Peru - Judicial Reform Project (Formerly listed as Administration of Justice Project)

Report No. PIC2426 Project Name Peru-Judicial Reform Project Region Latin America and the Caribbean Sector Public Sector Modernization Project ID PEPA40107 Borrower Government of Peru Implementing Agencies Judiciary, Consejo Nacional de la Magistratura, Academia de la Magistratura, and Defensoria del Pueblo (*) Project Coordination Unit: Oficina Tecnica de Cooperacion Internacional del Poder Judicial, Palacio de Justicia, Lima, Peru Tel (511) 4288085-86 Date PID Prepared November 15, 1996 Appraisal Date October, 1996 Projected Board Date March/April 1997 Background 1. The past five years in Peru have seen dramatic reforms in economic policy for growth and social development. These reforms have occurred within the context of a redefinition of the role of the state, codified in the new Constitution adopted in 1993 which narrows the state's mandate away from productive activities and reorients government's role in the delivery of key public services. To date, institutional reform and restructuring have taken particular aim at the redefinition of the regulatory framework, the alleviation of poverty, and the improvement of conditions for private sector participation in economic growth. However, Peru's public institutions remain fragile and the issue of institutional sustainability is of paramount importance. In recognition of this fragility, the government has committed itself to a program of State modernization. 2. Modernization of the State involves an effective rule of law, a modern legal system and an adequate administration of justice. These are indispensable conditions to create a favorable investment climate, to alleviate poverty and to incorporate all social sectors to the productive process. This will not only ensure the efficiency and stability of economic transactions but also the promotion of employment, income and standard of living of the poorest people. 3. Substantial updating of the legal and regulatory framework for economic transactions has occurred in Peru in recent years. However, as pointed out in the Bank's private sector assesment, serious shortcomings exist in the application and interpretation of laws by the courts. The judicial sector largely fails to apply and interpret laws in an equitable, effective and efficient manner. Surveys and reports confirm the reality of a judiciary with unpredictable and low quality outcomes, unreasonable times to diposition, low levels of accesibility and  extensive politization and corruption. 4. Thus, the Peruvian judiciary sector is behind the times. Profound reforms are required in the justice system in order to facilitate the consolidation of economic reforms, encourage the productivity of enterprises and foster the integration of the poorest people into the productive process. Without a solid and respected justice system capable of guaranteeing in practice security of person and property, the aspirations of people, especially the poor, to participate in the benefits of economic and social opportunity cannot be fulfilled, and private sector development is disencouraged. 5. The judicial system in Peru shows an inadequate performance when measured against basic standards and principles of independence and accountability, access, efficiency and professional competence and integrity. This is reflected in the absence of a transparent and merit-based career system, weak disciplinary systems, low budgets and salaries, deficient court and case administration, weak monitoring of the judicial system, a lack of financial independence (due to the judiciary's limited resource generation capacity and low priority assigned in the government's budget), poor physical infrastructure and logistics, insufficient and uneven distribution of courts, limited availability and use of ADR mechanisms, inadequate legal education and judicial training, low ethical standards, etc. 6. The root causes of such inadequate justice system are varied and profound. Many studies and articles suggest that the above problems result from a political environment and legal culture that have relegated the judicial system in Peru to a minor and deliberately underfunded appendage of the executive branch, thus keeping the courts from making their rightful contribution to good governance. With a tradition of patronage in political appointments, outside interference in judicial proceedings and pervasive corruption, the courts have been prevented from becoming fair, objective and efficient arbiters of disputes. In a more general sense, this also reflects expectations, values and priorities in a society at large. There is a need to reaffirm cultural respect for the rule of law. This contradiction or gap between law and practice inhibits citizen participation, investment, trade and cooperation and rather fosters distrust, cynicism, the seeking of unfair advantage and other impediments to social and economic development. Reestablishing such cultural respect for the rule of law will allow to bridge the gap that exists between law and reality. Judges have an important and institutional role in bridging and making effective the rule of law. Objectives 7. The objective of the project is to provide better justice in civil and commercial dispute resolution by improving the access, efficiency, quality, integrity and independence of the justice system. The achievement of these objectives would increase public trust and confidence in the justice system, and thus improve the competitive environment for conflict resolution. Description -2-  8. To achieve the above objectives, the project would support selected initiatives in the first stage of a comprehensive and long-term reform program of the justice system. These selected initiatives would improve the 'supply' of the services of the Judiciary as well as strengthen 'demand' for better judicial services--both inside and outside the formal system. On the 'supply' side, the project would strengthen basic institutions in the judicial sector and support a set of focused, specific activities aimed at improving judicial performance at selected five districts: Lima (including Cono Norte and Callao), Arequipa, Cuzco, Lambayeque, and Piura. In this respect, the project aims to create five 'centers of excellence' showing short-term, tangible and measurable results with demonstration effects to the rest of