1. GAC STRATEGY IMPLEMENTATION: LEGAL IMPLICATIONS Core Course on Public Sector Governance and Anti-Corruption April 23-26, 2007

2. MAIN ISSUES Legal Issues – Articles considerations – Exercise of Contractual Remedies – Consistent but differentiated treatment – Legal and Judicial Reform Related Policy Issues – Bank Investigations – Guidance Note – Policy Updates – DPLs – Asset Recovery

3. KEY LEGAL ISSUES ARTICLES CONSIDERATIONS GAC Strategy falls within the Bank’s mandate Implementation subject to certain legal constraints, in particular the “political prohibition” as it applies to proposal for “multi-stakeholder engagement” on GAC issues

4. “Political Prohibition” entails a two-part test: Economic considerations only should guide Bank decision-making – Focus on economic (and not political) benefits of reform initiatives Bank must not interfere in political affairs of member countries – Remain impartial vis-à-vis partisan political actors – Ensure full country ownership – Prefer acting with broad coalitions and activities that enjoy consensus support – On the “demand side”: avoid engagement with actors with strong partisan associations

5. EXERCISE OF REMEDIES UNDER BANK LOAN AGREEMENTS GAC Strategy does not analyze the exercise of remedies, but the issue is critical Bank’s contractual remedies (i.e., suspension, cancellation, acceleration, refund) may need to be strengthened (e.g., refund for loans) Need more clarity on interpretation (i.e., improve General Conditions commentaries) Need guidance on exercise of remedies (e.g., a good practice note)

6. CONSISTENT BUT DIFFERENTIATED APPROACH “ Equal treatment” is a guiding principle, per Development Committee; GAC Strategy calls for “consistency” in approach but also cites need to differentiated per country conditions Need more clarity on this approach: – Normative and procedural measures to ensure “uniform standards and principles, consistently and impartially applied across countries in a transparent manner” – Credibility will depend on appearance of impartiality as much as reality – Flexibility is key: objective is consistency in approach, not in outcomes

7. LEGAL AND JUDICIAL REFORM GAC Strategy calls for legal and institutional reform (e.g., courts) to strengthen accountability and transparency Need to formulate an Action Plan for Legal and Judicial Reform component of the GAC Strategy Plan would include scaling up of work with oversight institutions such as courts and supreme audit institutions

8. RELATED POLICY ISSUES BANK INVESTIGATIONS GAC Strategy cites the important role of INT’s work in preventing and combating corruption in Bank projects Need standard protocols on key issues such as information sharing with member countries and handling investigation findings within the Bank Could be done by a Bank-wide working group to develop these protocols

9. GUIDANCE NOTE Need to develop a comprehensive Guidance Note on GAC-related policies and procedures Cover all new and existing requirements and good practices Would not replace existing OP/BPs, but act as a “navigational tool” No new OP/BP for now, maybe later…

10. POLICY UPDATES GAC Strategy will require an update to Disclosure Policy Fiduciary aspects of GAC Strategy suggest the need to update existing fiduciary policies and procedures: better quality control for procurement plans, ex ante controls for high-risk projects, enhanced monitoring of compliance with loan covenants Need to balance strengthening Bank fiduciary practices with over-arching need to strengthen country systems, one of the guiding principles of the GAC Strategy Need to reflect on implications of GAC Strategy on Trust Funds

11. DEVELOPMENT POLICY LENDING DPLs can play important role in promoting GAC-related policy reforms Strengthening existing framework in OP/BP 8.60 on GAC-related issues—no need for policy revisions Examples: – Include GAC concerns in DPL analytic work and local consultations – Clearer guidance on when to apply enhanced fiduciary requirements in DPLs

12. ASSET RECOVERY Proposal was discussed at recent Spring meetings Main ideas: build country capacity, build global partnerships, support implementation of UNCAC Legal Issues: – Bank can play a facilitative role in implementation of international conventions, including in the area of stolen assets recovery—but it has no standing to act as an “enforcer” – Capacity building should focus on overall capacity, should avoid support for individual law enforcement cases – Same general Articles considerations (e.g., political prohibitions) would apply to AR work as apply to GAC work generally