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The World Bank Legal Review Volume 3 Public Disclosure Authorized Edited by Hassane Cissé Daniel D. Bradlow Benedict Kingsbury Public Disclosure Authorized International Financial Institutions and Public Disclosure Authorized Global Legal Governance Public Disclosure Authorized The World Bank Legal Review Volume 3 The World Bank Legal Review Volume 3 International Financial Institutions and Global Legal Governance The World Bank Legal Review is a publication for policy makers and their advis- ers, judges, attorneys, and other professionals engaged in the fi eld of interna- tional development with a particular focus on law, justice, and development. It offers a combination of legal scholarship, lessons from experience, legal de- velopments, and recent research on the many ways in which the application of the law and the improvement of justice systems promote poverty reduction, economic development, and the rule of law. The World Bank Legal Review is part of the World Bank Law, Justice, and De- velopment Series managed by the Research and Editorial Board of the World Bank’s Legal Vice Presidency, composed of Hassane Cissé, Editor in Chief; Kenneth Mwenda and Alberto Ninio, Co-chairs; Christina Biebesheimer, Charles di Leva, Laurence Folliot Laulliot, Vikram Raghavan, Vijay Tata, and Kishor Uprety, Members. The present volume of The World Bank Legal Review benefi ted from inputs from members of the World Bank’s Legal Vice Presidency and other units of the World Bank Group, including Alexis Albion, Luiz Henrique Alcoforado, Evarist Baimu, Christina Biebesheimer, Anna Chytla, Adrian di Giovanni, Frank Fariello, Rowena Gorospe, Zoe Kolovou, Siobhan McInerney-Lankford, Patricia Miranda, Marco Nicoli, Alberto Ninio, Aristeidis Panou, Maurizio Ragazzi, Vikram Raghavan, Elena Segura, Barry Walsh, and Yesha Yadav. The preparation of this volume was made possible with the invaluable help of Paola Scalabrin and Nigel Quinney. The World Bank Legal Review Volume 3 International Financial Institutions and Global Legal Governance Hassane Cissé Daniel D. Bradlow Benedict Kingsbury Editors © 2012 International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org 1 2 3 4 15 14 13 12 11 This work is a product of the staff of The World Bank with external contributions. The fi ndings, interpretations, and conclusions expressed in this work do not necessarily refl ect the views of The World Bank, its Board of Executive Directors or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. For permission to reproduce any part of this work for commercial purposes, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Offi ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8863-1 e-ISBN: 978-0-8213-8864-8 DOI: 10.1596/978-0-8213-8863-1 Library of Congress Cataloging-in-Publication data has been requested. The World Bank Legal Review Volume 3 International Financial Institutions and Global Legal Governance EDITORS Hassane Cissé Deputy General Counsel, Knowledge and Research, World Bank Daniel D. Bradlow SARCHI Professor of International Development Law and African Economic Relations, University of Pretoria, and Professor of Law, American University Washington College of Law Benedict Kingsbury Murry and Ida Becker Professor of Law and Director of the Institute for International Law and Justice at New York University School of Law; Visiting Professor of Law, University of Utah PRODUCTION EDITOR Aristeidis Panou Legal Associate, World Bank Contents Foreword ix Robert B. Zoellick, World Bank Group President Preface xi Anne-Marie Leroy, Senior Vice President and Group General Counsel Contributors xii Introduction: Global Administrative Law in the Institutional Practice of Global Regulatory Governance 3 Benedict Kingsbury PART I LAW OF INTERNATIONAL ORGANIZATIONS: ISSUES CONFRONTING IFIS The Reform of the Governance of the IFIs: A Critical Assessment 37 Daniel D. Bradlow Should the Political Prohibition in Charters of International Financial Institutions Be Revisited? The Case of the World Bank 59 Hassane Cissé International Financial Institutions and Claims of Private Parties: Immunity Obliges 93 Rutsel Silvestre J. Martha Squaring the Concept of Immunity with the Fundamental Right to a Fair Trial: The Case of the OAS 133 William M. Berenson Responsibility of International Organizations and the World Bank Inspection Panel: Parallel Tracks Unlikely to Converge? 