the chart of accounts to accommodate the project and generate the required quarterly Interim Financial Reports for reporting to IDA.

28 As this is the first IDA financed project implemented by the Ministry of Justice, the financial management team will receive further training in Bank procedures on financial management and Credit disbursements, in addition to the short training provided during project preparation. Conversely, locally and internationally available training in financial management and auditing will be made available throughout project implementation, to be financed under the “Strengthening the Management Capacity of Judicial Institutions” component of the project. The project design includes other activities to build the capacity of the Financial Affairs Department, such as procurement of office equipment and computers, and development of network. To further strengthen the existing systems the following actions will be taken by the MOJ: (i)hiring of an assistant to the AccountingEconomic Advisor to further segregate her current responsibilities and dedicate more time to the Project; (ii)procurement of additional computers, office equipment and development of network and access to internet, which will enable running the accounting system from the network to facilitate sharing of accounting data and consolidation of financial statements; (iii)updating financial management section of the Project Operations Manual documenting procedures on financial management, disbursements and auditing arrangements for the implementation of the Project, Formats for Interim Financial Reports were agreed with the JMT responsible for the implementation of the Project. The format of these reports will be included in the Operations Manual. A financial covenant on submission of these reports, maintenance of adequate financial management systems and annual audit of the Project financial statements will be included in the legal agreement.

FM Imple~entution~esponsibil~: MOJ’s Director and Deputy Director for finance operations and the AccountantlEconomic advisor (who are also members of the JMT) will be responsible for financial management, disbursements, auditing and procurement arrangements for the implementation of the project.

Funds Flow: The project expenditures will be financed with an IDA Credit of US$21.6 million equivalent and Government counterpart funding of US$l1 .O million equivalent, with the financing gap covered through co-financing. The Borrower for the IDA Credit is the Republic of Azerbaijan, represented by the Ministry of Finance (MOF), and with the Ministry of Justice (MOJ) as the beneficiary (implementation agency).

(b) Procurement. Key risks concerning the procurement component for implementation of the project include the department’s limited procurement expertise and limited experience in procuring Goods and Works through national procurement rules, though they receive guidance from State Procurement Agency (SPA) procurement specialists. The procurement officer and staff of the JMT have participated in a training workshop in Bank procurement procedures and will require further training. The overall project risk for procurement has been rated high.

For strengthening procurement capacity for the project, the following measures have been agreed upon: (i)Training for procurement experts and head of the agency in Bank procurement procedures in ILO or any other suitable institute. The Bank project team will also provide hands on training during missions; (ii)Recruitment of at least three

29 consultants (procurement, finance and an architect firm with knowledge of environmental codes) to support the initial period of project implementation activities; (iii)A procurement plan has been prepared.

4. Social The delivery of judicial services to the public is very weak. Lack of awareness and knowledge about the ability of the courts to resolve disputes has resulted in very low demand for judicial services. The lack of an effective outreach program by the judicial authorities has served to compound the problem. There is general frustration about the lack of information available about the substantial legal and judicial changes of recent years and how these changes affect individual rights, or the functioning of the legal system and the courts. There are currently very limited mechanisms for obtaining legal advice and information from the courts. As a result, people resort to petitioning local officials (police, baZZudiyu head, Excom) to mediate or resolve disputes. In rural areas this includes members of the community such as village elders (aksakal), heads of kin, teachers, etc.

Preliminary consultations with communities, businesses and associations have identified a need for information about how to take a claim to court, obtain the services of a lawyer, and the associated costs, information about labor rights (protection or redress from unfair dismissal, family law, child support and maintenance, land registration, contract law, women's' rights, entitlement to pensions, social support services, etc.) and improving notary and registry services (or providing them where none exist). In most cases the distance to the nearest courthouse or law office for rural and remote communities adds an additional obstacle that significantly discourages individuals from seeking legal protections. There is a strong feeling that the interests of small businesses and farmers are at a great disadvantage due to their lack of awareness about how to access the court system.

A participatory needs assessment has been started during project preparation and will be advanced during the first months of the project to further develop the legal and judicial information needs of the population, including the specific needs of target and vulnerable groups (e.g., IDPs, women, low income families, youth, small businesses and farmers, etc.). The needs assessment will guide the development of a Citizen Information Strategy for the Project, and the implementation of citizen information programs on the basis of pilots in the area of legal information, ethical behavior and transparency and education that will be assessed and scaled up to address access and information gaps. Pilot user surveys and programs contemplate assessment of public perception of the lack of transparency and ethical behavior in the provision of judicial services. These surveys will assess public perception of transparency including informal costs of justice and public opinion on the fairness of the courts and other institutions in the sector. In addition, BEEPS survey will provide information on the overall views of businesses regarding the performance of the system. All these surveys will feed into the projects M&E process (see Part C3 of the PAD and Annex 3 on Results Framework and Monitoring).

5. Environment OPI BP 4.1: The proposed project is not expected to have any significant or irreversible environmental impacts, and is classified as Environmental Category "B". Component 11,

30 Upgrading Court Facilities, is to include rehabilitation of existing courts and construction of new courthouses on the sites of approximately 19 existing facilities or state-owned land in urban centers, mainly Baku, Sumqayit, Sheki, Ali Bayramli, Ganca and Nakchivan in the Autonomous Republic. The selection of specific courthouses will be made on the basis of the infrastructure Master Plan to be prepared by the Ministry of Justice during the first year of the project. The Master Plan will include consideration of cultural heritage value of the buildings selected for rehabilitation or reconstruction, and will take social, cultural and historical value into account in the design of construction or rehabilitation works. The other project components have no environmental impact, apart from the general very positive impact that modernization of the judicial system would contribute to a more efficient and transparent practice of rule of law, which is a necessary element for effective environmental regulatory compliance.

The short-term negative environmental impacts, which inevitably occur during construction or rehabilitation works, will be minimized by proper planning and application of preventive measures, and will be mitigated by restorative actions after the civil works are completed. Use of construction materials, which are hazardous to human health (e.g., asbestos) will not be permitted. The facilities manager of the Ministry of Justice Judicial Modernization Team will ensure that firms contracted to carry out works for all new construction and renovations of existing buildings obtain permits and clearances as required by Azerbaijan national regulations. The environmental section of the Project Operations Manual constitutes the project Environmental Management Plan (EMP), with details the specific measures and sample forms, checklists and contract formats. The EMP has been disclosed and published in Info Shop..

Involuntary Resettlement. [World Bank OP 4.121 The construction activities undertaken under this project will not entail any land acquisition, relocation of population, or restrictions on access to resources. Technical assistance will be provided during the development of the strategic court infrastructure Master Plan to ensure that measures to address the issue of involuntary resettlement are incorporated into the planning and design of future construction activities.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBP 4.01) [XI 11 Natural Habitats (OPIBP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [I [XI Involuntary Resettlement (OPlE3P 4.12) 11 [XI Indigenous Peoples (OPIBP 4.10) 11 [XI Forests (OPIBP 4.36) El [XI Safety of Dams (OPlBP 4.37) [I [XI Projects in Disputed Areas (OPIBP 7.60)* [I [XI

~

* By supporting the proposed project, the Bank does not intend to prejudice the final dete~inationof the parties’ claims on the disputed areas

31 Projects on International Waterways (OPIBP 7.50) [I [XI

7. Policy Exceptions and Readiness There are no exceptions required from Bank policies.

Three procurement packages (one for preparing infrastructure and ICT master plans, one for citizen information plan, and one for training) will be prepared and ready for issuance to potential bidders shortly after credit effectiveness.

32 Annex 1: Country and Sector Background AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

Institutional Challenges Facing the Judicial System

This Annex is divided into two parts. The first provides a brief introduction to the socio- economic and governance context. The second provides a profile of the judicial institutions and the courts, including a brief description of institutional challenges and problems.

1. Country Context

The Republic of Azerbaijan is a country in the South Caucasus, with a coast on the Caspian Sea. It has frontiers with Russia in the north, Georgia in the northwest, Armenia in the west, and Iran in the south (see Map Annex 15). The Nakchivan Autonomous Republic (NAR), an exclave of Azerbaijan, borders Armenia to the north and east, Iran to the south and west, and Turkey to the northwest. Despite a 1994 cease-fire, Azerbaijan and Armenia have yet to resolve their conflict.

Azerbaijan regained its independence after the collapse of the Soviet Union in 1991, and has been a member of the Council of Europe since 2001. Azerbaijan is a secular state. 93.4 percent of its almost 8 million population (2005 est.). The population growth rate is 0.7 percent per annum, with life expectancy at about 65.2 years. The population literacy rate is 99 percent. 51 percent of Azeris live in urban areas. (See Annex 16)

Azerbaijan is divided into 65 administrative units - rayons - and the Autonomous Republic of Nakchivan. It has 11 cities, of which 5 are large, as well as the city of Nakchivan in the Autonomous Republic. Azerbaijan has three branches of government. The President is the head of the Executive Branch. Since 2003 the President has been Ilham Aliyev. The President is elected by popular vote to a five-year term. The Prime Minister and the First Deputy Prime Minister are appointed by the President and confirmed by the National Assembly. The Legislative Branch consists of the unicameral National Assembly or the Milli Mejlis (125 deputies are selected by popular vote to a five-year term).

Azerbaijan's greatest economic asset is its energy sector, which has registered an increase in production every year since 1997. A consortium of Western oil companies is scheduled to begin pumping 1 million barrels a day in early 2006, through a $4 billion pipeline it built from Baku to Turkey's Mediterranean port of Ceyhan. Economists estimate that by 2010 revenues from this project will double the country's current GDP.

Azerbaijan, as other former Soviet republics, is struggling through the transition from a command to a market economy. The country has only recently begun making progress on economic reform, and old economic ties and structures are slowly being replaced. Several other obstacles impede Azerbaijan's economic progress: the need for stepped up foreign investment in the non-energy sector, and the continuing conflict with Armenia, among

33 others. Azerbaijan is formally an emerging democracy. Azerbaijan’s adherence to democracy, rule of law and secularism is envisaged in the Constitution of the Republic of Azerbaijan, adopted in 1995. Nevertheless, a great deal of effort is still needed to meet the constitutional mandates and international standards.

2. Sector Profile and Challenges

Cons~u~onalFramework. As established by Articles 125 and 127 of the Constitution, the Judicial Branch of Azerbaijan is comprised of courts and judges, mandated to be fair, impartial, and independent. The judiciary has the responsibility of administering justice based on the equality of citizens before the law, on the basis of facts and according to the law, and for the purpose of protecting the rights and freedoms of citizens.

Past Reforms. Since 1995 a series of judicial-legal reforms have been initiated, Through these reforms, the Azeri authorities redesigned the governance structure and organization of the courts, introduced a four-phase comprehensive competitive selection procedure for all new incoming judges, established the Judicial Council, initiated a development program for the Judicial Training Center including new and continuing legal education programs, created a group to prepare a judicial code of ethics and began the creation of a more independent bar association. Reforms resulted in the upgrade of legal databases (in the coming months a new national Azeri language web-based database of all normative acts will be launched), introduction of legal code reforms, including new Civil Code, Code of Civil Procedure, Criminal Code, Code of Criminal Procedure and Code of Administrative Crime. Azerbaijan’s judicial modernization framework is envisaged in the Courts and Judges Act (amended in 2004-2005), the Presidential Decree on court system modernization (January 19, 2006, No. 354) and in Council of Europe and international agreements.

Many institutions make up the judicial system, these include:

Courts: structure, size, workload and coverage. Azerbaijan is a civil law country. The three-tier court system consists of Courts of First Instance (general and specialized), Courts of Appeal and the Supreme Court (see Chart 1). Specialized courts include the economic courts. District Courts (general courts) try the majority of cases and judges both preside over and direct trials. General jurisdiction courts hear both criminal and civil law cases as well as juvenile cases. The Nakchivan Autonomous Republic’s Supreme Court is an appellate judicial body, which administers justice and oversees the activities of NAR general courts. The Constitution mandates public trials except in cases involving the state, commercial or professional secrets or confidential family matters and provides the right to appeal to both the prosecution and defense. By law, criminal defendants are presumed innocent and given the right to examine witnesses and present evidence at trial. For matters relating to the administration of Azerbaijan’s Constitution, a Constitutional Court was created.

Azerbaijan has the smallest judiciary in the region. There are 84 first instance general jurisdiction courts, each serving almost 98,000 inhabitants. The number of specialized first instance courts is 16. Overall, 12 first instance general and specialized courts serve

34 one million citizens, The country has one Court of Appeal in Baku and five more recently established under the Presidential Decree (to be instituted in Ali Bayramli, Ganca, Sumqayit, and Sheki), and seven local economic courts. The caseload of the courts is high considering the small size of the judiciary, but low compared to international standards (e.g. only 5 percent of the firms use courts in Azerbaijan as compared to 25 percent in CIS countries, according to the recent BEEPS survey). About 80 percent of the caseload of the system is in the six main cities which have 50 percent of the population and insufficient judges. Courts receive about 71,253 cases per year, of which 63 percent are civil cases and 12 percent criminal. Courts of Appeal hear roughly 120 civil and 60 criminal cases per month. A single court can receive 11 criminal and 869 non-criminal cases annually. In the city of Baku, the workload of judges in general courts on average amounts to 60-70 cases a judge per month (including civil and criminal cases, administrative violations and others) and for the district courts, 40-50 cases per month. For economic courts this figure is 30-35 cases per month.

Judges: Number, salaries, appoin~entand oversight. According to the data provided by the Ministry of Justice of Azerbaijan, the number of full-time judges is 329, with a supporting staff of 1,400. The total number of lawyers in Azerbaijan as of 2002 is 4,900 (6 lawyers per 100,000 people). The President appoints Supreme and Constitutional Court judges, who are then subject to confirmation by the National Assembly. Lower level judges are appointed by the President without confirmation, Terms of appointment are 10 years for judges of Supreme, economic and Appeals courts and five-year terms for other judges. A judge's salary ranges from US$500-600.

Azeri legislation provides for the possibility of disciplinary punishment, dismissal from office in case of breach of ethics, or in case of conduct incompatible with the high status of a judge. The Disciplinary Board of the Supreme Court has been created to consider disciplinary proceedings, as well as give consent to begin criminal prosecution, including for acts of corruption. Between 1990 and 2000, disciplinary sanctions were used against about 60 judges and more than a dozen judges were dismissed from office". mini st^ of Justice (MOJ): role, organization, functions including support to courts, and training The Ministry of Justice, part of the executive branch, is closely connected with the judiciary as far as it conducts the material-technical supply of the courts, and compilation of court statistical data. The Ministry supervises activities such as execution of court decisions, carries out state registration of legal entities, and is charged with the training of judicial staff. In addition, MOJ carries out management of notaries, forensic medicine institutions, civil status registration bodies, monitors penitentiaries, and citizen education. MOJ consists of the Minister (two deputies to the Minister), Collegium, heads of departments and administrative staff. The MOJ has approximately 150 staff members.

During the past few years the support office for administrating reforms at the Ministry of Justice has been significantly expanded. The Ministry now contains several specialized structural departments. Pursuant to the legislation, the Ministry of Justice is charged with providing the proper institutional facilities (finance and logistics) and the training of

" Fuad Aleskerof, Judicial-Legal Reforms in Azerbaijan: Independent Judicialy as a Barrier to Corruption, February 1999

35 judges for the First Instance Courts. In collaboration with the Council of Europe, a commission of experts carefully considered a curriculum for judges; long-term training programs have been prepared for candidates, keeping in mind the requirements for a varied curriculum, catering to occupational specializatidn.

Judicial-Legal Council (JLC): role and functions. In 2004, in close collaboration with the Council of Europe, the Azeri authorities created the Judicial Legal Council and a Judge Selection Commission. The Judicial-Legal Council (JLC) is an independent body, which oversees the organization and operation of the court system, arranges for the selection of judge candidates, evaluates the activities of judges, and decides on the transfer of judges to different judicial posts, their promotion, as well as disciplinary liability issues. The JLC has 15 members: Minister of Justice, Chairman of the Supreme Court; a person to be appointed by the President; a person to be appointed by the National Assembly; a judge to be appointed by the Constitutional Court; two judges of cassation to be appointed by the Supreme Court; a judge of Court of Appeal to be appointed by the Supreme Court; a judge of Economic Court of Appeal to be appointed by the Supreme Court; a judge of the Supreme Court of NAR to be appointed by the NAR Supreme Court; two judges of the first instance courts to be appointed by the Minister of Justice; a person to be appointed by Minister of Justice; a lawyer to be appointed by the Collegium of Bar Association; a person to be appointed by the General Prosecutor’s Office.

Judge Selection Committee (JSC): The Judge Selection Committee was formed by the JLC. The JSC collects the application documents of the candidates for vacant judicial posts and organizes written tests and oral exams, engages judicial candidates in long-term training and determines their professional eligibility through interview. The JSC consists of 11 members: two judges of the Supreme Court; two judges of the Court of Appeal; a judge of the Economic Court; NAR Supreme Court judge; a member of the Judicial- Legal Council; a representative of the Ministry of Justice; a representative of the Prosecutor General’s Office; a member of the Bar Association; and a law academician. Before the first qualifying exams were carried out, almost 60 percent of sitting judges were stripped of their appointments. The 2001 selection process was flawed and generated numerous complaints.

In 2004, a new four-phase transparent selection process for incoming judges was designed with the assistance of the Council of Europe and was implemented in 2005 (see Chart 2). Overseen by the JSC, the process regulates the final selection of judges confirmed by the JLC and includes an automatically generated multiple choice exam, a written essay exam, an oral exam, and a final training period which includes another written and oral exam period during which time judges are tested on their ability to conduct practical analytical and written exercises. Candidates successfully completing the training period are subject to a final interview conducted by the Selection Committee which prepares a comprehensive report on each candidate considering specializations and possible court assignments. Based on this process, selected candidates are referred to the JLC which may follow up with an additional interview and subsequently deliver its recommendations to the judiciary.

36 Notaries. As noted, the MOJ is responsible for the supervision of notaries, their establishment and suspension, as well as the appointment of public notaries and their staff. The activity of notaries in Azerbaijan is regulated by the Constitution, the Law of the Republic of Azerbaijan “On Notary” and other legislative acts. The Law “On Notary” (adopted in November 26, 1999, last amended in September 30, 2005) establishes that notary activity shall cover certification of the rights and the legal facts, as well as performance of other notary actions for legalization (registration) of official and original documents. Under the Law on notaries, a private notary may be established in the Republic of Azerbaijan. The number of public notaries in Azerbaijan is about 145.

State Registries. Like notaries, state registries are also under MOJ administration. In accordance with the Decree of the Cabinet of Ministers of April 2005, a single state registry of legal entities was established by the Ministry of Justice on the basis of data collected by the Ministry of Justice, the regional bodies of the Ministry of Justice for the state registration of legal entities, the State Committee for the registration of Religious Organizations, and the Ministry of Justice of the Nakhchivan Autonomous Republic. According to the Decree, all state registry data is to be stored centrally by the Ministry of Justice. The Ministry of Taxes and State Social Protection Fund should be provided monthly with information about registration and inclusion in the state registry of legal entities, as well as upon removal thereof. In addition to the central registry at the MOJ, there are 10 regional state registry offices in Azerbaijan.

