I will “sue” you in arbitration court…

In this short note we address some of the issues a party to cross-border agreement might consider when drafting a dispute resolution clause.

Arbitration is not a court

International arbitration has been around for quite some time, but at times it strikes us odd how business people and even lawyers misunderstand some of arbitration’s basic concepts.Expert-Services

It goes without saying, arbitration is not a “court” and it does not have a permanent location, unless parties choose one or it is set by default under certain rules.  We say this because in agreements we see reference to “arbitration court”.  If we can understand that arbitration is not a “court” (at least in the sense most of us are used to), that would certainly open a way for us to understand the flexible and contract nature of this dispute resolution mechanism.

In our practice a confusing dispute resolution language (such as “we will submit our disputes to arbitration court”) in a contract can lead to undesired consequences (obviously, “undesired” depends on a party’s position).  One is being uncertain whether a party wants to handle its dispute via arbitration or in court.  The 1958 New York Arbitration Convention says that a court, when looking at a claim, must refer the dispute to arbitration, if the parties have agreed on arbitration, provided, among other things, the agreement is not “inoperative or incapable of being performed”.  A lot depends on local laws and court practices, but if a party gets a the court confused as to the exact choice of dispute resolution mechanism (arbitration vs court), the court might as well just consider arbitration agreement useless.

Location of Dispute Resolution

Obviously, parties can agree on the place of arbitration – that is the physical location where hearings would take place, or jurisdiction of foreign court.  To be sure, many jurisdictions allow parties to agree on jurisdiction of foreign courts in cross-border transactions.  For instance, in a contract between parties from Azerbaijan and UK, parties may agree to submit their disputes to jurisdiction of Azerbaijani courts.

Often the issue comes up as to where dispute resolution would take place.  There are number of factors (and not just one) parties must consider before they choose the dispute resolution venue.  A UK company might think English courts are more effective, and therefore, they better choose English courts.  Alternatively, arbitration is better than courts in Azerbaijan, so better choose arbitration in London.  But these are not always effective.

We believe, at least in the context of Azerbaijan (and we are confident in many other jurisdictions), in cases where the amount of dispute is less likely be significant, it is better to choose jurisdiction of courts where would-be defendant’s (respondent’s) assets are.  It is usually much cheaper and more effective to enforce a local court decision against the defendant’s assets.   This is partly because after a plaintiff obtains decision of a foreign court (or decision of a foreign arbiter), that decision must be enforced.  In some countries enforcement of foreign court judgments or even arbitral awards could be a complicated and expensive process.

Arbitration is usually not cheap, so you want to go for arbitration in cases where amount of claim is likely be significant.

Siz “ağ mühasibatlıqla” işləməyə çalışırsınız? Artıq zamanı gəlir

Azərbaycanda bu ilin 1-ci kvartalında cəmi 34 vergi yoxlaması keçirilmişdir.  Bunu Azərbaycan Prezidenti Nazirlər Kabinetinin 9 aprel 2016-cı ildə keçirilən iclasında bəyan etmişdir.  Bu rəqəm çox şeyi deyir.  Ən əsası isə belə görünür, vergi yoxlamaları ölkə Prezidentinin birbaşa nəzarətindədir.

Son vaxtlar dövlət orqanları üzərində nəzarətin güclənməsi Azərbaycanda biznes mühitinin daha da yaxşılaşmasına gətirib çıxarmışdır.  Bizim müşahidələrimiz bunu tam təsdiq edir.  İnanın, biz bunları demək olar ki, gündəlik praktikadan keçiririk.

Təəssüf ki, ötən illərdə mövcud olan şərait Azərbaycan şirkətləri arasında “qara mühasibatlığın” yaranmasına səbəb olmuşdur.  Bunun üçün biznesləri qınamaq düzgün olmazdı, çünki onlar sadəcə mövcud şəraitdə fəaliyyət göstərməli olurlar.  Ancaq son zamanlar cənab Prezidentin səyləri ilə görülən tədbirlər getdikcə yerli şikətlərə “ağ mühasibatlıq”la işləməyə şərait yaradır.  Düzdür, bu məsələ hələ də tam olaraq öz həllini tapmamışdır, biznes ictimaiyyəti xüsusən vergi orqanlarından daha əməli tədbirlər gözləyir.  Ancaq müasir tendensiyanı nəzərə alaraq hesab edirik ki, bizneslər tərəfindən “ağlaşdırma” istiqamətində səmərəli tədbirlərin görülməsinin vaxtı gəlib çatıbdır.

Bizim hüquq şirkəti bu məsələ barədə uzun müddətdir ki, araşdırma aparır və iş adamları ilə müzakirə edir. Hüquqşünas olaraq bizim bizneslərə gətirə biləcəyimiz dəyər, bir sıra məsələlərlə yanaşı, korporativ strukturlaşdırma ilə bağlıdır.  Bu struktur elə qurulmalıdır ki, maliyyə nöqteyi-nəzərdən səmərəli olsun.  Mümkün qədər çalışmaq lazımdır ki, əlavə vergi yükünün yaranmasına və ya vergi optimallaşdırmasına nail olunsun.  Həmçinin strukturlaşdırma zamanı əlavə xərcləri aradan qaldırmaq və sinerjiyə nail olmaq mümkündür (konkret haldan asılı olaraq).

