EBRD Chief counsel: Change manager

Michel Nussbaumer, chief counsel at the European Bank for Reconstruction and Development, is turning his attention towards nations affected by the Arab Spring

Michel Nussbaumer
European Bank for Reconstruction and Development (EBRD)

Title: Chief counsel
Industry: Banking
Reporting to: Deputy general counsel Gerard Sanders
Company turnover (new business): €9bn (£7.42bn)
Employees: 1,500
Annual legal spend: £5m
Legal capability: 12 lawyers in the legal transition team; 75 lawyers in total in the EBRD
legal department

The European Bank for Reconstruction and Development (EBRD) celebrated its 20th anniversary in April 2011, a period that coincided with the Arab Spring. Even then it was clear that the events would provide the bank with some of the greatest challenges in its history.

As Michel Nussbaumer, head of the EBRD’s legal transition programme (LTP) puts it, there are many challenges ahead as his team strives to adapt its experience in Central and Eastern Europe (CEE) to the new region.

“This is the most exciting change since the bank was established,” notes Swiss-born Nussbaumer.

Out of the Red

The EBRD was formed in the wake of the collapse of Soviet Union in 1991, tasked with helping the economically fragile Eastern Bloc countries adapt to a market economy. In 1995, based on the idea that the bank is not only a financial institution but also an ­adviser to governments, a legal transition team was established in the ­office of the general counsel.

Nussbaumer’s team manages the EBRD’s legal policy dialogue work and related legal reform projects. By a process of standard-setting, assessment and technical cooperation it works to improve the investment ­climate throughout the bank’s 29 countries of operation.

“As an investor the EBRD is also a user of legal systems and has a credible voice to tell governments what the situation is and what they can do to improve,” Nussbaumer notes.

The EBRD receives funding from its membership which, at the time of writing, stands at 61 countries and two intergovernmental organisations (the EU and the European Investment Bank). These entities all act as shareholders.
As the LTP turns its gaze towards the Arab world Nussbaumer recognises the size of the task ahead.

“The situation is very different from when we began working in Eastern Europe 20 years ago,” he points out. “The EBRD was like the guru of the market economy and was welcomed with open arms by the new democracies. The Arab Spring was motivated by a desire to get rid of dictators and create a more transparent society, so the southern and eastern Mediterranean region – ’Semed’, as we term it – requires a completely different approach.”

Nussbaumer, who joined the EBRD’s London headquarters as a banking lawyer in 1999 and became head of the LTP in 2002, hopes to build on his team’s experience and success in the CEE area.

The 12-strong team of lawyers, comprising 10 nationalities, specialises in legal areas ranging from corporate governance, public procurement and secured transactions to energy efficiency. Although almost all of the team are in London, the extent of the bank’s investments in Russia – around 35 per cent – motivated the LTP to place its concessions specialist in the bank’s Moscow office.

While the country’s sheer size has made it an incredibly challenging jurisdiction for legal reform it has also provided the LTP team with some fascinating projects. It is currently advising Russia’s Ministry of Economic Development on designing ­reforms to the country’s pledge law.

As for smaller jurisdictions, Nussbaumer points to the success of a ­recent project in cooperation with the International Development Law Organisation (IDLO) to train almost 300 Kyrgyz lawyers on commercial law matters.

“A big part of our role is training public officials and improving their technical skills,” Nussbaumer says. “In Kyrgyzstan we’ve been training judges who may not have received any training on commercial matters and teaching them judicial and practical skills such as how to evaluate facts and write decisions.”

Into Arabia

Looking forward, plans are already in place to hire a lawyer to help with projects in the new region and the team has established links with a number of law firms in Egypt and Morocco, which are both already member countries of the bank. Egypt initially made its application to receive EBRD funding in 2010 when President Hosni Mubarak was still in power, but the events of the Arab Spring prompted the international community to ask the bank to expand its mandate. It now has plans to invest up to €2.5bn (£2bn) per year across the region.

The decision to work with new countries is never easy, however, notes Nussbaumer.

“There are a lot of technicalities involved, as working in new countries requires an amendment to our charter which has to be approved by member countries,” he points out.

The bank has already been granted permission to operate with technical cooperation in Egypt and Morocco. Jordan and Tunisia, at the time of writing, are not members of the bank, but are pending approval. Soon the bank will start to provide advisory services to these countries and investment activities are expected to follow later in 2012.

Nussbaumer also stresses that investment in the new region will not replace the EBRD’s interests in the CEE area, where global economic turmoil has slowed the prospects of transition.

The bank remains committed to its ’old’ region of operations and Nussbaumer notes that several countries are expected to graduate from the EBRD in coming years. The first graduate was the Czech Republic, which qualified as a market economy in 2007. Nussbaumer hopes to see many others, both in the CEE and the Semed area, follow in its footsteps.

See North Africa Special Report, page 38

Mahesh Uttamchandani
Global product leader – restructuring and insolvency, World Bank Group

The Arab Spring has created both a pause and renewed interest in the role of the private sector and insolvency reform in the Middle East and North Africa. As the EBRD begins its work there, it will see that there are few parallels with the challenges that faced countries in Central and Eastern Europe in the 1990s.

There are many more nuances across this new region and the key is to engage on a country-by-country basis. The Arab Spring has given international organisations such as the World Bank and the EBRD the opportunity to be responsive to changes and the desire for change in the region and we are already seeing some positive reaction to this.

Since its inception, what the legal transition team has done particularly well is connect its work with the goals of the EBRD’s investment work. This is particularly noticeable in areas such as secured transactions and telecoms work. What is essential now is for the team to understand that each country in this new region is different and the main challenge is to engage civil society in private sector reforms.

It’s about going beyond legislative reform – it’s about thinking of things such as setting up chambers of commerce and women’s business associations, and the dialogue in informing reform is critical.

Irina Rabinovich

Operations leader, International Development Law Organisation

My organisation is known in legal circles for providing judicial and legal training and technical assistance to countries in economic transition and post-conflict countries. We started working with the EBRD’s legal transition team in 2005 on a project to train Kyrgyz judges on commercial and civil commercial matters.

It was an uphill struggle as they had been educated in Soviet times, when many Western legal concepts were outlawed, so we often had to go back to basics and explain the concepts of a number of laws to them. The project is now in its
final stage.

The training has worked brilliantly and succeeded in giving these judges the tools to orient themselves in an imperfect system.

What the EBRD and the transition team are doing is important, focusing specifically on economic development through direct investment and legal assistance.

In Soviet times there was a wonderful saying that went: ’It’s easy to make fish soup out of an aquarium, but hard to do the reverse.’ In the same vein, in the absence of laws and the infrastructure for business the EBRD has succeeded in helping CEE nations, such that some are now members of the EU and no longer considered developing countries.