Sri Lanka - Legal and Judicial Reform Project

Report No. PID6350 Project Name Sri Lanka-Legal and Judicial (@) Reforms Project Region South Asia Regional Office Sector Financial Adjustment Project ID LKPE44809 Borrower(s) GOSL Implementing Agency Address MINISTRY OF JUSTICE AND THE JUDICIAL SERVICES COMMISSION Project Implementation and Coordination Unit Ministry of Justice and Constitutional Affairs 2nd F, North Wing, Sayuru Sevana 46/12, Nawam Mawatha Colombo 2, SRI LANKA Contact Person: Ms. Thusitha D. Pilapitiya, Project Director Tel: 94-1-478452-3 Fax: 94-1-478451 Email: thusitha@eureka.lk Environment Category C Date PID Prepared August 14, 2000 Projected Appraisal Date October 1999 Projected Board Date June 20, 2000 1. Country and Sector Background The challenges facing Sri Lanka in the 21st century include "second generation" structural reform issues such as legal and judicial reform. Successful implementation of such reforms entails a long term commitment to the process of consensus building in order to ensure ownership among the stakeholders as well as the general public. There is agreement among the stakeholders that legal and judicial reform is needed to improve the policy environment for private sector development, to improve the performance of the state, to increase access for the poor to protect their individual and property rights, and facilitate peaceful dispute resolution for ethnic and other discriminatory practices. Sri Lanka's civil conflict, which began in 1983, has given rise to regional disparities on both the poor and new vulnerable groups such as war widows, victims of abuse, and the physically challenged.The main challenge for the legal and judicial system in Sri Lanka is to improve its efficiency, predictability, access and transparency. Such improvements are part of the Government's overall long term strategy. Some of the main obstacles include delays in the judiciary; a perception of a lack of transparency; lack of access to dispute resolution by the poor; and lack of access to legal information by the public, the legal profession as well as the judiciary. The lack of technology also inhibits the sharing and dissemination to the general public of judicial decisions as well as the laws that protect individual and property rights. Government Strategy: The Government strategy is three-fold. First, the Government is committed to modernize the  commercial legal framework to promote private sector activities as well as to strengthen the judiciary as an institution. While the Government has recognized the need for a comprehensive reform for a considerable time, an effective mechanism and process is yet to be established to prioritize areas of reform, to build consensus among stakeholders, and to manage the legislative reform process. Secondly, although there are many elements of legal and judicial reform that could be addressed, the Government has chosen to implement reform in a phased approach with sequencing that includes focused activities that will allow the results to foster further longer term reform efforts. Thirdly, although considerable progress has been made in reforming the laws relating to civil and criminal laws, laws relating to commercial matters have not received sufficient attention yet. For instance, the Company Law, Consumer Protection, and Intellectual Property Law are currently undergoing reform but have not been finalized. 2. Objectives The broad project development objectives are to improve upon the existing legal and judicial framework by making it more efficient, transparent and responsive to the needs of the public at large and of the private sector in particular. More specifically, the project seeks to: (a) modernize the legislative framework that impacts private sector activity; (b) improve the administration, monitoring, and regulatory functions of the Company Registry; and (c) build capacity of the judiciary and other institutions providing dispute resolution services. The proposed project will support the Government of Sri Lanka's long term legal and judicial reform program, and includes a selected set of priority activities identified by the Government as a first phase of this program. 3. Rationale for Bank's Involvement The GOSL has requested assistance from the Bank because of its comparative advantage in this area, given its experience in private sector development and legal and judicial reform. Due to its experiences in countries around the world instituting similar reforms in the legal and judicial sector in particular, the Bank can also facilitate important cross-fertilization. In addition, IDA support will complement, in a much broader sense, the efforts and programs by other donors, such as USAID, the Asia Foundation, UNOPS and Swedish SIDA. 4. Description The project is composed of three main components: Legal Reform, Company Registry Reform, and Judicial Reform. The Legal Reform component has three subcomponents: a) the Commercial Law Development subcomponent aims to address weaknesses in the legal and regulatory framework that have adverse impacts on private sector activity, the business environment, and investor confidence through the drafting of new laws in prioritized areas; b) the Professional Development subcomponent seeks to strengthen the capacity of the institutions that are responsible for law reform, and legal education in the area of commercial law will be conducted; and c) the Access to Justice subcomponent will assist the government in providing access to accurate and up-to-date legal and judicial information through the development of an automated and on-line Legal Information Network (LAWNET). The objective of the Company Registry component is to make the Office of the Registrar of Companies (ORC) a more efficient, market-oriented, and increasingly self-sustaining service provider through improvements to the ORC's administrative, management, and regulatory - 2-  capacities. The Judicial Reform component has four subcomponents: a) the Judicial Training component will entail the institutionalization and systemization of judicial and judicial support personnel training; b) the Judicial Services Commission (JSC) subcomponent will assist the JSC to undertake a fundamental reorganization of its own administrative structure and of the administrative structure of the court system as a whole, including court and case management; c) the Model Courts subcomponent will introduce the administrative reforms developed through the JSC on the local level at twenty-five selected court-clusters, on a trial basis, together with the necessary infrastructure modificaiton; and d) the Mediation subcomponent will assist in the development of a formal mediation system for commercial disputes under the auspices of the Chamber of Commerce and the training of professional mediators, to help relieve the demand on the court system. 