BizCLIR

The Law of the Azerbaijan Republic on Insolvency and Bankruptcy (“Bankruptcy Law”) appears to provide an adequate legal framework for dealing with insolvency and bankruptcy cases. However, the Bankruptcy Law, which was approved by the Milli Mejlis on June 13, 1997, has rarely been used.

This is a result of two factors. First, the laws and courts dealing with commercial and consumer credit are generally viewed as inadequate by lenders. In this regard, there is a general perception in the business and banking community that the key implementing institution, the court system, is not effective -- specifically, the system is perceived as slow, expensive, and not impartial in its resolution of civil disputes. Just as importantly, an efficient central registry system for recording of liens on collateral has yet to be developed. Accordingly, there is little commercial or consumer credit available in the country, leading to rare application of its Bankruptcy Law. Second, there is a lack of education among the practicing lawyers and the judiciary about the availability and application of the Bankruptcy Law.

As a result, in the five years since the Bankruptcy Law’s enactment there have been approximately six business cases and no individual bankruptcy cases filed. Consequently, there are also no organized bankruptcy bar associations or other supporting institutions -- such as accountants and workout consultants experienced with the Bankruptcy Law’s operation.

There will be no market for institutional changes or assistance in the area of insolvency and bankruptcy laws until the institutional problems with the court system are solved, an efficient collateral registry created, and commercial/consumer credit becomes readily available.