BizCLIR

The commercial dispute resolution segment of the assessment focused on courts and arbitral tribunals in Azerbaijan. This is a new area of the assessment, moving beyond the more limited questions on courts as implementing institutions that are found in the sections on bankruptcy, secured transactions and contract.

Are courts in Azerbaijan well equipped to resolve commercial disputes arising between business entities? Are there meaningful out-of-court dispute settlement mechanisms available? At present the answer to both questions appears to be a resounding “No.” Although special economic courts exist to resolve disputes between business entities, they are not perceived as effective means to enforce property or contractual rights in Azerbaijan. Nearly all of the respondents interviewed expressed some dissatisfaction with the economic court system.

The commercial courts of Azerbaijan are referred to as the economic courts. They were established as recently as 2000. Economic court judges are still gaining experience and the system is relatively new. Overall satisfaction with commercial dispute resolution in Azerbaijan is extremely low. Respondents view economic court judges as corrupt and/or poorly trained.

The 2000 USAID Rule of Law assessment noted that “anecdotal evidence is that enterprises avoid the court system, preferring settling matters out of court to bribing judges and other court officials and risking incorrect decisions.” In 2002, anecdotal evidence once again suggests that the same concerns remain about bribery, corruption and a poorly trained judiciary.

The majority of cases before the economic courts are administrative disputes with government bodies including tax, licensing and privatization disputes. Azerbaijani lawyers and members of the business community stated that they tend to avoid the court system for resolution of commercial and contractual disputes. Private commercial disputes appear to be resolved informally rather than through litigation. Some respondents noted that informal community based dispute resolution mechanisms, including the use of peer pressure and the influence of elders, were more effective than litigation.

Enforcement of court decisions/judgments is also viewed as a problem. A new law on the execution of court judgments came into force on April 2002. The new law is meant to address some of the existing problems by establishing concrete procedures and time frames for enforcement procedures. The regular civil courts handle labor and employment disputes. Foreign investors have more experience in civil courts litigating employment disputes with Azerbaijani nationals.

Despite the pessimism expressed by many respondents, some lawyers have successfully litigated cases against the government. One company was reported to have successfully challenged a tax ruling although the appeals process was lengthy and expensive. A second case is currently being litigated against the Parliament relating to a construction dispute. Persistence, time and money appear to be the key to successful litigation in Azerbaijan. Most parties do not have the resources, financial or otherwise, to pursue litigation in such a determined fashion.

At present, there is no active commercial arbitration in Azerbaijan and no Azerbaijani court/chamber of arbitration, although one is under development. The oil and gas sector has incorporated international arbitration into their Production Sharing Agreements with the government and presumably other foreign investors also do the same. There has been a low volume of international commercial arbitration as well. Respondents indicated that there have been delays and problems with enforcement of foreign arbitral awards through the domestic courts

A new international arbitration court is being established in Baku for the mediation and arbitration of commercial and non-commercial disputes. The Eurasia Foundation funded this project, an Azerbaijani initiative. Given the systemic problems with the courts, out- of-court dispute settlement seems to be a more likely place to focus emphasis in the short term.

The assessment team was unable to meet with the Ministry of Justice (“MOJ”). In many respects, the MOJ is central to the administration and oversight of the courts. We were not able, however, to speak to anyone within the Ministry tasked with judicial oversight, training, or administration. Similarly, enforcement and execution of court judgments rests with a branch of the MOJ referred to as the judicial police (a new law labels them court executors). We were unable to speak to anyone from the MOJ from this branch either.