### LEGAL ASSESSMENT

### USAID/CAUCASUS

### GEORGIA

### 04/27/00

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### Primary Authors:

### Gene Gibson, USAID/Caucasus

Claudia Dumas, EE/DGSR/ROL

### Robyn Goodkind, Management Systems International

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### TABLE OF CONTENTS

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####### LIST OF ACRONYMS

### INTRODUCTION

###  A. Objective of Assessment

### Background and Context

B.  **Assessment Overview**

##### Methodology and Team

I.  **RULE OF LAW**

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A.  **Introduction and Overview**

B.  **Judiciary**

##### Procuracy and Law Enforcement

C.  **Executive**

D.  **Parliament**

##### Bar

E.  **NGOs, the Public and Human Rights**

F.  **Law Schools and Legal Education**

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II. **COMMERCIAL LAW**

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A.  **Introduction and Overview**

##### Progress to Date

B.  **Key Constraints**

C.  **Overview of Legal Issues**

D.  **Priority Needs**

# RECOMMENDATIONS

# Rule of Law

# Commercial Law

# 

# ANNEXES

# A. Assistance for Legal Reform in Georgia

####### B. Persons Met

# C. Legal Databases and Publications

##### D. Court Caseloads {#d.-court-caseloads .unnumbered}

**E. Gudauri Recommendations**

# F. Relationship of Legal Professionals in Georgia

#  Human Rights Watch Letter

> **H. SO 2.2 Impact**
>
> **I. Bibliography**

#  

# LIST OF ACRONYMS

ABA/CEELI American Bar Association/Central and Eastern European Legal
Initiative

CL Commercial Law

COE Council of Europe

COJ Council of Justice

DG Democracy and Governance

DOJ United States Department of Justice

ER Economic Restructuring

EU European Union

FSU Former Soviet Union

GYLA Georgia Young Lawyers Association

IDP Internally Displaced Person

JTC Judicial Training Center

MOI Ministry of Interior

MOJ Ministry of Justice

NIS Newly Independent States (of the former Soviet Union)

NGO Non-governmental Organization

ROL Rule of Law

SMW Small and Medium Size Enterprises

S.O. Strategic Objective

TOT Training Of Trainers

## UN United Nations

USG United States Government

UNDP United Nations Development Program

WB World Bank

WTO World Trade Organization

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### I. INTRODUCTION

**A. Objective of Assessment**

The purpose of this assessment is to provide USAID/Caucasus/Tbilisi with
information, analysis, and recommendations that can be used to develop
its legal reform activities for Georgia from FY2000 to FY2003. The
assessment focuses on a comprehensive range of sub-sectors identified in
part by the Strategic Plan for Georgia that USAID prepared and approved
in 1999. Two general substantive sections comprise this assessment: Rule
of Law (ROL) and Commercial Law, the latter limited to those issues
directly related to legal reform. Other matters related to economic
growth are not covered. The assessment attempts to demonstrate the
synergy between the two sections. Discussion and analysis on issues
related to anti-corruption are infused throughout both sections of the
assessment.

# B. Background and Context

Georgia's legal reform progress and priorities must be seen in the
context of the country's remarkable recent history. After its breakaway
from the Soviet Union, the former republic endured four years of violent
ethnic conflict and political chaos. In 1995, Georgia began in earnest
the arduous task of building a democracy. Like all former Soviet
republics, Georgia has found this process tedious and complex, and one
that cannot be completed quickly or painlessly. Persistent internal and
regional tensions have made the endeavor especially trying for Georgia,
a country of less than 5.6 million people who represent at least eight
distinct ethnic groups. Nevertheless, in the past five years, Georgia
has caught up with, if not surpassed, most of its neighbors in advancing
toward a free-market democracy.

Accomplishments have been impressive in the area of legal reform. In
1995 a new Constitution was adopted and later that year presidential and
parliamentary elections resulted in the installment of a core cadre of
reformers led by President Eduard Shevardnadze. In 1999, parliamentary
elections were again held, and presidential elections were held April 9,
2000. Parliament has enacted approximately 785 new laws, including a
Civil Code, Civil Procedure Code, Criminal Code, Criminal Procedure
Code, Administrative Code, and the commercial legislation needed for
accession to the World Trade Organization (WTO). Due to an unprecedented
merit based selection process 184 new judges have been seated, judicial
salaries have dramatically increased, and the entire court
administration system has been restructured and now includes an
appellate court system.

Despite these accomplishments, much work remains before firmly
establishing the rule of law in Georgia. The political will needed to
sustain Georgia's momentum is critical. While Georgia's reform-minded
leaders are credited with impressive results to date, the political
environment is volatile and unpredictable.

After several years of intensive activity, by early 1999 the reform
process had generally began to lag. In response, the USG and the
Government of Georgia (GOG) launched a high profile initiative known as
the Five-Point Program to serve as a catalyst for reinvigorating the
reform movement. As a consequence of the Five-Point Program, judicial
reform initiatives were accelerated and several pieces of critical
legislation designed to facilitate the fight against corruption were
passed. As a follow-up to the Five-Point Program, the Four-Point Program
was launched in February 2000. The latter program focuses on: 1)
anti-corruption, 2) revenue enhancement, 3) civil service and
administrative reform, and 4) improving the budget and controls over
government expenditures.

The recent transformation of the Supreme Court further demonstrates the
fluid environment for legal reform. Lado Chanturia, one of the leading
advocates for judicial reform and former Minister of Justice, was
appointed Chairman of the Supreme Court in June 1999. In addition, 16
new reform-oriented justices have been appointed to the Supreme Court.
Moreover, a host of new actors will appear as the decentralization
process accelerates.

Nevertheless, ongoing support by reformers, in the executive branch and
parliament, is not guaranteed. Continued commitments to reform are
especially critical in politically sensitive sectors such as law
enforcement and in particular the procuracy, as well as other
bureaucratic apparatuses, especially in view of several recent
anti-reform actions. For example, in a 1999 session, parliament weakened
a progressive Criminal Procedure Code with amendments that repealed
important human rights protections. Even more disturbing was an April
1999 amendment to the Law on Courts of General Jurisdiction (Law on
Courts) reinstituting the use of lay judges -- unqualified, politically
influenced vestiges of the Soviet era. Such lay judges would defeat the
purpose of having a merit-based selection process for judges.
Fortunately, this amendment was repealed. But now judicial reform is
threatened by late salary payments. These examples demonstrate the
fragility of judicial reform.

The stability of the state of Georgia itself poses another threat. The
critical assumption to USAID's Strategic Plan for Georgia that a general
state of peace will endure, cannot be taken for granted or
underestimated. Moreover, the economy is in dismal shape.

# C. Assessment Overview

The assessment confirmed that Georgia has made impressive strides in
legal reform, particularly in the development of a legislative framework
and judicial reform.[^1] Such advances, unusual for the Former Soviet
Union (FSU), reflect the reform-minded leadership of parliament, the
judiciary and some officials in the executive branch, and the openness
with which Georgian reformers have welcomed support from the west. The
reformers have pushed for integration with the west by joining the
Council of Europe and the WTO.

Still, legal reform is incomplete. Numerous gaps and inconsistencies
exist in the laws and a few critical pieces of legislation are missing.
While the quality of legal drafting has improved, laws often lack the
requisite specificity for implementation and conversely in many
instances prove overly detailed and restrictive. Parliament will need to
become more vigilant in conducting oversight to determine if the laws
are being implemented and if not, identify and correct the impediments.
Furthermore, the public needs to have greater input into parliament's
and the executive branch's decision-making process.

Executive branch authorities will need to focus on drafting and
promulgating implementing regulations[^2] and developing the capacity to
ensure compliance with the laws and regulations. The new Administrative
Code will provide a valuable legal tool in this process, but the
implementation of this Code constitutes a potentially overwhelming task.
The Administrative Code, with its Freedom of Information section, will
provide one of the strongest weapons in the fight against corruption by
providing transparency and accountability.

Georgian reformers and the donor community have, with significant
success, focused on judicial reform and in particular, the judicial
qualifications exams. But results are at risk if judicial reform does
not continue, and if the needs of other legal institutions, specifically
the procuracy and the Bar, are not addressed. The reform of these
institutions presents a huge undertaking. The assessment identifies the
assistance provided by other donor programs, in particular, the World
Bank (WB), the European Union (EU), the United Nations Development
Program (UNDP) and the United States Department of Justice (DOJ). Now
more than ever, donors must coordinate their efforts in order to
leverage resources so as to optimize the comparative advantage of each
donor (see *Annex A, Assistance for Legal Reform in Georgia*).

This assessment presents extensive recommendations considered necessary
for the continued success of Georgia's legal reform movement. However,
the assessment recognizes that the recommendations are beyond the
manageable interest of one implementing organization or even one donor.
In order to sustain existing accomplishments and undertake critical new
areas of reform, it will require expanded assistance. Despite progress
to date, a serious gap exists between institutional reform and public
access to justice. An overarching theme that emerges from the assessment
is that the public needs to be aware of and tangibly benefit from legal
reform, and legal institutions need to have the capacity to respond to
this demand. This must happen in Tbilisi and regions outside of Tbilisi.
USAID's comparative advantage in the civil society sector can prove
paramount to reaching this objective.

The Mission will require flexibility to implement its program. As
indicated in the background discussion above, the legal and political
environment remains fluid. The very real possibility exists of
governmental changes that will positively or negatively affect the
constituencies for legal reform. President Shevardnadze's political
party did well in the October 1999 parliamentary elections. But while
many reform-oriented MPs were elected, they did not always receive
important committee assignments. The Five-Point Program and now the
Four-Point Program demonstrate the need for a flexible and rapid
response approach.

# D. Methodology and Team

Recognizing the integrated nature of legal reform activities, the
Democracy and Governance (DG) Office and the Economic Restructuring (ER)
Office prepared a joint legal assessment. The assessment has two
sections. The first section examines ROL issues as identified in
USAID/Caucasus Strategic Objective (S.O.) 2.2: *Legal Systems that
Better Support Implementation of Democratic Processes and Market
Reform*. The second section assesses commercial laws germane to S.O.
1.3, *Accelerated Development and Growth of Private Enterprise.* Legal
issues pertaining to anti-corruption are integrated into both sections.
The Mission Strategy does not have a specific anti-corruption S.O.,
since anti-corruption components are incorporated into all of the
Mission's strategic frameworks. The final section, Recommendations,
provides concrete suggestions for future legal reform activities.

The assessment examines progress to date, targets priority needs,
identifies legal and institutional impediments to legal reform,
determines the extent to which donor assistance addresses these needs
and proposes recommendations for future activities. Legal and
institutional strengths, weaknesses, and opportunities are assessed.

Gene Gibson, ROL Adviser, DG Office, USAID/Caucasus, served as Team
Leader and assisted with the rule of law assessment. Robyn Goodkind, an
attorney and senior associate with the consulting firm Management
Systems International, had primary responsibility for the rule of law
section and was assisted by Ketty Makharashvili, ROL PMS, DG Office,
USAID/Caucasus. Claudia Dumas, the senior ROL attorney at EE/DGSR/ROL,
had primary responsibility for the commercial law section. Ms. Dumas was
assisted by James Watson, Deputy Director ER Office, USAID/Caucasus, and
Geoff Minott, Tax & Fiscal Specialist, ER Office, USAID/Caucasus. Carol
Horning, Regional Chief, DG Office, USAID/Caucasus, contributed to the
discussion on anti-corruption issues. The assessment was conducted in
Georgia during the period September and October 1999, and revised and
updated in March 2000. More than 100 people in Georgia were interviewed
for the assessment, including other donor representatives and Georgian
partners and stakeholders in four regions: Tbilisi, Rustavi, Gori, and
Kakheti (see *Annex B, Persons Met*).

# RULE OF LAW

**A. Introduction and Overview**

The ROL analysis in this assessment addresses the progress to date and
priority needs for the development of a legal framework in Georgia that
will provide the public with access to effective mechanisms for justice.

In a society based on the rule of law, citizens expect the state to
protect their legal rights. Citizens understand their rights under law;
they know how to seek redress for grievances; they have access to
competent legal counsel; they receive due process; their human rights
are respected; and they have confidence that the judiciary will provide
fair and predictable resolution of their legal problems. This public
trust occurs only when legal institutions and mechanisms function
properly. Laws must be well-drafted; regulations to implement the laws
must be in place; administrative processes and procedures must be
available and functional; courts must have sufficient capacity,
knowledge, and integrity; investigative bodies must be accountable;
judgements must be enforced; lawyers must be qualified; and civil
society must be an active participant, on behalf of the public, in
government processes.

As this assessment describes, Georgia has made progress towards
establishing a society based on the rule of law. However, the assessment
focuses less on accomplishments and more on the work that remains. In
order to determine how USAID can best assist Georgians in the legal
reform process, this assessment attempts to highlight the most important
needs against which tangible impact can be achieved in a four-year
period. The intention is to build on results reached to date.

A few common themes help to set the stage. First and foremost, the
public remains skeptical that the State protects individual interests.
While a few individuals expressed confidence in legal institutions, the
team concluded that most Georgians are still unaware of their legal
rights, distrust legal regimes, avoid formal avenues of resolution, and
are unimpressed with the progress of reform. This lack of confidence in
the system helps to sustain the cycle of corruption that Georgians
characterize as a tradition of "taking care of one's own" in a society
where no assurance exists that civil servants will serve the public.
This view was borne out in a WB focus group. [^3]

The gap between legality and reality that characterizes much of
Georgia's legal framework also helps explain public skepticism. A new
Constitution, hundreds of new laws, and countless amendments have been
enacted, but many laws are either vague or over-complicated, and
implementation and compliance are poor. In many cases, regulations have
not been passed, and a source at the Department for Enforcement of
Judgments reports that 70% of civil and administrative judgements go
unenforced.