147 Evarist Baimu and Aristeidis Panou Partnerships, Emulation, and Coordination: Toward the Emergence of a Droit Commun in the Field of Development Finance 173 Laurence Boisson de Chazournes Coordinating the Fight against Fraud and Corruption: Agreement on Cross-Debarment among Multilateral Development Banks 189 Stephen S. Zimmermann and Frank A. Fariello, Jr. viii The World Bank Legal Review PART II LEGAL OBLIGATIONS AND INSTITUTIONS OF DEVELOPING COUNTRIES: RETHINKING APPROACHES OF IFIS The Rule of Law and Development: In Search of the Holy Grail 207 Michael Trebilcock Rethinking Justice Reform in Fragile and Confl ict-Affected States: The Capacity of Development Agencies and Lessons from Liberia and Afghanistan 241 Deval Desai, Deborah Isser, and Michael Woolcock International Norms and Standards Applicable to Situations of State Fragility and Failure: An Overview 263 Chiara Giorgetti Legal Obligations and Institutions of Developing Countries: Rethinking Approaches to Forest Governance 293 Annie Petsonk PART III INTERNATIONAL FINANCE AND THE CHALLENGES OF REGULATORY GOVERNANCE Networks In(-)Action? The Transgovernmental Origins of, and Responses to, the Financial Crisis 323 Chris Brummer Mitigating the Impact of Financial Crises on the Brazilian Capital Market 335 Alexandre Pinheiro dos Santos Developments in Climate Finance from Rio to Cancun 345 Charlotte Streck and Thiago Chagas Governing a Fragmented Climate Finance Regime 363 Richard B. Stewart, Bryce Rudyk, and Kiri Mattes INDEX 391 Foreword ROBERT B. ZOELLICK The global fi nancial crisis encouraged a major rethinking of our global fi nan- cial architecture, policies, and institutions. But it also reminded us that effec- tive rule of law, including respect for property rights and access to justice, remains fundamental for inclusive and sustainable globalization. This was clearly demonstrated earlier this year: The frustration of a fruit vendor when his weighing scales were confi scated and he was mistreated by police—which led him to set himself on fi re in public—ignited a fi restorm that engulfed Tuni- sia and the wider Middle East, and led to a demand for justice, rules, and laws that are fair, predictable, and transparent. The rule of law is not just a set of rules and their judicial application. As the third volume of The World Bank Legal Review makes clear in its subtitle, International Financial Institutions and Global Legal Governance, the law is also about policy making, institutional frameworks, international politics, devel- opment, and—ultimately—freedom. The law broadens the scope of the ques- tions that people ask, and so helps policy makers fi nd solutions to complex, multifaceted problems. To do that effectively, however, legal research and le- gal practitioners must focus on how the law can support innovative and prag- matic responses to development challenges. One such challenge is how we can link international norms with local laws and customs. For example, today fi ghting corruption is a key part of develop- ment projects and programs. We know that corruption is a drag on economies, taxes the poor, and strangles opportunity. But anticorruption legislation and conventions can be effective only if they are linked with the needs of develop- ing economies and are seen as enabling rather than hampering. This linkage is particularly important for states affected by fragility and confl ict, which struggle to break free from vicious cycles of violence. Effective justice and justice administration—both formal justice institutions and local legal institutions—are key factors in breaking that cycle. Legal research and legal practitioners need to focus on exploring and promoting the linkages be- tween the formal justice institutions and local mechanisms. The law also has a role to play at the microlevel of community-driven development. Ethiopia, for example, has used intellectual property tools to renegotiate the distribution and selling arrangements of its coffee production with multinational enterprises. The results have benefi ted both local farmers and traders. ix x Foreword Legal research and practice