Digər mühüm məsələlərdən biri idarəçiliyin daha səmərəli olmasının təmin edilməsidir.  Bu zaman hansı vəzifənin kim tərəfindən yerinə yetirilməsi, holdinqə daxil olan şirkətlər arasında istər maliyyə, istərsə də hüquqi əlaqənin qurulması, subordinasiya və sair kimi məsələlər meydana çıxır.

Bir sıra çətinliklərə baxmayaraq biz xüsusən yerli biznesləri “ağ” işləməyə həvəsləndirmək istərdik.  Orta və uzun müddətli perspektivdə, bunun çox müsbət nəticələrinin meydana çıxacağına əminik.

Remells Hüquq Şirkəti

Setting up joint ventures in Azerbaijan

Azerbaijani market is generally open for foreign businesses[1].  A foreign company wanting to enter the Azerbaijani market does not have to partner with a local person.  If for business reasons the compstraegic-jv-partnersany does not need to establish a joint venture, there are couple of options.  We assume that all or substantial of the business activity is carried out in the territory of Azerbaijan.

Registered (Equity) JV

Perhaps most popular and widely used, especially outside the oil and gas industry, form of a registered joint venture (JV) is a limited liability company (LLC).  Most privately held companies in Azerbaijan are established in the form of an LLC[2].   The partners join to set up an LLC in which each holds a certain shares.  LLCs must be registered with the Azerbaijani Ministry of Taxes.

When setting up a joint venture the parties need to carefully consider the terms of LLC’s charter.  Charter of an LLC is the LLC’s constitutional document, which regulates, among other things, governance in the LLC.  The charter must be registered with the Ministry of Taxes.  In addition to the charter, we typically recommend that partners enter into shareholders or similar agreements.  These agreements should govern the matters, which for either practical or regulatory reasons, cannot be included in the LLC’s charter.

An LLC typically has 3 governing bodies: general meeting, supervisory council (or similar supervising authority) and executive body.  Having a supervisory council is not necessary – it is optional.  Under Azerbaijani law certain matters, e.g., liquidation or reorganization, distribution of dividends, approval of annual balance etc., fall within the exclusive authority of the general meeting.  Only the general meeting is authorized to decide these matters.  Outside this “exclusive authority” and few other requirements, there are no limitations on allocation of authorities among the LLC’s corporate bodies.  Partners in JV typically want to establish control mechanism to oversee the executive body of the JV.  For instance, requiring that a transaction above certain value be approved by the general meeting or supervisory council.  These mechanisms can be included in the LLC’s charter.

In terms of allocation of cash flow rights, dividends must be distributed in proportion to share percentage in the LLC’s capital.  If, for instance, partner A has 30% and partner B has 70% in the capital of the LLC, dividends must be distributed in that proportion – i.e., 30/70%.  While most of the time JV partners are happy with this kind of arrangement, some, however, may want more flexibility in allocation of cash flow rights.  Shareholders or similar agreements may be helpful, however, additional tax obligations may arise from allocation of dividends not in proportion to shareholdings.

Exiting the JV is not particularly difficult.  A partner may either sell its shares in the JV or withdraw by demanding from the LLC value of its share.  While selling a share provides easier exit route, Azerbaijani law does not govern withdrawal in detail.

Contractual JV

JV partners may set up a contractual joint venture – they do not register a joint company, but instead sign agreement on joint operations.  The agreement must be detailed to govern, among other things, decision making, distribution of profits, allocation of costs and withdrawal.  Contractual joint ventures are widely used among companies engaged in oil and gas industries.

For practical reasons, even if the partners do not form a joint company, if they are engaged in day-to-day operations in Azerbaijan, they have to have some form of legal presence in Azerbaijan.  For instance, either one or both parties may register a branch office in Azerbaijan.

Azerbaijani law does not specifically provide for or govern contractual joint venture agreements.  Instead, these agreements would be governed by general contractual provisions of relevant laws, most importantly the Civil Code of Azerbaijan.  A local lawyer’s assistance is necessary in case of contractual joint ventures, as these agreements must not contradict mandatory requirements of Azerbaijani law.

One of the key issues in contractual JVs is the use of bank accounts.  It is important that parties decide how they would use bank accounts that would be used for receiving payments in connection with the joint business.  In Azerbaijan only the entities with registered legal presence may open bank accounts.  In other words, if a foreign company has not registered any office in Azerbaijan, it will not be able to open a bank account with any local bank.  In case of contractual joint venture parties may open a joint bank account.  Disposal of funds from such account can be done with consent of the JV partners.

Tax Matters

Generally income from business activities in Azerbaijan is subject to 20% of profit tax.  This tax is calculated from the net profit, which is the difference between income and deductible expenses and exclusions.  There is also value added tax at the rate of 18%.  VAT is born by the end-user of the product or service.  Dividend distributions are subject to 10% of dividend withholding tax.