Legal professionalism poses another area of concern. Recent reforms have
produced a more competent judiciary, but judges require additional
training and the Law on Judicial Discipline, passed in February 2000,
needs to be implemented. The legal profession is wholly unregulated, but
parliament plans to hold hearings on a draft Law on the Bar in April
2000. The procuracy and other law enforcement agents have wide and
unchecked authority and police abuse is rampant. Administration of
justice is often conducted by a network of self-interested public
officials concerned with neither the defendant nor the victim.

The salary structure for civil servants slows reform efforts. Judicial
salaries have been significantly increased, but the government's payment
record is spotty. Procurators make approximately 30 Lari per month, and
police even less. The government has promised to raise procurator
salaries and judicial salaries again, but cynicism abounds as to the
political will and the availability of financial resources to implement
such pledges. Payment of an adequate salary is one of the corner-stones
of judicial reform.

Compared to just five years ago, a strong civil society now exists with
an active NGO community. Yet legal, cultural, and economic impediments
frustrate NGO efforts. Building civil society is an essential ingredient
in the development of ROL because NGOs can serve as the link between
citizens and the legal institutions they need to trust. Donors often
provide "capacity-building" support to NGOs, but legal advocacy training
and training in substantive legal matters are also needed.

To date, USAID's ROL activity in Georgia has focused on strengthening
institutions, such as the judiciary, and the legislative and executive
branches; providing assistance to parliament with assessments of draft
laws; and working with NGOs on advocacy and media activities. In USAID's
new Strategic Plan for Georgia, SO 2.2 seeks to continue support to
legal institutions but places new emphasis on generating the public
demand for effective performance and transparency of such institutions.
Thus, access to justice represents a guiding theme in this assessment
and the recommendations that follow. The mission-wide priority of
extending impact to regions beyond the capital is also addressed.

#### Judiciary

[1. Progress to Date]{.underline}

In the FSU, Georgia has taken the lead in instituting serious judicial
reform measures. This progress is especially impressive given that the
judiciary in Soviet society suffered from poor working conditions and
inadequate training. Moreover, the concept of an independent judiciary
was nonexistent. Telephone justice was common and the role of the
judiciary was to rubberstamp policies and decisions for the bureaucracy
− in particular, the procuracy and the communist party. Consequently,
the populace in Georgia and other former Soviet republics is not
accustomed to judges having the independent authority to administer
justice. On a scale with other legal professionals during the Soviet
period, judges had the least prestige and influence and procurators the
most. Not surprisingly, all of these conditions contributed to a state
of chronic corruption -- affecting not just the judiciary but all the
public and private sector actors who regularly interact with the
judiciary.

Thus, Georgia has faced three central challenges in its judicial reform
efforts: first, to create a legal and policy environment that empowers
the judiciary to do its job; second, to assure that the judiciary is
qualified; and third, to generate public trust in the judiciary. The
absence of any one of these conditions will render the judiciary
ineffective.

The Law on the Courts, enacted in 1997 and amended several times,
launched a series of judicial reform measures. First, it provided for
the establishment of a Council of Justice (COJ), a tripartite body
charged with overseeing judicial reform. Previously, the Ministry of
Justice (MOJ) had supervised the judiciary. Under the law, one of the
COJ's primary duties is to implement a process for judicial
qualification. With assistance from USAID, the COJ designed and now
implements a judicial qualification exam and vetting process that has
resulted in the appointment of 184 newly qualified judges. Salaries for
the new judges have been increased from approximately 50 Lari up to 500
Lari (U.S. \$267), although the government's payment record is poor.

Another important development, pursuant to the Law on the Courts, has
been the establishment of two District Courts in Tbilisi and Kutaisi
with appellate chambers. The Autonomous Republics of Abkhazia and
Adjaria have their own Supreme and Constitutional Courts. The
jurisdictional authority between these Courts and the national Supreme
and Constitutional Courts in Tbilisi has not been fully defined.

In addition to USAID support, these fundamental reforms are supported by
several donor-sponsored activities. The WB has taken the lead in
providing assistance for court administration, case processing and
courthouse rehabilitation. The EU, WB and Soros have extensive judicial
training programs with the Judicial Training Center (JTC). Soros is also
considering working with the Tbilisi State University Law School. UNDP
provides assistance to the Ombudsman Office, Parliament's
anti-corruption committee and the Constitutional Court's public outreach
program. The EU and UNDP have a variety of gender legal activities.

Overall, these advances have helped curb corruption in the judicial
sector, improve the competency of judges, and contribute to a more
independent judiciary. The judicial qualification and merit selection
process, which is now nearly sustainable under the auspices of the COJ,
is recognized as one of the most successful judicial reforms in the FSU.
Legal professionals in Georgia note that many of the newly seated judges
are more efficient, diligent, and knowledgeable, compared to the old
judges, particularly in the capital.

[2. Key Constraints and Priority Needs]{.underline}

Reform of the judicial sector is incomplete, and progress to date is at
risk without additional action. While judicial reform has received
widespread publicity, the public remains skeptical and is waiting to see
results and how judicial reform improves their lives. It will take time
before the public believes that the judiciary has the mandate and the
ability to administer justice. Moreover, the qualification exams, while
an important first step, are only the beginning in a long process of
judicial reform. The needs discussed below attempt to capture the key
constraints to a functional and independent judiciary.

*a. Judicial Independence*

Georgians and donors widely use the term "judicial independence," but no
clear criteria or common definition applies. Western definitions of
judicial independence include a complex set of elements.[^4] Developing
a common definition of judicial independence in Georgia would allow
Georgians and their donor counterparts to work with a uniformly
understood set of goals and criteria. This need has become especially
pronounced in the past year as judicial reform has received increased
attention and, in the process, several institutions now claim
responsibility for various issues concerning the judiciary (see
discussion in II(B)(3) below on judicial institutions).

Georgian judges typically describe independence as the ability and will
to decide cases on their merits without undue influence. In this regard,
the GOG's failure to pay an adequate salary in a timely manner poses a
grave threat to judicial independence, since judges could become
dependent on rent seeking. Furthermore, while many judges would not
succumb to bribe, they could feel pressured by extensive family and clan
networks. In fighting corruption, addressing conflict of interest issues
will prove critical.

Article 82(3) of the Georgian Constitution provides for judicial
independence, but Article 91(1) of the Constitution provides that the
Procurator's Office is also part of the judiciary. This has led to
confusion; several judges interviewed said that as a practical matter
the procuracy is part of the executive branch. But supporters of the
current system argue that the current system is similar to the French
magisterial system. The European Court of Human Rights has resolved
similar disputes by examining the [extent]{.underline} to which the
procuracy directly oversees both the investigation of cases and
represents the prosecution at trial. Additional issues relating to
judicial independence concern the degree to which judges are responsible
for judicial discipline, court administration and training.

*b. Judicial Discipline and Ethics*

The Parliament passed a Judicial Disciplinary Law in February 2000. A
widespread consensus existed among parliament, the COJ and judges on the
need for such a law in the battle against corruption. Most judges,
however, have criticized the law arguing it gives too much authority to
the COJ and the basis for initiating a disciplinary procedure are vague.
Judges argue the judiciary should have greater responsibility in
judicial discipline in order to retain its independence. Moreover, the
judges believed they were not adequately consulted when the COJ and
parliament drafted the law.

When the Conference of Judges convenes in June 2000 for its first
meeting, the Conference will likely adopt a Judicial Ethics Code. The
COJ has prepared a draft Code. USAID and ABA/CEELI will initiate
systematic and widespread training on judicial discipline and ethics and
assist with organizing the May 2000 meeting of the Conference (see
discussion in II(G)(2)).

While the judicial reform activities has brought a core of reform-minded
judges to the bench, there needs to be greater transparency and the
public needs an increased understanding of what is really happening in
the courtrooms. Such factual information will inform anti-corruption
efforts and prove far more useful than the anecdotal information that
now circulates. An informed and involved civil society will help
guarantee proper judicial process.

In order to help deter and remedy corruption, a court monitoring
activity could be implemented on the ground by qualified NGOs and/or
business associations (for commercial law cases). Violations of possible
judicial ethics and procedure could be reported to judicial disciplinary
authorities. The activity could be restricted to the courtroom, or could
extend beyond the courtroom to monitor enforcement of civil and
administrative judgements. While shining a light on possibly improper
judicial activities, it would assist the judges by reporting accurately
on court decisions. Many erroneous stories appear in the press -- often
intentionally. Judges, correctly so, do not discuss their cases with the
media and are not able to respond.

Another activity would be to conduct a Bar poll that periodically
queries lawyers, advocates, notaries, procurators and other legal
professionals on the progress of judicial reform and the performance of
judges. As a follow-up to the poll, a conference could be held to devise
solutions to the problems identified.

*c. Judicial Training*

Judicial training represents a priority need, but proves very
problematic to address. Training is needed in practically all
substantive areas of law and judicial skills, especially how to apply
the law in specific cases and legal drafting. These problems exist
nationally, but are especially severe outside of Tbilisi and Kutaisi.
Long-term sustainability of judicial training requires two key
conditions: a corps of competent Georgian trainers and guaranteed state
funding.

The EU/TACIS program has prepared a comprehensive inception report
addressing the retraining of Georgian judges. The EU's primary
counterpart in this activity is the Judicial Training Center and the key
task areas are: 1) institutional strengthening, 2) human resources
development, and 3) public awareness building. Working groups have been
formed in the following areas: 1) criminal law and procedure, 2)
administrative law and procedure, 3) civil law, 4) human rights/women's
rights, 5) market economy/non-legal training/international law, and 6)
civil procedure and judicial management. This activity intends to
develop 120 curricula in the form of modules.

USAID has identified a few substantive areas of law for judicial
training. Training on the new provisions of the Law on Judicial
Disciplinary, as noted above, will be necessary. Training on the
Administrative Code, a centerpiece of the efforts to ensure transparency
and fight corruption, must be a priority. The Commercial Law section of
this assessment identifies specialized topics for judicial training, as
well as training of other legal professionals. Depending on the
curriculum that the JTC develops, USAID could consider fulfilling the
need for training on select constitutional, criminal, local government
and civil law provisions.

One of the elements of an independent judiciary is the involvement of
judges in directing their own continuing legal education. To help meet
this challenge, in February 1999 USAID sent ten newly qualified judges
to the US on a study tour and to receive training in adult learning
techniques at the National Judicial Training Center in Nevada**.** In
order to ensure that the professional needs of the judiciary are met,
judges must have substantial input in JTC policy decisions. The
rationale for this principle is that judges are best qualified to assess
their own needs. Judicial participation on the JTC board could be
provided through the Judges of Georgia association, the Conference of
Judges, the Supreme Court, or all of the above. Regardless of the
process, the importance of majority judicial participation cannot be
overstated.

Donor coordination is always important, but is especially important in
judicial training in Georgia at this time. The primary donors are the
EU, WB and Soros. Even if USAID assumes responsibility for certain areas
of training, it must resolve questions of implementation, specifically
whether USAID-supported training will be provided through the JTC or
through other mechanisms. USAID will need to analyze the capacity of the
JTC to provide quality training in a timely manner to a sufficient
number of judges. USAID will also need to reconcile the urgent need for
judicial training with the need for training of other court-related
personnel, such as legal assistants, marshalls (aka court executors or
bailiffs) and notaries, and determine whether support for such
non-judicial training constitutes a priority. This can only be answered
after gaining a full understanding of the scope of the EU, WB and Soros
training assistance.

######## d. Information

Every judge interviewed spoke of the critical need for copies of laws,
commentaries on the laws, and copies of court decisions. Parliament has
enacted approximately 785 new laws since 1995 with numerous amendments;
thus, the information gap is understandable. Moreover, the reform laws
introduce democratic processes and a market economy and the judges need
commentaries and manuals to familiarize themselves with these new
concepts. The Department of Logistical Support of General Courts,
nominally under the Supreme Court, has the responsibility to furnish
judges with legal materials. But judges report they receive very little
from the Department and must use their own money to acquire copies of
laws and other materials.

The lack of information poses a problem for all legal professionals −
not just judges. The Ministry of Justice, with WB support, publishes the
Official Gazette which prints copies of new laws and amendments. Legal
professionals usually have a stack of Official Gazettes in their office
and if they need to do research, they try to remember in which issue a
law was published. Tracking amendments proves especially problematic.

The Parliament will soon have its electronic legal data base on line and
available for public access. As the WB's judicial reform project
progresses, the larger courthouses will receive computer equipment and
have electronic access to judicial decisions. But this could take
several years and internet connectivity outside major cities is poor.
GYLA has a law library in Tbilisi that is open to the public, but as a
practical matter only GYLA members use the library. There are no
courthouse law libraries in Tbilisi or other cities and the WB
courthouse rehabilitation project may not provide funds for libraries.
The Parliament has an outdated law library and the law library at
Tbilisi State University is reportedly woefully inadequate. The JTC
library, while inadequate now, will receive EU assistance to upgrade.

Several of the ROL donors fund the preparation and publication of
commentaries. But there has been little coordination as to who is
funding what commentaries and how the commentaries are distributed.
*Annex C, Legal Databases and Publications*, prepared by USAID for this
assessment, offers a draft summary of databases and other sources of
legal information in Georgia currently available.

*e. Court Administration and Case Management*

Courts are over-burdened and ill-equipped to handle increasing
caseloads. *Annex D, Court Caseloads* provides a breakdown on the
caseload at the various courts. The judges work long hours and
unconfirmed reports indicate they do not always meet the Civil Procedure
Code requirements for filing judgements. Unrealistic deadlines can
adversely affect due process if judges do not have adequate time to
decide a case and prepare their opinions.

