Azerbaijan is also a member of the Multilateral Investment Guarantee Agency (MIGA) and the European Bank for Reconstruction and Development (EBRD). For the time being, as a method of resolving disputes in Azerbaijan, international arbitration is unpopular and underdeveloped. International arbitration in Azerbaijan is regulated by the Law on International Commercial Arbitration, based on the UNCITRAL model law. Foreign investment in the governments priority sectors for economic diversification (agriculture, transportation, tourism, and ICT) has thus far been limited. https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx, * Source for Host Country Data: Azerbaijan State Statistical Committee, Courtney Brasier A working party on Azerbaijans succession to the WTO was established on July 16, 1997 and Azerbaijan began negotiations with WTO members in 2004. Currently, legal entities and individuals involved in entrepreneurial activities in one of five state-designated industrial or technological parks are exempt from income tax, property tax, land tax, and VAT on imported machinery and equipment until 2023. This law aimed to resolve difficulties in instances where it is impractical or inadvisable to arbitrate abroad (for example, for reasons of cost, language, or law). Foreign investment in Azerbaijan is regulated by a number of international treaties and agreements, and by domestic legal acts, including the Law on Protection of Foreign Investment dated 15 January 1992 (the Foreign Investment Law); the Law on Investment Activity dated 13 January 1995 (the . Large hydrocarbon reserves of Azerbaijan have always been attractive for foreign investment. Businesses report problems with the reliability and independence of judicial processes in Azerbaijan. According to Freedom Houses 2020 flagship report, Azerbaijans court system is subservient to the executive. The U.S. business community has complained about inconsistent application of regulations and non-transparent decision-making. Disputes or disagreements arising between foreign investors and enterprises with foreign investment, Azerbaijani state bodies and/or enterprises, and other Azerbaijani legal entities, are to be settled in the Azerbaijani court system or, upon agreement between the parties, in a court of arbitration, including international arbitration bodies. Though both the Law On International Arbitration and the New York Convention have been in force in Azerbaijan for several years, foreign arbitration is not necessarily effective and attempts to enforce foreign arbitral awards have been largely untested. Under Azerbaijani law, foreign investments enjoy complete and unreserved legal protection and may not be nationalized or appropriated, except under specific circumstances. The Central Bank assumed control over all financial regulation in January 2020, following disbandment of a formerly independent regulator. Under Azerbaijani laws, the state must retain a controlling stake in companies operating in the mining, oil and gas, satellite communication, and military arms sectors, limiting foreign or domestic private ownership to a 49 percent share of companies in these industries. Foreign investments enjoy complete and unreserved legal protection under the Law on the Protection of Foreign Investment, the Law on Investment Activity, and guarantees contained within international agreements and treaties. For additional information about national laws and points of contact at local IP offices, please see WIPOs country profiles at. While there are no immediate plans to privatize large SOEs, Azerbaijan is moving 21 major government-owned companies to a new state holding company tasked to improve efficiency and corporate governance as well as prepare them for possible privatization. Foreign ownership in the media sector is also strictly limited. The judiciary consists of the Constitutional Court of the Republic of Azerbaijan, the Supreme Court of the Republic of Azerbaijan, the appellate courts of the Republic of Azerbaijan, trial courts, and other specialized courts. The Azerbaijani government has suspended or threatened to suspend the operations of U.S. companies in Azerbaijan whose products or services are provided in the area of Nagorno-Karabakh in which Russian peacekeepers are currently deployed and has banned the entry into Azerbaijan of some persons who have visited Nagorno-Karabakh. SOFAZ investment is typically limited to real estate, precious metals, and low-yield government securities. Over the past 10 years, the U.S. Embassy in Baku has been notified of four investment dispute cases regarding U.S. citizens. Certificates are issued for seven years to projects in priority non-oil sectors. While Azerbaijans financial services sector has been a major area for investments, legacy OPIC-funded projects have included investments in the energy (such as the BTC oil pipeline completed in 2006), franchising, banking, microfinance, and hotel and hospitality sectors of Azerbaijan. The 2001 BIT in force between the United States and Azerbaijan encourages the reciprocal protection of investment. 