BaiZ~fsand Ushers. The enforcement of court decisions and the security of the courts is the responsibility of the MOJ. The number of bailiffs in the first instance courts is approximately 130.

Prosecutors. The Prosecutor’s Office initiates and undertakes the investigation of criminal cases; supervises the investigation of criminal cases, and ensures the lawfulness of investigative activities. Prosecutors’ office system consists of the Prosecutor General’s Office of the Republic of Azerbaijan, Military Prosecutor‘s office of the Republic of Azerbaijan, Prosecutor‘s Office of the Nakhchivan Autonomous Republic; district (city) prosecutor‘s offices, specialized military prosecutor‘s offices. The number of public prosecutors is more than 12 per 100,000 inhabitants12.

Legal Profession. The Collegium of Advocates serves as the defense bar for Azeri legal professionals. Civil Lawyers are not licensed by the state and can form associations outside the Collegium; the largest of which is the Azerbaijan Lawyers Forum with approximately 500 members. The Collegium was established as an independent entity, but in practice currently operates under the umbrella of the Executive Branch. The Law on Advocates and Advocate Activity, from 2000, establishes that membership of the Collegium be decided through examination. The 2000 Law, however, was never implemented and an exam was never held. In 2005 this law was amended to once again require an entrance exam, which was held for the first and only time in February 2005. The Collegium also assists advocates in finding clients, but for these services it charges a compensation of 20 percent from attorney’s earnings and another 30 percent in state

37 taxes13. At the Constitutive Meeting of the new Collegium of Advocates (under the 2004 Law) in November 2004, there were 370 registered Collegium members. Through the February 2005 exam process, 120 new members were admitted; and since that time approximately 40 more advocates have been admitted. The total number of Collegium members currently stands at approximately 530 and efforts by the international community are underway to encourage the Collegium to expand its membership.

The judicial system in Azerbaijan faces numerous challenges:

One key issue is the lack of adequately trained judges, and legal officers (notaries, bailiffs, ushers, etc.), as well as the shortage of court facilities. Training of judges on ethics is limited. There is no code of ethics to guide the work of judges and staff and make them accountable. Information provided by the European Commission for the Efficiency of Justice (CEPEJ) indicates Azerbaijan has the lowest number of judges in Europe and CIS, 4.06 per 100.000 inhabitants (see Chart 3 for comparative data on judges per 20,000 inhabitants). The per capita court budget in Azerbaijan is the lowest among the post-Soviet republics (0.64 euros)14 (see Chart 4). Additional courthouses are needed across the country.

In addition to inadequate human resources and infrastructure, courts in Azerbaijan also lack adequate technical and other equipment, and professional materials. For example, among the immediate needs of notaries are IT provision, necessary facilities, an updated legal database, and e-networking capabilities. An EU funded Fact Finding Mission conducted an overview and analysis of challenges and problems of bailiff and usher services at four Azerbaijani district courts - Ganca, Sumqayit, Guba, and Lancaran. According to their findings, among the major challenges faced by bailiff and usher services at these locations were: lack of professional staff; low salaries which made the staff vulnerable to bribery; poor infrastructure and technological support; inefficient and risky work environment (bailiffs were not issued guns), and lack of training programs and manuals, among,others.

The gap between legal extensiveness (number of new laws) and legal effectiveness (implementation) is exacerbated by the inadequate geographic coverage of the judiciary's infrastructure and its inability to respond to citizen demands and expectations generated by the political, economic and social changes of recent years. Low funding (0.5 percent of the national budget - the lowest in the region) and an increase in the number of cases as a result of new commercial and civil legislation has added to the strain on the system. However, from an international perspective the demand is still low as compared with CIS and ECA countries (see Chart 6). There are 10 first instance courts of general jurisdiction per 1 million inhabitants (CEPEJ reports that the range for the region is from 10 to 25, placing Azerbaijan at the bottom of the scale.) As a measure of effectiveness, the enforcement of commercial contracts is expensive and bureaucratic resulting in an additional cost of up to 20 percent of the original debt.

l3Markus Zimmer, Judicial and Legal Systems in the Republic of Azerbaijan: Preliminary Assessment, 2002, p. 11 l4European Judicial Systems 2002, European Commission of the Eflciency of Justice, Council of Europe Publishing, 2002

38 Another important issue is the need for improvement of court oversight and the support of professional ethics within the judiciary. A European Commission study of the efficiency of Justice (CEPEJ) indicates that Azerbaijan is one of only three former Soviet states that has no system for the supervision and control of the courts. In terms of transparency, Azerbaijan ranks lowest of ECA and CIS countries with respect to the accessibility of draft laws for public review and comment, and there are likewise no mechanisms for the publication of court decisions or the consultation of trial records. Business Environment and Enterprise Performance Survey (BEEPS) data show that scores rating the performance of the Judiciary as a constraint for doing business have increased progressively during 1999-2005, and scores based on user perceptions of the timeliness of court decisions have declined, as have ratings of the fairness and honesty of the courts (see Chart 5). BEEPS data shows that administrative corruption, or the 'bribe tax,' continues to be a high cost for firms, and corruption is ranked overall among the top five obstacles to business.

Although constitutional safeguards exist, judicial governance and oversight mechanisms are still evolving in practice and would continue to do so over the medium term. A positive mindset necessary for the development of a strong judiciary is lacking among the population and judges alike. In general, even during the Soviet era, lawyers and judges were ranked in low esteem. Legal activities were conducted in accordance with state interests and legal professionals were therefore viewed with suspicion. People perceive that it is preferable to resort to court only in cases of extreme ne~essity'~.

The poor public perception of the judiciary, especially among businesses, poor and vulnerable groups in society, is compounded by the lack of responsiveness of the courts and by the costs of corruption (see Chart 5). Moreover, according to a study conducted by the Council of Europe, Azerbaijan, Armenia and Moldova are the only former Soviet states which do not have special surveys to measure public trust and satisfaction with the services of the judiciary". Many consulted believe that judges and staff lack the moral and financial incentives to reject bribes and other pressures. This perception is attributed to two main causes: a) the low compensation of operators compared to living costs; and b) the high cost of securing judicial appointments in the years prior to the 2001 judge selection. A district court judge's monthly salary is $500 on average. The Government undertakes appropriate measures for eliminating negative cases in selection and appointment process of judges. The transparency issue appears to have been taken seriously by the authorities under the current judge selection process which has so far been deemed transparent by local and international observers. This new selection process signals a positive step forward.

Conclusion. While key judicial legislation was passed in the early years of transition to facilitate the functioning of a market economy, a great deal of work is required to ensure the development of a judicial system for Azerbaijan compatible with Council of Europe

l5Markus Zimmer, Judicial and Legal Systems in the Republic of Azerbaijan: Preliminary Assessment, 2002, p. 6 l6European Judicial Systems 2002, European Commission of the Eficiency of Justice, Council of Europe Publishing, 2002

39 standards and in line with the Presidential Decree of January 2006 on court modernization.

40 I I I I I I I I .-um I a8 I c, 1 .- I j c, I k I I u I I I I I I I I

I

I...... t .

I CHART 3. Number of Judges Per 20,000 Inhabitant: Croatia

Slo ve nia

SM-Se rbia

Hungary

Czech Republic

Germany

Slovak Republic

Austria

Poland

Bulgaria

Lithuania

*Sweden

Estonia

Romania

Latvia

Finland Canada I Iceland I Portugal

No may

Mofdo va

Russian Federation

Ne tberlands

Italy

US A

France

Spain

Georgia

*De nmark

Azerbaijan

Ireland

012345678

*Heads muted irstead of htl-time equivalents. Source: CEF'W, Empan Judicial Systems, 2Mn

43 I CHART 4. Court Budget per Capita (euros)

CHART 5. Views of Firms that Use Courts

Firms that Use Courts (%)

0 25 50 75 100

AMto enlorce its decmion

A1forde.M

Wick

Fair and hr&M

IAzsrbsjjan IaS 0 e2A

CHART 6. Use of Courts

use Of courts (%)

40.

Azerbawn as

Sources: BEEPS, MOJ, Supreme Court, CEPEJ and COE.

44 Annex 2: Major Related Projects Financed by the Bank andlor other Agencies AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

(a) List of IDA and IFC projects:

IDA FINANCED

Project name Amount Financier PIDO Ratings Sector issue Second Institutional US$9.45 M IDA IP-s Public Administration Building Technical DO-S Assistance Povertv Reduction 1 US$20M IDA 1 IP-s Public Administration, Suppoh Credit I DO-S Law and Justice Rural Investment I US$ 15.0M IDA 1 IP-s Energy and mining; Project Transportation; Water, Sanitation and flood; Public Administration, Law and Justice

Second Structural US$60 M ~ DO-S Public Administration; Central government Adjustment Credit administration; Oil and -gas; Power; Water supply; General industry and trade sector IFC TBA InvestmentPolicy; Law IFC Corporate IFC TA Facility TBA Investment Climate

(b) Donor financed projects include:

Organization Progrumfl71eme Objectives~A~tiv~~s Timing France (Embassy) Judicial Training - Training of Trainers seminars and study tours Germany (GTZ) 1997 - present Legal Reform

r I Access to Law and I -Legal awareness for journalists I Justice Judicial and Dispute - Technical Assistance on selection and appointment of judges Resolution Mechanisms - Training of Judges in Civil Code and CPC - Publication of Supreme Court judgments - Anti-torture initiatives Law Reform -Commentaries on law on constitutional courts Netherlands Legal Services -Lawyers training on international human rights litigation UK (Embassy) I Access to Law and -Distribution of anti-torture manual to training- colleges- and I Justice libraries Judicial and Dispute -Anti-torture initiatives Resolution Mechanisms Legal Services -Prosecutors training in anti-torture initiatives

Lawyers capacity building on human rights to support.. the I use ofthe ECHR I Personal and Property I -Training of police on anti-torture initiatives Rights Penitentiary System -Visit of the Deputy Minister of Justice to the UK to learn about UK's prison reform UK (British Council) Penitentiary System -Human Rights project "Forum Theater" May - October 71Kld

45 USAID (ABA- CEELI and NCSC) Access to Law and - Legal Resource Center for the public Justice - Development of legal database with the MOJ and President's Office (through- NCSC) - Regional seminars, legal awareness and discussion forums I Judicial and Dispute -Assistance on court Administration - Economic Court of Resolution Mechanisms Appeals - Judges Training: Opinion Writing, Code of Ethics (with OSCE), and Ekonomic Court of Appeals training on

Law Reform

Legal Services

US (Department of Justice) US Embassy Access to Law and Justice Judicial and Dispute Resolution Mechanisms Legal Services

Personal and Property Rights

government national action plan ABA-CEELZ Judicial and Dispute - CPC Trainers training Resolution Mechanisms Legal Services

Personal and Property Rights Council of Europe Judicial and Dispute Resolution Mechanisms

Law Reform

Legal Services Personal and Property Rights

Penitentiary System

EU TACIS Legal and Judicial Access to Law and Reform Justice Judicial and Dispute

46 Resolution Mechanisms judges; computers, faxes and legal literature for regional courts .CPC; Civil Code, Trainers Training; Curricula development; study tours to Germany Law Reform . Commentaries on CPC, Civil Code, law of obligations Personal and Property - Training of prosecutors on CPC, human rights, study tours to Rights Germany Civil Service Access to Law and - Booklet with Civil Service Law and all Regulations (2000 Refom (President's Justice copies)

Judicial and DisDute - Seminar on recruitment of civil servants Resolution Mecianisms Law Reform - Some comments on civil service law Penitentiary System - Project planned with MOJ

Legal Services - Provision to university libraries with publications on IHL Establishment of Book Funds; Courses on IHL Courses for students; moot court and essay competitions; support to teachers on writing of books on IHL Personal and Property - Implementation and disseminationof International Rights Humanitarian Law; Mechanism for repressionof crimes against humanity and war crimes,; Adoption of the law on protection of the use of the Red Cross and Red Crescent Emblems; Geneva Conventionsof 1949 and their additional protocols; Hague Convention of 1954 on Protection of Cultural property; Rome Statue of the International Criminal Court; other treaties on limitation of certain types of weapons; provisions with publications and treaties on IHL organization of seminars on IHL at regional (Moscow) and national levels; Human Rights Law and IHL courses for police and Internal Troops officers

Judicial and Dispute - Assist Constitutional Court in improving procedures for Resolution Mechanisms receptionladministrationof preliminary decision of individual constitutional complaints -Capacity building for local trial monitors Legal institutions for a - Assistance in implementation of Law on Registration of Market economy Legal Entities and Sate Register possibly its establishment Legal Services - Assistance in implementation of Law on Advocates and several other programs Personal and Property - Seminars on pre-trial investigation and Code of Ethics (with Rights ABA-CEELl); training for police and prosecutors on anti- trafficking (with US Embassy) upon adoption of national Plan)

Access to Law and - Media Program Justice Judicial and Dispute - Training for Support for Civil Society Resolution Mechanisms Sores Access to Law and - Media Program ~ Justice Judicial and Dispute - Capacity building for law drafting Resolution Mechanisms Legal Services - Practical training in IHR litigation with emphasis on non- discrimination, minority rights, ECHR, sessions in NL - Curriculum reform; legal clinic program - Support for Law Library of Baku State University Penitentiary System - Support for Penitentiary training Center - Training for military judges and prosecutors.

47 Annex 3: Results Framework and Monitoring AZERBAIJAN JUDICIAL MODERNIZATIONPROJECT

Results Framework

PDO Project Outcome Indicators Use of Project Outcome Information The objective of the project is to assist a. Improved staff and professional Zvaluation of project results in strategies the Azerbaijan authorities in developing performance md annual action plans to assess and implementing the initial phases of a b. Accessibility, adequacy, user mthorities’ needs and designs of future long-term judicial system modernization Eonfidence, and demand nvestments in judicial development. program by building capacity to achieve c. Improved availability of training incremental improvements in efficiency, 1. Public Awareness support and citizen information, and its ability to understanding of program handle future demand.

Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring A. Strengthening the Management Periodic reports, mid term evaluation, Capacity of Judicial Institutions BEEPS, learningldissemination

--Improved controi systems for resource --At least 50% of professional staff planning and application accessing and using IT based resource YRl: Formally agreed technical management system (RMS) requirements specification for the resource management system (RMS) --Number of staff with email addresses YR2: RMS Implementation, contract and internet connections signature YR3: System demonstration in selected MOJ office YR4-5: System installation in additional offices --Development of activities on court --At least 150 new judges selected using modernization, especially activities that new selection procedures enhancing the --Mid-term review yardstick to assess relate to the recruitment and selection of system accountability and transparency progress judges. -- Number of Judicial-Legal Council -- Improved communication via officials and other public institutions information network between the utilizing the information network YR1: A formally agreed technical Judicial-kgal Council and other public requirements specification institutions. YR2-: Information network supply contract signature YR3-5: National rollout of the --Number of experts engaged to scale up information network - Improved knowledge base and coordination capacity and deployed for modernization capacity knowledge transfer YRl-5: Successful capacity building of the modernization team, partners and stakeholders YR1-5: Results from knowledge sharing will be used to adjust project activities B. Upgrading Court Facilities Periodic reports, mid term evaluation, learningldissemination -Improved physical working conditions --Architectural models and strategic and insitu training infrastructure plan developed and YR1-5: Successful implementation of adopted by the judiciary in at least one modem architectural, organizational and - Improved ICT based case management pilot location IT models will be rolled out to other process in at least one location for pilot court buildings. and demonstration purposes --Development of an integrated ICT plan and other technical equipment for --Citizen and other stakeholder surveys

48 1 --Improved bailiff services and court courts constructed and rehabilitated in selected locations

--At least 17 courts constructed and 4 rehabilitated as per modernization --Midterm review yardstick for concepts assessing project progress

--Number ofjudges and staff trained in modern methods and tools

--At least 20% improvement in overall satisfaction with judicial services in at least two or more agreed pilot locations

--At least 20% reduction in time of court decision enforcement with organizational streamlining and automation in Baku C. Human Capital -Strengthening Periodic reports, mid term evaluation, Professionaiism of Judges and Staff BEEPS, learningldissemination -- Comprehensive training program --Modem judicial training center established and number of permanent YR1-5: Collaborative activities with established including key management, and part-time professors COE, donors and partners faculty of permanent and part time YR2-5: Survey oftrainers’ and trainees’s professors developed --Number of twinning partners on training center performance YR1-5: Annual judicial modernization conference -Improved and diversified training --At least 80% of new and current judges programs and mechanisms receive professional training courses --Mid term review yardstick to assess organized systematically project progress

D. Improving Citizen Information Periodic reports, mid term evaluation, BEEPS, learningldissemination. These -- Improved availability of and access to -- Information strategy developed and at will be publicly available through the legal and judicial information and least three regional citizen legal MOJ website and other media. services information center functioning YR2-5: Effective public communication -- New organization and automated strategy and improved operation of functioning of notaries, and registries courts, registries, notaries should lead to adopted at central and regional level improved judicial image and identify issues of conuption and unethical --At least 60% of users surveyed behavior in pilot locations which will be recognize improved technical capacity monitored through public and staff including computerization, of registries surveys. I and notaries

Mid-term review yardstick (survey) for soliciting stakeholder feedback and assessing project progress

49 & E

& e 0 # E m I d m d0 I I

se se zr- 4 4

se * se lx 54 54

se €3 4 :: R R 8 4 Annex 4: Detailed Project Description AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

The objectives of the Project will be achieved through these four inter-related components (see Chart 4 below):

Component 1: Strengthening the Management Capacity of Judicial Institutions Technical capabilities of judicial institutions for improved operations and undertaking the implementation of the Project would be supported through: (a) building the basic capacity of the Ministry of Justice (MOJ) to oversee its functions through the development and installation of an integrated information management system aimed at enhancing operational planning, statistical analysis, resource management and citizen information; (b) the design and implementation of an information network between the Judicial-Legal Council (JLC) and other public institutions for promoting communication and coordination mechanisms; (c) capacity building support for the development and implementation of suggestions prepared by the MOJ andor by the JLC in line with the Presidential Decree on court system modernization, with special emphasis on activities that relate to the evaluation of judges; and (d) capacity building support for the MOJ’s recently established Judicial Modernization Team (JMT) to plan and implement judicial modernization programs and promote stakeholder participation. The latter would be achieved through: (i)the employment of specialists, advisors and administrators in different project management areas, including coordination, administration, procurement, financial management, social communication, monitoring and evaluation, donor relations, institutional development and technology; (ii)the provision of training, information and communication technologies, office equipment, transport, logistical support and office space for the modernization group; and (iii) the carrying out of knowledge sharing and exchange on good practices through planning and organizing technical visits to local and international locations, video conferences, seminars, carrying out empirical studies and surveys, and consultation workshops with judges, staff, lawyers, and other stakeholders in the system, including users.