Several reasons explain the delay. First, a backlog of old cases are now
being heard, and an increasing number of new court cases are being
filed. Second, a delay in appointments has left judicial seats vacant,
putting an additional strain on sitting judges. Third, insufficient or
non-existent computer equipment, outdated courthouse facilities, and an
under-developed court administration system further aggravates the
problem (little attention has been paid to developing the capacity of
marshalls, clerks, and legal assistants.

The WB judicial reform project will develop and/or strengthen case
management procedures. This will include guidelines and procedures to
harmonize docket and document management, standardizing documents for
the court system and providing equipment.

*f. Funding for the Judiciary*

The problem of low salaries and non-payment of salaries for government
officials impedes reform throughout the legal sector. The average
judge's salary has been increased from approximately 50 Lari a month, up
to 500 Lari per month (after taxes about 375 Lari, U.S. \$210) for those
judges who have passed the qualification exam[^5]. But even 500 Lari a
month may be insufficient for a living wage. Chronically late salaries,
especially for judges outside Tbilisi, have further eroded many judges
confidence that judicial reform will succeed. The salary problem is an
invitation to corruption and many perceive this as a lack of GOG support
for the reform process.

After a very contentious debate, in February 2000 the Parliament
approved a budget that in theory should cover judicial salaries.
However, the budget fails to provide sufficient funding for court
operating expenses. The WB, as part of its judicial reform package,
proposed that 70% of court revenues (e.g. taxes, fees and penalties)
should go toward recurrent operating costs. Subsequently, the President
issued Decree #633 of November 27, 1999, instituting the 70% solution.
Some Georgian officials, however, interpret this decree broadly and see
it as a mechanism to pay judicial salaries. The very real possibility
for abuse exists if judges can pay their salaries from the fines they
collect.

Determining the extent to which the GOG can provide adequate funding for
the judiciary proves very difficult. A comparative budget analysis of
the court system that shows how allocations are expended could be a
useful tool for demonstrating how current budgets can be re-configured
to support higher salaries. Similar surveys in other countries have
proved effective in identifying ghost employees. Clarification on any
other benefits that the judges receive, such as housing allowances and
pensions, would also be useful.

*g. Judicial Recruitment*

The judicial qualification exams are the corner-stone of judicial reform
and have received widespread acclaim in Georgia and abroad. The COJ,
with support from USAID and ABA/CEELI, has prepared and administered six
exams since May 1998. The first four exams were prepared and printed in
the US, but the last two exams were prepared and printed in Georgia, a
significant advance in the COJ's sustainable capacity. Another
noteworthy accomplishment is that the COJ has provided technical
assistance to the Governments of Moldova and Tajikistan to assist them
prepare for administering judicial qualification exams.

By all accounts, the first three rounds of exams were fair and
transparent. The March 1999 exam led to unconfirmed reports of improper
practices because of the unusually high number of candidates that
passed. A number of logical causes could explain the pass rates and this
report makes no conclusion.

The September 1999 exam raised concerns owing to the very low pass rate
(13 candidates out of 390 passed the exam). The first four exams were
held in less than one year, but now they appear to be given on a regular
bi-annual schedule. At a minimum, the COJ should review the examination
process to ensure that a consistent standard of difficulty is used, as
well as a reasonable examination schedule that is designed to replace
losses caused by normal attrition.

One possible explanation for the recent low pass rates, is that the best
candidates may have now taken and passed the exam. To become a judge a
person must be at least 30 years old. Thus, bright, capable young
lawyers will need to wait a few years before they can become judges. The
ten-year terms for the old judges who did not take the exam will expire
in 2001. They may have their terms extended if replacements are not
available; especially, those judges sitting in the less desirable,
remote, rural regions. In addition to a smaller talent pool, lack of
funding for the judiciary is also a deterrent to recruiting new judges.

A related issue is the process of vetting and placement. Some judges and
other legal professionals have questioned whether the appointment of
judges is fair and transparent, or whether favoritism or other means of
undue influence are affecting this process. Safeguards for the
appointment process do not exist to the extent they do for the
qualification process, and assistance to examine ways to help improve
this critical stage of judicial selection could be considered. Closer
attention should be paid to the character portion of the judicial
qualification process. It is not clear how and to what extent this
requirement is being fulfilled.

######## h. Civil Law and Common Law Systems

As part of the dialogue on judicial independence, a related question
concerns how Georgians define their legal system. Georgia is a civil law
country; but many Georgians point to radical changes in how the legal
system operates. For instance, an adversarial approach is developing in
courtrooms between opposing counsel. Judges are now more likely to write
a dissenting opinion. In many civil law countries a dissenting or
concurring opinion is not written or published, nor are dissenting votes
noted. In Georgia, the impact of a dissenting opinion was vividly
demonstrated when Gia Meparishvili, then serving on the Constitutional
Court, wrote his opinion finding the requirement that sitting judges
must take the judicial qualification exam did not violate the
Constitution.

Georgian judges do not rely on stare decisis and would reject the
characterization that they are making laws. Nevertheless, judges face
the dilemma of adjudicating cases de novo and filling legislative gaps.
This often leads to inadequate adjudication and inconsistencies in
judicial decisions. Consistency in decisions is especially important in
light of corruption and judicial conflicts of interest. While rejecting
the doctrine of legal precedent, judges often find decisions by high
ranking and/or well regarded judges persuasive. The problem arises,
however, that only the Supreme Court and Constitutional Court publish
their decisions and these decisions are not widely distributed.
Moreover, judges need to develop a more expository writing style that
discusses the facts of a case and the legal authority for their
decision.

Perhaps a hybrid system is emerging that integrates principles and
practice from both models -- adapted to the Georgian environment. In any
event, the legal reform process would benefit from clarifying these
issues so judges better understand their role, produce consistent
decisions and harmonize judicial practice. In particular, a peculiar
feature of the judicial system, that greatly delays case processing, is
that when cases are appealed a new trial on the merits is held. The
court does not limit itself to hearing the errors allegedly committed in
the court below.

######### 3. Judicial Organizations

Several public and private organizations have responsibilities,
potentially overlapping, relating to the judiciary.

######## 

######## a. Council of Justice

The Council of Justice (COJ), founded in 1997 pursuant to the Law on the
Courts, is the public body responsible for coordinating judicial reform.
In particular, the COJ prepares and administers the judicial
qualification exams, the competition for seats and the judicial
candidate vetting process. The COJ then makes recommendations to the
President who appoints the judges. The COJ also has a role to play in
judicial discipline. The President chairs the COJ and each of the three
branches of government has four representatives. The COJ has a permanent
staff, which is managed by the Secretary, who the President appoints.

Many people saw the COJ as an interim body that would dissolve after the
completion of judicial reform. But the Law on the Courts is silent on
this issue and no other legal source for this claim can be found. With
so many new judges on the Common Courts and the Supreme Court, judges
and others argue that the COJ should play a reduced role in court
administration and judicial discipline so as to ensure judicial
independence. Others argue that the COJ is an effective and progressive
body and its mandate should be expanded to include other legal reform
oversight functions, such as administering qualification exams for the
procuracy and bar.

Two potential concerns arise as to expanding the COJ's mandate. First,
if the COJ continues to expand its role in judicial reform, the
government should consider changing the composition of the COJ so that a
majority of the council represents the judiciary. Second, if the COJ's
mandate is expanded, which would require amending the law, to include
other sectors of legal reform, such as the procuracy, it could create an
unwieldy body attempting to accomplish too many objectives. Moreover,
providing procuracy representation on the COJ may strengthen the
argument that the procuracy is part of the judiciary. Such a scenario
could threaten the objective of judicial reform, since interests would
be further divided. Another option is to give the COJ responsibility for
qualification of legal professionals, including judges, procurators, and
for a limited period −lawyers, and place other functions associated with
judiciary with the judiciary.

######## b. Conference of Judges

A plenary of all Georgian judges, except the Constitutional Court, will
comprise the Conference of Judges, and the Chairman of the Supreme Court
will serve as chair. The Law on the Courts provides for establishing the
Conference and gives the Conference a broad mandate for overseeing
judicial independence. The law is vague, but the Conference's primary
responsibilities are for court administration and judicial discipline.
The Conference will elect an Administrative Committee, Disciplinary
Council and a Coordination Council. These responsibilities need
reconciling with current functions of the COJ and the Department of
Logistics. The Conference has yet to be established, but the Chairman of
the Supreme Court has scheduled the organizational meeting for June 17,
2000. USAID and ABA/CEELI will provide assistance for this meeting.

######## c. Judges of Georgia

The Judges of Georgia (JOG) is a private association established in
August 1999. Its charter charges it with responsibility for judicial
independence, enhancing public confidence in the judiciary, working with
the mass media, improving the welfare of judges, and lobbying for the
rights of the judiciary in government. All Georgian judges are eligible
for membership and approximately 100 judges are founding members. Most
of the members are from Tbilisi and Kutaisi, but the JOG purports to be
expanding.

According to its chairman, JOG hopes to participate in the development
of curriculum at the JTC. The JOG has slowly begun to speak out on the
issue of judges' salaries and is the logical organization to press this
issue and serve as an advocate for judicial independence. However, the
JOG needs to further define its goals and develop an action plan for
achieving these goals so as to ensure its activities do not overlap with
the Conference of Judges. USAID and ABA/CEELI will provide the JOG with
a sub-grant, which will enable the JOG to hire a director and secretary,
rent an office, purchase equipment, and increase its activities.

######## d. Judicial Training Center

Judicial training will be delivered by the Judicial Training Center
(JTC, aka Training Center for Justice), which was established in 1998 as
an independent NGO. The JTC has faced numerous obstacles. Since its
founding, the JTC has had five directors. The JTC's mandate quickly grew
to include training for legal assistants, marshalls (aka court executors
or bailiffs), notaries, and preparatory training for the judicial
qualification exams. This proved to be too ambitious a mandate. The COJ
had prolonged discussions for several months as to the JTC's activities.
As a consequence, Presidential Decree #591 of October 12, 1999 was
issued. The JTC was refounded and will now train only judges and legal
assistants. The MOJ will train marshalls, notaries and MOJ personnel.
The MOJ training organization, the Teaching Methodological and
Scientific Analytical Center of Justice, is the legal successor to the
original JTC.

The JTC plans to have its core curriculum developed and begin teaching
these courses by April 2000. The JTC has provided some training, but the
operational start-up of systematic training has been slow. There are
still many outstanding questions related to the plan for the
implementation of training through the JTC, and the JTC's capacity to
meet the growing demand for training on complex, new subjects. The
EU/TACIS inception report provides a more in-depth discussion of the
JTC.

The JTC's State budgetary allocation is provided through and
administered by the COJ. Financing for JTC constitutes a constant
struggle. Some in the GOG argue that the government should not fund a
private organization, but donors want to see burden sharing. The WB, EU
and Soros are the primary donors. The COJ plans for a second JTC office
in western Georgia. The building will require renovation and the JTC's
capacity to take on training at a second cite at this time is
problematic.

######## e. Department of Logistical Support of General Courts 

The Department of Logistical Support of the Courts (Department of
Logistics), pursuant to the Law on the Courts, serves as the primary
administrative and management body of the judiciary and handles those
functions previously handled by the MOJ. This includes drawing judicial
districts, ensuring adequate staffing in courts, collecting and
maintaining judicial statistics, supplying courts with office equipment
and legal information, and maintaining the courts' physical
facilities.[^6] The COJ currently collects court statistics, but the
issue arises as to whether the Department of Logistics should handle
this responsibility. Many judges have criticized the Department of
Logistics for not acting in a transparent manner. After the
establishment of the Conference of Judges, the Department will need to
become more accountable and report to the Conference of Judges
Administrative Committee.

######## f. Supreme Court

Lado Chanturia, the author of the judicial qualification exams and
former Minister of Justice, was appointed Chairman of the Supreme Court
in 1999. Since his assuming the bench, sixteen other vacancies have been
filled. The Court now has a total of 43 judges; perhaps, too large a
number since an appellate court system has now been established. The
President proposes judges for the Court, which parliament must approve.

The Supreme Court has three main chambers: Civil, Criminal and
Administrative. The Supreme Court serves as the court of first instance
for appeals from the Central Election Commission and serious criminal
cases. Lay judges are used in criminal cases, but this should be
discontinued. Special qualification exams for the Supreme Court judges
are tentatively scheduled for May 2000. The Supreme Court faces a
serious financial shortfall, but the funding is not as precarious as for
the lower courts. Supreme Court funding appears as a line item in the
national budget.

*g. Constitutional Court*

In addition to the Constitution, the Law on the Constitutional Court
enacted January 31, 1996, and the Law on the Procedure in the
Constitutional Court, enacted March 21, 1996, govern the Court's
operation. The Constitutional Court hears only constitutional issues and
serves as a court of first instance for such cases. The Court has heard
very few cases since its formation in September 1996. As of September
1999, 118 claims had been filed, 82 were heard, and approximately 50% of
those heard were dismissed. The Court ruled in favor of individuals and
organizations in approximately 40% of the cases it heard.

The Court's rules of procedure make it difficult to establish standing
and permit the Court to hear only one case at a time. The public is
generally unaware of their constitutional rights and unfamiliar with the
Court as a legal institution. The potential exists for greater use of
the Court. For example, according to a judge on the Court, a group of
individuals with the same claim can join in one case, paying one filing
fee of ten Lari. This may provide an opening for "class action" type
constitutional claims. If citizens, lawyers, and NGOs were better aware
of how the Court could be used and if Court procedures were streamlined,
the Court could become an important judicial body for enforcing
constitutional law.

