The Lay of the Land 

TBY talks to Anar Baghirov, Managing Partner of BHM Baku Law Center, on Azerbaijan’s business legal climate. 

TBY: What should foreign companies be aware of before engaging in their start-up phase? 

ANAR BAGHIROV: The Azeri government welcomes foreign investors and considers foreign investment to be important for the development of the national economy. Therefore, continuous improvements are being made to the legislation in order to attract more and more investors. In order to be successful in engaging local markets, one should first become familiar with the culture and tradition of the regions. This is a great opportunity for investors to not only do business, but also to expand their knowledge of a variety of cultures around the world, making it easier for them to understand individuals from different backgrounds. Moreover, from the very start, investors should be set on targeting markets on a continuous basis, as well as making new contacts and even more friends. Local partners can also offer a great deal of assistance. This makes processes run more smoothly, enabling investors to achieve their goals in a shorter timeframe. Investors should be aware that although the oil and gas industry is the field attracting most foreign investment, Azerbaijan’s economic strategy is to develop the other fields of economy. Thus, foreign companies should view investing in other production or service industries as good opportunities that will also be welcomed and protected by the government. Azerbaijan has concluded numerous bilateral investment treaties and is a party to several multilateral treaties that should give more assurance to foreign investors from countries that are also parties to those treaties. The fact that Azerbaijan is a party to the Washington Convention on the Settlement of Investment Disputes between nations and nationals of other nations means that investors can have any disputes between them and the state settled by ICSID arbitration, which is a neutral forum. Foreign investors should note that Azerbaijan is not a member of the WTO, although accession negotiations are ongoing and Azerbaijan is gradually improving its legislation in accordance with the WTO norms and standards.

What regulation changes are we likely to see over the medium term aimed at making life easier for foreign investors and start-up companies? 

Azerbaijan is continuously developing its legal framework in order to create better and easier conditions for foreign investors to do business in Azerbaijan. Old laws are simplified and modernized, taking into account international practice and the recommendations of international organizations. In early 2011 a new act on Administrative Proceeding and Administrative Procedural Code came into force. This provides a new legislative base from which the judiciary will conduct administrative activities and judges are now receiving training on the new legislation. The act aims to improve human rights in the country. In the near future the adoption of new important codes such as the Construction Code and the Competition Code is expected. These Codes will unify, harmonize, and simplify numerous laws and regulations governing these issues. Also, a new draft of the Customs Code will replace the current one. Besides creating more favorable conditions and simplifying the registration and declaration rules, the new Customs Code is expected to foster modernization of the customs infrastructure in conformity with international standards and accelerate Azerbaijan’s membership to the WTO. Apart from these major codification changes, various laws and regulations are going to be amended in order to make business easier for foreign investors.