Under this component, IDA would finance (estimated at US$2.47 million) consultant services, training, goods and minor works. The main focus of the MOJ in modernizing internal information systems and other upgrading will be its headquarters in Baku. The support for the development of suggestions on the evaluation of judges would be in partnership with the Council of Europe (COE) already engaged in the development of a code of ethics and selection process for judges. Knowledge sharing support (including research and development on ADR) would be provided with the participation of other donors as needed (e.g., ABA-CEELWSAID, GTZ, EU- TACIS, Japan PHRDIJICA). Support of the Judicial Modernization Team would be in-line and consistent with the Bank’s policy favoring management of the Project within the MOJ to enhance capacity and country ownership. Stakeholder consultations already initiated during project development would be continued and expanded during project implementation to help build social facilitation capabilities in the MOJ and other judicial institutions,

53 Chart 4. Component 2: Upgrading Court Facilities I Project’s Institutional Development Components Development of physical infrastructure and introduction of court technologies to support the efficient provision of judicial services Management and information would be promoted through 1 two subcomponents.

2.1. Court Physical Infrastructure. Courthouses would be upgraded to international standards through: (a) the t Physical Facilities development of a strategic infrastructure and Technology plan for the medium and long-term for Economic Courts, other First Instance Courts and Courts of Appeal to: (i)help prioritize and sequence capital investment in cities, regions and Nakhchivan Autonomous Republic; (ii)the design of prototype court architectural models to meet international standards and modernization needs (such as organization, technology, user accessibility, training, image, operation and maintenance, and ancillary legal and judicial services); and (iii)guide the renovations and rehabilitations of existing courthouses and judicial offices; (c) the carrying out of court renovation, rehabilitation and construction in Baku, Ganca, Sumqayit, Ali Bayramli, Sheki and Nakhchivan in the Autonomous Republic; (d) the capacity building support for continuing supervision (including fiduciary oversight) of rehabilitation and construction activities to be undertaken under the project; and (e) the provision of office equipment, furniture and materials in courts.

2.2 Court Technologies. Introduction of court technologies to COE standards (including for the Supreme Court and Constitutional Court) would be supported through: (a) the design and preparation of an ICT master plan for courts, including design of the technology platform, networks and communication system (LAN, WAN); (b) the design, test and implementation of automated case management systems in one location in Baku for demonstration purposes (or in Sumqayit, or Sheki, or Ganca, or Ali Bayramli) during the first year of implementation; and (c) the provision of ICT and other technical equipment for courts constructed and rehabilitated in Baku, Sumqayit, Sheki, Ganca, Ali Bayramli and Nakhchivan in the Autonomous Republic.

Under this component, IDA would finance (estimated at US$11.33 million) consultant services, training, goods and works. The first step would be the development of a strategic infrastructure plan. Construction and rehabilitation work will mainly target locations mandated by the Presidential Decree to accommodate the creation of new Courts of Appeal and Economic Courts and accommodate the increased number of judges in the first instance courts (See Box 1 for approach and selection criteria). As parallel financing the Government will fund the construction of the Supreme Court building. Information technologies would be introduced on a pilot basis in upgraded courthouses or new facilities (including the Supreme Court and Constitutional Court) after the provision of training to judges and staff in the use of technologies for word processing, document receipt, handling of archives, management of cases, recording of proceedings, decision preparation, publication of decisions, enforcement of judgments, and provision of statistics and user information.

54 Box 1. Snapshot of Projected Court Facilities Upgrading* Upgrading of courts and judicial facilities (physical and technological) will be carried out in six cities (namely, Baku, Ganca, Ali Bayramli, Sumqayit, Sheki and Nackchivan) in about 19 locations. These cities have about 50 percent of the population and cater to about 80 percent of the workload. The list of courts that need rehabilitation and construction is provided in the Table below. These have been identified based on both policy (Presidential Decree) and technical criteria: (a) need for facilities for new appeal courts and training center established by Presidential Decree; (b) courts that will accommodate an increase in the number of judges in first instance courts as per Presidential Decree and COE standards to cater to future demand; (c) modernization requirements such as replacing dilapidated or unserviceable courthouses, providing support to central management, meeting requirements for introducing technologies and court proceeding rooms, accommodating new work methods and providing citizen services.

Overall, about 180 judges and 600 support staff would operate in the improved facilities (about 50 percent of the current system). These investments would cater to and help enhance the operation of about 80 percent of the workload of system. Investments will bring appeal courts closer to the population since facilities in four new locations will be added to the facility currently serving only Baku. Improvements in first instance courts would bring direct benefits to citizens where they are most needed. Construction and rehabilitation designs will be premised on operational efficiency, citizen access and integrated technologies for enhanced effectiveness and transparency.

Type of Court CityLoeation No of Sites Plan Appeal Courts Baku 1 Rehabilitation Ganca 1 Construction Ali Bayramli 1 Construction Sumqayit 1 Construction Sheki Construction I First Instance Courts Baku Local Economic Court N 2 1 Construction Sumqayit Local Economic Court 1 Construction Sheki Local Economic Court 1 Construction AR Grave Crimes Court 1 Construction NAR Grave Crimes Court 1 Construction Baku city Khatai district Court 1 Construction Baku city Narimanov district Court 1 Construction Baku city Yasarnal district Court 1 Construction Baku city Binagadi district Court 1 Construction Baku city Sabunchi district Court 1 Construction Sumgayit city court 1 Construction Gedabek regional court 1 Construction Oguz regional court 1 Construction

Baku city Sabail district Court 1 Rehabilitation Baku city Surakhani district Court 1 Rehabilitation Baku city Nasimi district Court 1 Rehabilitation Gandja city Nizami district Court 1 Rehabilitation

Total- - 22 *Upgrading includes physic; and technological improvements

Court construction will be financed by the Government in parallel to this Project. Snnrre. Miniqtn, of Justice and Sumerne Court.

Component 3: Human Capital -StrengtheningProfessionalism of Judges and Staff

Improvements in professional training and development opportunities are closely associated with judicial system capacity and organizational change which would be supported through three subcomponents.

3.1 Institutionalizationof Training Capacity. Capacity building would be supported through: (a) the design and development of organization and structure for a modem training center, and the selection and appointment of key management staff and their training in local and international training systems; (b) the development of a faculty of permanent and part-time 55 professors, and the formalization of twinning arrangement with international training institutions (e.g., France, US Federal Judicial Center, ABA-CEELI Prague Institute); (c) the development of training programs and materials with the participation of technical working groups (including groups established for the COE programs); (d) the design and provision of physical facilities for the training center, including space for key management staff and visiting faculty, seminar rooms, information technology training rooms, video conference center, library center, in-house publishing center, moot court center, data center, and conference facility; (e) the provision of information and communication technologies (ICT) and other technical equipment for the training center for about eighty work and training stations, including laptops, projectors, simultaneous translation booths, and other audio-visual equipment; (f) the provision of office equipment, furniture and materials for the training center.

3.2. Judicial Training at the Entry Level as well as Continuing Education. The development of professional skills and capabilities of new and senior judges, staff and legal professionals would be supported through a variety of targeted capacity building programs, including: (a) the implementation of training programs for new judges and judicial candidates, especially in such topics as organization and administration, drafting judgments, judicial ethics, enabling legislation and key international legal instruments, practical implementation of national legislation, information technology skills, moot court exercises, and others; (b) the implementation of continuing education training programs for Senior Judges, especially in new legislation, international instruments, international courts case-law and others; (c) the implementation of continuing education training programs for Court Chairman and Deputy Chairman, especially in administration, human resource management, data analysis and statistics, appellate rules and procedures, information technology skills, and social communication skills; (d) the implementation of continuing education training programs for Judicial Sector Staff for Court Clerks and Legal Assistants in advanced legal research and drafting skills, case records and management, modem information management skills and techniques, administrative and court organization skills, information technology skills and others. Technical and Administrative Staff in administration and court organization techniques, case records and management, information technology skills, and modern information management skills. Ushers and Bailiffs in new regulations and administrative procedures, information technalogy skills and improved service delivery techniques, including scaling up ongoing TACIS training programs; and (e) the implementation of continuing education training programs for Other Judicial Sector Officials: Notaries in theoretical and practical training in new legislation and international instruments, State and Private Lawyers in local and international law, new legal and administrative procedures, and topics related to sector modernization.

3.3 Annual Conference and Evaluation of Training Programs. Capacity building support would be provided through: (a) the organization of a dissemination event to mark the commencement of the first comprehensive training course for newly appointed judges, and formalization of the annual organization of judicial modernization conference with local and international participation; and (b) the carrying out of an evaluation of impacts of training programs.

Under this component, IDA would finance (estimated at US$4.0 million) consultant services, training, goods and works. Full rehabilitation (including provision of appropriate technologies) would be carried out to the judicial office building earmarked to accommodate the needs of a modern training center at an estimated cost of about US$2-3 million. The training programs 56 would be co-funded with other donors, especially ABA-CEELI, COE, USAID, GTZ, OSCE, France and Japan. Overall, about 1000 persons are expected to be trained during the next five years.

Component 4: Improving Citizen Information including strengthening of registries and notaries Support for the development of mechanisms and opportunities for the provision of legal and judicial information to the population and target groups for responding to supply and demand of services would be provided through two subcomponents:

4.1. Citizen Information Pilot Programs. Capacity would be improved through: (a) the identification of information needs of target groups (such as IDPs, women, minors, low-income families, user groups, small businesses, and farmers) through participatory consultations and surveys and the design and development of an information strategy; (b) the development of pilot citizen information programs such as: (i)publishing basic user-friendly legal guides to inform citizens about laws and the procedures of the court system, and how to gain access to judicial services; (ii)creating a pilot legal and judicial information center in one city and one region in locations with appropriate human resources and physical and technological capabilities, including the possibility of mobile services; (iii)creating partnerships between schools and local courts, in collaboration with the Ministry of Education, to organize judges’ visits to classrooms and class visits to courthouses;(iv) creating partnerships with existing projects (eg. AzRIP, IFC Corporate Governance, FIAS, BP Azerbaijan, ARANIOXFAM) where mechanisms for channeling legal information to specific target groups exist or can be easily developed, including information campaigns in urban and rural areas through appropriate media (e.g., TV, radio, print media, billboards, etc; (v) development of internet-based information services including design of websites to enable the publication of court decisions and related materials for citizens and legal professionals; and (vi) creation of a legal information ‘hotline’ connected to legal and judicial information centers; (c) support for information campaigns to inform citizens about the modernization program of the judicial system; and (d) support for carrying out the evaluation of pilot citizen information programs and their replicationlscale-up.

4.2. Upgrading the functioning of registries and notaries. Capacity enhancement would be achieved through: (a) the review of and adjustment to information collection, automation, cataloging and archival services of registries (for legal entities-businesses, NGOs) in Baku, the central office located in the MOJ headquarters and all regional locations, including the provision of information and communication technologies, equipment and development of knowledge strategies; and (b) the review and update of the organization and functioning of notaries, automation and adjustment to the certification and information collection services, including provision of information and communication technologies.

Under this component, IDA would finance (estimated at US$3.4 million) consultant services, training, and goods. The cost of this component would be adjusted based on final costing during the negotiation mission. The main focus would be on piloting citizen information programs, evaluating them before possible scale-up. Partnerships (e.g. with AzRIP, IFC, FIAS, ARANIOXFAM, and BP Azerbaijan) for setting up information centers and developing mechanisms for citizen information would be explored during implementation as part of the consultative process to promote sustainability and cost effectiveness of pilot programs.

57 Annex 5: Project Costs AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

Local Foreign Total Project Cost By Component us us us $million $million $million

A Strengthening the Management Capacity of 2.07 2.40 4.47 Judicial Institutions B. Upgrading Court facilities 17.63 2.00 19.63 C. Human Capital - Strengthening 5.70 1.oo 6.70 Professionalism of Judges and Staff D. Improving Citizen Information, including 3.90 0.50 4.40 Strengthening of Registries and Notaries Total Baseline Cost 29.30 5.90 35.20 Operating Costs 0.40 0.40

Total Project Costs 35.60 Total Financing Required 29.70 5.90 35.60

Note. Japanese PI-IRD Grant in the amount of US$3.0 million will partially cover foreign costs.

58 Annex 6: Implementation Arrangements AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

The implementing agency under the project will be the Ministry of Justice (MOJ) through the Judicial Modernization Team (JMT) (established under MOJ Decree Dated February 4, 2006). This multi-disciplinary JMT will be supported through the provision of experts, training and logistics in accordance with fully integrated good practice PIU model of Bank project^'^. (See organizational Chart 5)

Strategy for ImpZeme~tutio~.As institutional development is a long and learning process, a step- by-step approach to modernization is contemplated. Knowledge sharing and stakeholder consultations are planned to promote change and learning.

Chart 5. Implementation Arrangements: Judicial ModernizationTeam

CABINETOWIMSTERS CONsTlTmoNAL COURT MINISTRY OF FINANCE ~~1 JUSTICE Technlcai SUPREMECOURT MINISTRY OF ECONOMIC DEVELOPMENT - UDICIAL- LEGU COUNCIL

The project design calls for concentration of activities in a manageable geographic area and with technical support. As noted above, management capacity enhancement (Component I)under the Project would basically target MOJ and the Judicial Legal Council (JLC) operation in central headquarters. This component will also provide institutional support to the Judicial Modernization Team (JMT) responsible for project implementation. Upgrading of court facilities (Component 2) will target courts in the six main urban centers (Baku, Sumqayit, Sheki, Ganca, Ali Bayramli and Nakchivan) (see Box 1 in Part B4 above). Professional development of judges and staff and legal professionals (Component 3) will be broad and comprehensive, given the very small size of the judiciary. The project work on improving citizen information (Component 4) would be focused on target groups such as IDPs, women, poor and small businesses (see Annex 16). Pilots would be tested before scale-up.

l7 For different PIU typologies and good practice guidance see Guidance Note for Project Management: Strengthening Institutional Capacity During Project Implementation, OPCS, World Bank, October 2005. 59 The Project would be implemented in three overlappingphases over apve year period.

1. ~obilizationand knowledge for impzementation (years 1-2). This refers to the buildup of institutional capabilities to plan and implement improvement programs, carry out consultations, surveys and organize knowledge sharing programs for key stakeholders. The activities would be intensive in the initial years and level off as capabilities develop, The activities are principally oriented towards the development of proposals for the evaluation of judges and their training in topics related to modernization. This will include identification and training of a core group of judges and staff who would be responsible for developing pilots for improved information services. In parallel, there would be contracting of consultancies for the development of the strategic infrastructure plan, ICT master plan, citizen information plan, and initiation of space refurbishing and renovation.

2. Development of court environment to “demonstrate” modemization (years 2-4). This will consist of stocktaking and initiation of capital investments in physical infrastructure and technologies, and launch of citizen information pilots. Support will begin for the introduction of staff training, and the provision of ICT platform for the judicial training center.

3. ~ustainabizi~of institutional development eflorts (years 3-5). Continuation of the preceding phase, with further emphases on training functionaries and users in the new work methods, modem tools, and in the evaluation of the achievement of the objectives and the impacts of the modernization efforts. This also implies the scale-up of citizen information programs and development of follow-on improvement efforts.

The creation and approval of the Project OM will be a condition of effectiveness, In addition to coordination and administration arrangements, the OM will include arrangements for the following: e Procurement and financial management under the project, annual reviews and IDA credit audit requirements. e M&E, including the supervision of construction and fiduciary oversight. e Strengthening capacity of JMT, with specific training for procurement and financial management, including testing of e-procurement and e-financial management, and for the hiring of specialists for preparation of key TORS, procurement documents, FM reports and audits. Provision of education to potential local bidders and the general public on modernization project procurement processes. Environmental management plan and safeguard measures Annual publication of modernization progress report with technical and citizen information, and public dissemination of procurement data and contract awards.

60 The Chart 6 below provides the implementation phases, and the Project’s key institutional development activities. It highlights the sequence, and timing of pilot activities. The scope of the pilots would be manageable and basically limited to one of six cities identified as target areas for the Project.

61 Annex 7: Financial Management and Disbursement Arrangements AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

Financial Management Implementation Arrangements. The Ministry of Justice Financial Affairs Department (the Department) within the Ministry of Justice (MOJ) will have the overall responsibility for financial management, disbursements, auditing and procurement arrangements for the implementation of the Judicial Modernization Project. The Department is headed by a Director who reports directly to the Minister and the Deputy Minister. The Director is supported by two Deputy Directors who are responsible for general management of the finance and economic operations. The Deputy Director for finance operations is supported by an AccountinglEconomic Advisor and five accountants. The Director, Deputy Director for finance operations and the AccountantlEconomic advisor are members of the Judicial Modernization Team (JMT) responsible for the implementation of the Project

An assessment of financial management systems of the Financial Affairs Department was carried out during project preparation and updated at appraisal. The objective of the assessment was to evaluate the capacity and adequacy of the Department’s financial management systems for project implementation, including: (a) accounting and financial reporting; (b) staffing and internal controls; (c) flow of funds; and (c) auditing arrangements. Conclusion derived from the assessment was that overall financial management systems for the implementation of the Judicial Modernization Project meet Bank minimum financial management requirements. In order to further strengthen such systems, the Finance Affairs Department is modifying the Chart of Accounts of the existing accounting system to accommodate the project. The existing Finance Manual which documents accounting and administrative controls, procedures and regulations will be incorporated into the Operational Manual for the Project. The Operational Manual is under preparation and will be completed by the Ministry of Justice by effectiveness. The Financial Affairs Department staff who are members of the Judicial Modernization Team received Bank training in financial management, financial reporting and disbursements during project preparation. Additional training will be provided during project implementation, and new computers procured to replace the existing outdated office equipment, to be financed from the project. Although the Judicial Modernization Team is not an independent entity but operates within the Ministry of Justice, its organization structure including the structure of the Financial Affairs Department will assure efficient and timely implementation of project activities. The Ministry of Justice has the ability to deal with the impact of civil service rules and regulations that might impact project implementation. Based on assessment carried out on existing financial management arrangements and systems for the implementation of the Judicial Modernization Project, overall financial management risk for the project is rated as moderate to substantial.