In case of registered JV (as discussed above) in addition to 20% of profit tax, there will also be 10% of tax on dividends, which the JV decides to distribute to its shareholders.  As a result, there is double taxation of income, which is finally distributed to the JV partner. The Azerbaijani Tax Code provides that (i) further distribution of dividends is not subject to dividend tax, and (ii) in case the receiver of dividends is the “factual owner” (essentially, beneficial owner), the dividends are not subject to any other tax – i.e., they are subject to profit tax in the hands of the person, who receives dividends.  It is not clear who is considered “beneficial owner” for the purposes of the second type of exemption.  This matter can be subject to dispute.

In case of contractual JV, the contractual JV fulfills its VAT payment obligations and partners pay taxes on the profit, which they receive from their joint business.  Therefore, there can be tax benefit in contractual JV depending on the circumstances.

Given Azerbaijani tax regulations are generally not clear on some of the key issues concerning JVs, it is always best to ask advice from the professional before making any final arrangements.

This material is not and is not meant to constitute a legal advice.  Each case is different.  You must seek professional advice on your particular case.      

[1] Some limitations maybe in regulated industries, such as banking and insurance

[2] For more information on forms of legal entities in Azerbaijan please see the material in the following link: http://remells.com/files/Investing_and_Business_In_Azerbaijan_2014.pdf

Azerbaijan’s agriculture related regulations

General

Over years the government of Azerbaijan has been keeping special attention on agriculture.  In particular, most small government loans, which are issued through National Fund for Support of Entrepreneurship[1], have been issued to agro businesses.  The government owned “Agrolizinq” OJSC leases agriculture related equipment to agro businesses on preferential terms. Further, the President of Azerbaijan declared the year of 2015 the Year of Agriculture[2].

The Ministry of Agriculture of Azerbaijan is the main regulatory body.  It forms and implements the state policy in agriculture. It includes national and regional programs, social sectors, rural infrastructure, land reclamation, water economy, irrigation, research programs in plant growing and cattle-implementation, veterinary services, product processing, sustainability in biological diversity, realization of unified scientific policy in agriculture etc. The Ministry registers of veterinary drugs and other medications.

The primary crops produced in Azerbaijan are grapes, cotton, tobacco, citrus fruits and vegetables. Livestock, wheat, rice, dairy products, wine and alcohol also make up a considerable part of farm products.

Land Regulations

In Azerbaijan land had been privatized in 1996 with the adoption of the Law On Land Reforms, dated July 16, 1996.  The Parliament adopted new Land Code in 1999.  Following are some of the key principles of land ownership and use in Azerbaijan:

  • In terms of ownership land can be government owned, municipality owned or privately owned. Most agricultural land either municipality owned or privately owned.  From time to time municipalities auction sale or leasing of agricultural land through organized auctions.
  • Foreign persons (individuals or legal entities) may not own land in Azerbaijan. They may either lease land or own it indirectly through a local legal person – i.e., they can be a shareholder in a local legal person, which owns the land.
  • Land are categorized based on their designation of use. There are, for instance, land for industrial use and residential use.  There are also land for agriculture use.  Only the Cabinet of Ministers of Azerbaijan may change the land designation.  Generally, changing designation of a land is a long and cumbersome process, unless the project has the government backing.

Tax benefits

Natural persons’ income derived directly from production of agricultural products is free from income tax (Section 102.1.11 of the Tax Code).  Starting from January 1, 2014 and for the period of 5 years from then profit of companies from activities in agricultural production is exempt from profit tax (Section 106.1.14 of the Tax Code).

Legal and physical persons, who are eligible for simplified tax are exempt from tax – i.e., they are except from simplified tax (Section 219.1.7 of the Tax Code).  These taxpayers are also exempt from VAT from trading in agricultural products, and the property tax from property that they use for agricultural production (Sections 164.1.18 and 199.9 of the Tax Code).  This exception is effective for five years starting from January 2014.

The land tax for agricultural land is calculated as 0.06 AZN for 1 conditional point. Conditional points are determined by the Ministry of Agriculture by administrative regions taking into account the allocation, geographical location and quality of agricultural lands (Section 206 of the Tax Code)

Insurance

In 2002 the government adopted the Law On Incentivizing Insurance in Agriculture to boost development of insurance in agriculture sector. The Law aims to cover (i) agricultural plant products that are not genetically modified, (ii) agricultural livestock, domestic birds, wild animals with fur, bee families, (iii) buildings, equipment, devices, vehicles for use in agriculture etc. These are to be insured from natural catastrophes, such as fire, hail, flood, storm, frost, thunderstorm, earthquake, landslide, drought in arid lands. Non-genetically modified agricultural products, agricultural livestock, domestic birds, rabbits, wild animals with fur, bee families are to be insured from expansion or attack of harmful pests, epidemics. Buildings equipment, devices, vehicles of agricultural allocation are to be insured from accidents.