Assistance to the Court in the short-term should be restricted to
addressing impediments to access, such as revising the Law on Procedures
and training NGOs and lawyers on how to use the Court for constitutional
claims. Only then should other areas of assistance be explored.

**C. The Procuracy and Law Enforcement**

[1. Progress to Date]{.underline}

Judicial reforms are at risk without reform of complementary legal
sectors, such as other procurators, police/investigators, marshalls,
notaries, lawyers, prison officials, etc. The procuracy in particular
desperately needs reform. The team heard numerous reports of
procuratorial abuse, poor working conditions and corruption. Procuracy
reform was a condition for Georgia's admission to the Council of Europe.
While the 1996 Law on the Procuracy marked a positive step forward,
virtually no progress has been made since then. The 1996 law, however,
did remove the procruacy from having a role in civil cases.

Contingent on a manifestation of political will for reform in the
procuracy, the US Department of Justice (USDOJ) would like to initiate
activities to address the critical procuracy needs. In the Fall of 1999,
USDOJ conducted an assessment of the Kaheti Procurator's Office, headed
by a reform-oriented procurator, and in February 2000, USDOJ and
ABA/CEELI conducted a feasibility study on assisting with procuracy
exams.

[2. Key Constraints and Priority Needs]{.underline}

Historically, procurators enjoyed the highest stature in the legal
profession, and old codes of honor still protect them and the police. In
the Soviet system, procurators drove the implementation of State and
Party policy, and oversaw government activities in all other areas of
bureaucracy.

The procuracy remains a powerful organization. For example, procurators
appear to be gaining more authority at the expense of the judiciary. In
the 1999 amendments to the Criminal Procedure Code, previously checked
authority was returned to the procuracy, the police, and other
investigative bodies. The Ministry of Interior (MOI) and the Procurator
General led an initiative to "clarify" sections of the Criminal
Procedure Code. Human rights advocates, NGOs, legal professionals, and
others have expressed grave concerns about the regressive nature of the
amendments, and fear that incidents of police and Procurator abuse will
increase.[^7]

Concerning the old balance of power between law enforcement and the
courts, one source noted: "police and procurators who got kicked out
used to be made judges." Now, with the benefit of judicial reforms,
judges earn ten times more than procurators and are gaining the
reputation as a more prestigious and elite group. Procurators outnumber
judges three to one. One Georgian observer noted that with each reform
that improves the status of judges and lawyers, the procuracy and the
MOI feel the sting and tighten their resolve to resist change that might
weaken their position. The swift passage of amendments to the Criminal
Procedure Code evidence their dogged political clout. The procuracy and
MOI's ability to damage legal reform should not be underestimated. A few
reformed-minded procurators, however, believe that it is in the
procuracy's interest to accede to reform in hopes of raising their
stature and income.

Procurators work within an informal yet firmly established (and many
say, corrupt) network of police, criminal advocates, and defendants to
direct the course of adjudication before courts ever receive a case (see
discussion below on bar reform). With salaries of only 30 Lari per
month, it is not surprising that competent and fair procurators are
tempted into other legal professions as reforms progress and those that
stay are tempted to engage in rent seeking. Combined with a police force
that numbers between 70 and 90,000 who earn even less and go months
without pay, and a corrupt and underpaid force of marshalls responsible
for enforcing court judgements (earning 18 Lari per month) \-- the need
for reform of the law enforcement sector is increasingly urgent.

####### D. Executive Branch

######### 1. Progress to Date

Many agencies in the executive branch have failed to solicit and accept
public input, implement and enforce laws, and are noted for wide spread
corruption. The potential now exists, however, for radical change that
will redefine the relationship between the government and the public. On
January 1, 2000, the most progressive Administrative Code in the FSU
went into force. The Code's groundbreaking Freedom of Information (FOI)
section will help ensure government transparency and reduce
opportunities for corruption.

USAID and its implementing partner AMEX organized a conference in
December 1999 to plan for the implementation of the FOI section of the
Administrative Code. Senior officials from the executive branch, MPs,
judges, NGOs and the media participated in the conference and prepared a
series of recommendations, known as the Gudauri recommendations (see
*Annex E, Gudauri Recommendations)*. The GOG has moved quickly to
implement many of these recommendations. In December 1999, the President
issued Decree 1549, which established the Administrative Code Advisory
Board, chaired by the State Minister with representatives from
parliament, the judiciary, the executive branch, media, NGOs, and
donors. The Board has four general areas of activities in which it will
advise the government: 1) proposals for legislative amendments, 2)
training for civil servants, 3) public awareness, and 4) overseeing
implementation.

In addition to the Administrative Code Advisory Board, the Four-Point
Program established the Civil Service/Administrative Reform working
group co-chaired by the Minister of Justice and the Chief of the DG
Office at USAID. Representatives from the GOG and the donor community
participate in the working group. Of particular relevance to the
activities of the working group is the WB's Civil Service reform
project.

[2. Key Constraints and Priority Needs]{.underline}

Many government agencies lack the capacity, resources and political will
to implement and enforce the laws. In particular, government agencies do
not have in place the processes and procedures needed for compliance
with the new Administrative Code. Implementing the Administrative Code
will require reviewing and probably amending agency charters and
promulgating regulations to create appeals mechanisms. Model regulations
need to be prepared and then adapted for use by all agencies, with minor
modifications needed for technical issues unique to a particular agency.
For those targeted agencies that need to implement administrative
regulations, a process mapping exercise could be conducted. Civil
servants at the national, regional and local levels require training on
drafting and promulgating regulations. A central database with all the
regulations promulgated by government agencies that the public can
access needs to be established.

In both theory and practice, government agencies, in particular the
procuracy and the MOI, must not have final review and authority over
administrative decisions they make. Administrative Code implementation
will fail if the judges are not independent, qualified and capable of
reviewing administrative decisions. In most FSU countries,
administrative schemes function without the involvement of an
independent judiciary; thus, increasing opportunities for corruption by
avoiding a transparent process for government accountability.

Several government agencies have expressed interest in developing
management information systems to track the paper flow within their
agency and automate finance and accounting systems. Such systems will
help the agencies to respond to FOI requests, but the agencies should
try to use a common system. In this regards, the Parliament, with
EU/TACIS support and in cooperation with a local vendor, developed a
Georgian software system that has proved user friendly, transferable,
and sustainable. The Chancellery, with UNDP support, has also developed
a software system, informally known as "the Chilean system", which has
good potential. However, the Chilean system is very complex and
modifications to the system need to be made in Chile. USAID expects to
have an assessment of the two systems completed in the near future.

In March 2000, the Central Election Commission (CEC), with assistance
from USAID and IFES, launched a web-site containing a broad array of
election-related information.[^8] The web-site has candidate
biographies, election laws and regulations, general election
information, forms, names and addresses and most important -- it will
display national, district and precinct level results. The effectiveness
of this web-site should be tracked to see if and how it could be
replicated at government agencies.

With the establishment of the COJ, the MOJ no longer has a major role to
play in judicial administration. The Minister of Justice, however, does
serve on the COJ board and the Department for the Enforcement of
Judgments reports to the MOJ[^9]. The Department and the MOJ share
responsibility for selecting and training marshals. However, judgements
are largely unenforced (one source reports only 30% of civil and
administrative judgements are enforced). The apparatus for enforcement,
with its dysfunctional fee structure partly explains the problem. The
filing and enforcement regimes actually create disincentives for use of
courts between filing and enforcement fees, plaintiffs have to post up
to sixteen % of their claims. The WB may provide assistance to the
Secretariat.

####### E. Parliament

[1. Progress to Date]{.underline}

With its reform-oriented leadership, the Georgian Parliament is one of
the most active in the FSU. As noted above, parliament has passed
approximately 745 pieces of legislation since 1995. In addition to a new
Constitution, some of the most important laws include a Civil Code,
Civil Procedure Code, Criminal Code, Criminal Procedure Code,
Administrative Code, Administrative Procedures Code, Law on the Courts
of General Jurisdictions, Law on the Procuracy, Law on Procedure for
Enforcement of Judgments, Licensing Law, and a plethora of amendments.
Numerous commercial laws have also been passed in order to help Georgia
receive an invitation to join the WTO (see Commercial Law section of
assessment). The Parliament has been effective in putting the legal
framework in place for democratic, market-oriented economy.

The Citizens Union of Georgia (CUG), President Shevardnadze's party, has
a majority of seats in parliament and increased its number in the
October 1999 elections. Many of the previous parliamentary leaders
returned to parliament, but the majority of the CUG members are new and
initially appear more conservative than their predecessors. Members of
Parliament (MPs) serve five year terms. Parliament is now unicameral,
but a Senate is supposed to be added after the country's restoration of
its territorial integrity.

In1992 the Parliament had two computers. Several donors have provided
assistance to upgrade the system. In particular, USAID contributed over
\$900,000 for the installation of a management information system. This
local area network (LAN) connects 17 Offices, Committees and
Departments. Furthermore, the public will be able to access the
electronic legal database.

[2. Key Constraints and Priority Needs]{.underline}

A great need exists for increased parliamentary oversight. For the past
five years parliament was so occupied enacting new laws, it did not have
sufficient time to conduct oversight of the executive branch. If the
laws are not implemented and enforced, parliament needs to know what the
impediments are and take action to remedy the situation. Further
complicating this issue, ministers have refused to appear before
parliament in some instances. MPs need to know of their rights and
responsibilities.

Parliament generally operates with transparency and openness. But in
several glaring instances it acted behind closed doors and without
public input; specifically, when amending the Election Law and the
Criminal Procedure Code. The committees need to increase their
operational effectiveness and further open the legislative process to
public view and to invite public participation. USAID and the National
Democratic Institute (NDI) will provide assistance to parliament over
the next several years to increase public input and to enhance its
oversight of the executive branch. NDI will need to coordinate with
USAID ROL partners on issues requiring substantive legal expertise.

While most observers agree on the reform orientation of the new laws,
problems do exist with some laws, and some additional laws are still
needed. In particular, judges and lawyers often complain that some laws
are too vague, too broad, or too complex. In the commercial law arena,
overly detailed laws are also prevalent. The concern about unpredictable
treatment by court magnifies the need for precision in the laws.
Inconsistent use of terminology, in laws and throughout the legal
profession, worsens the situation. More implementation oriented laws
with such features as reporting requirements, realistic deadlines and
explicit jurisdictional authority would help.

The Constitution and the area of administrative law provide salient
examples of the gaps, inconsistencies and overlaps in the laws. The new
Administrative Code has a comprehensive framework for administrative
law, yet there is little analysis that explains how this new law will be
reconciled with old sources of administrative law, such as the
Administrative Offenses Code, the Law on the Procedures for Reviewing
Applications Complaints and Appeals in State Agencies, and some existing
agency regulations. Nor is there an analysis that shows how it is
consistent with, supersedes, or contradicts other new laws (such as the
new Law on Normative Acts). At least one legal scholar has suggested
that portions of the old administrative law more appropriately belong in
laws directed at more substantive areas.

The Constitution has been in effect for five years. Some constitutional
clauses are in conflict with subsequently passed legislation, and some
clauses are vague. At some point, Georgia may undertake the task of
amending the Constitution and could start preparing for that process
now. Where feasible, Georgia should first consider correcting the
deficiency with an amended or new law, before amending the Constitution.

Two constitutional issues have received particular attention. Georgia
has a presidential system, but parliament often considers adopting a
parliamentary system with a Prime Minister. In December 1999, with an
amendment to the Law on the Structure and Activity of the Executive,
this debate was temporarily suspended by increasing the authority of the
State Minister. The issue will likely arise again after the April 2000
presidential election. The second issue concerns the Constitution's
failure to define a territorial arrangement for the country, pending
restoration of the country's territorial integrity.

Parliament will require continued assistance in both legal drafting
techniques and on substantive legal issues. In addition, while the LAN
system has proved of enormous value, its covers only half the Parliament
and needs extending.

####### F. The Bar 

######### 1. Progress to Date

No formal professional standards exist for lawyers. But a draft Law on
the Bar, required for COE accession and stalled for several years, now
appears to be gaining acceptance. Consensus has been reached on the need
to include a licensing provision and bar exam, despite some arguments
that market forces would eventually weed out bad lawyers. The law will
likely include a code of professional conduct and a delineation of
attorney rights. The most contentious issue concerns the body to prepare
and administer bar exams. The compromise position will probably provide
that the COJ will administer the exams for a limited time period until a
sufficient number of attorneys have passed the exams and formed a bar
association to administer the exams.

######### 2. Key Constraints and Priority Needs

The team heard numerous complaints that many attorneys appear in court
unprepared, and attorneys acknowledge their lack of familiarity with
laws and procedures. Most lawyers receive an inadequate professional
education, and must supplement their education on their own to reach a
minimal standard of competence (see section II(H) for a discussion of
legal education).

The most critical needs in the Bar are enactment of a Law on the Bar,
training in substantive areas of law and advocacy skills, access to
legal information, and professional development. A program to train and
strengthen the capabilities of criminal defense attorneys is
particularly necessary.

######## a. Georgia Young Lawyers Association

The Georgia Young Lawyers Association (GYLA), which began as an
alternative lawyers' association in, has received significant donor
support. It has 700 members nationally, 60% of whom are law students.
GYLA's original mandate was not to be a bar association in the
conventional sense, but to provide support to the professional
development of law students and young lawyers. To this end, it rotates
bright young professionals in and out of key program and project
positions. This strategy has resulted in a very young membership,
average age is 24, and has alienated some lawyers who are now second and
third generation members. GYLA is considering a restructuring plan that
would address this problem by creating an umbrella organization of more
senior Georgian lawyers, under which GYLA (as it currently functions)
would form a branch.