the judicial districts. A phased, pilot approach would be taken, with initial activities focusing on the Lima district where judicial appointment by the CNM has been completed. The experience of the Lima pilot would be evaluated and disseminated before the pilot is replicated to the other districts. On the 'demand' side, the project would support greater public demand and accessibility to judicial services through the strengthening of the Justice of Peace and the Defensor del Pueblo and a demand-driven 'Access Fund' to promote ADR initiatives and other innovative activities to develop the capacity of the civil society for demanding and monitoring judicial performance. (A) Administration of Justice. This component will support two categories of activities to improve the quality of judicial services: (i) the modernization of administrative apparatus of the Judiciary in planning, budgeting and managing the judicial system, mainly through the strengthening of general management of the Supreme Court and the Superior Courts (i.e., administrative decentralization through training and the implementation management information system, financial management, improving the image of the Judiciary); and (ii) court performance improvement pilots in selected districts through the implementation of a set of focused, monitorable programs such as: (a) judicial decisions--national and regional workshops to diagnose the uniformity of judicial decisions, and the design and implementation of incentive systems associated with the quality of judicial performance, (b) court procedures and organization--a series of workshops for judges to evaluate the application of new civil procedural code, annual delay studies, and the implementation of new court organization (diffusion, training, evaluation), (c) the development of judicial information systems in the areas of registry and document processing based on standardized format, caseflow management, statistics, multiple data base (both legislation and cases), and court automation, and (d) infrastructure remodeling of central courthouses in each of the selected districts. (B) Judicial Selection, Evaluation, and Training. This component will assist: (i) the CNM in strengthening the norms and system for selection, destitution, and ratification of judges, studies on corruption and judges' profile, the strengthening of its strategic planning capacity, information support, and staff training; (ii) the AM in the implementation of comprehensive and integrated training programs for civil and labor judges in the selected districts to upgrade their judicial skills and aptitudes, strengthen their knowledge in selective business law matters, improve ethical standards and instill a 'culture' -3 -  of service; and (iii) the Office of Supervision of the Magistracy of the Judiciary (Oficina de Control de los Magistrados) in strengthening a disciplinary system. (C) Access to Justice. This component will support: (i) the Justice of Peace (JP) and community authorities through the provision of training on conciliation techniques, the initial baseline and follow-up evaluation studies on the performance of JPs (to measure the impact of training programs), and the development and revision of laws and regulations for the JP system; (ii) a demand-driven 'Access Fund' to finance eligible subprojects aimed at: a) promoting ADR mechanisms (e.g., training of mediators and arbitrators, development of training materials, mediation and arbitration to the public); and b) strengthening the capacity of civil society for demanding and monitoring judicial performance (e.g., recopilation and publication of data on judicial performance, public opinion surveys, civic education efforts, 'court watch' activities, monitoring of judicial ethics and judicial appointments); and (iii) the newly created Office of Defensor del Pueblo (DP) to refine its organizational structure, norms and procedures, carry out baseline and follow-up analyses/workshops on the issues related with native communities, environmental protection, and the relationship between citizens and the public/judicial sector institutions, and provide other logistic and informatic support. Financing 9 The project would finance consulting services, training, equipment, and physical infrastructure through the following integrated components. The total project costs, including price and physical contingencies, are estimated to be $29 million. A Bank loan of approximately US$21 million is proposed. In addition, the project preparation has benefited greatly from a Japanese PHRD Grant (57.6 million Yen). The IDB has been providing a technical assistance grant (US$1.4 million from MIF) for ADR and is also in the process of preparing parallel financing for a loan of US$5-10 million to support the judicial sector. There has been close coordination between the Bank and the IDB during preparation, including joint missions. The IDB project would focus on access to justice, such as training of Justice of Peace, and courtroom modernization and infrastructure improvement in decentralized Juzgados de Paz that are not covered under the Bank project. Implementation 10. There are four implementing agencies: the Judiciary, the Consejo Nacional de la Magistratura, the Academia de la Magistratura, and the Defensoria del Pueblo. Because this is the first proposed project for the sector and in light of their unfamiliarity with Bank operations, the Project Coordination Unit (PCU) was established within the Judiciary with the responsibility for executing the Japanese grant for the preparation of the Bank project--in collaboration with the other implementing agencies--and coordinating the support from other donors. During the project implementation, the PCU would be responsible for assisting each of the four implementing agencies in the project execution and monitoring the progress of the project components, both physically and financially. -4-  Lessons from Prior Bank Experience 10. Since this project would represent the Bank's first operation in support of judicial reform in Peru, no lessons of sectoral experience are available. Moreover, given the relative recent history of Bank involvement in the judicial sector, there has not been much experience in the area from which to draw lessons, except for Venezuela and Bolivia (under implementation) and Ecuador (approved by the Board in July 1996). Experience with the