If the insured procures insurance for the property but does not use the insurance amount during three consecutive years, the insured is entitled to discount of 10% for the fourth year, 20% for the fifth year, and 30 % for each subsequent years after that.

The insurance amount is 70% of the product value of (i) group, 80% of the product value of (ii) group, and full value of property of (iii) group.

[1] http://anfes.gov.az/en/

[2] Presidential Order dated 3 April 2015

New system of appellate councils aim to protect businesses in Azerbaijan

Introduction

The President of Azerbaijan created Appellate Council to handle complaints from businesses more efficiently.  Decree, No. 761, date 3 February 2016, On Establishment of the Appellate Council created the Appellate Council (the “Council”) in the President’s Office.  The same Decree requires that local and centralized executive authorities (such as ministries and state committees) create their internal appellate councils.

How This New System Works

The idea is that if an entrepreneur faces a challenge from any executive authority – e.g., refused a favorable decision on its case – and it believes the authority has breached the law, it may appeal the matter to the appellate council of that authority.  In other words, appeal to the internal appellate council of the authority, which issued (or refused issuing) the decision.  The internal appellate council must review the complaint and issue its decision.  If the entrepreneur is not happy with the decision of the internal appellate council, it may appeal the internal council’s decision to the Appellate Council in the President’s Office.

The Council

The Council is a collegial and public state institution.  The members of the Council are appointed by the President.

The Council receives appeals in written form (in person, postal or electronically). It hears complaints from a decision, refusal of decision, as well as any actions or inactions of internal appellate councils. Appeals must be in connection with business activities of an appellant.If the Council finds a violation it is authorized to refer the violation to the President of Azerbaijan for taking actions regarding persons, who commits the violation.

The Council is authorized to obtain documents from any state bodies, municipalities, NGOs and natural or legal persons.

Further details in connection with appeals are set out in the Law On Administrative Proceeding. According to the Law, an administrative complaint must be handled and a decision adopted not later than one month from the date it is received.

Azerbaijan suspends government audits of local businesses for at least two years

The Azerbaijani President signed the Law On Suspension of Audits of Business in Azerbaijan (Law).  Under the Law expect in few circumstances, starting from November 1, 2015 government audit of businesses in Azerbaijan is suspended for at least 2 years (until November 1, 2017).  This important measure is aimed at further improving the business environment and creating favorable investment climate in Azerbaijan.

There are few exceptions to this suspension requirement.  In particular, audit by the Ministry of Health of medical drugs and other similar substances in terms of their effect to health and security, audit by the Central Bank of Azerbaijan of banks and other credit organizations, illegal connection to electricity, gas and other utilities, and audit by the Ministry for Emergency Situations of potentially hazardous objects in terms of their compliance with the technical security requirements are not covered by the Law.

Tax audits are also not covered by the Law, however, on October 27, 2015 the Ministry of Taxes issued a statement that it (i) suspends on-site audit of business, whose turnover does not exceed AZN 120,000 and (ii) on-side audit of other businesses may be carried out with regard to only high risk entities – i.e., entities with respect to which there is high-risk of their tax evasion.

The Azerbaijani President initiated the suspension of government audits and the decision has been saluted and supported by majority of Azerbaijan’s population.  It is no doubt the initiate will further contribute to business environment in Azerbaijan.

Remells Law Firm

www.remells.com

European Court says Armenia violated rights of Azerbaijanis as a result of Armenia’s occupation of Nagorno-Karabakh

In its decision Chiragov and others v. Armenia, the European Court of Human Rights (the “Court”) decided that Armenia violated rights of Azerbaijanies to property (Article 1 of Protocol 1), privacy (Article 8) and effective remedy (Article 13) as a result of Armenia’s occupation of Azerbaijan’s territories.  Many consider this decision important in light of the continued occupation by Armenia of Azerbaijan’s internationally recognized territories.  This occupation continues even despite 4 UN Security Council resolutions demanding withdrawal of Armenian troops from the occupied territories.

The decision marks yet another stage in protection of certain fundamental rights throughout Europe, and confirms states’ obligation to observe these rights even in the circumstances of war and other hostilities.  While reading the Court’s decision, we have come across few interesting points, which we thought might draw a reader’s attention.

Some Background:  Nagorno-Karabakh was and still is internationally recognized as part of Azerbaijan’s territory.  Over years the composition of the population in that territory has changed, especially following 1828 Turkmenchay Treaty between Russia and Persia, with percentage of ethnical Armenians increasing compared to the local Azerbaijani population.  The Turkmenchay Treaty provided for the movement of many Armenian families (some estimate around 125,000 families) to Azerbaijan’s territories (known at that time Khanats), including Nagorno-Karabakh.  In 1978 local government in Armenia constructed the monument devoted to the 150th year of movement of Armenians to Nagorno-Karabakh.  The monument was later destroyed by Armenians.

