Comparing extensiveness and effectiveness

A comparison of the assessments of the insolvency laws of each country with the results of the survey  (0.1Mb). The first observation worth noting is the high correlation between the scores obtained on the assessment and the scores obtained under the survey. This appears to demonstrate that the extensiveness of the law will generally dictate the effectiveness of the application of that law. This is not true for all countries, however. In Bulgaria, for example, the courts appear simply to ignore legislative provisions mandating strict time limits.

Secondly, virtually all countries achieve a higher score on the assessment than on the survey. This suggests that while current laws in many countries are approaching international standards in many respects, legal institutions responsible for their implementation need further reform throughout the region. It also reflects the range of international institutions providing legislative assistance and the relative dearth of those providing help with implementation.

Recognising the importance of having good legislation, many countries may have concentrated resources (with varying degrees of success) on achieving this goal first. However, a highly effective insolvency regime requires much more than good laws and good procedures. In many cases, it is the product of a well-trained and honest judiciary, strong relationships between commercial actors and a healthy regulatory framework with highly qualified insolvency administrators. Simple transplantation of good laws from abroad will not necessarily give rise to an effective regime.

One almost universally consistent finding is that the countries with the best legislation also performed best in the survey – Armenia, Estonia and Poland in particular. Not surprisingly, these tend to be the countries that have identified insolvency law reform as a priority. Poland, for example, which has come under more general criticism for issues such as judicial competence, recently requested the EBRD’s technical assistance with the training of its insolvency judges under a project completed in 2003.