On December 15 1999, Azerbaijan joined the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, more
commonly known as the New York Convention of 1958. Joining the
New York Convention alone, however, was not sufficient to make
private arbitration in Azerbaijan a reality, as the treaty is
not self-executing - enabling legislation and basic rules of
procedures were also required to implement the treaty's
provisions. To that end, Azerbaijan recently enacted two laws:
the Civil Procedure Code, which became effective on September 1
2000, and the Law On International Arbitration which became
effective from February 1999.
The enactment of the International Arbitration Law has had a
significant impact on international commerce, banking and
finance in Azerbaijan. First, it allows international
arbitration of commercial disputes to be conducted both in
Azerbaijan and in any foreign jurisdiction mutually agreed upon
by the parties.
Parties to a dispute may designate an arbitral proceeding as
international arbitration, as long as the dispute is not
between two purely Azerbaijani parties, and it is related to
more than one country.
Second, it provides for the recognition and enforcement of
foreign arbitral awards in Azerbaijan, unless these awards are
not enforceable due to a violation of the New York Convention
or the International Arbitration Law.
Third, it authorizes the general recognition and enforcement
of foreign arbitral awards, irrespective of any treaties on
mutual recognition and enforcement of foreign awards.
These statutory provisions are important, given that most
Azerbaijani legal entities and individuals transacting
international commerce with foreign investors have their
primary assets in Azerbaijan. Presumably, with the enactment of
the International Arbitration Law, most disputes arising in
connection with foreign investment will be resolved by foreign
arbitration to avoid adjudication by the local courts.
As might be expected, the practice of enforcing arbitral
awards is still undeveloped, given Azerbaijan's limited
experience with commercial arbitration generally. But joining
the New York Convention, coupled with adopting the necessary
implementing legislation, provides a legal foundation for the
development of a system of private commercial arbitration in
Azerbaijan and the subsequent enforcement of awards. If
practice bears out the promise of the legislation, Azerbaijan
will have made a step forward for foreign companies operating
here, as well as for the country itself.
Dan Matthews and Natik Mamedov