During the time Azerbaijan was part of Soviet Union, Nagorno-Karabakh was an autonomous region inside Azerbaijan.  It was an enclave inside Azerbaijan (marked light brown in the map – http://www.ezilon.com/maps/europe/azerbaijan-maps.html) – it did not have any area adjacent to any country, including Armenia – one of five countries sharing borders with Azerbaijan .  Towards the end of 1980s, Armenian nationalists commenced movement, the aim of which was to unite Nagorno-Karabakh with Armenia.  Armenia essentially started a territorial dispute.  Obviously, Azerbaijan objected, following which Armenia commenced military attacks.

In the Chiragov case Mr. Elkhan Chiragov and other applicants were from Lachin – the Azerbaijan’s territory adjacent to Armenia (and to Nagorno-Karabakh), which is currently under Armenian occupation.  Essentially, Lachin is in between Armenia and Nagorno-Karabakh.

Ethnic Cleansing and Attacking Lachin:  The Court draws attention to the fact that Lachin was attacked by Armenian military forces.   In 1992 “ethnic Armenians conquered several Azeri villages”.  The Court goes on to say that “[t]he district of Lachin… was attacked many times”, and “[i]n mid-May 1992 Lachin was subjected to aerial bombardment, in the course of which many houses were destroyed” (para. 18-19).  Interestingly, the Court points out to the ethnic composition of territories of Azerbaijan at the time of the conflict.  77% of the population of Nagorno-Karabakh region consisted of ethnic Armenians, while in Lachin 60,000 were Kurds and Azeris and only 5-6 % were Armenians.  The line the Court draws between Kurds and Azeris, on one hand, and Armenians, on the other, is noteworthy.  During attacks by Armenians to them there were only Armenians and non-Armenians.

It is true that in Azerbaijan is not customary to make any distinctions between Azerbaijanis of Turkish and other descent, which is why Azerbaijan is a multinational country and Armenia is not.  The distinction the Court emphasized, however, helps to shed light on true reasons of this conflict, which is territorial and, to a lot of extent, also ethnic.

Applicants: The applicants in this case were born in Soviet Azerbaijan.  They lived in their houses in Lachin.  The Soviet Constitution recognized a very limited property rights.  Most of the time houses and land plot under buildings were not owned by their residents in a sense understood in modern democratic societies.  Residents would usually lease or have right to use the land and property.  This right, however, would be granted for life and could even be inherited.  For this reason the Court found that the applicants’ property is considered “possession” within Article 1 of Protocol 1 of the European Human Rights Convention (the “Convention”).

Armenia is Responsible:  The applicants submitted their complaint against Armenia.  Armenia claimed that it is not responsible for these violations, since it does not control the occupied territories, but the self-proclaimed “Nagorno-Karabakh government” does.  The Court rejected this argument on the grounds that Armenia de facto controls the occupied territories.  The Court listed evidence in support of this conclusion, including statements of government officials or former government officials of Armenia.  In particular, there is sufficient evidence supporting the claim that Armenia (you can also read is as “Russia”) finances the self-proclaimed government in the occupied Nagorno-Karabakh and provides other support.  Citizens of Armenia serve their military term in Nagorno-Karabakh.

Violation of Property Rights: In a nutshell, Armenia violated the applicants’ property rights by not having any mechanism for the applicants’ to claim their rights to their property in their occupied home land.  This “mechanism” (or legal means) aspect is important.  The Armenian government claimed that the applicants never appealed to Armenian government.  The Court says there was no legal means for them to do that. The Court goes on to say that “twenty years after the ceasefire agreement, people displaced during the conflict have not been able to return to Nagrono-Karabakh and the surrounding territories” (para. 195).

Fake Court Decisions and Call for Negotiations:  In support of its claims that some legal means existed in Armenia for protection of rights, Armenian government produced two fake court decisions, claiming that they were issued by local courts.  It was clear from the Court’s discussions that these decisions were fake…  Armenian government just made them up to support their position.  The Court was too polite is rejecting these decisions for the reason that the Armenian government submitted those decisions too late – after around 3 years of commencing the case.

We see an implicit call to the parties to the conflict, especially to Armenia, to negotiate a peaceful resolution to Nagorno-Karabakh conflict.  As Judge Ziemele noted in its partly dissenting and partly concurring opinion “the message… is that Armenia should do its utmost to engage effectively with Azerbaijan in finding a solution to the conflict”.  Fair enough… though it is difficult to see how Azerbaijan could talk to Armenia – the country, which, in particular, does not see an issue with producing fake court decisions to the attention of an international court….

Azerbaijan adopts new law on securities market

On July 14, 2015 the President of Azerbaijan signs the Law On Securities Market (the “Law”). The Law regulates, among other things, public issue of investment securities – mainly stocks and bonds, activities of investment companies, clearing and settlement and depository system. The Law is a comprehensive regulatory document on matters relating to Azerbaijan’s securities market.

Public Issue of Securities: The Law defines “public issue” of investment securities.  In a nutshell, that is offering securities to indefinite number of people or offering it to more than 50 persons.  Following the approach in Azerbaijan’s Civil Code, which used to be the main regulatory instrument on securities, in the Law “investment securities” include stocks in Open Joint Stock Companies and bonds.  In order to issue securities publicly, the issuer must, among other things, prepare and publish prospectus and register the securities with the Azerbaijani State Committee for Securities (the “SCS”).  The prospectus must disclose information on the issuer, its business, management and etc.  The audited financial statements of the issuer must be attached to the prospectus.