GYLA has done good work in establishing chapters around the country that
involve law students and young lawyers in educational activities and
legal consultations. Members teach seminars in law schools and conduct
continuing legal education (CLE). Seminars typically are open to all
lawyers free of charge, but most participants are members. All GYLA
chapters have telephone hotlines and some conduct face-to-face legal
consultations. Some GYLA chapters provide actual representation in
court. In this case, GYLA serves as a legal aid clinic and often uses
law students to provide free services to the indigent.

GYLA chapters appear to specialize in legal issues relevant to each
region. For instance, the Gori GYLA teaches and works on issues related
to IDPs and the socially disadvantaged, as well as domestic cases
(divorce, abuse, etc.). The GYLA Rustavi focuses on human rights cases
and some commercial law cases, and the Tbilisi and Kutaisi chapters
cover a broad spectrum of legal issues. The Tbilisi chapter is also
active in publication and dissemination of information, public education
TV programs, and legislative lobbying.

######## b. Collegium of Advocates

The old state-run Collegium of Advocates, which was mandatory for all
defense attorneys during the Soviet era, still provides most of the
court-appointed lawyers in criminal cases. Current law provides for
state-funded counsel for indigent defendants. The Collegium has 300-400
members who serve in this capacity. For each court appointment, a small
fee is earned from the Collegium's budget that the advocate pockets, in
addition to his/her salary.

The Criminal Procedure Code allows the appointment of private attorneys
outside of the Collegium, but the Collegium manages to block outsiders
from receiving such appointments. The "chairmen" within the Collegium
select the lawyer, and close connections (characterized by some as
corrupt) between the police, procurator, chairmen, advocates, and
sometimes even the defendant (if he has financial means) keep this
process insulated. Within this circle, self-interested state agents make
decisions every day that direct the outcome of cases, often with no
consideration of the legal positions of either the defendant or the
victim (see *Annex F,* *Relationships of Legal Professionals in
Georgia*).

######### **F. NGOs, the Public and Human Rights**

######### 1. Progress to Date

This assessment does not discuss the full breadth of the human rights
problem; rather, it highlights a few key legal approaches to combating
human rights violations. The U.S. State Department's Human Rights Report
and a letter from Human Rights Watch sent to President Clinton (see
*Annex G, Human Rights Watch Letter)* summarize the gravity and scope of
the problem.

A small, but dedicated group, of indigenous NGOs and international
organizations have documented human rights abuses. Common human rights
violations in Georgia include abuse by law enforcement officials -- on
the street, in pre-trial detention, in prison facilities -- and
discrimination against socially disadvantaged groups such as the
internally displaced people (many property and housing claims are at
issue in this context) and members of non-traditional religions such as
Jehovah's Witnesses. These organizations have worked diligently on
behalf of victims, and have had some success. They carry out public
education campaigns, lobby legislators, and operate legal clinics.

The City of Tbilisi, the police and GYLA initiated an innovative pilot
project, known as City Attorneys. The project provided legal
representation for criminal defendants during the first 48 hours after
arrest. Police abuse is most likely to occur during this critical
period. During the pilot phase, 45 people were released, but the police
have blocked the renewal of the project since the parliamentary
election.

The Ombudsman[^10] is charged with receiving human rights complaints
from the public and making recommendations to parliament and the
executive branch. To date, the Office has proved generally ineffective
in generating the political will or capacity to attack human rights
issues. The Office is now vacant and human rights advocates hope a
credible candidate will be proposed. The President proposes and the
Parliament appoints the Ombudsman for a five-year term. The UNDP has
provided assistance to the Ombudsman's Office.

######### 2. Key Constraints and Priority Needs

The term "human rights" is often broadly defined in Georgia. For
purposes of this assessment, basic human rights are defined generally as
those rights necessary for life, liberty, dignity, and the ability to
work productively. It includes, for example, equal protection, due
process, security of person and property, and basic freedoms (e.g.
religion, speech, association). It does not include broader second tier
economic or social rights, such as education, insurance, or employment
benefits.

Access to mechanisms for justice to remedy human rights violations
proves problematic. The barriers include disinterested incompetent
courts and procurators; legal roadblocks such as the new criminal
procedure amendments that give excessive authority to procurators to
hear complaints of abuse; inexperienced lawyers who do not know how to
effectively file or argue human rights claims; and ineffective criminal
defense attorneys who fail to protect their clients from procuratorial
or police abuse.

The lack of access to prisons and pre-trial detention facilities also
constitutes an important issue for NGOs working with detainees. The law
remains unclear as to whether the Ministry of the Interior (MOI) must
allow such access, or whether the new MOJ structure provided for in the
Law on Imprisonment will do so.

As noted above, the Parliament has not helped matters with the
amendments to the Criminal Procedure Code. Another recently passed law
is also regressive. The Law on Imprisonment, which is hailed by some for
addressing human rights violations, shifts authority for detention of
inmates from the MOI to the MOJ, in order to avoid the conflict of
having the investigative body oversee care of inmates. But the reported
problem with this new structure is that the new MOJ detention facilities
will be staffed with old MOI employees serving in the same capacity.

Former Political Prisoners for Human Rights, Article 42 and other watch
dog groups conduct court monitoring activities for select cases.
Expanded court monitoring activities could track the behavior and
legality of all players in the courtroom and provide an informal
mechanism for procuratorial oversight and help deter corruption.

An effective legal services system for competent and comprehensive
criminal defense representation by lawyers, would help provide a check
on the actions of procurators. Criminal defense attorneys need training
on substantive legal issues and the mechanisms needed for fighting human
rights abuses.

Legal advocacy NGOs require assistance not only to continue the legal
clinics they now operate but to bring test cases, such as mentioned in
section II(B)(3)(g) dealing with the Constitutional Court.

The public remains largely unaware of the magnitude of the human rights
problem and other legal issues that bear on their daily life. Public
support and demand for change are key in any effort to establish ROL.
Currently the majority of the population has little or no access to
accurate information about the law. Targeted groups and the public needs
to have a better understanding of the new reform laws and how they can
use and benefit from these laws.

####### H. Law Schools and Legal Education

######### 1. Progress to Date

The dismal state of formal legal education partly explains poor legal
performance. A corps of Soviet-era administrators and professors run
many of the state law schools. Additionally, more than 200 private law
schools have sprouted since independence, some of which consist of only
two or three professors. The law schools, which are not subject to
accreditation standards, graduate a countless number of lawyers
annually. Corrupt practices determine which applicants get into the best
schools, receive the best grades, and graduate. Teaching materials are
scarce and out-dated. Competent practicing attorneys report that the
rapidly changing legal environment makes it difficult for professors,
even the best ones, to teach law. The problems with formal legal
education are so deeply institutionalized that donors are reluctant to
work in this area. Soros, however, may initiate a program with Tbilisi
State University (TSU).

######### 2. Key Constraints and Priority Needs

An ABA/CEELI team visited Georgia in May/June 1999 and in their report
made three preliminary recommendations for reform of legal education, in
priority sequence, 1) adopt a general qualification examination for
attorneys, 2) develop an accreditation system for law schools, and 3)
develop a general aptitude examination for law school entrance.

Given the current political environment, the first step proves the most
viable in the short to medium term (5 to 10 years). A bar exam will
address the problem from the demand side through market forces. Law
students, knowing they will face a bar exam, will demand a higher
quality of legal education. The second recommendation would help
eliminate many of the fly-by-night law schools. Work in this area will
prove politically sensitive, since the large state schools could use
accreditation standards to eliminate competition.

CLE courses offered through GYLA and the donors presents a possible
short-term training option. Legal service clinics staffed by law
students also show promise, as they enable the students to develop their
advocacy skills. This proves especially important since the law school
teaching methodology is highly theoretical. Legal advocacy NGOs, such as
Article 42 and the Center for the Protection of Constitutional Rights
(ABA/CEELI sub-grantees), operate such clinics. The difficulty in
reaching agreement with law school administrators that would allow
students to receive practicum credit for their clinic work is a barrier
for further development of legal clinics.

### III. COMMERCIAL LAW

####### A. Introduction and Overview 

The commercial law analysis has a different structure from the ROL
discussion, since this section has a narrower focus. This section seeks
to provide analysis on those aspects of the Mission's economic
activities that affect, or are affected by, legal reform. To this end,
the discussion focuses on the implementation of the commercial law
framework, and the constraints that the current commercial law structure
imposes on economic growth. This section accordingly addresses: (a) the
preparation and passage of key commercial laws, (b) the implementation
and use of these laws, and (c) the enforcement of these laws. The
principal commercial law categories covered include: company law,
contract law (also referred to as obligations law), collateral law
(personal property), bankruptcy law, trade regime (WTO accession),
foreign investment environment, and competition policy.

The assessment does not analyze the activities of the economic reform
contractors working in the areas of capital markets, accounting reform,
tax and fiscal reform, banking, privatization (including land titling),
and energy. The assessment, however, does discuss the legal issues
raised, particularly (1) where there are linkages between the reform
areas and commercial laws and (2) in identifying issues that are likely
to present impediments to economic growth and that are accordingly
relevant both to investment and the Mission's achievement of its Small
and Medium Enterprise (SME) objectives.

B.  **Progress to Date**

Major progress can been seen in the enactment of codes and statutes
necessary to establish most of Georgia's commercial law framework, as
well as various statutes supporting USAID's market reform programs. The
Civil Code includes articles governing obligations law, collateral law
and mortgage law.[^11] Georgia also has a bankruptcy law (the Law on
Proceedings in Bankruptcy), company law (Law on Entrepreneurs),
anti-monopoly law[^12], securities law, and tax code. The WTO issued
Georgia an invitation for accession in October 1999.

Georgia has also enacted various laws governing the operations of the
entities, which adjudicate and administer its laws. Primary among these
are the new Civil Procedure Code, General Administrative Code of Georgia
and Code of Administrative Court Procedures of Georgia. The
Administrative Code is particularly important as it is intended to
provide greater transparency and due process in, among others, executive
branch administrative bodies. The Administrative Code includes
provisions regarding: limits on the exercise of discretionary power; the
right of the public to have access to administrative documents (e.g.,
freedom of information provisions); basic process requirements for
issuing regulations (also referred to as administrative acts); and basic
process requirements for administrative decisions and appeals of those
decisions. The Law on the Procedures for the Enforcement of Judgments
establishes a Department of Enforcement under the MOJ to enforce
judgments of both the courts and administrative officials.

C.  **Key Constraints**

The constraints to the implementation of commercial law and economic
growth in Georgia fundamentally demonstrate the linkages between ROL and
economic growth. Such constraints also indicate the impact that
corruption has in reducing economic growth. As discussed in the
following section, Georgia has made great progress in the enactment of a
commercial law framework. However, the reduction of corruption and the
establishment of the rule of law are critical for implementing this
framework and realizing economic growth.

Many of the constraints to economic growth in Georgia -- particularly
with respect to SME growth -- have been identified in assessments and
analyses previously prepared for USAID/Caucasus. However, a number of
themes arose in meetings during this assessment which bear summarizing,
particularly as these themes relate to commercial law implementation and
enforcement.

[1. Civil Servant Corruption]{.underline}

Civil servant corruption, particularly within the tax inspectorate and
customs, was consistently identified as the major problem facing
Georgia. This corruption prevents a uniform administration of the laws,
provides incentives for the private sector to engage in corrupt
practices to obtain favorable results, puts entities, which do not
participate, in corrupt practices at a competitive disadvantage, and
prevents transparency and predictability in the public sector. Corrupt
practices also threaten Georgia's economic growth. Monies which would
otherwise fund government budgets are siphoned into the pockets of
public servants. In addition, certain private sector participants fail
to make tax and similar payments.

Public service reform, including adequate compensation for public
servants, strong honest leadership, and a mechanism to enforce laws
against those taking bribes are all necessary. As an indication of low
salaries, the marshalls under the new enforcement service receive an
average salary of approximately 18 Lari/month. Such salary may be
supplemented by up to 1% of proceeds realized under a recent approach
developed by the Department of Enforcement; however, such a low base
salary may nonetheless create incentives for marshalls to demand
payments to facilitate services they are required to perform by statute,
or for skimming cash proceeds realized. Various Georgian banks state
that they routinely must pay to marshalls an additional 2-3% of the
value of collateral to be seized in order for marshalls to foreclose
upon the collateral.

The tax inspectorate and customs were always identified as the most
problematical subsectors in the area of corruption. Almost every
interview conducted on the subject of commercial law and business growth
began, "The biggest problems are the tax inspectorate and customs."

The absence of strong leadership supporting reforms is a related
constraint. There is at least a perception that the Ministry of Defense
has prevented the successful enforcement of certain matters that may be
adverse to its interests. Similarly, the Antimonopoly Service has not
proceeded adversely against enterprises connected with senior Georgian
officials. State executive branch agencies mentioned as being
particularly corrupt (without further information regarding the nature,
level or source of the corrupt practices and influences) include the
Ministry of Fuel and Energy and Ministry of Transport.

Despite the recent reforms regarding the judiciary -- including the
mandatory qualification examinations for judges -- businesses remain
concerned regarding the potential for judges to engage in corrupt
practices. Partners of one prominent Georgian law firm report that
judicial corruption is more prevalent outside of Tbilisi.

[2. Over-regulation and Overly Detailed Laws]{.underline}

Georgian policy makers and law makers have a tendency to regulate
commercial activity -- rather than set rules that will allow business to
function within agreed rules of the game. For example, the Law on
Entrepreneurs contains detailed provisions requiring that all business
correspondence be kept for ten years. Accountants note that Georgia
policy makers have not yet shifted to an understanding that accountants
should not support the government budget process. To quote one Georgian
(who spoke in English): "Everything is too detailed. Everything."

