XXXIX Course on International Law Current Issues in International Development: Some Perspectives from the World Bank Lecture 1 The Rule of Law in the World Bank: Legal and Policy Issues Anne-Marie Leroy Senior Vice President and General Counsel, World Bank

Outline I.Introduction to the World Bank Group II.The Legal Order of International Organizations III.Understanding the Rule of Law in the World Bank’s Legal Order

Introduction to World Bank Group

What is the World Bank? World Bank Group - Composition International Bank for Reconstruction and Development (IBRD) — 1944 International Finance Corporation (IFC) — 1956 International Development Association (IDA) 1960 International Centre for Settlement of Investment Disputes (ICSID) — 1966 Multilateral Investment Guarantee Agency (MIGA) — 1988 IBRD + IDA = “The World Bank”

International Bank for Reconstruction and Development (IBRD) Established at Bretton Woods with IMF Reconstruction and Economic Development after World War II Development assistance for Middle-Income and Creditworthy Low-Income Countries Borrows from Capital Markets; AAA Rating Objectives and instruments Evolved over time Poverty Reduction Mandate

International Development Association (IDA) Bank’s Concessional Lending Arm Loans on Most-Favourable Terms to Development Countries Periodic Replenishments from Rich Members IDA Funds Allocated to Borrowers Based on Income Levels and Track Record Special Allocations for Conflict Legally and Financially Distinct from IBRD but Same Management and Staff

Bank Ownership and Governance Structure Shareholders are all Member Countries IBRD – 187 members; and IDA – 170 members Voting Proportionate to Member’s Shares Board of Governors Highest Decision-Making Organ; Each Member Appoints a Governor Meets Annually; Mail Votes Executive Directors (24) 5 Largest Shareholders Appoint Separate Directors Other Shareholders elect 19 Directors President - appointed by Executive Directors

Bank’s Board of Governors v. Executive Directors Board of Governors All corporate authority vested in governors Governors may delegate some powers to directors List of “Reserved Powers” Powers of Executive Directors Responsibility for Bank’s general operations Exercise all powers delegated by Governors Power to select World Bank president, interpret Articles, establish committees Dual duties: Bank official and country representative

Bank President Appointed and fired by Executive Directors Cannot be a Governor or Executive Director 2011 New Guidelines Chief of staff and Conducts Ordinary Business Subject to Board’s General Control Appointment and Dismissal of Staff 5-Year Renewable Contract Duty to the Bank alone

Bank’s Accountability and Review Entities Administrative Tribunal; Inspection Panel; Sanctions Board; Access to Information Board Internal Audit Department; Independent Evaluations Group Internal Transparency and Accountability No Strict Articles Basis President’s Power to Conduct Ordinary Business Others Entities under Implied Powers Varying Operational and Functional Autonomy

The Legal Order of International Organizations

Elements of the Legal Order Constitution Decisions and Rules of the Organization International Law (treaties, general principles, custom)

World Bank’s Internal Legal Hierarchy

Understanding the Rule of Law in the World Bank’s Legal Order

Characteristics of the Rule of Law Rules known in advance Enforceable rules Mechanisms for ensuring proper application of rules and departure from them according to established procedures Resolution of conflicts in the application of the rules through binding decisions of an independent judicial or arbitral body Known procedures for amending rules when they no longer serve their purpose

Challenges in the application of the Rule of Law in the World Bank’s Internal Legal Order Transparency and Predictability Existence of disperse and scattered rules Multiple processes for adopting exception from rules Enforceability and Accountability Operation of various accountability and oversight bodies Absence of a court of law to adjudicate on internal institutional differences

Promotion of the Rule of Law through the Bank’s organs Role of Executive Directors Interpretation of the Articles of Agreements not as a court of law, but constrained by the Bank’s legal framework and guided by the requirements of effectiveness, reasonableness, good faith, and the Bank’s common interests and those of its members as a whole. Possibility to acting as an informal dispute resolution mechanism for differences between entities established by the Board.

Promotion of the Rule of Law through the Bank’s organs Role of President and Management Interpretation of the Bank’s internal rules within the Bank’s legal framework and guided by the requirements of effectiveness, reasonableness, good faith, and the Bank’s common interests. Operation as informal dispute resolution mechanisms for institutional disputes between subordinate units

Promotion of the Rule of Law through the Bank’s organs Role of General Counsel Provision of legal advise for the interpretation of the Bank’s Articles and policy decisions by the Executive Directors Approval of all lending operations prior to the Executive Directors’ approval Interventions in institutional controversies upon request from the Executive Directors or Management

Recent Initiatives for the Promotion of Internal Rule of Law Access to Information Policy Sanctions Reform Modernization and Consolidation of Operational Policies and Procedures

The External Effect of a World Bank’s Legal Order governed by the Rule of Law Effectiveness Legitimacy Consistency with the organization’s mandate