Following issues of the securities and their listing in a stock exchange, issuers must make half-yearly and yearly disclosures.  The implementing regulations that the SCS will issue will provide for more specific list of information that the issuer must disclose.  In general, issuer must disclose information on its business, management and, of course, financial statements.  While half-yearly financial statements do not have to be audited, yearly financial statements must be audited.

Investment Companies: The Law brought more significant changes to regulations on investment companies.  Prior to the Law, Azerbaijan followed the US system of having brokers and dealers.  The Law does not distinguish between brokers and dealers, but instead introduces the concept of “investment company” – this follows the EU approach.  An investment company may engage in certain core and also in ancillary activities.  As part of their core activities investment companies may act as intermediary in the sale and purchase of securities by its clients (such as brokers), may be act as underwriters in securities issues (such as dealers), manage portfolio of securities etc.  Ancillary services include managing clients’ accounts, investment research, foreign currency transactions relating to its core activities etc.

Investment companies must obtain a license from the SCS for providing investment services.  There are no limitations as to nationality of holders of interest in investment companies.  Therefore, foreign investment companies may register their wholly owned subsidiaries.  Alternatively, they may establish their branch office in Azerbaijan, which can provide investment services.

Insider Trading: The Law governs insider information and insider trading.  Insider information is confidential information, which is material for investor’s choice of making investment decision and which, if disclosed, could affect prices of securities.  More specific examples of insider information will be provided in the implementing regulations.  The Law provides for the list of “insiders” – those are mainly managers of the issuer and its certain employees having access to the information, consultants and members of their families.  Unlawful disclosure of insider information is a violation, which leads to penalties.

Depository System: Another important part of the Law concerns depository system.  The depository system consists of one central depository, investment companies, who are its members and also depositories of investment funds.

Lawyer of Remells Rashid Aliyev actively participated in works in connection with drafting the Law and its implementing regulations.

Remells Law Firm’s lawyers have significant experience in Azerbaijan business law. Our lawyers are experienced in cross-border transactions and large scale litigations.  We provide legal services and assist our clients on matters relating to corporate law, finance, oil & gas, IT, employment, tax and other areas of law.

Remells’ lawyers hold law degrees from reputable US and European law schools.

Please visit our website www.remells.com for more information about Remells Law Firm.

If you have any question about this material or any other question please do not hesitate to the firm’s partner Rashid Aliyev via email – rashid.aliyev@remells.com

Azərbaycan Konstitusiya Məhkəməsinin Qərarı: Siyasi Məsələ Doktrinası və Kreditin Hesablanması

Azərbaycanın Konstitusiya Məhkəmsi (bundan sonra “Məhkəmə”) 14 may 2015-ci il tarixli qərarında bu nəticəyə gəlmişdir ki, Azərbaycanda kreditlər xarici valyuta verilə bilərlər.  Bu Azərbaycan Konstitusiyasının 19.III maddəsinə zidd deyildir.  19.III maddəyə əsasən Azərbaycanda yalnız manat ödəniş vasitəsi kimi çıxış edə bilər.  Kredit müqaviləsində isə valyuta (manat və ya xarici valyuta) ödəniş vasitəsi deyil, müqavilənin premetini təşkil edir.

Hesab edirik ki, ümumiyyətlə Məhkəmənin qərarı yaxşı əsaslandırılmışdır.  Bununla belə, Məhkəmənin qərarından bir sıra məqamlar ortaya çıxır.  Misal üçün:

  1. Kredit müqaviləsi maliyyənin təqdim edilməsinin bir formasıdır. Maliyyənin təqdim edilməsinin bir çox digər formaları vardır.  Bunlardan lizinq müqaviləsini misal gətirmək olar.  Lizinq müqaviləsində predmet hər hansı əşya ola bilər.  Məhkəmənin qərarı bu cür maliyyəşmə formalarına aid deyildir? Bu zaman lizinq və onun kimi digər maliyyələşdirmə müqavilələri etibarsızdır?
  1. Əgər kredit müqaviləsində valyuta (manat və ya xarici valyuta) predmet kimi çıxış edərsə, o zaman bu cür müqavilələr üzrə faizlər nədir? Faizlər “qaytarılmalı olan əşya” deyillər və birmənalı olaraq “ödəniş” hesab edilməlidirlər.  Kredit müqaviləsində faiz istər mahiyyət etibarı ilə, istərsə də müqavilə (formal) əsasında məhz borc götürülən borc üçün “ödənişdir” (və ya borcun qiymətidir).  Deməli borcun özü xarici valyuta da olsa da belə, faiz manatla olmalıdır?

