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4.1 Rule of Law
4.2 Enforcement of Contracts
4.3 Efficient Administration
In-Country Assessment Information

Although the justice system is administered reasonably well in terms of the cost of court proceedings, adjudication often remains contingent on political, personal, or financial interference and is highly bureaucratic. In fact, Armenia’s latest Doing Business rating of the time needed for court filing, trial, and judgment enforcement shows a precipitous drop from 285 days last year to 440 days this year. This is largely attributed to the fairly weak rule of law combined with a flawed system of law enforcement. The lack of a fully independent judiciary also tends to weaken the efficacy of the state administrative bodies and fosters a widespread lack of public trust in the legal system, including in property disputes. The vast majority of entrepreneurs do not trust the courts and other public institutions.

Alternative dispute resolution mechanisms are legally available, mainly in the form of mediation institutions or arbitrages. However, small businesses do not use them or only use them very rarely, as they are considered ineffective.

 

Goal – An efficient institutional framework that
balances the rights of the public, owners, lenders and borrowers in the event of a dispute or loan default
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4.1 Rule of Law

 

Core Question: Do all market participants abide by the rule of law and have confidence in the courts and the ability of police to control crime? No – Weak, the judicial system is still underdeveloped and plagued by corruption.

Impartiality
4.1.1 What is the confidence level of the strength and impartiality of the police, courts and contract enforcement? Weak – Percentile Ranking – 42.9 Trend ↓

Source: Governance Matters, World Bank, www.govindicators.org

Independent Judiciary
4.1.2 Can members of the judiciary be held accountable for their actions? No – Score 67 out of 100 – Weak, Trend =

Source:Global Integrity Report – http://report.globalintegrity.org/Armenia/2009

Costs of Crime
4.1.3 What are the business costs of crime and violence? Low Costs – Ranking 25th out of 133 – Score 5.7 out of 7, Very Strong, Trend ↑

Source:The Global Competitiveness Report 2011-2012, World Economic Forum, www.weforum.org/issues/global-competitiveness
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4.2 Enforcement of Contracts

 


Core Question: Are systems in place for timely and efficient enforcement of contracts?Commercial – No – Weak, judicial enforcement remains the only option.

4.2.1 – Judicial Enforcement
Commercial – Weak – Ranking 91st out of 183 Trend ↓While costs are relatively low (in line with the OECD levels), judges are not well trained for commercial cases.

4.2.1.1 What is the number of procedures involved in resolving a commercial dispute? 49

4.2.1.2 What is the time between the filing of a lawsuit and resolution in judicial enforcements? 440 days

4.2.1.3 What is the cost of judicial enforcements as a percentage of debt value? 19%

Source: 2012 Doing Business – www.doingbusiness.org/data/exploreeconomies/armenia

4.2.2 – Summary Proceedings
SQ 10: Summary proceedings are alternative dispute resolution processes where creditors can apply for a direct court order in property disputes. What is the time between notice of intent to foreclose and loan collection in summary proceedings if available to lenders? Not available – Very Weak

SQ 11: What is the cost of summary proceeding if available to lenders as a percentage of property value? Not available – Very Weak

4.2.3 – Power-of-Sale
SQ 12: Power-of-sale agreements give creditors the power to sell properties after notice to the borrower without court intervention. What is the time between notice of intent to sell and loan collection for power-of-sale agreements if available to lenders? Not Available – Very Weak

SQ 13: What is the cost of power-of-sale agreements if available to lenders as a percentage of property value? Not Available – Very Weak

Source:Financing Homes 2008, World Bank and International Housing Finance Corporation, http://www.cipe.org/sites/default/files/publication-docs/Financing%20Homes%202008.pdf

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4.3 Commercial Dispute Resolution

 

Core Question: Can commercial disputes be resolved efficiently and fairly without exorbitant expense and delay? No – Weak, while the Law on Arbitration Courts provides a wide range of options for settling commercial disputes, most businesses still rely on the courts.

Survey Questions
Commercial Courts
SQ 14: Do specialized commercial courts exist for the handling of property disputes and foreclosures? No – Weak, commercial disputes are tried in courts of general jurisdiction.

Source: U.S. Embassy Commercial Guide, http://armenia.usembassy.gov/uploads/Nf/H_/NfH_XWTan3xHMji4k9yAJQ/ccg_2010.pdf

Alternative Dispute Resolution
SQ 15: Are alternative dispute resolution mechanisms in place including commercial arbitration, private mediation and community based processes? Yes – Weak, Arbitration Court established in 2007, but small businesses do not view ADR as effective.

Source: Chamber of Commerce and Industry – www.armcci.am/en/our_services/arbitration

Commercial Treaties
SQ 16: What bilateral, regional and international commercial treaties exist concerning business between countries? Armenia has bilateral investment treaties in force with 21 countries: the U.S., Argentina, Austria, Belarus, Bulgaria, Canada, China, Cyprus, France, Germany, Greece, Georgia, Iran, Italy, Kyrgyzstan, Lebanon, Romania, Switzerland, Ukraine, the United Kingdom and Vietnam – Very Strong

Source: U.S. Embassy Commercial Guide http://armenia.usembassy.gov/uploads/Nf/H_/NfH_XWTan3xHMji4k9yAJQ/ccg_2010.pdf

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In-Country Assessment


FQ20: To what extent do small businesses trust public institutions to support contract enforcement?The vast majority of entrepreneurs surveyed do not trust the courts or other public institutions. Small businesses feel that authorities do not adequately guarantee and enforce their property rights. They feel they are at a disadvantage compared with larger firms because they cannot compete due to limited resources. The unreliable judiciary is undermining property rights and contract enforcement. The main reason is high levels of corruption. Most entrepreneurs do not believe that it is possible to settle any dispute on property rights justly without paying bribes.

FQ21: To what extent are alternative dispute resolution procedures used and trusted by small businesses?Though alternative dispute resolution mechanisms are legally available (mainly in the form of mediation courts or arbitrages) small businesses do not use them or use very rarely. Most reported that ADR mechanisms do not work.