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