Venezuela Judicial Infrastructure Project suggests the desirability of prior strengthening of the implementing agency and unit, especially given the limited experience in the judicial sector with project planning and implementation; the establishment of a broad- based advisory commission to ensure communication among agencies that affect and are affected by the project; and constant reinforcement of the commitment and ownership of the project by Government and the judicial sector. Recent Bank efforts in Bolivia and in the preparation of the Ecuador Judicial Reform Project reinforce the need for these three elements: (i) professional and functioning coordination units; (ii) the establishment of clear coordination responsibilities across branches of Government; and (iii) commitment and understanding of changes by the Judiciary. Rationale for Bank Involvement 11. The project is consistent with the Country Assistance Strategy and the recent policy dialogue held with the Government at the time of the Bank programming mission in December 1995. In particular, the project would assist in the process of the modernization of the state, improve public sector management in support of growth, assist in poverty alleviation and provide improved and alternative conflict resolution mechanisms for the private sector. The absence of a credible and efficient Judiciary and alternative dispute resolution (ADR) mechanisms adversely affects the enabling environment for private sector development and contributes to inequities in access to justice by the poor. Bank support of the Government's economic program in the areas of private sector development and the social sectors is hampered by the lack of attention to problems in the judicial sector. The Bank's expertise in administrative strengthening, its perceived objectivity in a sensitive area, and its support for the Government's economic reform program provide the rationale for Bank involvement. Participatory Approach and Sustainability 12. For judicial reform, and any institutional reform in general, to be sustainable and viable over the long-run, it requires consensus and a broad participation from the legal community as well as the civil society. During preparation, a carefully-designed participatory approach has been taken to build an internal consensus leading to reform. A series of workshops and meetings were organized and continued to be planned for: (i) judges and key agencies to be involved in the project (seeking the cooperation and consensus on project design, and evaluating and sharing the pilot experience in Lima); and (ii) more broadly the civil society, including bar associations, NGOs, the business community, and other users of the system (aimed at information sharing, consultation, and evaluation on reform progress). For example, - 5 -  during pre-appraisal, two workshops were organized by the PPU with the funding of the Japanese Grant--'Access to Justice' with the participation of DP, Jueces de Paz Letrados, NGOs, academics, and other authorities; and 'Judicial Reform' with the participation of about 35 judges mostly from Lima in collaboration with the Judiciary, the AM, and the CNM. These workshops resulted in a major success and confirmed the existence of: (i) strong motivation and commitment among judges to reform; (ii) the high degree of consensus among them on problems and actions to be taken; and (iii) strong interest in civil society in participating in the reform process. Proposals made at the workshops have been taken into account the further design of the project. 13. The sustainability of the project will depend in part on the continued commitment of the Judiciary itself and the government to judicial reform. Interest in this comprehensive reform program is shared between the Executive and the Judiciary. The Executive views judicial reform as an integral component of its plan of government, supporting its economic reform objectives as well as its aim to modernize state institutions. Project Benefits 14. The project is expected to strenghten the capacity of the Judiciary to build and sustain its independent role, to improve the enabling environment for private sector development, and to increase the access to justice for the citizenry. More specific benefits include increased courtroom productivity and efficiency, thereby reducing the private and social costs of dispute resolution and improve equity in access to justice. Benefits also include reductions in the time of delay in court actions, reduced case backlogs, and improved quality of decision making by judges and justices of the peace. 15. Although the project has limited focus in terms of its scope and direct counterpart agencies, by restoring essential capabilities of a simple, but functioning judicial system, it would indirectly contribute to strengthening the other areas of the system. First, the project would support measures to improve economic independence of the Judiciary. Although budget allocation is partly a function of overall resource constraints, the Judiciary must be able to seek the resources needed to meet its responsibilities, use those resources prudently, and account for their use. It must be also able to raise separate resources (from user charges) to secure its financial base. The low salary level of the judicial sector that hinders attracting capable personnel, poor infrastructure etc.--these problems are caused in part by the inability of the judiciary to manage and assign resources efficiently and effectively. The project would strengthen financial management, implement new fee structure, and reform incentive schemes for judges, administrative and court personnel. Second, the project is designed to strengthen the functioning of selected, fundamental pieces of the justice system: the Judiciary, CNM, AM, and DP. To this end, discrete activities have been identified: e.g., modernization of court management, judge training, development of a merit-based recruitment and advancement system (transparent and impartial selection and promotion process for judges), infrastructure improvement, and initial institutional development of newly created DP. With improved incentive - 6 -  structures, a reorganized, modern court system, and a performance monitoring system put in place, the project would contribute to strengthening the functioning of selected, key judicial institutions in an integrated manner. In