Assessment of laws and practice [EBRD - Sectors: Legal transition]

Sector specific assessments

The objective of the sector specific assessments is to benchmark the development of key legal sectors in each country against international or harmonised standards. The assessments are designed to present what has been achieved and what remains to be achieved, identifying any continuing needs for legal reform and showing how issues have been addressed in other transition countries. Countries can draw on this information when undertaking reforms on their own or with the assistance of others. Results are also used to help measure the level of legal risk related to each country and to specific investment activities.

EBRD Legal Indicator Survey 2005

In November 2005, the Bank published the results of the new legal indicator survey on corporate governance in the Transition Report. The Legal Indicator Survey concentrates on the effectiveness of corporate governance legislation focusing on the protection of minority shareholder rights in the context of related party transactions.

EBRD Legal Indicator Survey 2004

To complement its assessment of insolvency legislation, the EBRD launched the 2004 Legal Indicator Survey. The aim of the Survey was to assess how the legislation, together with the local institutional framework (including rules of procedure, courts and judges and insolvency administrators), in each country works to create a functional (or dysfunctional) insolvency legal regime.

EBRD New Legal Indicator Survey 2003

In 2003, the EBRD launched a New Legal Indicator Survey (NLIS) based on a revised methodology. It substitutes the extensiveness ratings with sector assessments prepared by the Bank’s own legal staff assisted by expert consultants. The main objective of all these assessments is to measure “laws in transition”, i.e. the extent to which legal rules comply with international standards. The legal effectiveness ratings derive from empirical case studies measuring “laws in action”, i.e. the extent to which the legal regime provides an efficient result in a given practical situation. EBRD sees these two aspects of the legal framework (laws in transition and laws in action) as essential benchmarks to measure legal reform and point to the strengths and weaknesses of individual countries.

In 2003, the NLIS focuses on a single legal sector, secured transactions. The sector assessment (Secured Transactions Regional Survey) and the case study on enforcement are used to make cross-country comparisons of progress in legal reform and to highlight areas where further efforts are needed both in the adoption and implementation of reforms in this area of the law.

See the results published in the EBRD Transition Report 2004.

The governments of Japan, the United Kingdom and the United States provided support for the EBRD Regional Survey on Secured Transactions and the New Legal Indicators Survey and their analysis. This funding is gratefully acknowledged.

The EBRD also gratefully acknowledge the generous participation of our legal partners in the project, in particular the law firms Allen & Overy and Chadbourne & Parke LLP.

Legal Indicator Survey 1995-2002

The Legal Indicator Survey is a perceptions-based tool launched in 1995 to measure and analyse countries' legal systems. It takes a snapshot of legal reform as perceived by local lawyers. It assesses the extent to which key commercial and financial laws reach international standards (extensiveness), are implemented and are enforced (effectiveness). It also highlights general trends about how perceptions of practising lawyers vary compared with assessments of the law on the books. An understanding of both the substantive law and how the law works in practice is important when developing a robust and effective legal system designed to attract investment.

The need for a perception-based tool was identified in the early days of transition following the extremely rapid evolution of legislation. The survey helps understanding the motivation of the changes and assesses how successfully legislation has been implemented. The first two surveys were conducted in 1995 and 1996, and focused on laws promoting foreign investment. In 1997, the survey shifted focus to commercial and financial laws such as secured transactions laws, company laws and insolvency laws, looking at their dissemination, and judicial and administrative enforcement.

Survey preparation
An extensive questionnaire was sent to lawyers, academics and law reform agencies annually. Responses were analysed to provide a numerical rating system for each country. Ratings ranged from 1 to 4+ for the extensiveness and effectiveness of commercial and financial laws. The indicators were based on respondents' perceptions rather than on an objective assessment of the laws. The EBRD reviewed and compared these perceptions with its experience as a user of the legal system. To arbitrate among competing views of respondents, the EBRD sometimes relied on its own experience as a user of the legal system.

More information:What local lawyers think: A retrospective on the EBRD's Legal Indicator Surveys (0.2Mb) , Law in Transition, Autumn 2002.

Survey results
The results were published annually in the legal annex of the EBRD's Transition Report. See for example the 2002 results (0.1Mb).