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