Over-regulation and overly detailed laws make it difficult for
businesses to operate, cause businesses to spend additional time and
funds determining how to comply with laws, and may create disincentives
for entering into business transactions. In addition, over-regulation
and overly detailed laws -- particularly when combined with the
increased likelihood of conflicting legal standards and vague drafting
-- create opportunities for corruption. Anecdotes from the business
community indicate that tax inspectors are exploiting provisions in the
Law on Entrepreneurs and other laws that they reportedly do not have the
authority to administer or enforce. Although the new Law on Licensing
Activities and Law on Entrepreneurs are important additions to the
statutory framework of Georgia, (1) the business registration process
still contains numerous processes and requires approvals from various
authorities, (2) businesses remain concerned about the numbers of
licenses and other permits they may be required to obtain in connection
with the ongoing operation of their businesses, and (3) the Law on
Entrepreneurs contains overly burdensome provisions with which
businesses must comply.

[3. Vague Laws and Absence of Implementing Provisions]{.underline}

General complaints were raised about laws being vague, often as a result
of inconsistent terminology. This may be due to a lack of legal drafting
expertise. In other cases -- including with respect to the Civil Code
and the Law on Entrepreneurs -- this likely results from difficulties
and errors encountered in translating laws from German and other foreign
languages into Georgian. The aforementioned laws are based on German
models. Individuals also generally noted that laws often lack
implementing provisions -- sometimes referring to MPs failing to
anticipate the processes and other tools that executive branch bodies
will require to implement and administer the laws; other times
expressing the views that regulations from ministries or other
implementing measures are needed to provide procedural guidance.

[4. Fragmented Legislative and Executive Rule-making Process and Absence
of Policy]{.underline}

Particularly with respect to the tax code, there is a fragmented
legislative process. Over 17 sets of amendments were issued with respect
to the tax code. In some instances, tax code amendments have been viewed
as introduced solely to facilitate corrupt practices and transactions.
Such a fragmented process suggests an absence of policy consensus, or a
failure to honor that policy when personal interests dominate over
public responsibilities.

[5. Insufficient Judicial Knowledge of Business Practices and
Concepts]{.underline}

Judges note that they lack an understanding of basic business practices.
This includes an understanding of such matters as finance and valuation
principles, as well as a contextual understanding of fields that are
entirely new to them, such as bankruptcy. Judges will not be able to
apply proper legal standards to factual circumstances if they lack a
framework for understanding the underlying business transaction --
including forms of transactions, distinguishing characteristics among
those forms, simple accounting concepts, and simple asset valuation
standards. These matters will be particularly relevant in judicial
determination of damages and bankruptcy cases. Indeed, one judge
candidly -- and emphatically -- stated that he needed to understand
basic business concepts and new fields in order to make correct
decisions, including to identify weaknesses and inaccuracies in the
positions taken by advocates.

[6. Insufficient Knowledge of Applicable Legal Standards and Timely
Access to Laws]{.underline}

Legal professionals and business persons lack knowledge both of relevant
laws and of easy access to those laws. The means by which laws and other
legal norms are disseminated is discussed in more detail in the ROL
section of this assessment. In order to emphasize the extent to which
the public is not aware of enacted laws, a partner in one of the top law
firms in Tbilisi was not aware until the team met with him that the
Parliament has passed the Administrative Code or the Law on Enforcement
of Judgments. The inability of the assessment team to pin down the
status of several commercial law related matters further attests to the
difficulty of obtaining information in Georgia -- conflicting accounts
of the status of several matters and processes inquired about were the
norm, even from sophisticated assistance providers. To quote one judge,
"We need information, again information". This speaker stated this in
the context of needing both training, as well as in requesting materials
that would help courts understand how other courts were making decisions
-- both correctly and incorrectly.

**D. Overview of Laws and Legal Issues**

[1. Obligations Law/Civil Code]{.underline}

As previously noted, the Civil Code contains Georgia's basic contract
law. The Civil Code was prepared with substantial US, Dutch, and German
assistance, and with GTZ apparently providing significant assistance
regarding obligations law. Several Georgian professionals complained
that the Civil Code generally needs amendments or clarifications.
However, no citations were made to obligations law. Due to the poor
quality of the currently available English translation of the Civil
Code, it is not possible for the assessment team to determine if there
are major problem areas in the obligations law.[^13]

[2. Collateral Law]{.underline}

The absence of a registry covering collateral constitutes the most
glaring omission in the commercial law framework. Specifically, the
"unified public registry" contemplated by Article 311 of the Civil Code
has not been established. Article 311 provides for the establishment of
a register for recording the rights of ownership in immovables and
rights in other property. The Article specifies "The procedure for
arranging the register shall be defined under a separate law." Pursuant
to Article 255, pledges of personal property which are notarized are
generally required to be recorded in the public registry. [^14]

Lawyers, international assistance providers focusing on land issues, and
bankers all agree that establishing the registry would greatly assist
Georgia. Tbilisi-based lawyers spoke of contortions in making personal
property filings in real property records (both State Land Management
Bureau and the Technical Inventory Bureau). In order to complete the
statutory scheme, reduce confusion, and establish an institutional body
as responsible for maintaining a unified registry, the personal property
registry need to be established.

The collateral law may also suffer from deficiencies that will cause
confusion and that will limit the attractiveness of lenders using
personal property as collateral. Several legal experts, including one
prominent Tbilisi lawyer, stated that the collateral law is deficient in
not establishing a clear priority scheme among holders of pledges with
competing claims on property. The law's disposition provisions also
contain various deficiencies which may retard the efficient and
transparent disposition of property.

Related to the adequacy of the collateral law is whether the Civil Code
adequately governs the intersection of collateral law and mortgage law.
Without citing specific provisions, several persons suggested that the
Civil Code might be inadequate in this respect. In addition, concerns
were expressed regarding whether the mortgage law (and also the property
law) also sufficiently addresses immovable property rights (e.g., houses
and apartments) with respect to which the owner does not own the
underlying land.

[3. Bankruptcy Law]{.underline}

The popular view is that bankruptcy law is not understood in Georgia.
There have been few bankruptcy cases brought for reasons about which
this assessment can speculate based on discussions held. Businessmen and
the public may not understand the purposes of bankruptcy and the new
law, including the rights and obligations associated with bankruptcy.
Directors and managers may fear liability for voluntarily filing cases.
The filing of bankruptcy by companies which are state owned is likely to
lower the value of the company that the GOG may otherwise feel will be
obtained for that company upon its privatization. In August 1999,
President Shevarnadze criticized the Ministry of State Property
Management for not raising sufficient revenues from privatization.
Businesspersons and lawyers may not trust the courts and bankruptcy
administrators to handle a bankruptcy case honestly and competently --
both as a result of the historic corruption among the judiciary and the
newness of the process. Workers may fear losing the right to be paid
wages and of losing jobs.

The bankruptcy law itself is generally acknowledged to require various
amendments, and some suggest regulations, to clarify unclear provisions
and complete various missing concepts. For example, the definition of
insolvency -- based on the inability of a debtor to perform obligations
in a fixed term -- is considered vague.[^15] There is no provision
establishing a body to supervise bankruptcy administrators, who evaluate
the debtor's property and, when directors of legal entities are
terminated, reportedly have the authority to enter into agreements on
behalf of the debtor. Tax liens are junior in right of payment to
unsecured claims. In addition, provisions of the Civil Procedure Code,
which generally applies to court proceedings of all courts of general
jurisdiction, including bankruptcy cases, may require some amendments so
as to not overrule certain specific procedural provisions of the
bankruptcy law.

[4. Foreign Investment Environment]{.underline}

Foreign investors in Georgia are uniformly frustrated by the pervasive
corruption, complex and unclear tax code, and over-regulation of their
businesses; specifically, the Law on Entrepreneurs and assorted licenses
requirements. Various types of taxes, and their rate structure, result
in a high net tax rate for businesses. Tax inspectors pay numerous
visits looking for excuses to extract a bribe in exchange for
overlooking alleged violations, including minor violations investors
attribute to over-regulation. Investors complain about the ability of
the tax inspectorate to freeze their bank accounts (into which certain
specified amounts required to form and operate a business entity must be
deposited; other accounts are presently protected by bank secrecy laws)
and cause the funds to be transferred to the state budget without any
requirement of a court hearing. Customs smuggling and customs officials
seeking bribes are additional causes of significant complaints.

[5. Competition Policy]{.underline}

The team did not conduct heavily focused discussions regarding the
adequacy of Georgia's anti-monopoly law governing non-regulated
industries. Some sources surmised that Georgia probably has an adequate
anti-monopoly law. One of the primary constraints presently associated
with the implementation of the law is that the individuals leading the
present anti-monopoly commission, who are appointed by the President,
lack the will to administer the policy contrary to the interests of high
level Georgian officials and those associated with them.

**E. Priority Needs**

Georgia's commercial law statutory framework has largely been drafted.
Georgia now needs to implement that framework. Those charged with
administration, adjudication and enforcement of the laws must perform
their roles in a consistent and predictable fashion that complies with
the statutory framework. The business community must understand the
statutory framework and the obligations and benefits it imposes. In
several instances − largely involving collateral and bankruptcy law −
additional technical assistance will be required to complete the
statutory framework, amend vague provisions and conflicts in the
existing laws, and provide additional provisions that will facilitate
the application and enforcement of the law.

Improving the investment climate and encouraging SMEs also require that
over-regulation of businesses continues to be reduced. As discussed
above, executive decrees, regulations and cases must be distributed
promptly and be available to members of the legal community,
administering agencies and the public. Recommendations regarding the
publication and distribution of such information, as well as
recommendations for better public participation in parliamentary
processes, are set forth in the Recommendations section.

The items listed in the Commercial Law Recommendations section are
critical to the impartial and predictable administration, adjudication
and enforcement of Georgia's commercial law and to economic growth.
However, it must be emphasized that *the most important need for the
impartial administration is the reduction of public servant corruption*
-- in the tax administration, customs administration and public
administration as a whole. Concomitantly, the reform of Georgia's tax
code -- to develop a consistent code with a structure that will balance
the needs of businesses to enjoy their profits against the need for the
state to raise revenues -- is essential to Georgia's stability and
economic growth.

**IV. RECOMMENDATIONS**

It is important to keep in mind, when reviewing the below listed
recommendations and designing corresponding implementing activities,
that the environment in Georgia is dynamic.[^16] Implementing mechanisms
must have the flexibility to adapt to changing legal, political, social,
and economic variables. Critical assumptions stated in Georgia's new
strategic plan should be considered as well. Furthermore, the assessment
recognizes that the recommendations are beyond the manageable interest
of one implementing organization or even one donor.

The following recommendations are divided into two sections that
correspond to the two sections of the assessment: Rule of Law and
Commercial Law. Where direct linkages exist between the recommendations,
they are indicated in italicized parentheses. The team has also included
some recommendations in the Rule of Law section designed to address
problems of corruption. These primarily involve aspects of
administrative law.

A.  **Rule of Law Recommendations**

[1. Project Design]{.underline}

*a. Executive Branch Counterparts*

Develop criteria for selecting executive branch agencies with which to
work. Possible criteria could include: (1) has USAID worked productively
with the agency, (2) does the agency have the political will to
undertake reform, (3) does the agency have the requisite minimal
capabilities, \[i.e. an implementation and enforcement agenda should not
get ahead of the capacity of the implementing agency and its allied
organizations\] (4) who are the agencies primary users/clients and are
these users/clients with whom USAID interacts and supports, (5) how does
the agency manage its interactions with its users/clients, (6) how does
the agency manage its relationship with opponents of legal reform.

*b. Activity Locations*

Develop criteria for selecting cities and regions in which to conduct
activities. Possible criteria could include: (1) a District Court with
Demonstration and Administrative Functions (DCDA, courts with the
biggest caseload and number of assigned judges), (2) courts noted for
the high caliber of sitting judges, (3) GYLA has chapters or partner
relationships, and (4)

regions in which USAID has other activities.

[2. Completion and Refinements of Legal Framework]{.underline}

*a. Laws*

Continue to support legislative reform as needed with technical
assistance, conferences and workshops. Ongoing support to enactment
priority legislation such as the Law on the Bar and possible amendments
the Judicial Disciplinary Law, Law on Constitutional Court Procedures,
Law on the Courts, Administrative Code, Criminal Code, Criminal
Procedure Code, Law on Forensic Evidence, Law on the Procuracy, etc.
This will entail an analysis of the current legislative framework in a
particular area of law to identify strengths, weaknesses, gaps, and
redundancies (*CL Recommendations 1(a) --(f)*)

*b. Administrative Code*

Conduct a comprehensive assessment on the status of administrative law.
This assessment should analyze the extent to which Georgia's new
Administrative Code and Administrative Procedures Code are consistent
with, supersede, or contradict old sources of administrative law,
including the administrative offenses code, the Law on the Procedures
for Reviewing Applications Complaints and Appeals in State Agencies, and
other articles in existing legislation, including existing agency
regulations; and also the extent to which they are consistent with,
supersede, or contradict new laws (such as the new law on "normative
acts"). The assessment should include an analysis of whether portions of
the old administrative law more appropriately belong in other
legislation directed at more substantive areas. Based on the outcome of
this assessment, design tasks that will assist the Georgians in
harmonizing all aspects of administrative law -- old and new -- in order
to facilitate orderly implementation of regulatory procedures.

*c. Regulations*

Work with a select group of targeted ministries to adopt administrative
regulations consistent with the new Administrative Code, and amend
Agency charters that are inconsistent with the new Code. This task
should include distribution of model regulations that could be adapted
for use by all agencies, with minor modifications needed for technical
issues such as energy regulation or banking. This task will help ensure
harmonization with the Administrative Code. Other USAID contractors
could help develop the regulations and the ROL contractor could provide
review and suggestions for meeting uniform standards.