Və sair…  Bizim üçün məsələ Məhkəmənin qərarında olan arqumentlər deyil, daha çox Məhkəmənin bu konstitusiya hüququ məsələlərinə yanaşmasıdır (və ya yanaşmasının olmamasıdır).  Fikrimizcə, qərarın daha dolğun və Konstitusiya əsasında olması üçün xarici ədəbiyyatda “siyasi məsələ doktrinası” adlandırılan konsepsiyaya müraciət etmək zəruri idi.

Bizim Nəzərdə Tutuduğumuz Qərar

Bizim son qərar barəd müəyyən fikrimiz var; ancaq son qərar muxtəlif olar bilər, yetər ki, o, konstitusiyaya əsaslansın və yaxşı əsaslandırılmış olsun.  Bu işdə əsas sual bu idi: “kreditlərin xarici valyutada verilməsi Konstitusiyanın 19.III maddəsinə ziddirmi?”  İlkin olaraq biz qərarın bu cür olmasını düşünmüşdük:

  1. Azərbaycan Respublikasında kredit xarici valyuta ilə verilə bilməz – bu Konstitusiyanın 19.III maddəsi bunu qadağan edir.
  1. Azərbaycan Respublikasında kredit və onun faizləri xarici valyutada hesablana bilər, ancaq bütün ödənişlər manatla olmalıdır – Konstitusiyanın 19.III bunu qadağan etmir.
  1. Azərbaycan şəxsinin xarici şəxslə əlaqəsinə dair Konstitusiya heç bir məhdudiyyət müəyyən etmir – onlar öhdəliklərini istər manatla, istərsə də valyuta da müəyyən edə bilərlər.
  1. Siyasi orqan olaraq Milli Məclsi yuxarıda 2 və 3-cü məsələrə dair hər hansı qaydalar və məhdudiyyətlər müəyyən edə bilər. Nə qədər ki, qayda və məhdudiyyətlər Konstitusiyaya zidd deyillər, bu siyasi-iqtisadi qərardır.
  1. Etiraf edək ki, Məhkəmənin “kredit müqaviləsində kreditin məbləği ödəniş vasitəsi deyildir – müqavilənin predmetidir” konsepsiyası bizim üçün yeni oldu.  Ona görə də bizim yuxarıda qeyd etdiyimiz bəndlərdən 1-cisini və 4-cüsünü dəyişdirərək bu cür ifadə edə bilərik: “Konstitusiyanın 19.III maddəsi kreditin xarici valyuta ilə verilməsini qadağan etmir, çünki kredit özü müqavilənin predmetidir”, və “Siyasi orqan olaraq Milli Məclis 1, 2 və 3-cü məsələlərə dair hər hansı qaydalar və ya məhdudiyyətlər qəbul edə bilər”.

Siyasi Məsələ Doktrinası

Tarixən konstitusiya icraatını həyata keçirən məhkəmələrin və ya digər oxşar qurumların səlahiyyətləri geniş olmuşdur, və hazırda da dünyanın bir çox inkişaf etmiş ölkələrində bu belədir.  Bu cür məhkəmələrin səlahiyyətləri adətən Konstitusiyada təsbit olunur.  Konstitusiyanın maddələri isə adətən çox geniş və mücərrədirlər.   Azərbaycanda da bu belədir.  Baxın misal üçün, Konstitusiyanın 130-cu maddəsinə.  Ona görə də daim konstitusiya məhkəməsinin icra və qanunverici orqanların səlahiyyətlərinə müdaxiləsi problemi üzə çıxır.

Bunu nəzərə alaraq konstitusiya məhkəmələri öz səlahiyyətlərinin həddlərini müəyyənləşdirməyə çalışmışlar.  ABŞ konstitusiya hüququ ədəbiyyatında bu cür məhdudiyyətlər “siyasi məsələ doktrinası” üzərinə qurulur.  Nu nəzəriyyəyə əsasən ABŞ Ali Məhkəməsi sırf siyasi məsələyə müdaxilə etmir – yalnız hüquqi məsələyə müdaxilə edir.  Ancaq nəyin siyasi və nəyin sırf hüquqi məsələ olması heç də hər zaman aydın deyildir, və sonda məhkəmə özü bu barədə qərar verir.

Bizim kredit müqaviləsi ilə bağlı işdə Məhkəmənin çox da toxunmadığı əsas sual vardır: “niyə” sualı – “nə üçün xarici dollarla kreditin verilməsinə icaə verilsin (və ya verilməsin)?”  Başqa cür desək “iqtisadi nöqteyi-nəzərdən kreditin xarici valyuta ilə verilməsi yaxşıdır, yoxsa pis?”  Əlbəttə, Məhkəmə qeyd edə bilər ki, bu iqtisadi məsələdir, o da hüquqi orqan kimi bu cür məsələ barədə heç bir fikir bildirə bilməz.  Bu belədir.  Ancaq kökündə kreditin xarici valyuta ilə verilməsi məsələsi məhz iqtisadi məsələdir.  Razısınız?  Bu gün xarici valyutada kreditin verilməsi hər hansı iqtisadi səbəblərdən məqbul sayıla bilər.  Ancaq sabah bu cür eytiyyac olmaya bilər və bəlkə də kreditin xarici valyutada verilməsi Azərbaycan iqtisadiyyatına ziyan vura bilər.  Yenə də bunu Konstitusiya Məhkəməsi bilə bilməz.  Bunu daha yaxşı siyasi orqan olan icra hakimiyyəti və qanunverici orqan bilə bilər.