particular, the strengthening of CNM (performance monitoring of judges), AM (training), and DP (ombudsman) is expected to have spill-over effects in the entire judicial sector. Third, although the project will not involve criminal courts or Constituitonal Tribunal, the resources saved by the increased efficiency in the other areas can be devoted to these aspects of the judicial system. Additionally, better civil courts would improve the overall image of the Judiciary, thus increasing popular trust in the institutions. This is closely related to the second point above. In this way, the project would bring about positive externalities to the entire justice system, including criminal justice and Constitutional Tribunal. Fourth, the project is designed to build the social capacity for monitoring the progress in judicial reform by broadly involving the civil society--such as bar associations, NGOs, universities, the business community, NGOs, and the other users--in the evaluation of reform process and outcome. It is expected that such efforts would result in a better system of checks and balances as provided in the new Constitution and contribute to achieving stronger judicial independence. Project Risks 16. Despite new opportunities and impetus provided by recent developments, the project faces challenges and potential risks. It must be recognized that this is a project in a very sensitive sector. Major risks include: (i) medium-term sustainability of the project; (ii) a lack of coordination among the key implementing agencies involved in the reform; (iii) weak institutional capacity for the implementation of the project; (iv) resistance to change from key groups, including judges, court personnel, businessmen and litigants, with vested interests in the current system; and (v) political interference and potential instability in the project environment. The proposed project incorporates features which would help mitigate such risks as follows: 17. First, regarding the issue on medium-term sustainability, Bank preparation has been placing special emphasis on the engagement of key players, who would be responsible for the implementation of the project. Major efforts are being made in identifying a core group of reform- minded judges to assume leadership in project preparation and who would actively participate in the court performance improvement pilot in the Lima district; these judges are expected to play a lead role when the pilot is replicated at other districts. The project also would promote the participation of the civil society in monitoring progress in judicial reform to increase the chances of sustainable change. Second, the issue of coordination is addressed by the establishment, prior to negotiations, of an appropriate coordination mechanism at both policy and operational levels. Furthermore, throughout preparation, a number of joint meetings and workshops have been organized to discuss specific reform proposals which have bearings on various actors. Third, to address the issue on weak institutional capacity, the project takes a phased, pilot approach, starting in the Lima district, where there are indications of strong leadership commitment and a sense of reform ownership among judges. The pilot experience of Lima would be evaluated - 7 -  and the lessons gained would be disseminated and incoporated in the subsequent pilots in the other districts. Moreover, the Japanese PHRD grant has been provided to set up a functioning PPU, which lializes various agencies involved in the project and ensures the consistency of activities. Fourth, the issue of resistance to change is expected to be minimized through the implementation of a participatory approach and plan, with project financing, to involve affected groups in each of the selected districts. 18. Lastly, the issue of weak judicial autonomy, political interference and potential instability in the project environment. An effective judiciary requires that it function free from political interference to ensure its impartiality in the delivery of judicial decisions. It is widely recognized that there is no strong tradition of an independent judiciary in Peru as other LDCs. The project intends to help the 'depolitization' of the Judiciary at different levels though it must be clearly recognized that this is hardly an easy risk to manage or mitigate. First, the project aims to supporting the CNM to move towards a merit-based system of judicial recruitment and removals. The CNM members enjoy widespread recognition in the legal community for their objectivity and transparency. Second, several project activities targeted to the selected districts (including court automation and remodeling) would be conditioned on satisfactory progress toward the re- establishment of tenure in the respective districts. Third, to strengthen independence in decision-making, the project would support training efforts of the AM to enhance the independent role of the judge and reaffirm 'culture' of independence. Fourth, the project, mainly through the Access Fund, is expected to further promote and sustain a constituency in support of judicial reform as a means to demand and pressure for sustainable institutional changes. Fifth, other project interventions such as improvement in the administration of the courts would indirectly strengthen independence by improving the standing of the Judiciary in the community. Poverty Category 19. Not applicable. However, the Access to Justice component would help improve the access and quality of justice for traditional communities and thus address the needs of the poorer segments of the society. Environmental Assessment 20. As this is a technical assistance project and does not have explicit environmental components or effects, it is recommended that it be classified as Type C. Project Objective Category 21. The primary project objective category is Public Sector Modernization (PB). to replicate such workshops over the coming months in the other selected districts. Most importantly, the project would promote, through the Access Fund, the participation of the civil society in monitoring the progress in judicial reform. -8-  Contact Point: Izumi Ohno, Task Manager The World Bank 1818 H Street N.W. Washington D.C. 20433 Telephone No.: (202)458-8015 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by The Public Information Center week ending December 6, 1996. -9-