*d. Constitutional Review*

A separate review should be conducted of the Constitution, in order to
identify inconsistencies with other legislation, weaknesses, gaps, or
vague language. This would help Georgia prepare for the process of
amending the Constitution, and help avoid multiple amendment processes.

[3. Training and Reference Materials]{.underline}

*a. Judiciary*

Provide judicial training in select priority subjects, such as
commercial law *(CL Recommendation 2(a))*, basic business principles,
judicial discipline and ethics, judicial skills, administrative law and
human rights. The first step should be to conduct a full review (perhaps
in a retreat venue), with the participation of EU, WB, SOROS, JTC, COJ,
and all other relevant individuals and organizations involved in
judicial training in Georgia in order to determine the capacity and
scope of existing institutions in light of current and anticipated
needs. A judicial training action plan that delineates roles and
responsibilities for provision of judicial training for the next 5 to 10
years should be drafted among those participating.

*b. Training of Trainers*

A TOT program for judicial training needs to be in place, as this is one
of the most fundamental prerequisites to a sustainable indigenous
judicial training program. Training activities conducted by expatriates
alone should be avoided.

*c. Alternatives*

If the JTC lacks sufficient capacity at this time, other training
options could include:

i.  A program of short (2-5 days) seminars and workshops led by
    expatriates, with Georgian experts, delivered over the course of
    four years to sitting judges in Tbilisi and outlying regions. In
    addition, USAID should attempt to take advantage of visiting legal
    experts on temporary duty for other assignments, by including extra
    days in their contracts for one or two-day seminars on topics of
    interest.

ii. Use study tours to expose Georgian judges to western models and
    courses. Care should be taken to select participants fairly, and
    study tours should be designed to maximize the potential for
    learning while minimizing waste and redundancy. Over time, a broad
    and representational body of judges should be included in study
    tours.

iii. A "mobile" unit of Georgian trainers comprised of judges or
     multi-disciplinary teams, with expatriate assistance, who can
     provide extension training to judges, on an as-needed basis at a
     low cost. This program could extend the pilot activity developed by
     USAID's ROL contractor, AMEX, to provide one or two-hour "brown
     bag" sessions for judges on topics of interest. Programs of this
     nature should be developed and implemented in partnership with a
     Georgian counterpart, such as the JOG or JTC.

iv. Develop a small commercial law center in the USAID-funded banking
    training center in Tbilisi, to focus on select courses for judges,
    lawyers and other legal professionals. A small library of commercial
    law materials could be concurrently developed. A plan for extending
    training to outlying regions will need developing.

With the exception of study tours, these training activities would
require the development of modules that could be replicated and adapted.
Any or all of these activities could be carried out in partnership with
the JTC, to the extent it has the capacity.

*d. Legal Professionals*

Training of other legal professionals, such as legal assistants,
notaries, marshals, and attorneys needs to be considered, and included
in the donor/partners action plan. Develop training activities for such
sub-sectors as needed. *(CL Recommendation 2(b))*

*e. Evaluations*

Any training activities should include a methodological approach for
assessing the ongoing needs with frequent evaluations.

## *f. Lawyers*

Provide training for lawyers in substantive areas of law, procedures,
and skills related to advocacy (e.g., drafting pleadings, collecting
evidence, developing arguments, etc.) This activity could be implemented
in partnership with GYLA, other bar associations, or through other
mechanisms but it will be imperative to develop this training program in
collaboration with a Georgian partner in order to lay the foundation for
sustainability**.**

*g. Commercial Law*

Training for lawyers on commercial laws and related procedures is
critical. This activity could be incorporated into other training
programs, or could operate as a stand-alone program. It could be
included in the Commercial Law Training Center within the Banking
Training Center, mentioned above as a possibility for provision of
judicial training. (*CL Recommendations 2(b)(c))*.

*h. Criminal Law*

A separate feasibility study should be undertaken for exploring options
for training and strengthening the sub-sector of criminal defense
attorneys. Care should be taken to consider both the public and private
sector when designing a program for criminal defense attorneys, given
the existence of the Collegium of Advocates, its link to the Ministry of
Justice, and its significant role in the provision of public-supported
defense.

*i. Legal Drafting*

Legal drafting training must be provided for the legislative (laws),
executive (regulations), judicial branches (decisions) and private
attorneys. The issue turns on whether to have a stand alone legal
drafting activity for all legal professions or have a legal drafting
component integrated into the training programs designed for a
particular sector.

*j. Georgian/English Legal Glossary*

Produce a glossary of English\\Georgian legal terms, with Georgian
translations. This could build on the work done by the Academy for
Educational Development and AMEX. Soros may be working on a similar
project and duplication of tasks must be avoided. In particular,
ambiguous, vague or misused terms such as: judicial independence, public
defender or defender, ombudsman, expertise, human rights, and corruption
need to be defined.

## *k. Sources of Legal Information*

A review should be completed of existing and planned databases,
libraries, and other publications, public or private, that contain
information on laws, decrees, regulations, court decisions, commentaries
and other legal analyses, and manuals. This review should lead to a
regularly updated donor matrix of commentaries, manuals, laws,
dictionaries, glossaries, and databases related to legal subjects.

## *l. Libraries and Databases*

Based on the findings of the review of sources of legal information,
support development of databases or libraries, in courthouses and other
venues, to help meet the demand by legal professionals for current and
accessible information. The District Courts with Demonstration and
Administrative Functions are possible library sites. Libraries could be
phased-in as the courthouses are rehabilitated. A system for
comprehensive distribution of the important judicial decisions would be
useful. The idea of establishing regional law libraries should also be
explored. Development of databases should include a database for all
government regulations.

## *m. Commentaries and Manuals*

To complement *ROL Recommendation 3(l)*, support the preparation,
publication and distribution of commentaries, manuals and other source
materials to understand the law and obtain guidance regarding its
application for legal professionals, particularly judges and lawyers.
This is especially recommended in the area of Commercial Law. (*CL
Recommendation 2(c)).*

## *n. Information Technology*

Parliament's local area network (LAN) needs to be expanded to cover all
the committees. Targeted government agencies and courts, in the regions
in which USAID has activities, require computer and peripheral equipment
and software programs adapted to Georgian needs.

[4. Institutional Development/Capacity Building]{.underline}

*a. Judicial Independence*

Sponsor a forum to clarify the meaning of judicial independence in
Georgia. Georgian and expatriate organizations involved in judicial
reform should try to reach consensus on how Georgians define judicial
independence, in order to promote a common understanding of Georgia's
goals and criteria in this area. Once developed, these principles could
be included in appropriate legislation or charters. They could be used
as a checklist, to periodically rate Georgia's progress in reaching and
maintaining judicial independence. The JOG would be an appropriate
Georgian counterpart for this exercise.

*b. Developments in the Legal System*

A similar dialogue could be started on the issue of how Georgian see
their legal system developing. Reconciling some of the conflicts between
civil law and common law approaches could help reformers clarify the
role of courts and bring more consistency to court decisions.

*c. Judicial Administrative Responsibilities*

A related and important task is to help the institutions charged with
judicial reform clarify their respective roles and responsibilities,
such as managing the court budget, overseeing judicial training and
education, enforcing judicial discipline and ethics, advocating on
behalf of judicial interests, and pursuing other goals associated with
judicial independence and reform.

*d. Judicial Recruitment*

Continue to support the COJ in its role as administrator of the judicial
qualification examinations. A review of the current schedule of
examinations should be conducted in light of the number of seats that
are vacant and anticipated rates of attrition over time, in order to
stabilize the examination process. Attention should also be given to
other stages of judicial qualification, such as the competition for
positions, the vetting/placement process, and character review in order
to ensure that all phases of judicial qualification are fair and
transparent.

## *e. Court Budget Survey*

To address the issue of salaries, conduct an analysis of the entire
court budget. The analysis would examine allocations and expenditures,
to reveal "ghost employees" and other areas of waste, fraud or abuse.
The objective is to see if salaries can be increased without the need
for additional allocations.

## *f. Harmonization of Judicial Practice*

Assist the Supreme Court and the District Court Appellate Chambers.
Assistance could focus on developing common methodologies in reaching
and presenting court opinions and developing rules or guidelines for
reviewing cases on appeal (e.g., whether cases on appeal should be
argued again in their entirety, or whether review should be restricted
to questions of judicial error below).

## *g. Judicial Networking*

Establish a judicial exchange and networking program in which Georgian
judges and judges from Central and Eastern Europe would have a forum to
promote horizontal cooperation. Such a program could provide for
exchanges.

*h. Process Mapping*

Undertake process mapping (institutional assessment) for targeted
agencies that need to implement administrative regulations, in order to
assist that office in the process of following step-by-step procedures
for establishment of regulations consistent with the Administrative Code
and Administrative Procedure Code.

## 

## *i. Civil Service/Administrative Reform Working Group*

Provide assistance to establish a secretariat with a small staff.

## *j. Administrative Code Advisory Board*

Provide assistance to Administrative Code Advisory Board. This Board has
the potential to challenge and begin to change firmly established
attitudes about the role of government in the lives of citizens, and the
extent to which government should be accountable to society. This
activity recognizes that the executive branch must embrace a correction
to the imbalance of power between the bureaucracy and the populace,
which will require a public endorsement of tough-minded reforms in the
arena of administrative law. (*CL Recommendation 4(b))*

*k. Bar Examinations*

After a law on the bar is passed, and assuming it provides for attorney
qualification exams, support activation of the licensing requirement for
lawyers. Assistance could include design and administration of the bar
exam, based on the successful experience with the judicial qualification
examinations.

*l. Law School Accreditation*

Once licensing for lawyers is activated and underway, consider an
initiative to reform law schools by introducing accreditation standards.
However, it is unlikely that Georgia will be ready for this step in the
immediate or medium term.

*m. Anti-corruption Working Group*

Continue participation on the Georgian Anti-Corruption Working Group,
and add to the working group a representative from USAID's Office of
Economic Restructuring.

n.  *Enforcement of Judgements*

The Department for the Enforcement of Judgements housed within the
Ministry of Justice requires assistance. This could entail providing
technical assistance, training, equipment and manuals with model forms.
In addition, an institutional assessment or process mapping exercise
would assist the Department to develop step-by-step procedures for
enforcing judgements.

# 5. Public Awareness/Access to Justice

## *a. Awareness Campaigns*

Conduct awareness campaigns to inform targeted interest groups and/or
the public of specific laws. The campaign will inform people how they
can use and benefit from the law. When publicizing the laws, concrete
examples of success stories should be presented. A variety of mechanisms
could be pursued, such as announcements and articles in mass media,
hotlines, hosting a web-site or chat room, arranging workshops for
journalists and/or targeted groups, and publishing pocket cards or
brochures. A public awareness campaign, pilot project on the
Administrative Code could prove particularly timely.

## 

## *b. Court Monitoring*

Establish a court monitoring activity that would be implemented on the
ground by qualified NGOs and/or business associations (for commercial
law cases). The activity could be restricted to the courtroom, or could
extend beyond the courtroom to monitor enforcement of court decisions or
even agency administrative decisions. While shining a light on possibly
improper judicial activities, it would assist the judges by reporting
accurately on court decisions. Many erroneous stories appear in the
press − often intentionally.

This activity needs to be developed carefully. Strict criteria must be
in place, activities must be carefully reviewed by USAID, and procedures
should be in place for the selection and training of monitors. Questions
of administration will need to be addressed, such as how court
monitoring by unrelated NGOs is coordinated; how results will be
compiled and reported; and what will be done with the data. While
shining a light on possibly improper judicial activities, it would
assist the judges in reporting accurately on court decisions.

## *c. Bar Poll*

Conduct a Bar poll that periodically queries lawyers, advocates,
notaries, procurators and other legal professionals on the progress of
judicial reform and the performance of judges. As a follow-up to the
poll, a conference could be held to devise solutions to the problems
identified. Such a poll would not need to be conducted every year.

## *d. Legal Services*

Support for providers of legal services in the area of human rights and
possibly non-commercial civil law cases.

## *e. Clinical Programs*

Support or help establish legal clinical programs run by NGOs such as
CPCR and Article 42 that use law students. Efforts should be made to
help the NGOs reach formal agreements with law schools so that
participating students can receive practicum credit for clinic work.
Care should be taken to ensure that all law students are supervised by
law professors or clinic lawyers when engaged in client representation.
Clinics could be specialized, depending on the region and the NGO.

## *f. Test Cases*

The potential for pursuing test cases or cases of major significance
should be seriously reviewed. For example, lawyers with legal advocacy
NGOs could be selected for training and assistance in bringing claims in
the Constitutional Court, including "class-action"- type claims. The
GYLA chapter in Rustavi could sponsor a clinic that focuses on cases of
police/procuratorial abuse, since they have developed a substantive
expertise in this area, and focus on taking on cases with widespread
significance. Also, a special initiative could entail targeting cases
with good potential for testing the new Administrative Code.

## *g. City Attorneys*

Support GYLA in the management of the Tbilisi City Attorney program.

*h. Constitutional Court*

Assistance to the Constitutional Court should be delayed, pending
progress on improving access to the Court through streamlined procedures
and initiatives to promote use of the Court for viable claims by
competent counsel.

## *i. Ombudsman*

If the new Ombudsman is a strong advocate for human rights, explore
means of collaboration with UNDP to support this office, as it has the
potential to publicly profile in Parliament, through the media, and
other fora problems and solutions in this arena.