Country Issues. A Country Financial Accountability Assessment (CFAA) for Azerbaijan was carried out in 2003 with the objective of identifying strengths and weaknesses of the country’s financial accountability arrangements and the risk that these may pose to the use of Bank funds. The report identified weaknesses and made recommendations to strengthen public and corporate sector accounting, auditing, governance and financial accountability frameworks. With respect to the public sector, the Government, with support from the Bank and other development partners, has made efforts to strengthen public financial management through enactment of a Budget System Law, modernization of the Treasury operations, and strengthening capacity of the Chamber of Accounts -the country’s supreme audit institution. The Government continues to receive support from the donors to continue its efforts in reinforcing public financial

62 management, particularly on improving budget preparation and allocation, introducing internal audit function and overall accountability and transparency in financial reporting, Regarding the corporate sector, the report recommended: (a) introduction, development and application of international financial reporting standards and establishing Council of Accountants with responsibility for preparing and determining accounting standards; (b) developing a plan to harmonize various sources of accounting guidance; (c) introduction and application of international standards on auditing and relying more on auditor’s conclusions to determine compliance with relevant accounting standards; (d) capacity building of the Chamber of Auditors -the country’s auditing services regulator and standard-setter, and revising the Law on Audit Service in line with international standards; and (e) developing training and capacity building programs to enhance and sustain the reforms. The ongoing IDF Grant on Accounting and Auditing Reforms and the proposed Corporate and Public Sector Accountability Project will provide support to corporate sector development and investment, improve public financial management and accountability, and establish a sustainable training capacity in accounting and auditing, thus integrating Bank support into the Government’s overall program of accounting and auditing reform in the country.

The Country Procurement Assessment (CPAR) carried out in 2002 reviewed the current two- stage control by the Ministry of Finance following budget allocation on contract-by-contract control whereby the prices of bids are compared to some “average market price” and rejected to the extent that the successful bid price exceeds the hypothetical market price. The CPAR recommended that this control should be abandoned as it leads to widespread inefficiencies and corruption. Another recommendation that has impact on Project financial management was strengthening total budget control to ensure the value of all contracts entered into in any one budgetary year does not exceed the budget allocation for that year.

The Country Portfolio Performance Review of May 2005 identified some generic issues affecting Bank-financed projects. The key issues monitored by the Ministry of Finance and the Bank include, amendment to the Public Procurement Law in line with international standards and practices and enhancing capacity of the project implementing entities and government entities that implement Bank-financed projects through training in financial management, disbursements and procurement.

Project Accounting and Financial Reporting. Accounting and financial reporting is centralized at the Financial Affairs Department. The existing in-house accounting and financial reporting system is not integrated, but instead has ledger modules loaded into computers of accountants responsible for respective modules relating to their segregated accounting and budgeting tasks. This does not allow sharing of data, and most important does not facilitate consolidation of financial statements. Accounting data is backed-up each evening into diskettes to secure the accounting data. The Department uses accrual basis of accounting to allow recording of accounting transactions, and preparation of financial statements. Ledgers (books of accounts) are maintained electronically in the accounting system, and also maintained manually by respective accountants responsible for specific segregated accounting tasks. The Finance Director reviews the ledgers and transactions for accuracy and completeness of the accounting records and financial statements. Further upgrading of the system including development of a network to enhance integrated accounting will be carried out during project implementation and financed from the project as part of the desired outcomes of the project.

63 Regarding financial reporting, the existing system will require further strengthening by updating the existing chart of accounts to accommodate the project and generate quarterly Interim Financial Reports required for reporting to IDA. The Interim Financial Reports will be used for project monitoring and supervision, and will include at a minimum: (i)statement showing for the period and cumulatively actual and planned cash receipts and payments by main income and expenditure classifications; and (ii)beginning and ending cash balances of the project. The Interim Financial Reports will be prepared quarterly throughout the life of the project, and submitted to the IDA no later than 45 days after end of each quarter. Annual financial statements will be prepared in accordance with international accounting standards, and should include summary of funds received, summary of expenditures, statement of deposit account, balance sheet showing accumulated funds of the project, bank balances and other assets of the project, and liabilities. Preparation of the financial statements is the responsibility of the management of the Ministry of Justice. Subject to the foregoing, the indicative formats which were discussed with the Finance and Economic Department staff will be included in the Operational Manual. In addition to reporting to IDA, the Department also provides financial statements to the Ministry of Finance, the Chamber of Accounts (Supreme Audit Institution), the Ministry of Taxes, the Statistics Committee and the State Procurement Agency. A financial covenant on submission of the quarterly Interim Financial Reports and maintenance of adequate financial management systems is included in the legal agreement.

StaEng and Internal Controls. There are 150 staff in the Ministry of Justice, of which 22 are in the Financial Affairs Department, 8 who report directly to the Finance Director. Accounting duties are segregated among the accountingleconomic advisor and the five accountants in the areas of budgeting, accounting, financial reporting, disbursements and procurement related activities. The deputy director for finance operations is responsible for general management and overall oversight of the finance operations within the Department. See Chart 1 below.

The mission met with the key accounting staff and reviewed their activities which clearly indicate proper segregation of duties, including safeguarding of assets, and well-managed accounting and administration control oversight by the Finance Director. The Department has instituted a set of appropriate accounting procedures and internal controls including authorization and segregation of duties. These procedures, rules and regulations are documented in various Manuals. In addition to the existing procedure manuals, procedures on financial management, disbursements and auditing arrangements for the implementation of the Project will be documented in the Operational Manual. As this is the first World Bank-financed project implemented by the Ministry of Justice, the financial management team will require further training in IDA procedures on financial management and Credit disbursements, in addition to training offered during Project preparation. More training in financial management will be offered locally or regionally by IDA staff, and internationally during Project implementation.

64 Budgeting. Annual budget process starts in January of each year with the issuance of Decree of the Cabinet of Ministers in accordance with the Budget Law, and from directive issued by the Ministry of Finance that is sent to all budgetary organizations. The budget is prepared and consolidated by two economists based on financing and expenditure needs from all courts, marriage license offices, bailiff offices, notary offices and business registry offices. The budget is reviewed by the Finance Director and approved by the Minister of Justice before it is forwarded to the Ministry of Finance for discussion and approval in July of each year. After discussions and negotiations between the Ministry of Justice and the Ministry of Finance, the budget is submitted to the Cabinet of Ministers by the Ministry of Finance in September of each year. Parliamentary approval of the budget takes place around November of each year. Due to the fact budgetary funds allocated to the Ministry of Justice are delayed, the Ministry receives the funds in February of each year.

Funds Flow and Disbursement Arrangements. The total project cost estimate of $35.6 million will finance strengthening management capacity of the judicial system, upgrading court facilities, strengthening capacity of judges and staff, and improving citizen information. The project expenditures will be financed with IDA Credit of $21.6 million equivalent and Government counterpart funding of $11.0 million equivalent, with the financing gap of $3.0 million covered through the Japanese Co-financing Institutional Capacity Building Grant. The Borrower for the IDA Credit is the Republic of Azerbaijan, represented by the Ministry of Finance (MOF), and with the Ministry of Justice as the beneficiary (implementation agency).

The Country Financing Parameters for the Republic of Azerbaijan approved in December 2004 will be applied to determine the level of IDA financing. These Parameters allow cost sharing of up to 100 percent, no country-level limit on financing of recurrent costs, and local and foreign costs may be financed in any proportions required for the project. Regarding financing of taxes, no taxes and duties are judged to be unreasonable. IDA can therefore finance all taxes and duties associated with project expenditures. In the Republic of Azerbaijan, international financial institutions’ projects are exempted from paying VAT.

Table 1: Allocation of Credit Proceeds

Transaction Based Disbursement Methods. The Government of Azerbaijan has not accepted Report-based Credit disbursement method (disbursements on basis of Interim Financial Reports). Therefore, the IDA Credit funds under the Judicial Modernization Project will be provided on standard IDA Credit terms, to be disbursed through transaction-based disbursement methods that include: additional instructions regarding reimbursements with full documentation,

65 reimbursements on basis of Statements of Expenditures for small expenditures with defined thresholds, payments against Special Commitments, direct payments to third parties, and payments through the Designated Account are described in the Disbursement ktter.

Designated Account. To facilitate project implementation, a Designated Account for IDA funds will be opened in a commercial bank, on terms and conditions acceptable to IDA. The ceiling for the DA has been established at $2,000,000. The Designated Account will be replenished regularly, at least every three months, and audited in conjunction with the annual audit of the project financial statements.

Government Contribution. The Government counterpart funds of $1 1.0 will be disbursed from budgetary allocations expended through the Treasury System to a Project Account opened for the , Ministry of Justice. The authorized official from the Financial Affairs Department of the Ministry of Justice will be responsible for the management of the Project Account for financing Project expenditures. Currently, the Finance Director and either the Minister or the Deputy Minister are the authorized officials to sign payment orders to finance expenditures financed from the budget funds. In order to ensure adequate counterpart funds are made available to the Project on timely basis, it was agreed at negotiations that a Project Account will be opened in a bank on terms and conditions acceptable to IDA with an initial deposit in local currency equivalent to US$50,000.

Auditing Arrangements. The audit of the proposed Project financial statements will be conducted by independent auditors under terms of reference acceptable to IDA, and in accordance with International Standards on Auditing (ISA). The annual audited financial statements will be submitted to the IDA within four months after end of each calendar year, and also at the closing of the project. The first audit for the Project will be at the end of the first year of Project implementation. The contract for the audit awarded during the first year of project implementation can be extended from year-to-year with the same auditor, subject to satisfactory performance. Such contract will be procured under Least-Cost Selection procurement method. The cost of the audit is eligible for financing from the proceeds of the Credit. A financial covenant for the annual audit of the project financial statements is included in the legal agreement.

Risk Assessment and Mitigation. Financial management risks relate to country level risks (inherent risks) and risks associated with Project financial management systems (control risks). These risks are summarized below, and outlined in a report available in Project Files.

Risk Risk Rating Risk Mitigating Measures Incorporated into Project Design 1. Inherent Risk Country Level High Legal and regulatory reforms conducive to increased accountability and efficiency addressed in the PRSC and in the proposed Corporate & Public Sector Accountability project 2. Entity Level Moderate The Project includes a component for institutional building and capacity strengthening of the Ministry of Justice judicial and administration institutions, including capacity building of the Judicial Modernization Team. 66 Project Level Moderate Procurement of office equipment, computers, design of a network, and training for the Judicial Modernization Team ~ (JMT) members responsible for implementation of the project incorporated into the project design. A short workshop on financial management and disbursements was provided to the JMT members directly responsible for financial management and disbursement related aspects of the project. Additional training of the JMT to be provided during project implementation. Project includes a component for capacity building of the Judicial Modernization Team in all aspects of project implementation. In addition, an operational review will be I carried out at least every two years under terms of reference acceptable to IDA.

Moderate Appoint an English speaking assistant accountant to the Accounting Advisor specifically to assist in project accounting. Budgeting Moderate Project costing linked to borrower 4-year plan prepared under the Project Moderate Develop a network to enhance integrated accounting svstem. [ Internal Moderate nla

Substantial Government to deposit an Advance to the Project Account to be replenished quarterly Moderate Financial reporting module of the existing in-house system Reporting to be further customized to automatically generate required quarterly Interim Financial Reports. iAuditing Moderate By March 3 1,2007 appoint external auditors under terms ol reference acceptable to IDA

Overall risk is rated as Moderate to Substantial. While progress has been made toward public sector transparency and accountability, and institutional and legal frameworks are established, much remains to be done to enhance the sustainability of these reforms. The above mitigating measures address key controls in budget formulation and execution, treasury financial management, public procurement and internal and external audit, which would enhance transparency and accountability at the country, entity and project levels. In addition and at the project and entity level, an operational review will be carried out at least every two years to review internal controls, procurement controls, disbursement controls, and safeguarding of assets.

Financial Covenants. The Financial Affairs Department will be required to maintain a financial management system, including records and accounts, and prepare financial statements adequate to reflect operations, resources and expenditures related to the project. The quarterly Interim Financial Reports will be submitted to the IDA no later than 45 days after end of each quarter. The project records and accounts will be audited annually by independent auditors under terms of reference acceptable to the IDA, and the audit report submitted to the IDA no later than six months after each year audited. A Project Account will be opened in a bank on terms and conditions acceptable to IDA with an initial deposit in local currency equivalent to US$50,000.

Strengthens and Weaknesses. Although this is the first Bank-financed Project for the Ministry of Justice, the Judicial Modernization Team has the capacity to implement the Project. The team 67 has already received short training in financial management and disbursement procedures, and additional training will be provided during project implementation. An English-speaking accountant will be recruited to support the accounting advisor responsible for project accounting and financial reporting.

Action Plan. A time-bound Action Plan to strengthen project financial management systems was agreed at appraisal and confirmed at negotiations, as follows:

0 Provide additional training in Bank financial management and disbursements to the Jhrfl: by December 2006

0 Hire an assistant to the AccountinglEconomic Advisor before start of project implementation to further segregate her current responsibilities and dedicate more time to the project.

0 Complete updating Chart of Accounts of the existing accounting system and customization of Interim Financial Reports for project accounting and financial reporting, before start of project implementation.

0 Complete updating the existing financial management manual which will form part of the Operations Manual. Operational Manual acceptable to the Bank to be adopted by the Ministry of Justice before Credit Effectiveness.

0 Open a Project Account with initial deposit of US$50,000 for Government counterpart funds, by end January 2007.

0 Appoint independent auditor, and under terms of reference acceptable to IDA, by March 31,2007.

Supervision Plan. The Bank will conduct financial management supervision every six months to monitor progress of project implementation. The financial management supervision would pay particular attention to: (i)Credit disbursements and financial management arrangements; (ii) review of the project’s Interim Financial Reports and audited financial statements; and (iii) review of implementation of auditor’s recommendations on strengthening systems and controls as outlined in the Management Letters issued by the auditors with the annual Audit Reports.

68 Annex 8: Procurement Arrangements AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

A. General This section describes the procurement arrangements under the Project. Procurement would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Development Credit Agreement. The general description of various items under different expenditure category are described below and summarized in Table A. For each contract to be financed by the credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the IDA project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

B. Procurement Arrangements

Procurement of Works: The Project would finance contracts for upgrading court facilities, including rehabilitation and construction of new court buildings in numerous districts of Baku city and country districts and it also foresees renovation with possible extension of existing court facilities and repair of buildings in various districts. Furthermore, the project would finance rehabilitatio~constructionof the Judicial Training Academy facilities. The total amount of works estimated under the project is US$18.5M equivalent with IDA financing estimated about US$10.02 million.

International Competitive Bidding (ICB): Large value contracts for civil works mostly comprising of construction of the new courthouses in various regions each estimated at cost of US$400,000 or more, would be awarded on the basis of ICB procedures: Procurement through ICB will follow IDA procedures specified in the Procurement Guidelines. The IDA Standard Bidding Documents (SBD) will be used.

National Competitive Bidding (NCB): Civil works contracts estimated to cost less than US$400,000 or equivalent for rehabilitation of courthouses and upgrading of existing buildings scattered in different regions of Azerbaijan that might not be expected to attract the interest of foreign contractors may be procured through NCB. ECA sample NCB documents will be used as agreed with the implementing authority.

Minor Works: Small works may include simple civil works Le., repairs and renovation of state courthouses for minor works estimated to cost less than US$lOO,OOO equivalent per contract may be procured through price comparison of quotations of at least three contractors, received in response to a written invitation. The invitation will include a detailed description of the small works, including basic specifications, required completion dates, and a basic contract form acceptable to the IDA. When needed, and if the requirements of paragraphs 3.1, 3.5,3.6, and 3.7 of the Procurement Guidelines are met, direct contracting of small works may be undertaken with prior agreement of the IDA.

69 Procurement of Goods: Goods procured under this project may include: equipment and software for case management and information technology activities, infrastructure technology, motor vehicles (e.g. for mobile legal and judicial information center), furniture, and proprietary software and office supplies (including goods for operation) totaling US$12.02 million with IDA financing of estimated about 6.47 million.

International Competitive Bidding (ICB): All contracts estimated to cost US$300,000 or more will be procured through ICB method. Procurement through ICB will follow IDA procedures specified in the Procurement Guidelines, using the IDA Standard Bidding Documents for goods and Supply and Installation of IT Equipment (Single or Two stage).

National Competitive Bidding: All contracts estimated to cost less than US$300,000 shall be procured through NCB method. Procurement through NCB follows IDA procedures specified in the Procurement Guidelines. The goods will be procured through competition within the country and the bidding documents shall contain draft contract and conditions of contract acceptable to the IDA. The IDA’Ssample form of SBD can be used.

Shopping: For contracts estimated cost less than US$lOO,OOO shopping procedures may be followed based on a model request for quotations satisfactory to IDA.

Selection of Consultants: Consultants services will consist of technical assistance, knowledge sharing, studies, management advice in policy reforms, capacity building, development of information technology systems and training. The credit will finance several short- and long- term consultant assignments for national and international individuals. Description of consulting services, TORS and methodologies required, will be included in the Request of Expression of Interests (REoI) prepared by JMT in coordination with IDA headquarters. These services are estimated to cost US$2.07 million equivalent. Consulting firms would be selected following QCBS, LCS and CQ procedures, in accordance with Section 1 of the Guidelines, Small assignments generally estimated to cost less then $200,000 for the development of training, evaluation of training program, develop an information system and for the design of architecture model will be procured through LCS and CQ. All large consulting assignments like design and implementation automated case management system and cataloging and archival services will be procured through QCBS A number of individual consultants will be selected by comparing of at least three CVs.

The MOJ will follow the Bank’s anti-corruption measures and will not engage services of firms and individuals debarred by the Bank. The listing of debarred firms and individuals is located at: http://www .worldban k.or~html/oDr/procure/deb~~.html

Anti-corruption Measures:

The following measures will be carried out to mitigate corruption:

-Prior Review: Intensive and close supervision including majority of contracts will be prior reviewed. -Post Review: One in five contracts will be post reviewed. -Complaints: All complaints by bidders will be diligently addressed and monitored in consultation with RPM office. -Publication of Advertisement and Contracts: All publications of advertisement and contracts including results of awards will be monitored as per the Bank Procurement Guidelines. 70 -Training: Project launch workshop and intensive procurement training for MoJ staff will be conducted periodically. -Procurement Plan and Thresholds: Procurement plan will determine the prior and post review thresholds including packaging of contracts based on construction and manufacturing capacity in Azerbaijan. -Fiduciary Staff Additional staff (Procurement Specialist, Financial Management Specialist and Architecture) will be hired to assist the MoJ to implement the project. -Evaluation Committee: The IDA will review and comments on the qualifications and experiences of evaluation committee members selected by the MoJ for each project activities to ensure that only the person with appropriate qualifications are selected with no conflict of interest. -Contactors, Suppliers and Consultants Payment: Payment to contractors, suppliers and consultants will be monitored to ensure timely payment.

Training: Training would consist of workshops, conferences, knowledge sharing sessions, seminars, consultation meetings, technical visits for staff of participating agencies and stakeholders working in project activities. IDA would finance travel, subsistence and per diem to trainees, registration fees, logistic expenses for organization of training events and training materials. Training program for judicial sector staff, implantation of continuous training of senior judges is estimated to US$2.64 million.

Operating Cost: The project will finance the incremental operating costs up to US$O.4M, including: (a) Procurement, Financial and a Project coordinator and other professionals’ travel expenses locally and abroad; and (b) communications, maintenance and operation cost for equipment procured or used under the project. An architectural firm will be selected to assist MOJ for rehabilitation and construction of courthouses. The firm will draft the technical specifications including design, supervision of the contractor works.