Ona görə də bizim yuxarıda qeyd etdiyimiz (və 4-cü bənd kimi sadaladığımız) məsələ böyük əhəmiyyət kəsb edir.  Nəticə olaraq, Konstitusiyanın 19.III maddəsi kreditin xarici valyuta ilə verilməsini sadəcə qadağan etmir.  Ancaq ümumiyyətlə bu qəbul olunandı, yoxsa yox – bu artıq siyasi məsələdir və Konstitusiya Məhkəməsi bu barədə ümumi qərar vermir.  Əlbəttə ki, hər bir halda icra və qanunverici orqanın istənilən qərarı Konstitusiyaya uyğu olamlıdır və Konstitusiya Məhkəməsi də bunu yoxlaya bilər.  Ancaq prinsip etibarı ilə bu məsələ barədə siyasi orqanlar qərar qəbul etməlidirlər – Məhkəmə isə bu cür qərarlar üçün sərbəst yer açır.

Kreditin Hesablanması

Məhkəmənin qərarının Mülki Məcəllənin 439-cu maddəsinə dair hissəsini oxuyarkən bizdə belə bir təəssürat yaranır ki, bu maddənin şərhində Məhkəmə çətinliklərlə rastlaşır.  Etiraf edək ki, bəzi hissələrdə Məhkəmənin yanaşması bizə aydın deyildir – bu hissədə qərar bir qədər qarışıq görsənir.  Hər halda bizdə belə fikir formalaşır – bu düz olmaya da bilər.  Əgər bu hissədə hər hansı çətinlik vardırsa, biz hesab edirik ki, bu Məhkəmənin “kreditin hesablanması” məsələsinə toxunmamasından irəli gəlir.  Prinsip etibarı ilə kredit və ya hər hansı digər müqavilə üzrə ödəniş xarici valyuta ilə hesablana və yerli valyuta olan manatla ödənilə bilər.  Misal üçün, biz alqı-satqı müqavilələrində bəzən bu cür bəndlərin salınmasını məsləhət görürük (sadələşdirilmiş formada): “Satın alınan malın qiyməti 1000 ABŞ dolları təşkil edir.  Alıcı bu məbləği hər ödəniş 250 ABŞ dolları olmaqla 4 dəfəyə ödəməlidir.  Hər ödəniş günündə Alıcı Azərbaycan Respublikası Mərkəzi Bankının rəsmi məzənnələrinə uyğun olaraq 250 ABŞ dollarının Azərbaycan manatında ekvivalentini hesablayaraq Satıcıya manatla ödəməlidir”.  Yəni malın dəyəri ABŞ dolları ilə hesablanır, ancaq ödəniş Azərbaycan manatı ilə həyata keçirilir.

Əgər bunun məqbul olduğunu nəzərə alsaq – və bu cür razılaşmalar Konstitusiyaya zidd deyillər – Mülki Məcəllənin 439-cu maddəsinin şərhi daha da asanlaşar.  Konstitusiya Məhkəməsi Rusiya Federasiyasının qanunvericiliyinə istnad edir.  Məhkəmə tam başqa mövqeyini dəstəkləmək üçün müraciət etsə də, Rusiyanın Mülki Məcəlləsinin 317-ci maddəsi məhz bizim burada qeyd etdiyimiz ödənişin hesablanması barədədir.

Ümumiyyətlə hesab edirik ki, Mülki Məcəllənin adi şərhi (yəni Konstitusiya əsasında deyil) adi məhkəmələrin, o cümlədən Azərbaycanın Ali Məhkəməsinin işidir.  Konstitusiya Məhkəməsi isə sadəcə bu cür şərhlərin nə dərəcədə Konstitusiyaya olduğunu yoxlamalıdır.  Biz hesab edirik ki, qanunvericiliyin məhkəmə tərəfindən şərhi sistemi məhz bu cür qurulmalıdır.

Rules for Acting Securities Dealers in Azerbaijan Become Effective

The new rule in Azerbaijan defines requirements to securities dealers.

The State Committee for Securities (the “SCS”) has issued Rules On Acting as Dealers in Securities Market on June 30, 2014. The rules became effective on January 1, 2015.

Dealer are professional participants of Azerbaijan’s securities market. A dealer must obtain license from the SCS to be able to operate in Azerbaijan. A dealer may act as market maker – stand ready to buy and sell the securities at their bid and ask prices. More important for Azerbaijani market, dealers act as underwriters in security issues.

The new rules set out new requirements with respect to organizational structure of a dealer. A dealer must have, among others, internal control, internal audit and risk management department.

The rules also set forth capital requirements. In all cases, a dealer’s risk weighed capital must not be below AZN 100,000, which is around USD 125,881. A dealer must also maintain certain amount of so called “total capital”.