5. Financing Total ( US$m) GOVERNMENT 2.94 IBRD IDA 18.19 Total Project Cost 21.14 6. Implementation Project implementation will be overseen by a Steering Committee, will be chaired by His Lordship Chief Justice of Sri Lanka. In addition, the Committee will be made up of: the Attorney General, one additional judge from the Sri Lanka Supreme Court, the Secretary of the Ministry of Justice, the Secretary of the Ministry of Internal and International Food and Commerce, the Secretary of the Ministry of Finance, the Legal Draftsman, the Secretary of the Judicial Services Commission, the Private Secretary to the Honorable Minister of Justice, Constitutional Affairs, Ethnic Affairs, and National Integration, and an adviser. The PICU is responsible for administering the day-to-day implementation of the Project with relevant implementing institutions, and will be accountable to the Steering Committee. The implementing institutions will include: the Ministry of Justice, the Attorney General's Office, the Office of the Registrar of Companies, the Judiciary, the Judicial Services Commission, the Ministry of Internal and International Food and Commerce, Chambers of Commerce, law schools, and bar associations. 7. Sustainability Sustainability of benefits from institutional reforms in judicial and legal institutions, like institutional reform in general, requires consensus and a broad participation from the legal community as well as the civil society. Therefore a careful and broad participatory approach is planned to build internal consensus leading to reforms. GOSL is seeking consensus on project design and project performance monitoring indicators from judges, the Bar Association, NGOs, the business community, and other key organizations. On financial aspects, project design will address the issues of cost recovery (LAWNET and Office of Registrar of Companies) and financing of recurrent costs with assistance from the Ministry of Finance. 8. Lessons learned from past operations in the country/sector Lessons from other TA efforts in Sri Lanka: Given that TA components in - 3 -  IDA-financed projects are slow to disburse and often difficult to administer, projects need to be highly focused and selective in the components included. In addition, IDA's experience in country is that as much preparation as possible needs to be done prior to project implementation. Toward that end, a Project Preparation Fund (US$450,000) was approved in June 1997 to assist GOSL in preparing as many project components ahead of time, and an additional PPF was signed in 1999 in order to finance preliminary preparatory activities to ensure smooth implementation (US$560,000). Lessons from Bank/IDA Legal TA in Other Countries: Despite the novelty of the area, the Bank's experience with legal and judicial reform programs has shown that these projects in particular present challenges in their formulation and implementation. Because the reform programs often affect the balance of power among the various branches of government, and because efforts at reforming the judiciary can be impeded by pressure from vested interests, strong government committment is critical the success of these programs. This project has the governmental committment for it to be successful and committees and working groups with broad representation have been created to protect against vested interests. Furthermore, legal and judicial reform is a long term process; reforms are often implemented in stages. Ideally, the sequencing of such stages should take into account the government's priorities as well as the country's capacity to implement such reforms. For this reason, the project has been focused with activities that have achievable goals and that can lay groundwork for further reforms. An additional lesson is that wholesale importation of legal systems may not be appropriate. While comparative law experience is an extremely important source of guidance, any lessons learned should be adapted to national legal systems and the particular requirements of the society concerned. The project will use policy papers from which to prepare draft laws, and in addition, the comparative perspective of foreign experts will be fused with the knowledge of the local legal community. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues : The project will have no negative environmental impacts. Positive impact on the environment is expected from enforcing property rights and contractual obligations, and a general strengthening of the legal and judicial system in the country. The court construction and upgrading activities will be implemented in accordance with the existing building codes, including the provision of adequate water, sanitation and waste removal facilities. Construction waste will be handled in an environmentally safe manner. These requirements will be included in the bidding documents. 11. Contact Point: Task Manager Maria Dakolias The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 202-473-4962 Fax: 202-522-3091 -4-  12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. Processed by the InfoShop week ending August 18, 2000. - 5 -