C. Assessment of the Agency’s Procurement Capacity and Other Implementation Issues

The implementing agency under the project will be the Judicial Modernization Team of the Ministry of Justice (MOJ) and will be supported through the provision of experts, training and logistics in accordance with fully integrated good practice PIU model of the IDA projects. The JMT will include the Head of Finance Department, as well as specialists in Procurement, Financial Management, Architecture, IT and others. MOJ would be responsible for developing and updating the Project Operations Manual (OM), ensuring that project activities are implemented according to the OM, and reporting on project progress to the Head of Financial and Administration Department. MOJ is responsible for ensuring that procurement of goods, works and services will be cqied out in a timely manner, and in accordance with IDA guidelines, Also it will manage project funds, maintain accounts, hire annual auditors, request adequate budget provisions for the MOJ in the national budget, facilitate the work of consultants and working groups, review consultant outputs, organize acceptance testing of IT system etc. The head of the JMT would ensure that access to decision-makers at the appropriate level is obtained for proactive consultation and decision making, to mitigate emerging implementation or coordination problems in a timely manner.

An assessment of the MOJ’s procurement capacity to carry out the Project procurement was conducted by Gurcharan Singh, Sr. Procurement Specialist on February 18, 2006. The 71 assessment reviewed the organizational structure of the implementing agency and the interaction and linkages between the JMT staff (particularly the procurement staff) and the Ministry’s central unit for administration and finance.

Most of the risks concerning the procurement of the project have been identified. Among the Table A: Project Costs by Procurement Arrangements

onsultant Servic

important concerns are that the JMT staff has very little procurement expertise, limited prior procurement experience in national procurement, and no staff has experience in IDA procedures. To remedy the situation, MOJ agreed to send its procurement staff and the head of the JMT for IDA procurement training. In addition, the IDA project team will provide hands-on training during missions.

The overall project risk for procurement is rated high.

Procurement Plan: The MOJ has developed a Procurement Plan for project implementation which provides the basis for the procurement. This plan has been agreed between the Borrower and the Project Team during May, 2006 mission, available in project file. It will also be available in the Project’s database and in the IDA’S external website, (without the estimated costs upon Borrower’s request). The Procurement Plan will be updated annually in agreement with the IDA project team or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Monitoring and Reporting: Based on inputs from the Ministry of the Justice, JMT would provide to IDA quarterly reports on implementation progress. Such reports shall include the level of commitments and disbursements under the credit. In addition, the Ministry of Justice, Executive Council and IDA will carry out Annual Reviews to assess the implementation progress. This review would specifically assess progress towards meeting the implementation targets set forth in Annex 3, the impact on the judiciary’s performance of the initiatives supported by the project and the adjustments that may be required in order to achieve the desired impact in justice administration. 72 Frequency of Procurement Supervision: In addition to the prior review supervision to be carried out from IDA offices, the capacity assessment of the Implementing Agency has recommended two supervision missions per year. The post review of procurement actions would also be carried out during the supervision mission

73 IDA Review of Procurement Decisions

(b) ICB Contracts estimated to cost above USD equivalent $400,000 for works, $300,000 for Goods per contract and all Direct contracting will be subject to prior review by the IDA,

I Consultant 1 QCBS 1 SFB I LCS I CQ I Other I N.B.F. I Total Services cost Expenditure Category A. Firms 1.36 0.34 1.7 (1.36) 0.34 (1.7) B. 0.37 0.37 I EdividualsIndividuals (0.37) (0.37) Total 1.36 0.34 0.37 2.07 (1.36) (0.34) (0.37) (2.07)

(b) Consultancy services estimated to cost above US$lOO,OOO equivalent (Firms) per contract or above US$50,000 equivalent (Individual consultants) will be subject to prior review by the IDA.

Expenditure Category Contract Value Procurement Method Contracts Subject to (Threshold) Prior Review US$ thousands 1. Works >400 ICB All >100<400 NCB All e or 3o0 ICB All >100<300 NCB First 2 contracts e or =lo0 Shopping First 2 contracts Direct contracting All 3. Consultants Firms >loo QCBS All e or =lo0 QCBS, LCS, and None (Post review) Consultants’ Qualifications

Individuals >50 See section V of All (TOR. contract,.I CV) I Guidelines I e50 I See section v of I Review of TOR only I Guidelines

74 First Year Plan: Some Main Tasks

Component 1: Strengthening the management capacity ofjudicial institutions. Specific Object: Support technical capabilities for improved functioning of judicial institutions. Activities: 0 Selection of specialists, advisors and administrators in different areas of the modernization team in the Ministry of Justice: coordination, administration, procurement, financial management, social communication, monitoring and evaluation, institutional development, technology. Also, provision of training, ICT, others equipment, transport and physical space. 0 Carry out knowledge sharing and exchange of good practices through technical visits to local and international locations, video conferences, seminars, and workshops with judges, staff, lawyers, and other stakeholders in the system and users.

Component 2: Upgrading court facilities. Specific Object: Develop physical infrastructure of courts. Activities: 0 Design of prototype architectural models to respond to modernization needs (such as organization, technology, user accessibility, training, image, dignity, operation and maintenance, and ancillary legal and judicial services) and development of a strategic infrastructure plan for the medium and long term, to help prioritize and sequence investment in cities, regions and Nakchavan Autonomous Region. 0 Design and provision of physical facilities for the training center, including space for key management staff, seminar rooms, visiting faculty, three information technology training rooms, one video conference center, one library center, in-house publishing center, one moot court center, data center, and conference facility.

Specific Object: Introduce technologies in the operation of courts. Activities: 0 Preparation of an ICT master plan for courts, Supreme Court and Constitutional Court including design of the technology platform, networks and communication system (LAN, WAN). Start of training in use of ICT.

Component 3: Human Capital - Strengthening professionalism of judges and staff. Specific Object: Institutionalization of training capacity Activities: 0 Development of organization and structure of a modern training center, and the selection and appointment of key management staff and their training in local and international training systems. 0 Development of training programs and materials with the participation of technical working groups (including groups established for the COE programs).

Specific Object: Develop professional skills and capabilities of new and senior judges, staff and legal professionals. Activities: 0 Implementation of training programs for new judges and candidates, especially in topics such as organization and administration, technical language and drafting judgments, judicial ethics, enabling legislation and key international legal instruments, rights and obligations, 75 public administration, and national regulations, practical implementation of national legislation, information technology skills, moot court exercises, and others.

Component 4: Improving citizen information including strengthening of registries and notaries Specific Object: Develop mechanisms and opportunities for the provision of legal and judicial information to the population and target groups for responding to supply and demand of services. Activities: 0 Development of strategy and identification of information needs of target groups (such as IDPs, women, minors, low-income families, communities, small businesses, and general public) through participatory consultations and surveys.

Specific Object: Upgrade the functioning of registries and notaries. Activities: 0 Review and adjust the information collection, cataloging and archival services in Baku, MOJ central office and in all the regional offices. 0 Review and update the organization and functioning of notaries, including automation.

76 Annex 9: Economic and Financial Analysis AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

The benefits from improvements in judicial performance will be both economic and social. Implementation of the project is expected to increase the capacity and efficiency of the judiciary. It is difficult to precisely quantify the social and economic benefits of an improved justice system but a review of available data suggests that they would be significant.

The project will support a number of measures to increase the efficiency of the court system, Specifically it will support improved functioning of judicial institutions by strengthening the management capacity of the Ministry of Justice and the Legal-Judicial Council; upgrading court facilities, including rehabilitation and construction and provision of technology and equipment; strengthening the professionalism of judges and justice sector staff, including provision of training and upgrading of training facilities; improving access to information, including the strengthening of registries. The project will also contribute to a more efficient use of public resources allocated for the judicial system, which although currently the lowest in the region are expected to increase as a result of the authorities’ support for the Judiciary’s Modernization Program.

The one area which will require direct budget financing (recurrent costs) to ensure sustainability is the operational maintenance of ICT. The MOJ has agreed to cover these expenditures through its budget allocation.

77 Annex 10: Safeguard Policy Issues AZERBAIJAN JUDICIAL MODERNIZATIONPROJECT

1. 1. Involuntary Resettlement (World Bank OP 4.12): The construction activities undertaken under this project will not entail any land acquisition, relocation of population, or restrictions on access to resources. Technical assistance wil be provided during the development of the infrastructure Master Plan to ensure that measures to address the issue of involuntary resettlement are incorporated into the planning and design of future construction activities.

2. 2. International Waterways (World Bank OP 7.50): The project will not trigger OP 7.50 as it involves rehabilitation or replacement of courthouses, and will not increase water abstraction from, nor waste water discharges to, transboundary waterways as defined by OP 7.50.

Environmental Assessment (World Bank OP 4.01): The project triggers environmental operational policy 4.01 and has been assigned environmental category B, as the impacts under Component 11, Upgrading Court Facilities, are site-specific, reversible, limited in duration, and readily addressed by mitigatory measures. The other project components have no environmental impact. The following measures have been or will be taken to mitigate possible problems:

{a) The studies or assessments that have been, or are proposed to be, carried out to help identifi, minimize and address safeg~ards-rela~edimpacts. The organizations that prepared and will prepare the studies should be listed. The selection of specific courthouses and other buildings for rehabilitation or replacement will be made on the basis of the infrastructure Master Plan to be prepared by the Ministry of Justice during the first year of the project. The Master Plan will include consideration of cultural heritage value of the buildings selected for rehabilitation or reconstruction, and will take social, cultural and historical values into account in the design of construction or rehabilitation works. The rehabilitation or construction works contracts will include provisions to identify, minimize and address negative environmental impacts during rehabilitation or reconstruction of the courthouses. The works contracts will be supervised by the facilities manager of the Ministry of Justice Judicial Modernization Team. The environmental section of the Project Operations Manual constitutes the project Environmental Management Plan (EMP), with details regarding the specific measures and sample forms, checklists and contract formats

(b) Any safeguards-related risks, perceived or substantive, and measures taken or proposed to be taken to address the risks. The project is not expected to have any significant or irreversible environmental impacts, and is classified as Environmental Category "B". The minor impacts associated with construction or rehabilitation will be addressed by the works contractors under the terms of their contracts.

(c) The alternatives considered to minimize adverse safeguards-related impacts of the proposed project. Alternatives to specific construction or rehabilitation impact mitigation measures will be considered and assessed during preparation of the terms of reference for the works contracts for each building or group of buildings, as per guidelines provided in the OM,

78 (d) Consultations with, and participation o$ various afected groups and other stakeholders in the project preparation process, and a description of how the results of these co~sultatio~sare reflected in project design and im~~ementation. Preparation of the Judicial Modernization Project has included participatory assessments of current conditions and needs among actors and users of the justice system. Discussions with judges, support staff and bailiffs have been held in courts in Baku, Sumqayit, Davachi, Gusar and Barda. Project preparation has also benefited from preliminary consultations with community associations in Saatly, Yevlakh and Barda and with NGOs working in the sector. A summary of the main findings of the community consultations is provided below.

The communities were identified in collaboration with the Rural Investment Project (AzRIP) which has successfully mobilized a number of rural communities to identify local development needs, set priorities and begin implementation of targeted development programs. The communities consulted ranged from having very limited experience to having some capacity based on training workshops and program implementation. The groups consulted included women, ethnic minorities and IDPs, and individuals with a variety of occupations and educational levels, within a range of very low to medium incomes.

The communities were informed about the goals of the proposed Judicial Modernization Project and the key activities to be supported under the four components of the Project. Discussion then covered i)General needs and priorities identified by the communities for improving local resources and quality of life; ii) Legal Protection: community experiences with dispute resolution through both formal and informal mechanisms; iii) Legal Information: the specific needs of the communities in terms of access to information about legal rights, judicial services and how to pursue legal remedies; and iii) Accountability and Enforcement: community experiences with the effectiveness of available dispute resolution channels and other legal remedies. Descriptions of the communities and findings of the consultations are summarized below.

e Shirinbey Community Association, Saatly. 14 participants (10 men, 4 women), elected by the community. With a population of 4,100, Shirinbey is largely composed of the minority Meskhetian Turk ethnicity. Located 30 km from the nearest courthouse or lawyer’s office. e Karvan Regional Handicraft Association, IDP Settlement Camp #1, Saatly. 12 participants (12 women). The Association provides income generating opportunities for women across 6 rayons, including the regions most affected by the conflict with Armenia. The women consulted at this location have been living at the camp in a semi-permanent state with about 50 other family groups for 12 years since the end of the conflict. e Salahle Community Association, Yevlakh. 16 participants (3 women, 13 men), elected by the community. A 3,000-member community largely composed of majority ethnic Azeri inhabitants, of which approximately ten percent are IDPs.

Visits were made to two community information centers, one administered by the Ministry of Justice in Barda, the other by an NGO in Saatly, to gauge the access to, uses of, and needs for legal and judicial information among local communities. Visits were 79 also made to two NGO's working in the sector: The Public Association on Human Rights Education and the Independent Law Center, to assess activity and needs in the sector.

The consultations found that a profound lack of awareness and information about legal rights and mechanisms for dispute resolution has resulted in a perception of the judicial system as remote and inaccessible. Participants reported resorting to petitioning local officials (police, ~aZZu~~yuhead, Excom) and even the President's office to mediate or resolve disputes. In rural areas this includes respected members of the community such as village elders (aksakal), heads of kin, teachers, etc.

Participants identified the need for information about how to take a claim to court, obtain the services of a lawyer, and the associated costs. In most cases the community's distance from the nearest courthouse or law office adds an additional obstacle that significantly discourages individuals from seeking legal protections. Particular needs were identified in relation to labor rights (protection or redress from unfair dismissal, for e.g.), family law (child support and maintenance payments for e.g), land registration, contract law (for e.g. to assist the communities in implementing their development projects), women's' rights, entitlement to pensions, social support services, etc., and improving notary services (or providing them where none exist). There was a strong feeling that the interests of small businesses and farmers were at a great disadvantage due to the lack of awareness about how to protect their rights.

Participants expressed awareness that there has been substantial change in laws and governance during the transition since independence, and frustration about the limited knowledge that they have about new laws and rights, or the functioning of the courts under the new system. A certain nostalgia for the tutelary assistance provided by the courts under the soviet regime was expressed, and a desire for the opportunity to gain legal advice and information presently lacking under the current system. All expressed the wish for a court facility and legal information center to be located within reach of their community.

Given the traditional role played by community leaders in dispute resolution, mediation is by default the most effective mode for dispute resolution at present. However the mediation service provided is often informal and its quality highly uneven. For example women have limited access to existing mediation services (which tend to be dominated by men), and vulnerable groups (e.g. IDPs) are often dissuaded from making claims against local influential persons. Participants suggested that training in mediation for community leaders, in addition to providing information for all about legal rights could bring substantial benefits to the community by strengthening existing dispute resolution channels.

Based on these initial findings and the analysis provided by studies and reports by CoE, ABNCEELI, USAID, CEPEJ, and BEEPS, the Project will support the development of a Citizen Information Strategy and the design and implementation of a Citizen Information Program. A participatory needs assessment will be carried out during the first six months of the project to identify the legal and judicial information needs of the population, including the specific needs of target and vulnerable groups (e.g. IDPs, women, low income families, youth, small businesses and farmers, etc.) to address current information

80 and access gaps. Participatory consultations will be carried out during the life of the Project to monitor results of project activities and make adjustments where needed.

(e) The safeguards-related impacts identified, including a description of any long term andor cumulative impacts ofthe proposed project and related developments in the area. No long-term or cumulative negative environmental impacts are anticipated. Impacts are limited to noise, dust, traffic disruptions, protection of amenities, and proper disposal of wastes arising from site clearing, construction or rehabilitation of courthouses. (If) The plan(s) to avoid, minimize and mitigate the potential adverse impacts, prepared in accordance with the provisions of the respective safeguard policies triggered. The OM section dealing with environmental management includes a framework for assessing and mitigating the minor impacts expected to occur during building rehabilitation or construction.

(8) The assessment of the capacity and comm~tmentof the institutions responsible for implementing and monitoring the agreed plans. Description of proposals, if any, to build the capacity of institutions involved in i~plementationand monitoring of the plans. The Ministry of Justice Judicial Modernization Team is responsible for overall project implementation and monitoring. The Team Facilities Manager is responsible for preparing terms of reference to manage impacts as part of the works contracts awarded by MOJ to contractors. Capacity of the Facilities Manager and Procurement Officer has been assessed during project preparation and found to be adequate for current needs but in need of additional support for scope of project implementation and for IDA procedures through training and specialized technical assistance. (h) Arrangements forfinding and a schedule of implementation of the plans. Environmental management will be provided by MOJ Team through its staff, funded by the IDA credit over the life of the project. Implementation of specific mitigation measures at the works contract level will be funded as part of works contract and implemented by the firm selected to perform the works. (i) References to the mitigation plan in the project legal agreement, including appropriate covenants and conditionalities. MOJ shall implement the project consistent with the OM. No specific environmental covenants or conditionalities are needed.

(j) ~echanismsto monitor the implementation of the agreed plans. Environmental monitoring is to be done by MOJ Judicial Modernization Team as part of regular project implementation monitoring. (k) Arrangements, including stafing and resources, for supervising the imple~entationof the agreed plans. The IDA supervision team will include an environmental specialist to supervise implementation of environmental management under the project. The environmental staff will be drawn from other project teams working in Azerbaijan, andor the Country Office local environmental specialist staff. Resources are budgeted at one staff/week per year.

81 Annex 11: Project Preparation and Supervision AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

Planned Actual PCN review Prep. Started 9105 PCN 113012006 113012006 Initial PID to PIC PCN 113012006 113012006 Initial ISDS to PIC 113012006 113012006 Appraisal April 19 2006 511 1- 15,2006 Negotiations May 15,2006 BoardlRVP approval June 29,2006 Planned date of effectiveness December 3 1,2006 Planned date of mid-term review Planned closing date December 3 1,2011

Key institutions responsible for preparation of the project:

Ministry of Justice through the Judicial Modernization Team (JMT), recently created under MOJ Decree Feb 2006 in consultation with the Judicial-Legal Council, the Supreme Court and the Constitutional Court.