B.  **Commercial Law Recommendations**

[1. Completion and Important Refinements of Legislative
Framework]{.underline}

*a. Personal Property Registry*

Set up a registry for personal property; associated analysis and
establishment of lien priorities, collateral filing requirements and
consideration of whether filing should be required for more security
interests in personal property. Increased filings would provide greater
protection for lenders and potential business partners by providing
public notice of encumbered property. Such filings would also provide a
record for notifying those with an interest in property when such
property is proposed to be disposed of - whether to satisfy a court
decision, in connection with bankruptcy proceedings, and in other
circumstances.

*b. Bankruptcy*

Assist in drafting and enacting bankruptcy amendments (including those
providing for supervisory mechanism for bankruptcy administrators),
standard forms and outreach. If bankruptcy gains greater acceptance,
regulations may be appropriate. There is a group of Georgians who have
begun working on amendments and some amendments have reportedly been
submitted to Parliament. GTZ has reportedly provided some assistance
regarding certain draft amendments to the bankruptcy code, however, it
appears that USAID assistance will be appropriate to assist the
identification and preparation of amendments. (*ROL Recommendation
2(a))*.

*c. Harmonization and Clarification*

Oversee harmonization of laws; clarification of important existing
provisions; and preparation of amendments necessary to implement
legislative reforms (see discussion in Rule of Law section above). Both
assessment results and regional experience establish that some needs
exist in this area and will arise over time, This is particularly likely
in the case of the Civil Code, due to its breadth in governing many
basic commercial transactions. For example, the Civil Code does not
recognize electronic communications (e-trade confirmations) for valid
obligations. This should be an area where a contractor is available to
provide assistance as and when needed, in addition to the collateral and
bankruptcy areas noted above. (*ROL Recommendation 28*).

*d. Acquiring and Liquidating Property*

Assist with drafting and enacting amendments to the Civil Code, Civil
Procedure Code and other laws that will facilitate lenders and others
acquiring and liquidating property in an efficient manner. It appears
that a useful task will include the contractor - in coordination with
Booz/Land Privatization, Booz/Banking, other appropriate assistance
providers, and the local banking community (suggest working group
here) - assisting in identifying impediments to the acquisition and
liquidation of collateral and assisting in the preparation of necessary
changes.[^17] (*ROL Recommendation 2(b)*.

*e. Procurement Law*

Provide assistance (as necessary) to cause the government procurement
law to satisfy WTO standards, by setting forth provision for
international procurements. Anticipated WTO date for effectiveness of
such a law is December 31, 2000. (*ROL Recommendation 2(b)*

*f. Business Regulation*

Simplification (ongoing) of business regulation:
registration/licensing/other. This task will integrating with the SME
activity. The SOW provides for legislative technical assistance, as and
when necessary to complement the new SME activity. Depending on whether
SME priority, could assist in developing central registry of information
regarding business registration as all registrations are currently at
local and regional courts where the business is based. The International
Chamber of Commerce has also proposed centralizing the business
registration registry.

*g. Leasing Law*

The GOG has not demonstrated to date interest in legislation governing
financing leases. It is not clear that the business community has a
particular interest in a financing lease law. However, assistance may be
appropriate where there is political will and identification of what the
particular products likely to be provided under finance leasing are. The
new SME activity may be used to gauge SME demand for additional
legislation in this issue, including providing the statutory framework
for leases and financing leases

h.  *Franchise Law*

Same points as leasing law. The new SME activity may be used to gauge
SME demand for additional legislation in this area.

[2. Training and Reference Materials]{.underline}

*a. Judges*

Judges, who are charged with interpreting laws and adjudicating matters,
must understand the new laws in order to apply them properly to specific
factual cases. Training should include useful hand-outs to assist judges
until commentaries and manuals[^18] are available. This is particularly
important as there are a limited number of experts in Georgia who have
knowledge of the new laws to prepare commentaries and manuals.[^19]
Although the World Bank and EU/TACIS plan to support the JTC in its
development and delivery of curricula, it is unlikely that their
assistance will extend to all priority commercial law areas.
Particularly important subject areas that will not be covered by any
modules generally covering the civil code include: bankruptcy, the Law
on Entrepreneurs, the securities law, tax law, banking law, and the
Administrative Code. Judges will need to understand collateral law,
bankruptcy law, foreclosure law and applicable provisions of the Civil
Procedure Code, all as they relate to the execution of decisions to
acquire and/or liquidate real and personal property. (*ROL
Recommendation 3(a)(b)(c))*

*b. Legal Profession*

Advocates, jurist consultants (similar to in-house counsel), notaries,
bankruptcy administrators, and marshals will also require training in
commercial law. In particular, marshals will need training in collateral
law, bankruptcy law, foreclosure law and applicable provisions of the
Civil Procedure Code, all as they relate to the execution of decisions
to acquire and/or liquidate real and personal property. The World Bank
and/or GTZ may be providing assistance in training marshals on certain
topics. Notaries, among other things, determine that contracts to be
notarized comply with law. As they have a legal education, they can be
included in various training programs with lawyers.

*c. Legal Source Material*

Legal professionals, particularly judges and lawyers, require
commentaries, manuals and other source materials to understand the law
and obtain guidance regarding its application. Support should be
provided for the preparation and distribution of the following secondary
source materials:

-   Law on Entrepreneurs -- manual to supplement the existing commentary

-   Tax Code -- commentary or manual

-   Securities law -- commentary or manual

-   Banking law -- commentary or manual

-   Civil Code -- manuals on property, general obligations and special
    obligations.

In addition, to the extent that AMEX International does not complete the
preparation of commentaries and other materials which it is scheduled to
complete prior to the expiration of its contract, especially the
bankruptcy practitioners guide, support for the preparation of such
materials will need to continue. (*ROL Recommendations 3(m))*.

*d. Arbitrators*

Training arbitrators who will conduct arbitration proceedings under the
arbitration subsidiary being established under the Barents/Capital
Markets project to hear securities-related disputes. This training is
reportedly not included in Barents' project.

[3. Public Awareness]{.underline}

*a. Business Community*

Assist in building public awareness of reforms, especially to the
business community. The public, and businesses in particular, need to
understand commercial laws, including the rights and obligations that
they impose. Public outreach efforts to businesses regarding reforms
should contain practical and specific information regarding reforms and
emphasize, where possible, expected benefits to business from the
reforms. (*ROL Recommendations 14-15*)

[4. Institutional Development/Capacity Building]{.underline}

*a. Property Registry*

Provide institutional strengthening associated with bodies who implement
and administer laws -- particularly, collateral registry, company
registries. This includes technical assistance to the body responsible
for the registry to support the establishment of a filing system and
procedures for its transparent and efficient operation.

*b. Administrative Code*

In the case of the executive agencies who are significant counterparts
to USAID ER Office, the respective contractors under these activities
should be able to provide technical assistance in this area. For
example, Barents/Tax and Fiscal and Barents/Capital Markets can assist
the tax and securities administrations in establishing procedures that
comply with the applicable provisions of the Administrative Code. Due to
the progress of Barents/Capital Markets to date in assisting to
establish the securities exchange, on which trading is anticipated to
commence before 12/31/99, this may require minor additional assistance
by Barents/Capital Markets. (*ROL Recommendation 2(b))*.

*c. Fees*

Additional item outside program design. The Mission may wish to include
in the new SME activity, or otherwise procure, an analysis of court
filing fees, enforcement fees and notary structure to gauge their
potential for deterring on SME growth. This may be appropriate to
include in new SME activity

> [5. Quick Starts]{.underline}

These are small activities that the team believes could be implemented
over the next six months, mostly accessing contracting mechanisms
already in place. Items marked with an asterisk do not require any
additional funding or contract vehicles.

*a. Tax Code Review*

AmCham and Barents/Tax & Fiscal are cooperating in Barents' review of
the tax code.

*b. Law on Entrepreneurs*

Barents/Capital Markets will be contacting AmCham to discuss AmCham
concerns regarding specific provisions of the Law on Entrepreneurs.

*c. Taxpayer Procedural Rights*

As part of its public outreach work, Barents/Tax and Fiscal can conduct
public information effort regarding taxpayers' procedural rights
regarding the freezing and transferring of funds on deposit in bank
accounts. For example, it appears based on advice from Barents/Tax and
Fiscal that (1) a taxpayer should receive a collection order before
funds can be transferred and (2) the taxpayer has the right to appeal
the notice (initially within the tax administration) prior to the
transfer of funds. Barents/Tax and Fiscal will need to coordinate with
the new Booz/Banking project to determine the extent to which banks face
fines or are under other pressure to approve quickly funds transfers.

*d. Basic Business Practices*

Initial judicial training on basic business practices. Combine forms of
business organization (law on entrepreneurs), types of transactions,
some accounting (*Rule of Law Recommendation 3(a))*.

*e. Anti-corruption Working Group*

Add an Economic Restructuring member to the Anti-Corruption Working
Group.

*f. Bankruptcy*

Assistance with preparation of amendments, building on AMEX's recent
work regarding bankruptcy. \[Note: USAID should (1) determine if
bankruptcy code reform is likely to be a significant priority prior to
Presidential elections and (2) absorptive capacity of AMEX to perform
this work\]. The assistance should incorporate relevant suggestions of
the short term (approximately one month) bankruptcy expert who will be
reviewing the voluntary liquidation procedures under the bankruptcy law
as part of the Office of Economic Restructuring's privatization
assistance.

*g. Collateral Registry Design and Collateral Law Assessment*

Short term technical assistance to provide design suggests for the
unified registry. The consultant would, among other things, (a)
determine possible institutional bodies where the registry might be
based, (b) assess current filing requirements for liens on movable and
immovable property, (c) determine major areas of collateral, mortgage
and bankruptcy law that may need revision to clarify and establish the
rights of competing lien-holders, and (d) initially identify process
requirements (e,g, adequacy of notice of disposition, sales price
floors) that may limit the efficient disposition of collateral. Part (c)
would also include an analysis regarding whether current law adequately
deals with the rights regarding immovable property where the rights are
separate from the ownership of the underlying land. One vehicle for this
technical assistance may be a tier one contract under SEGIR Legal and
Institutional Reform.

*h. Task Identification*

Leverage onto SME initial meetings for business outreach and to identify
priority concerns. This provides a way to jump-start onto important
demand areas that may require additional technical assistance.

*i. Translation of Civil Code*

OER review of AMEX English language translation of Civil Code to be
completed prior to expiration of AMEX's contract, do determine that the
translation can be used by foreign investors.

[^1]: For additional information on judicial reform see *Georgia
    Judicial Assessment*, World Bank Report No. 17356-GE, April 10,
    1998. In particular, this report provides a detailed discussion of
    the court system.

[^2]: In Georgian legal parlance, regulations are referred to as
    subordinate normative acts or administrative acts.

[^3]: As part of its judicial reform project, the WB will conduct a
    series of annual focus groups with judges, lawyers, the business
    community, public officials and recent court users.

[^4]: The United Nations (UN) has developed guidelines for judicial
    independence and the ABA/CEELI is in the process of testing a
    judicial independence survey in the FSU, partly based on the UN
    principles.

[^5]: The Law on the Courts provides that newly qualified judges shall
    receive a salary at least equal to that of MPs.

[^6]: See WB assessment, no. 17356-GE. The WB will provide assistance to
    the Department of Logistics.

[^7]: Human Rights Watch has prepared an assessment of the Criminal
    Procedure Code amendments, which will be released in the near
    future.

[^8]: See [www.cec.gov.ge/index.htm](http://www.cec.gov.ge/index.htm)
    for the English version.

[^9]: See Law on Procedure for Enforcement of Judgments, April 16, 1999.

[^10]: The term Ombudsman is often used interchangeably with the term
    "public defender" by translators and English-language speakers, but
    an Ombudsman does not have the same duties and responsibilities as a
    public defender has in the US.

[^11]: The five parts of the Civil Code in their respective order are:
    General Provisions; Right of Ownership and Other Rights in Rem
    (which includes provisions on movable and immovable property,
    including collateral law) and Law of Obligation -- General Part and
    Special Part.

[^12]: Parliament enacted the Law on Monopolistic Activities and
    Competition on June 26, 1996. This law charges the Antimonopoly
    Service, located in the Ministry of Economy, with enforcement.

[^13]: USAID's ROL implementing partner, AMEX, expects to have a high
    quality English translation of the Civil Code available by May 2000.

[^14]: Pledges of personal property are recorded in a number of places,
    both based on the introductory language to Article 255 ("A pledge of
    movable things and endorseable securities, where necessary, as well
    as other non-material property wealth is effectuated under the
    procedure for the acquisition thereof"). Liens on motor vehicles are
    recorded with offices of the local police department. Pledges of
    shares of limited liability companies are apparently registered in
    company registration records at the court where the LLC's charter
    documents are registered. Tax code liens are filed on a regional
    basis in "county offices".

[^15]: This may be particularly troublesome if, as one person suggested,
    it is a criminal violation under the new Criminal Code for a party
    not to file a petition with the court when insolvent.

[^16]: When reviewing the recommendations, the reader should refer to
    the Annex H matrix table, which provides a survey of the impact of
    SO 2.2 as of February 2000.

[^17]: Booze/Land Privatization is not doing any work to assist in the
    implementation of the law on mortgage foreclosure. Although it has
    published a handbook for individuals who wish to mortgage their
    property. Booz is doing daily face-to-face training for 30
    enterprises on how to file ownership documents in connection with
    privatization. Finally, Booz has prepared a handbook to help
    agricultural landowners register land.

[^18]: As used in this assessment, and as apparently referred to in
    Georgia, "manuals" include practical instruction regarding how the
    law is intended to apply to particular situations.

[^19]: According to AMEX, the preparation of commentaries in its work
    plan -- specialized obligations and licensing law -- have been
    delayed due to the death of the Georgian experts working on those
    commentaries and the difficulty in finding experts to continue the
    work.