Guided and prepared by including:

Artur Rasi-zade, Prime Minister of Azerbaijan Samir Sharifov, Minister of Finance Heydar Babayev, Minister of Economic Development Elman Rustamov, Chairman of the National Bank of Azerbaijan

Ministry of Justice: Fikrat Mammedov, Minister of Justice; Togrul Musayev, Deputy Minister of Justice, Leader of Modernization Team; Azer Jafarov, Deputy Leader Modernization Team and Director, Organization and Analysis Department; Aslan Muradov, Director, Financial Affairs Department; Adil Aliyev, Deputy Director, Legislation and Legal Information Department; Chingiz Mammedov, Deputy Director, Financial Affairs Department; Jahangir Alizade, Deputy Director, Population State Registry Service; Ramin Gurbanov, Senior Advisor, Organization and Analysis Department; Hassan Baghirov, Leading Adviser, International Legal Cooperation Department; Sevda Eyvazova, Senior Advisor, Financial Affairs Department; Gunel Nagiyeva, Leading Adviser, Organization and Analysis Department; Islam Teymurov, Legal Information Counselor for Barda, Tartar, Yevlakh, and Agdam rayons; Ramin Guliyev; Elchin Gasimov

Ilgar Mammadov, Chief, Department of the Notary and the Civil Status Act; Aga Kerim Samed-Zade, Senior Advisor, Department of the Notary and the Civil Status Act; Fazil Mammadov, Chief, Legal Entities Registration Department, Ministry of Justice; Subhi A. Kazimov, Deputy Head of the State Registration of the Legal Entities Department; Nasimi Guliyev, Director, Baku Registration of the Legal Entities Office; Mahmud Yusif Nabiyev, Chairman, Grave Crimes Court; Hasan Aliyev, Chairman, District Court of Binaqadi; Movsumov Anar, Senior Adviser of the District Court of Binaqadi; Alexander Sidorov,Adviser of Nizami District Court; Arzu Abdulgasanov, Chairman of Sabunchu District Court; Tagiev Ali, Chief Judge Yevlax District Court; Zoya Aliyeva, Judge of the District Court of Binaqadi; Mansuma Huseynova, Construction Engineer; Tamara Novruzova, Economist, Kara Karayev, ConstructionlSite manager of Nizami District Court

Office of the President of the Republic of Azerbaijan: Fuad M. Aleskerov, Director, Department of Coordination of Law Enforcement Agencies (LEA); Otari Gvaladze, Senior Adviser, Department of Coordination LEA

The Supreme Court of Justice: Ramiz Y. Rzayev, President of the Supreme Court; Mirzayev Hikmat Abbas oglu, Vice President of the Supreme Court of Justice; Aslan Kalbaliyev, Justice of the Supreme Court; Rashad Guliyev,

82 Advisor, Supreme Court of Justice; Ali-isa Dadashov, Senior Advisor, Supreme Court of Justice; Ibrahimova Hynuz, Accountant, Supreme Court of Justice; Vugar Hasanov, Architect far the Supreme Court, Xazar Architects

Constitutional Court: Farhad Abdoullayev, President of the Court; and his team including Raouf Guliyev, Head International Department

Cabinet of Ministers: Nail Fataliyev, Deputy Head, Economic and Finance-Credit Policy Department; Mrs. Rugayat EFCP Dept.

Ministry of Finance: Ilgar Fatizadeh, First Deputy Minister, Ministry of Finance; Mardan Mardanov, Head, Foreign Economic Relations Department, Ministry of Finance; Fazil Abdullayev, Deputy Head, Economic Relations Department, Ministry of Finance and Ilham Karimov Economic Relations Department, Ministry of Finance

Consulted: Ministry of Communications and Information Technology: Jamil Ismayilov, Project Manager, National E-Governance Network Initiative Project, Ministry of Communications and Information Technology

Consulted: State Agency on Agricultural Credits under the Ministry of AgricultureNorld Bank Rural Investment Project (AZRIP): Subhan Asgerov, Project Director, Azerbaijan Rural Investment Project, AZRIP; Gulbaniz Ganbarova, Project Manager, AZRIP; Atabala Hassanov, Director, AZRIP Nugan Salyan Regional Operations Office; Solmaz Huseynova, Procurement Specialist, Agricultural Development and Credit Project; Aybeniz Hajiyeva-Iskenderova, Procurement Specialist, AZRIP; Farida Eminova, Community Development Consultant, AZRIP; Anar Guliyev, Monitoring and Evaluation Specialist, Agricultural Development and Credit Project

Consulted: State Committee for Management of State Property: Ilgar Habiyev, Senior Consultant, State Committee for Management of State Property; Yashar Niftiyev, Chief Consultant, Information Technology, Analysis and Information Dept.

IDA: Donna Dowsett-Coirolo, Country Director; Cheryl Gray, Sector Director; Deborah Wetzel, Sector Manager; Amitabha Mukherjee, Acting SM, ECSPE; Christian Petersen, Lead Economist, ECSPE; Christos Kostopoulos, Senior Economist, ECSPE; Maninder Gill, Sector Manager, Social Development, ECSSD; Robert Buergenthal, Senior Counsel, LEGJR; Junk0 Funahashi, Sr. Counsel, LEGEC; Andrina Ambrose, Finance Officer, LOAGl; Anthony Cholst, Lead Country Officer, ECCU3; Shahridan Faiez, Senior Social Development Specialist, ECSSD; Amy Evans, Consultant, ECSSD; Ida Njeri Muhoho, Sr. FM Specialist, ECSPS; Saida Bagirli, Sr. Operations Officer, ECCBU; Gurcharan Singh, Sr. Procurement Specialist, ECSPS; Camille Nuamah, Senior Economist, ECSPE; Klaus Decker, Counsel, LEGJR; Manilena Payos, Resource Management Officer, ECACA, Enver Kamal, TF Coordinator, ECACA, Wahida Huq, Sr. Operations Officer, TFO; Alison Tregea, Resource Management Analyst, ECACA, Lea M. D'Almeida-Senou, Program Assistant, ECCU3; Nigar Farhad Aliyeva, Program Assistant, ECCAZ; Vusala Asadova, Team Assistant, ECCAZ; Mala Johnson, Program Assistant, ECSPE; Sandra Craig; Program Assistant, ECSPE; Zaur Rzayev, Social Communications and Translator, ECCBU; Jamila R. Jabbarli, Adm. Temporary, ECCAZ; Maria Novoa, Consultant, LCSPS, LCSPS; Gerald Thacker, Consultant, EASPR; Alexandra Habershon, Consultant, LCSPS; Nina Ohman, ET Consultant; Takao Hasuike, Consultant; Hikaru Kitai, Consultant; others and Waleed Malik, Lead Public Sector Management Specialist and TTL.

Peer reviewers: Richard Messick (PRMPS), Anthony Toft (LEGEA), Jean Claus and Alessandro Mancini (Council of Europe); Lynn Zferrazza (ABA-CEELI); Frances Zemans (Prof. Chicago).

IFC: Aliya Azimova, Country Officer, CSEAZ; Charles Canfield, Project Manager, CEUTE.

IMF: Aggun Qadirli, Office Manager, Leyla Abbasova, Resident Representative Office

Council of Europe: Jean Claus, Administrator, Directorate General of Legal Affairs, Alessandro Mancini, Directorate General of Legal Affairs; Mats Lindberg, Special Representative, Council of Europe in Azerbaijan

ABAICEELI: Lynn Sferrazza, Country Director and Ann Furr ABNCEELI office, Azerbaijan; Robert Levanthal, Julie Garuccio, Washington Headquarters.

OSCE: Andreas Busch, Human Dimension Officer Baku Office.

83 EC TACIS: Marco Corsi, Team Leader European Commission TACIS Project, Support to the Bailiffs and Ushers Service, Ministry of Justice; Lothar M. Hahn, Chairman, Center for Public Reform, University of Innsbruck

USAID: Livia Mimica, Democracy and Governance Advisor, USAID; Natalija S. Djurickovich, Senior Rule of Law Advisor, Europe and Eurasia, USAID, Washington; Angana R. Shah, Democracy and Governance Fellow

US Embassy Baku: David McCormick, Economic Officer; Paul Narain Senior Advisor, Law Programs.

GTZ: Thomas Hermann Advisor.

Japanese Embassy: Mitsuhiro Kohno, First Secretary, Embassy of Japan, Baku; Kenichi Osugi, Japan’s JICA Aid Coordination Advisor

Private Information Centers: Tofig A. Babayev, Director, Baku Scientific and Training Center, BSTC, Baku; Alimusa Aliyev, Director, “Taraggi“ Development Resource Center, Saatly

Independent Law Center: Aydin Kerirnov, Director,

Public Association on Human Rights Education: Irada Javadova, Director

Rural Community Leaders: Rustam Khalilov, Community Leader, Shirinbey County, Saatly; Zakir Hasanov, Municipal Leader, Shirinbey County, Saatly Suleyman Shadmanov, Executive Committee representative, Shirinbey County, Saatly ;Gulshan Aliyeva, President, “Karvan” Regional Handicraft Association, Fizuli and Saatly

Others: Ilaha Abbasova, Private Legal Consultant, Laura Fuesers, GTZ, TiblisilBaku Office; Volodymyr Chaykovskyy, Country Manager, Microsoft Azerbaijan

84 Annex 12: Documents in the Project File AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

A. Project Implementation Plan

MOJ - Judicial Modernization Plan, Costs and Implementation Sequence Project Document: (Development Objective, Components, Context) February 2006 CEPEJ - (by COE and MOJ) Azerbaijan Assessment in European Judicial Systems 2002, European Commission of the EfJiciency of Justice, Council of Europe Publishing, 2002 Azerbaijan Judicial Assessment MOJ

B. Bank Staff Assessments, Reviews and Other Reports and Materials include: e Financial Management - Ida Njeri Muhoho, WB e Procurement - Gurcharan Singh WB e Environmental Issues (including IS) - Shahridan Faez, Amy Evans, AIexandra Habershon, WB e Stakeholder Issues - Shahridan Faez, Amy Evans, Alexandra Habershon, Saida Bagirli WB e Judicial Sector and other Related Background Information- Robert Buergenthal, WB Judicial Sector and other Related Background Information- Waleed Malik, WB e Institutional Arrangements and ST, MT, LT Program Costs - Maria Novoa, WB e Physical Infrastructure and ICT Needs - Gerald Thacker, Hikaru Kitai, Takao HasuikeWB Country Partnership Strategy draft (CPS) e Judicial Systems in Transition Economies, James Anderson, David Bernstein, Cheryl Gray, WB e European Judicial Systems 2002, European Commission of the ESficiency of Justice, Council of Europe Publishing, 2002 Azerbaijan Judicial Assessment Azer Jafarov MOJ e Building Competitiveness An Integrated Non-Oil Trade and Investment Strategy Nov 20,2003 WB e Public Expenditure Review Christian Petersen, WB Poverty Reduction Strategy Paper, WB e Azerbaijan Country Brief 2006, WB e Country Report, European Neighborhood Policy - Commission Of The European Communities Anticorruption in Transition 2: Corruption in Enterprise State Interactions in Europe and Central Asia. 1999-2002. Cheryl Gray, Joel Hellman and Randi Ryterman, WB From Plan to Market (World Development Report, 1996), WB e Building Institutions for Markets (World Development Report, 2002), WB Economic Growth in the 1990s: Learning from a Decade of Reform (1994), WB Doing Business, 2005, Legal Empowerment of the Poor: An Action Agenda for the World Bank, 2005, WB e Azerbaijan Poverty Assessment, World Bank 2003 e Creating a Poverty Map for Azerbaijan -Jane Fakingham, Angela Baschieri, WB e State Statistical Committee of the Republic of Azerbaijan. Statistical Yearbook 2004 e EBRD-World Bank Business Environment and Enterprise Performance Survey 2002-2005. e Legal and institutionalFrameworks for Fighting Corruption, Istanbul Anti-CorruptionAction Plan, 2004 - OECD Legal Assessment: Azerbaijan, June 2000 - Dumas, Claudia, Beth Jones, Robert LaMont and Ketti Kvartskhava e State Anti-CorruptionCommission, Action Plan for 2005 - Republic of Azerbaijan e Judicial and Legal Systems in the Republic of Azerbaijan, A preliminary Analysis, Markus B. Zimer - ABAICEELI, September 2002 ABA-CEELI Progress Report e COE Reports e USAID Reports (including anti-corruption reports) e FIAS Reports IFC Corporate Governance Reports Doing business in Azerbaijan, March 2004 -Baker and McKenzie e Commercial Legal and Institutional Reform Assessment for Europe and Eurasia: Diagnostic Assessment Report for the Republic of Azerbaijan (draft), Allen Hamilton - Prepared for USAID Azerbaijan, August 2002 e CM Documents, 911 Meeting, January, 2005,2.4 Monitoring Group[GT-SUIVI-AGO],5'h Progress Report, Section II,C,47 and Section II1,63, I1- Counsel of Europe Glossary of International Anti-CorruptionStandards with Examples of National Legal Practice (draft), Gemma Aiolfi and Zora Ledergerber - Base1 Institute on Governance, prepared for the Anti-CorruptionNetwork for Transition Economies 6" General meeting, May 2005, Istanbul, Turkey Azeri Women in Transition: Women in Soviet and post-Soviet Azerbaijan. Farideh Heyat, Routledge, 2002.

85 0 Transparency International Corruption Perception Index 2004 - Azerbaijan. 0 Azerbaijin Legal Database Project, Fourth Quarterly Report April -June 2005, submitted for USAID, July 15 2005, Charles Shapiro - National Center for State Courts 0 Country Strategy Paper 2002-2006, European Commission 0 Corporate and Public Sector Accountability Project, WB 0 Decree of the President of Azerbaijan N352, “On Modernizationof the court system in the Republic of Azerbaijan and implementation of the Law of the Republic of Azerbaijan, ‘On amendments to some legal acts of the Republic of Azerbaijan”’, Janua~y19,2006 0 Judicial Legal Council Act, Baku 2005, Art: 12.0.20-23. The Politics of Judicial Reform in Eastern Europe, P. Magalhaes, Comparative Politics, Vol. 32, No.1 (Oct 1999) pp. 43-62. Human Capital Investments and Productivity, S. Black and L. Lynch, The American Economic Review, Vol86, No. 2 Papers and Proceedings of the Hundredth and Eight Annual Meeting of the American Economic Association San Francisco, CA, January 5-7, 1996. (May 1996), pp. 263-267 Judicial Training and Justice Reform, L. Hammergren, 1998 Other studies: information technology needs, workshop reports, technical visit reports, seminar materials. Bibliography of several articles, sector reports, Internet sources and other materials Electronic IRIS files, audiovisual materials, photos and other documents.

86 Annex 13: Statement of Loans and Credits AZERBAIJAN JUDICIAL MODERNIZATION PROJECT Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Fm.Rev’d PO94488 2006 HWY 2 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0.00 PO89751 2005 IDP ECON DEVT SUPPORT 0.00 11.50 0.00 0.00 0.00 10.24 1.54 0.00 PO83341 2005 POWER TRANSMISSION 48.00 0.00 0.00 0.00 0.00 48.00 0.33 0.00 PO81616 2005 FIN SERVS DEVT 0.00 12.25 0.00 0.00 0.00 11.75 -0.03 0.00 PO74938 2005 PRSC 0.00 20.00 0.00 0.00 0.00 18.92 0.00 0.00 PO66199 2005 RURAL ENVIRONMENT 0.00 8.00 0.00 0.00 0.00 7.13 0.21 0.00 w49892 2004 PENSION & SOC ASST 0.00 10.00 0.00 0.00 0.00 9.09 4.23 0.34 PO76234 2004 RURAL INVSMT (AZRIP) 0.00 15.00 0.00 0.00 0.00 13.27 0.87 0.0d PO08286 2003 IRRIG DIST SYS & MGMT IMPROVMT 0.00 35.00 0.00 0.00 0.00 35.05 5.75 0.00 PO70989 2003 ED SECT DEV (APL #I) 0.00 18.00 0.00 0.00 0.00 15.74 7.48 0.00 PO66100 2002 IBTA 2 0.00 9.45 0.00 0.00 0.00 6.11 0.95 0.00 PO70973 2001 FIN SECT TA 0.00 5.40 0.00 0.00 0.00 0.93 0.07 0.00 PO69293 2001 HEALTH REF LIL 0.00 5 .OO 0.00 0.00 0.00 0.83 0.20 0.20 PO40716 2001 HIGHWAY 0.00 40.00 0.00 0.00 0.00 20.30 14.59 -3.87 PO08284 2000 IRRIGlDRAINAGE REHAB 0.00 42.00 0.00 0.00 0.00 12.44 8.63 0.00 PO58969 1999 CULT HERITAGE PRSV 0.00 7.50 0.00 0.00 0.00 1.45 1.12 1.12 PO35813 1999 AGRIC DEVT & CREDIT 0.00 30.00 0.00 0.00 0.00 1.30 0.15 0.19 Totaf: 248.00 269.10 0.00 0.00 0.00 413.15 46.09 - 2.02

STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2004 Amerada Hess ... 1.68 0.00 0.00 1.68 1.68 0.00 0.00 1.68 1998 Azerb. JV Bank 0.00 1.oo 0.00 0.00 0.00 1.oo 0.00 0.00 2004 Azerb. JV Bank 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00 2003 Azerigazbank 1.oo 0.00 0.00 0.00 1 .00 0.00 0.00 0.00 2004 BP Corp NA 10.00 0.00 0.00 10.00 10.00 0.00 0.00 10.00 1999 Baku Hotel 2.92 0.00 0.00 0.00 2.92 0.00 0.00 0.00 2002 MFB Azerbaijan 0.00 1.60 0.00 0.00 0.00 1.60 0.00 0.00 2006 MFB Azerbaijan 3.00 0.00 0.00 0.00 3.00 0.00 0.00 0.00 2003 Rabitabank 1.oo 0.00 0.00 0.00 1.OO 0.00 0.00 0.00 2004 Statoil 8.75 0.00 0.00 8.75 2.50 0.00 0.00 2.50 UniBank 5 .OO 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 33.35 3.00 0.00 20.43 22.10 3.00 0.00 14.18

Approvals Pending Commitment

Fy Approval Company Loan Equity Quasi Partic. 2001 Azer JV Increase 0.00 0.00 0.00 0.00 Total pending commitment: 0.00 0.00 0.00 0.00

87 Annex 14: Country at a Glance AZERBAIJAN JUDICIAL MODERNIZATION PROJECT Europe & Lower- POVERTY andSOCiAL Central middle- Development diamond' Azerbailan Aaia income 2004 Population,mid-year (millions) 8.3 472 2,430 GNI percapita (Aflas mahod, US$) 950 3m 1580 GNi (Atlas method, US$ billbnS) 7.8 1553 3,M7 Average annual growth, 1998-04 Population I%) 0.8 -0.1 10 Labor force (%) 22 -0.5 0.7 GNI Gross per primary Most recent eatimate (later1 year available, l998-04) capita nrollrnent Poverty (%of populafion bslownafionalpoverlyline) 49 Urban population (%of total population) 50 M 49 Life ewtancyat birth (pars) €6 88 70 infant mortality(per l~livebirl~) 75 29 33 Childmalnutrition (%ofchlld~nu~r5) 7 11 Access lo improvedroratersource Access to an improved water source (%O~populafion~ 77 91 81 Literacy(%ofpqxdatlonage E+ 99 97 90 Gross primary enrollment (%of school-agepopulafion) 92 x11 114 -Azerbaijan Male 94 103 115 Lo wr-middle-incomegroup Female 91 x11 ra

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economlc ratlor' GDP (US$ billions) .. 3.3 7.3 8.5 Gross capital IormationlGDP .. 5.3 532 54.5 Eqmrts of goods and ServiceslGDP .. 88.7 42.1 49.7 Trade Gross domestic savingslGDP -11 29.7 30.1 Gross national savingslGDP .. 5.0 25.4 24.1 Cumnt account balme/GDP -3.7 -27.7 -30.3 .. Domestic Capital Interest paynentslGDP .. 0.0 0.4 0.2 savings formation Total debVGDP .. 3.4 24.5 24.2 Total debt service/epxts .. 0.0 6.7 52 Present value of debtlGDP 8.6 8.4 Present value of debtlevrts 415 37.1 indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual gro wth) GDP .. 7.7 112 102 20.0 -Azerbaijan 6.7 x1.4 GDP percapita .. 9.8 19.1 Lo wr-middle-incomeamuD Eports of goods and services .. 20.8 0.9 x1.7 27.8 I

STRUCTURE of the ECONOMY 1984 1994 2003 2004 Growth of capital and GDP (%) (%of GDP) KUlT Agriculture .. 33.0 a.5 e.3 industry .. 28.2 52.6 55.4 Manufacturing .. e.9 9.4 9.2 Services .. 38.8 34.0 323 I 99 W 01 02 03 04 Household final consumption eqenditure .. 77.6 58.0 582 -Ea General gov't final consumption eqenditure .. 23.5 P.4 116 Imports of goods andservices .. 65.1 65.6 74.0

1984-94 1994-04 2003 2004 Growth of exports and imports (%) (average annualgroMh) Agriculture __ 52 5.6 4.6 =OT Industry .. 9.5 12.1 P.6 Manufacturing _. -0.4 14.0 x1.5 Services .. 7.1 9.5 8.7 Household final consumptionexpenddUre .. 112 7.3 lt6 General gov't final consumption eqenditure .. 2.5 2.5 0.4

Gross capital formation r. 30.3 75.1 5.9 I -EXrJorls -1nDorts imports of goods andservices .. 16.5 39.4 23.3 I

Note:ilW data are preliminaryestimates. 'Thediamonds showfourkeyindicatominthecountry(in bold)comparedwithits income-groupaverage.II dataaremissing.thediamond~l1 be incomplete.

88 Azerbaijan

PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Inflation (%) Domestic prlces t (56 change) Consumer prices 4664.0 2.2 6.7 Implicit GDP deflator 4385.2 6.0 6.4 Government finance (%of GDP, includes Cumnt gn3nfS) Current revenue 33.8 26.6 27.3 Current budget balance -113 4.3 5.1 -GDPdeflafor -CPI Overall surplusldeficit -E1 -12 0.8

TRADE 1984 1994 2003 2004 Export and import levels (US$ mlll.) (US$ mi//ions)

Totalexports (fob) 682 2,625 3,743 60W T Crudeoii 1836 2,382 Petroleum products 208 402 703 Manulactures 376 279 531 Total imports (cif) 845 2,723 3,581 Food 205 281 378 Fuel and energy 259 1.m 1624 Capital goods 102 684 1074 M1 88 W 01 M 03 04 Export price index (ZOOO=ZW) 147 95 P3 Import price index(ZOOO=ZW) 110 110 im Exports Ciimports Terms of trade (ZCOckDO) t34 86 04

BALANCE of PAYMENTS 1484 1994 2003 2004 Current account balance to GDP (%) (US$ mi//ions) Exports of goods and services 819 3,061 4235 Imports of goods andsewices 1,015 4,772 6.3'0 Resourcebalance -196 -1711 -2,076 Net income -3 -442 -703 Net current transfers 75 t34 82 Current account balance -P3 -2,019 -2,587 Financing items (net) 44 2256 3,071 Changes in net reserves 79 -237 -484 Memo: Reserves includinggold (US$ millh7S) 2 803 IO75 Conversion rate (DEC, /ocaYUS$) 565.3 4,9112 4,9P.8

EXTERNAL DEBT and RESOURCE FLOWS 1484 1994 2003 2004 :omposition of 2004 debt (USS mill.) (US$ millions) Total debt outstandingand disbursed m 1781 2,061 IBRD 0 0 0 G: 213 IDA 0 422 493 Total debt sewice 0 28 232 IBRD 0 0 0 IDA 0 3 4 Composiiionof net resourceflows Official grants 144 57 57 Officialcreditors 67 149 65 Private creditors 0 -26 ll7 Foreigndirect investment (net inflows) 22 2,353 2,351 Portfolio equity(net inflows) 0 0 World Bank program Commitments 0 66 25 4. IBRD E- Bilaerd Disbursements 0 75 49 3 - IDA D -Other multilsimal F - Private Principalrepayments 0 0 0 :-IMF G ~ Short-term Net flows 0 75 49 Interest payments 0 3 4 Net iransiers 0 72 45

Development Economics 9116105

89 Annex 15: Stakeholder Issues and Social Analysis AZERBAIJAN JUDICIAL MODERNIZATION PROJECT

This Annex provides an overview of the issues faced by the stakeholders of the justice system relating to access to judicial services and information based on the findings of the preliminary assessment and stakeholder consultations for the Judicial Modernization project.

Preparation of the Judicial Modernization Project has benefited from participatory consultations and assessments of current conditions and needs among actors and users of the justice system. Discussions with judges, administrators, support staff and bailiffs have been held in courts in Baku, Sumqayit, Davachi, Gusar and Barda, and in the Legal Entities Registry offices in Baku. Project preparation has also benefited from preliminary consultations with community associations in Saatly, Yevlakh and Barda, as well as visits to information centers and NGOs working in the sector.” A summary of the main findings of these consultations is provided below. Analysis of current conditions has also benefited from studies and reports by ABNCEELI, COE, CEPEJ, BEEPS, OSCE, GTZ, and USAID as well as the consultations for the upcoming Bank CPS and other World Bank reports.”

I.Context and Issues

The current status of judicial services in Azerbaijan is one of low public confidence and low usage. Azerbaijan inherited a portfolio of dilapidated courthouses and inefficient services post independence, and although numerous reforms have since been implemented to bring the system up to date, the impact of these changes from the perspective of the stakeholders of the system remains limited in terms of both the supply and demand of services.

A key problem in this respect is the limited coverage of the court system. The weak delivery of judicial services, which is particularly acute in rural areas, leaves many communities with little or no option to pursue legal remedies or protect their rights through formal channels. The number of first instance courts of general jurisdiction per 1 million inhabitants is 10.2, placing Azerbaijan at the lowest end of the scale for the region which ranges from 10 to 25 courts per million inhabitants. The number of judges per 100,000 inhabitants is 4.06, and there is less than 1 lawyer per 10,000 inhabitants.

Low public confidence in the courts and the judicial system is also due to perceptions of endemic corruption in the public sector. Transparency International’s Corruption Perception Index for 2005 ranks the country 137th place out 158, with a score of 2.2, a small improvement on 1.9 in 2004. Various studies show that public confidence ranks highest in institutions like the mass media and the military, low for the courts and the police, and lowest for political parties and

Consultations with community associations were conducted in collaboration with the IDA Rural Investment Project (AZRIP). Synergies with this project, which has successfully mobilized a large number of rural communities to support the identification of local development needs and priorities and the implementation of targeted development programs, would be supported to enhance participation and impacts of the Judicial Modernization Project. l9 Economic data and social statistics for this annex are from the following sources: World Bank Country Data, studies and reports, Development Gateway Country Data, State Statistical Committee of the Republic of Azerbaijan; Council of Europe “European Neighborhood Policy Country Report: Azerbaijan 2005; CEPEJ, BEEPS, ABNCEELI, USAID. 90 NGOs. A public opinion survey in 2005 found that 50 percent of respondents do not trust local courts (compared to 34 percent who do). Public opinion tends to regard most judges as subject to political or economic influence, otherwise known as “telephone justice.” As a result people resort to petitioning local officials (police, ~uZZu~~yuhead, Excom) and even the President’s office to mediate or resolve disputes. In rural areas this includes respected members of the community such as village elders (u~~u~uZ),heads of kin, teachers, etc.

There is general public awareness of the profound changes that have taken place in governance during the transition since independence, but there is also a deep sense of frustration about the lack of information available, and the limited knowledge that people have about the new laws, or about the functioning of the courts under the new system. As a result, the judiciary is perceived as remote and inaccessible, and misconceptions about the social function of the judicial system persist well over a decade since independence. A small number of pilot legal education initiatives have been undertaken in the last few years, and legal information centers have been established in one region?’ but there is a need for the judiciary to take the lead in adopting a programmatic approach to building awareness and public confidence.

The current situation also compounds the economic exclusion of the rural and urban poor, by denying them the opportunity to protect their rights and interests. A recent World Bank study found, for example, that farmers who, along with other agricultural workers make up 39 percent of the country’s labor force, face particular constraints in developing effective supply chain relationships because of the difficulty to enforce contracts in rural areas. This has contributed to the difficulty of farm households to increase their incomes thus impeding efforts to reduce rural poverty. The State Program for Poverty Reduction and Economic Development (SPPRED) 2004- 2008 identifies the judicial system as an area in need of improvement to support sustainable economic development of the regions and the development of non oil and gas sectors of the economy.

Similar challenges are faced by small businesses. Bureaucracy and weak legal institutions are perceived as the greatest obstacle to investment outside the oil sector. A favorable legal and regulatory environment needs to be developed in order to attract foreign direct investment in non-oil and gas sectors of the economy and to promote domestic business growth.21 A series of presidential decrees were issued in 2002 to address business concerns, calling for a reduction in the number of activities subject to licensing and for streamlining the licensing procedure. Although improvements were made, and ten regional registration centers have been established to decentralize the process for businesses, the registration and licensing procedures continue to

Aran Legal Advice’Service Project, in partnership with Oxfam, has created legal information centers in 12 locations in the Aran economic region. The Ministry of Justice also piloted legal information centers in 9 locations between 2003-2005. Azerbaijan is divided into 59 rayons, 11 cities including the capital Baku (home to almost one third of the population), and the Autonomous Republic of Nakhchivan As administrative units, rayons, are further divided into 2,650 municipalities. Municipal governance is administered by municipal authorities and the local branches of the executive authority (Executive Committee or Excorn), although ’the precise division of responsibilities for regional administration between these entities and the central government is not clearly defined. The country is also divided into 10 ‘economic regions’ (Absheron, including Baku and Sumqayit cities, Ganja- Gazakh including Ganca and NaBalan cities, Sheki-Zagatala, Lankaran, Guba-Khachmaz, Aran including Ali- Bayramly, Mingechevir and Yevlakh cities, Upper Karabakh, Kelbejer-Lachin, Mountainous Shirvan, and Nakhchivan Autonomous Republic. Nakhchivan’s territory is not contiguous with the rest of the country. It has a opulation of 354,000, its own constitution, court system and parliament. ’’ Azerbaijan is ranked 146 out of 189 countries on the World Banks 2002 Index for Regulatory Quality. The informal economy accounts for an estimated 18-20 percent of GDP. 91 be heavily bureaucratic and time consuming.22Registration procedures need to be streamlined, including simplifying and speeding up the process for all legal entities.23 A lack of transparency and perceptions of corruption also contribute to the constraints on business growth and opportunities. The BEEPS findings indicate the cost of administrative corruption, the “bribe tax”, continues to be ranked as hi h by busine~ses,~~and corruption continues to rank in the top five obstacles to doing business.28

11. Dispute Resolution Strategies and Target Groups

One of the social dimensions of long-standing habituation to corruption in public institutions and to inefficiency in the enforcement of contractual and other obligations is reflected in the importance that Azerbaijanis place on social and kinship networks and on patron-client relationships in personal and business affairs. Lack of access to the courts and certain deeply rooted features of the soviet system have also resulted in local dependence on alternatives to the formal court system, such as community elders and local authorities. Given the traditional role played by community leaders in dispute resolution, mediation is by default the most effective mode for dispute resolution at present. However the mediation service provided is often informal and its quality highly uneven. For example women have limited access to existing mediation services (which tend to be dominated by men), and vulnerable groups (e.g. IDPs~~)are often dissuaded from making claims against local influential persons. Support for both community-led and formal dispute resolution mechanisms is currently needed, Programs to improve the effectiveness and accessibility of legal and judicial services could potentially support the beneficial aspects of existing culturally accepted strategies, such as community mediation, while providing access to other much needed services. Increasing the quality of mediation services for the public for e.g. could be supported through better targeting of mediators, and the provision of effective training and capacity building.

While there is a generalized need for information for the population as a whole, these needs are particularly acute for vulnerable groups including IDPs, women, small businesses and farmers. For example, consultations and studies show that there is a need for information about

22 Among the regulatory challenges of doing business are the following: Entrepreneurs can expect to go through 14 steps to launch a business over 115 days on average, at a cost equal to 12.5 percent of gross national income (GNI) per capita. It takes 28 steps and 212 days to complete the process of complying with licensing and permit requirements for ongoing operations, and costs 1,326.2 percent of income per capita. It takes 7 steps and 61 days for businesses to register property. The time and cost required to resolve bankruptcies is 2.7 years and 8 percent of the estate value. Local firms and foreign firms are expected to pay the same costs to comply with regulatory requirements. Other legal entities such as NGOs are also required to register, and the procedures are equally ifnot more cumbersome, requiring them to register in the Ministry of Justice offices in Baku. Azerbaijan Poverty Assessment, World Bank 2003. 24 EBRD-World Bank Business Environment and Enterprise Performance Survey 2002-2005. 25 Anticorruption in Transition 2: Corruption in Enterprise State Interactions in Europe and Central Asia. 1999-2002. World Bank. Cheryl Gray, Joel Hellman and Randi Ryterman. 26 Azerbaijan’s current economic and social conditions still bear the scars of the armed conflict with neighboring Armenia over Nagorno Karabakh from 1988 to 1994. The conflict led to an influx of over one million refugees and internally displaced people (IDP) in Azerbaijan, disrupted key regional trade and transport links and led to a blockade of the disputed Nagorno-Karabakh territory. The Government’s PRS targets continued assistance to IDPs as a development priority. 27 29 percent of the population is below the age of 18, and 54 percent is under the age of 30. The age group under 35 years make up 69 percent of the unemployed. Unemployment is highest for women and youth in urban areas. For 20-29 year old higher education graduates, an unemployment rate of 26 percent indicates a mismatch between skills acquired and the needs of the private sector. 92 how to take a claim to court, obtain the services of a lawyer, and the associated costs. There is a need for information and public education about labor rights (protection or redress from unfair dismissal, for e.g.), family law (child support and maintenance payments for e.g.), land registration, contract law (for e.g. for farmers and to assist communities implementing rural development projects), women’s’ rights, entitlement to pensions and other social support services, and for improving notary services (or providing them where none exist).

The common denominator among vulnerable roups in Azerbaijan is poverty. Azerbaijan is one of the seven lowest income countries in ECA.58 Although poverty is not limited to rural areas (- 50 percent of the population of 8 million now live in cities and towns -) rural areas are hardest hit by deficiencies in infrastructure and basic services. Ethnic minorities tend to have a larger representation among rural populations and are therefore also affected by the associated hardships and in some cases discrimination. While the Caucasus has multiple ethnic identities that are in many cases at odds with national boundaries, Azerbaijan’s ethnic profile is more uniform than the rest of the region, with 82 percent of its population of Azeri ethnicity. Azerbaijan is a secular state, with 94 percent Muslim population, the rest largely Russian and Armenian Orthodox. Azerbaijani is the national language. Other languages also spoken in Azerbaijan include Talysh, Lezgi, Avar and Tat, and less than ten percent are estimated to be monolingual in a language other than A~erbaijani.~~

Women share equal rights under the legal system, but their wages and access to opportunities are much lower than those of men. The sectors where they are employed are among the hardest hit by the transition, and war widows and women IDPs from the conflict with Armenia are among the most in need of social protections. Women’s rights are well provided for by law, but there is often a gap in enforcement and public awareness of these rights. Domestic violence against women is an issue that warrants more attention. Though rape is a criminal offense there are no laws against spousal abuse or spousal rape. The Criminal Code mandates severe penalties for crimes against children and prohibits the employment of minors (under the age of 18) in hazardous or difficult working conditions.

** In 2002,49 percent of the population lived below the poverty line, and over 8 percent in extreme poverty. The poverty line is defined in the PRSP progress report‘of 2003 as 179,000 AZM (US$36) in monthly consumption expenditures. 29 The Talysh live in the south (the Talysh mountains, Lerik, Astara, Lenkoran and Massaly rayons). The Lezgis mainly live in the north on the border with Dagestan in Russia (Gusz, Guba, Gakh and Oguz rayons), the Tats mainly live on the Caspian shore (Devechi, Khizi, Absheron.) The Avar live in the north on the border with Georgia and Russia (Zagatala and Balakan). 93 111. The way ahead

A key challenge in addressing the current access and information gap will be the development of mechanisms for providing relevant information to these different target groups, kssons learned from the Ministry of Justice's pilot legal information centers point to the important benefit of establishing centers for the public provision of legal advice that are decentralized and mobile. In this respect the establishment of mobile legal information units based in the regions would be an important mechanism. There are also rich benefits to derive from utilizing existing channels for disseminating information to local communities through ongoing Government projects such as the Azerbaijan rural investment project (AzRIP). The effectiveness through which information is able to reach out to the different target groups will be an important determinant of the ability of the Judicial Modernization Project to help reduce the remoteness of Azerbaijan's judicial system from the public.

To lay the groundwork for the development of a legal information strategy, a participatory needs assessment will be carried out during the first six months of the Project to fully identify the legal and judicial information needs of the population, including the specific needs of target and vulnerable groups (including but not limited to IDPs, ethnic minorities, women, low income families, youth, small businesses and farmers). The assessment will guide the development of a Citizen Information Strategy for the Project, and the implementation of a Citizen Information Program in line with the objectives provided by the recent Presidential Decree to 'increase citizens trust in courts and facilitate opportunities for citizens to seek legal and judicial assistance' among other issues.

The Project will support the implementation of a Citizen Information Strategy and Program on the basis of pilots in the area of legal information, ethical behavior and transparency and education that will be assessed and scaled up to effectively address current access and information gaps. (See below proposed Terms of Reference.) User surveys and programs contemplate assessment of public perception of the lack of transparency and ethical behavior in the provision of judicial services. These surveys will assess public perception of transparency including informal costs of justice and public opinion on the fairness of the courts and other institutions in the sector. In addition, BEEPS survey already carried out in 1999, 2002, and 2005 will be continued and which will provide information on the overall views of businesses regarding the performance of the system. Participatory consultations will be carried out during the life of the project to assess impacts and assist in the development of long-term public information policies.

CITIZEN INFORMATION PROGRAM: Proposed Terms of Reference for Strategy Development

I. BACKGROUND

The Ministry of Justice of Azerbaijan plans to implement an IDA supported Judicial Modernization Project which seeks to bring justice closer to the people. The project will assist the Azerbaijan authorities to develop and implement the initial phases of a long-term judicial system modernization program by building capacity to achieve incremental improvements in the efficiency of service delivery, increased citizen access to information, and improve the court's ability to handle future demand. The Project seeks to move the judicial system onto an 94 appropriate institutional development path, in line with the Presidential Decree on the modernization of the court system and Council of Europe and other international standards.

The current status of judicial services in Azerbaijan is one of low public confidence and low usage. Azerbaijan inherited a portfolio of dilapidated courthouses and inefficient services post independence, and although numerous reforms have since been implemented to bring the system up to date, the impact of these changes from the perspective of the stakeholders of the system remains limited in terms of both the supply and demand of services. A small number of pilot legal education initiatives have been undertaken in the last few years, and legal information centers have been established in some regions, but the lack of information about rights and judicial services contributes to the perception of the judiciary as remote and inaccessible, and discourages citizens from seeking judicial assistance to resolve disputes or protect their rights, There is a need for the judiciary to take the lead in adopting a programmatic approach to building awareness and public confidence.

This activity will assist the Ministry of Justice (MOJ) in addressing the current lack of an institutional strategy and program for citizen information, envisaged under Component 4 of the Judicial Modernization Project. This Component aims to develop mechanisms to more effectively educate the public about the availability of judicial services and the ways by which these can be accessed. Special attention will be given to particular target groups such as the rural and urban poor, IDPs, women, youth, ethnic minorities, community leaders (aksakaE), small businesses and farmers who may face particular obstacles in gaining access to judicial services. This Citizen Information Program will be developed in two phases: (1) identification of the demand for judicial services among different stakeholders through a needs assessment survey, and (2) the development of a citizen information strategy and implementation plan. A technical team will be hired (using Japan PHRD Grant and or IDA funds) to undertake this assignment and will report directly to the Judicial Modernization Team (JMT) of the MOJ.

11. OBJECTIVE and SCOPE OF WORK The objective of this assignment is to collect information, conduct analysis and facilitate the development of the Citizen Information Program as part of the Judicial Modernization Project. The assignment will be conducted in a highly consultative manner in order to build a strong consensus for the Program among the project’s key stakeholders. The assignment will be based on the following scope of work:

Phase 1 - Needs Review The aim of this activity is to identify the key stakeholders for the Citizen Information Program, determine their specific informational needs and identify their constraints to access to justice. The activities will be carried out in the following sequence:

a) Carry out desk research to identify current and potential user groups of judicial services and issues related to their access to justice. b) Conduct focus group interviews in two locations (one urban, one rural) with representatives of user groups to test out and refine the parameters of the draft questionnaire attached in the Annex to this document [To be prepared]. c) From the results of the above, develop a Scoping of Issues report which will outline the key issues to be probed in the survey and will include a final draft questionnaire and a detailed Needs Assessment survey plan. The plan should specify the approach.

95 and methodology for conducting a quantitative and qualitative survey in 20 locations across at least 5 economic regions of the country, to include major urban centers and rural areas. d) Execute the needs assessment survey.

96 Phase 2 - Citizen Info~ationStrategy and Im~lementationPlan The aim of this activity is to develop specific informational packages targeted at particular user groups and to identify the most effective medium for delivery of informational content. Specifically, the consultant will be responsible for undertaking the following: Organize a multi-stakeholder workshop (e.g. MOJ, Ministry of Communications and Information Technology, NGOs) to present and finalize the results of the needs assessment. Using the results of the Needs Assessment, develop and package for the JMT the informational content targeted at specific user groups. Identify the appropriate mechanisms for effectively delivering the informational content to specific target groups including the use of mass media, decentralized communication facilities (eg. mobile information units), and existing community- targeted communication channels such as AzRIP. Develop a detailed cost table for the implementation of the Citizen Information Program over the life of the project. Develop a detailed implementation plan with clear identification of resource needs, lines of responsibility and time-lines. Develop a set of practical key performance indicators to measure the implementation progress of the Citizen Information Program.

111. OUTPUTS and DELIVERABLES

The main deliverables for this assignment are as follows: 1) Scoping of Issues report which should include the draft final questionnaire and Needs Assessment Survey plan. The report should not exceed 20 pages long excluding annexes (week 3 of assignment). 2) Workshops for strategy development (week 12 of assignment). 3) Final Needs Assessment report. This will include a detailed description of issues and key stakeholders, baseline data from the quantitative survey and specific case studies to illustrate the different dimensions of access to justice issues, and a prioritization of issues that can be addressed under the project (week 14 of assignment). 4) Citizen Information Strategy and Implementation Plan (week 18 of assignment).

All documents and reports including questionnaire and datasets will be submitted in hard and electronic copies to the Ministry of Justice (and a copy to IDA) in English and Azerbaijani.

IV. IMPLEMENTATION ARRANGEMENT

The Consultant will report directly to the Judicial Modernization Team of the Ministry of Justice, who will hold all proprietary rights to the materials and results of the activity. The assignment will be executed through a lump sum contract with a senior international level consultant who will be responsible for engaging and leading a team of Azerbaijani specialists to undertake all the necessary activities. The senior consultant will be responsible for the delivery and quality of all outputs and obtaining feedback from different institutions (including IDA) and incorporating comments before submission of final reports.

97 IV. CONSULTANT QUALIFICATIONS

1. The senior international consultant will have the following qualifications:

An advanced degree in economics, law, social sciences or relevant subject from a reputable institution. Experience in access to justice issues and familiarity with justice sector data analysis. At least 5 years experience ilz dispute resolution issues. At least 5 years of experience in designing and conducting quantitative and qualitative surveys in challenging institutional environments. At least 5 years experience in participatory approaches in the design andlor implementation of development projects. Excellent writing and communication skills. Excellent team leadership skills. Practical experience on development issues in the former Soviet Union.

2. The local team of experts will have the following key qualifications:

a) At least 5 years experience on access to justice and dispute resolution issues in Azerbaijan. This should include field experience in different regions of Azerbaijan. b) At least 3 years experience in qualitative and quantitative survey design and implementation with international donor organizations. c) At least 3 years experience in participation and community development issues with international donor projects. d) At least 3 years experience working on DPissues. e) At least 3 years experience in design and implementation of communication strategy for commercial firms andlor international donor projects.

98 Annex 16: Decree of the President of the Republic of Azerbaijan N 352, January 19,2006 On Modernization of the court system in the Republic of Azerbaijan and implementation of the Law of the Republic of Azerbaijan “On amendments to some legal acts of the Republic of Azerbaijan (Unofficial Translation)

Since the adoption of the Constitution of the Republic of Azerbaijan, the principal aim ofjudicial reforms has been to progressively solve conceptual issues such as strengthening judicial power as an authoritative and independent institution within the state mechanism, the guarantee of protection of human rights and freedoms in justice administration, the implementation of democratic principles in criminal and civil judgments, the formation of a professional body of judges, and the provision of transparency of court activity; as well as other issues.

As a result of important steps made during the initial stage of judicial reforms, the relevant legislative base has been brought into conformity with international standards, a new three-stage court system has been established, and new judges were appointed through a competitive testing process for the first time in the history of the country. The basis for independence of judicial power and status of judges, as well as the principles of justice administration inherent to lawful state were established in the legislation necessary conditions were created for court activity, material and social provision for judges were significantly improved.

The rapid development of the economic and social life of our society maintains the issue of court system improvement as the issue of the day. Therefore, judicial reform was continued and moved toward a new stage, and within the last two years, new qualitative changes have taken place in the development of justice administration at the initiative of the President of the Republic of Azerbaijan,

For the purposes of improvement of court activity, and bringing it in compliance with the international requirements, the Law “On Judicial-Legal Council” was adopted in December, 2004,and the Law “On courts and judges” was significantly amended by the provisions providing for the determination of a judges selection procedure on the basis of new values, the strengthening of administrative liability of judges committing abuse of their authority during their activity, and the provision of transparency in court activities, As a result of actions realized in view of provision of implementation of duties proceeding from these normative legal acts, substantively a new body implementing self-governance functions - the Judicial-Legal Council- was established, and a newly created Judge Selection Committee initiated for the first time the process of candidate selection for the vacant judge posts.

The next stage of court system modernization provides for the solution of issues such as, creating new courts to meet population demands in legal institutions and legal assistance under the circumstances of social-economic development of regions, eliminating cases of abuse of authority, bureaucracy and other shortcomings which cause citizens dissatisfaction, increase of justice administration efficiency and citizens trust in court, facilitating citizen application opportunities to the courts, applying new information technologies in court activity, more optimal organization of the court structures and activity, as well as other important issues.

With the purpose of mode~izationof the court system and provision of implementation of the Law of the Republic of Azerbaijan “On amend~entsto some legal acts of the Republic of Azerbaijan”, guiding by the article 109 of the Constitution of the Republic of Azerbaijan, I hereby decree:

1. To create the foollowing new courts in the Republic of Azerbaijan:

I.I. Baku Appeal Court - in Baku; 1.2. Ganja Appeal Court - in Ganja, 99 1.3. Sumgayit Appeal Court - in Sumgayit; 1.4. Ali Bayramli Appeal Court - in Ali Bayramli; 1.5. Sheki Appeal Court - in Sheki; 1.4. Court on cases on grave crimes of the Nakhchivan Autonomous Republic - in Nakhchivan city; 1.7. Baku local economic court N 2 - in Baku; 1.8. Suimgayit local economic court - in Sumgayit; 1.9, Sheki local economic court - in Sheki.

2. To rename:

Local economic court N 1 in Baku local economic court N 1; Local economic court N 2 in Ganja local economic court; Local economic court N 3 in Ali Bayramli local economic court.

3. To recommend to Judicial-Legal Council the following:

3.1. to present to the President of the Republic of Azerbaijan proposals regarding determination of territorial jurisdiction of appeal courts, local economic courts, the relevant military courts of the Republic of Azerbaijan;

3.2, to present to the President of the Republic of Azerbaijan proposals on the determination of the number ofjudges at the newly established courts and on increase of the number ofjudges in other courts;

3.3. to complete activity evaluation ofjudges of the first instance courts by October 2006;

3.4. to present to the President of the Republic of Azerbaijan proposals regarding candidates for the posts of the relevant courts chairmen, deputies chairman and Collegium chairmen whose term of office expired.

3.5. to carry out actions to increase the professional level of judges for provision of training of judge candidates meeting modern requirements,

3.6, to draft and approve a Code of Ethics for Judges for the purposes of determination of high moral and cultural aspects for justice administration;

3.7. to carry out serious actions for immediate investigation of appeals regarding misuse, corruption and other law violations in judges activity and, subject to existence of appropriate basis, for applying administrative liability measures for judges.

4. To recommend to the J~ic~l-~galCouncil and to charge the Ministry of Justice of the Republic of Azerbaijan as follows:

4.1. to review organizational issues of court activity, to improve statistics and record keeping affairs in the courts, to provide serious observation of labor and performance discipline, to carry out actions for elimination of bureaucratic cases and shortcomings in citizens receive;

4.2. to present to the President of the Republic of Azerbaijan substantive proposals regarding the establishment and activity of High Justice School with the purpose to increase professional level of educated lawyers for their appointment on certain positions in accordance with their specialization.

5. To recommend to the Supreme Court of the Republic of Azerbaijan, courts of appeal of the Republic of Azerbaijan and the Supreme Court of ~akhchivanAutonomous ~epublicand to charge the Ministry of Justice with the following:

100 5.1. jointly with the Judicial-Legal Council to review the issue of improvement ofjudicial body structures and activities, and to carry out the appropriate arrangements.

5.2. jointly with Judicial-Legal Council to improve implementation of legal and Information provision of court activity, to provide application of new information technologies in courts.

6. To recommend to the Supreme Court of the Republic of Azerbaijan, appeal courts of the Republic of Azerbaijan, and the Supreme Court of Nakhchivan Autonomous Republic to organize the issue of study of case law of the European Court on Human Rights and to take it into account in court practice.

7. To recommend to the prosecutor’s office bodies of the Republic of Azerbaijan to carry out changes in the organization of state defense at the courts in view of the establishment of new courts.

8. To recommend to the Bar Collegium of the Republic of Azerbaijan to review the issue of increase of number of advocates and to carry out arrangements for improvement of efficiency of legal assistance rendered to popu~ionin the regions.

9. To charge the Cabinet of Ministers of the Republic of Azerbaijan as follows:

9.1. to provide newly established courts of the Republic of Azerbaijan with buildings appropriate with their high status, to carry out actions for provision of equipment, communication, transport facilities and other tools necessary for court activity;

9.2. to continue financing the activities of the Appeal Court of the Republic of Azerbaijan; the Economic Court of the Republic of Azerbaijan; and the Economic Court of the Republic of Azerbaijan on disputes arising out of international agreements prior to the appointment of judges of the newly established courts in the Republic of Azerbaijan;

9.3. to draft within two months and to submit to the President of the Republic of Azerbaijan proposals regarding adjustment of valid legislative acts with the Law of the Republic of Azerbaijan “On amendments to some legal acts of the Republic of Azerbaijan”;

9.4. to provide adjustment of normative legal acts of the Cabinet of Ministers of the Republic of Azerbaijan and of the relevant central executive power bodies with this Law and to inform the President of the Republic of Azerbaijan thereon;

9.5. to solve other issues proceeding from the Law of the Republic of Azerbaijan “On amendments to some legal acts of the Republic of Azerbaijan”.

10. To establ~hthat the powers of “the relevant central executive power body of the Nakhchivan Autonomous Repub1ic”prov~edfor in the second part of the Article 55 of the Luw of the Republic of Azerbaijan “On courts and judges” shall be carried out by the Ministry of Justice of the ~akhchiv~n Autonomous Republic.

11. This Decree shall come into force on the day of its signing.

Ilham Aliyev President of the Republic of Azerbaijan Baku, January 19,2006 N 352

101

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s s s

Sevan

BABEK Lake s s s

e e

e AGST Gazakh AGSTAFA Gazakh

50 Miles

Babek Babek

NAKHCHIV NAKHCHIVAN r r r

SHAKHBUZ

Shakhbuz Shakhbuz AF C C

C Agstafa

Tbilisi

DZHULF DZHULFA GEDABA GEDABAY

A a a

a To Dzhulfa Dzhulfa

u u

u Tovuz T

ovuz

c c

Tabriz c

AN ORDUBAD

A

To To a a a

Y

Shemkir Shemkir

Ordubad Ordubad

s s s Gedabay Gedabay K

u u u

DASHKESAN u DASHKESAN DASHKESAN

TOVUZ TOVUZ

46 r a s s s

°

E47

SHEMKIR SHEMKIR

KELBADZHAR KELBADZHAR M M

Kelbadzhar M Kelbadzhar Dashkesan Dashkesan

°

E47

o o o

LACHIN LACHIN

u u u

n n

n KHANLAR KHANLAR

t t

t BALAKEN

a a

Tabriz a

GANJA

To To

i i

ZANGILAN i

ZANGILAN Lachin Lachin

SAMUKH SAMUKH n n

n Khanlar Khanlar

s s

s Nabiagaly Nabiagaly

Ganja Ganja Gubadly Gubadly

KHODZHAL KHODZHALY Balaken Khodzhaly Khodzhaly

ISLAMIC REPUBLIC

GUBADL GUBADLY

SHUSHA GERANBOY GERANBOY Shusha Shusha Geranboy Geranboy Zangilan Zangilan

Zagatala T TARTAR

AR

ZAGA ZAGATALA

GAKH GAKH

Y

Reservoir Mingechevir

T

T Tartar

AR Y

ar

DZEBRAIL DZEBRAIL

OF IRAN KHODZHAKHODZHAVENO Dzebrail Dzebrail AGDAM AGDAM

tar

T

ALA

MINGECHEVIR Agdam MINGECHEVIR Agdam

YEVLACH YEVLACH

SHEKI SHEKI VENO Gakh

°

E48 G G Y Yevlach G °

E48

evlach

Mingechevir Mingechevir

r r r

BARDA

FEDERATION

Khodzhaveno Khodzhaveno Fizuli Fizuli e e Barda e

Sheki

AGDZHEBEDI AGDZHEBEDI FIZULI FIZULI a a

a RUSSIAN

AGDASH AGDASH

t t t

e e Agdash e

Oghuz

r r r

OGHUZ OGHUZ

Agdzhebedi Agdzhebedi

C C

Zardab C Zardab

BEILAGAN BEILAGAN

Beilagan Beilagan

a a a

ZARDAB ZARDAB

Tabriz u u

Udjar u GABALA GABALA To To

UDJAR

GOYCHA GOYCHAY

c c c

K K K a a

Goychay a

u u u

s s s

r r

r Gabala

a a a u u

IMISHLI u IMISHLI

Y YARDYMLY Y

Ismailli

s s

ARDYML s

Makhachkala L L

L °

°

E49

KYURDAMIR KYURDAMIR

Imishli Imishli E49 o o o

M M M

ISMAILLI ISMAILLI

w w w

o o o

l l

Y l

Y Akhsu Akhsu K

u u u To

Kyurdamir

a a a

u

GUSAR GUSAR

Y Yardymly r

Gusar Gusar n n n

a

ardymly Bilasuvar Bilasuvar Lerik Lerik n n n

L L

L BILASUV BILASUVAR

AKHSU AKHSU

e e e

A

JALILABAD JALILABAD t t t

n n n

d d d SABIRABAD SABIRABAD raz a a a

k k

k SAA

SAATLY Guba Guba

LERIK

LERIK Saatly

a a a

i i i

r r r GUBA GUBA

a a a

n n n

n n

n TL

Masally

SHAMAKHY

AR

s s s

L L

L Sabirabad

Y o o

o Jalilabad Jalilabad

w w

w Shamakhy Shamakhy

MASALL MASALLY

l l l

a a

AST a ASTARA

LENKORAN KHACHMAZ

n n n

d d d

HAGIKABUL HAGIKABUL

ARA

DEVECHI DEVECHI

Rasht

To To

Y

GOBUST GOBUSTAN

NEFTCHALA NEFTCHALA Khachmaz Lenkoran Gazi-Mammad Gazi-Mammad Astara

Maraza

SIY Ali Bayramli SIYAZAN Ali Bayramli

Devechi Devechi

° ALI BA BAYRAMLI E

Khizi Khizi Neftchala Neftchala

AN Salyan AN Salyan AZAN

°

SAL SALYAN

E

ABSHERON ABSHERON

YRAMLI

Y KHIZI KHIZI

Siyazan

AN 39 °

N

BAKU BAKU

SUMGA SUMGAYIT

Sumgayit Sumgayit

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, the part of The World Bank Group, any judgment on the legal status of territory, or endorsement or acceptance of such boundaries.

YIT Khyrdalan Khyrdalan AZERBAIJAN BAKU INTERNATIONAL BOUNDARIES RAYON BOUNDARIES RAILROADS MAIN ROADS RIVERS NATIONAL CAPITAL CAPITAL OF AUTONOMOUS REPUBLIC RAYON CAPITALS 50 °

E51 Caspian Sea AZERBAIJAN 40 41

° °

° N N E IBRD 33365 IBRD