0 reflects amounts rounded to +/- USD 500,000. Following independence, the government implemented land reforms that divided state-owned farms into privately held small plots. Azerbaijan has been a party to three ICSID cases, two of which (Barmek v. Azerbaijan and Fondel Metal Participations and B.V. v. Azerbaijan) were settled and one of which (Azpetrol v. Azerbaijan) was decided in favor of the State. The Central Bank assumed control over all financial regulation in January 2020, following disbandment of a formerly independent regulator. These allegations have markedly decreased since 2017. The Bilateral Investment Treaty (BIT) between the United States and Azerbaijan, which went into force in 2001, provides U.S. investors recourse to settle any investment dispute using the ICSID convention. The Law on the Protection of Foreign Investments forbids nationalization and requisition of foreign investment, except under certain circumstances. The Central Bank administers the overall enforcement of currency regulation. Azerbaijans primary body responsible for investment promotion is the Azerbaijan Export and Investment Promotion Agency (AzPromo). A formally registered employee who becomes unemployed is entitled to 70 percent of his/her average monthly wage, calculated over the past 12 months at the last place of work. The funds assets totaled USD 4. state-owned enterprises have used their regulatory authority to block new entrants into the market. The project represents the first and largest foreign investment made in Azerbaijan's renewable energy sector to date and contributes to the country's target to generate 30 percent of its energy through renewables. Azerbaijan has an abundant supply of semi-skilled and unskilled laborers. These are only obligatory for large companies. Azerbaijans government has not shown any pattern of discriminating against U.S. persons or entities through illegal expropriation. International arbitration in Azerbaijan is regulated by the, Law on International Commercial Arbitration. The number of legalized labor contracts increased by 30 percent during 2017-2021. Secretary SUMMARY: The U.S. Department of the Treasury's Office of Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC's Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC's determination that one or more applicable legal criteria were satisfied. Though both the Law On International Arbitration and the New York Convention have been in force in Azerbaijan for several years, foreign arbitration is not necessarily effective and attempts to enforce foreign arbitral awards have been largely untested. The Azerbaijani government meets regularly with the American Chamber of Commerce (AmCham) to solicit the input from the business community, particularly as part of AmChams biennial white paper process. Azerbaijani law permits foreign direct investment in any activity in which a national investor may also invest, unless otherwise prohibited (see Limits on Foreign Control and Right to Private Ownership and Establishment for further information). However, as no procedural mechanism has been established in Azerbaijan for the enforcement of a local arbitral award, arbitration proceedings inside Azerbaijan are fraught with difficulties. Private enterprises do not have the same access (including terms) to financing as SOEs. It is understood that a new Space FDI Policy is in its final . Advisory Commission on Public Diplomacy, 1. The law on Antimonopoly Activity was amended in April 2016 to introduce regulations on price fixing and other anti-competitive behavior. These funds will be reportedly used to restore road infrastructure, electricity, gas, water, communications infrastructure, and the education and healthcare sectors, along with the restoration of cultural and historical monuments. Several U.S. companies with operations and investments in Azerbaijan previously reported they had been subjected to repeated tax audits, requests for prepayment of taxes, and court-imposed fines for violations of the tax code. In the event of nationalization or requisition, foreign investors are legally entitled to prompt, effective, and adequate compensation. SOEs are also afforded material advantages such as preferential access to land and raw materials advantages that are not available to private enterprises. Azerbaijan does not screen inbound foreign investment, and U.S. investors are not specifically disadvantaged by any existing control mechanisms. Russian forces have played a role in controlling access along highways near the border and into the Nagorno-Karabakh region from Armenia and Azerbaijan. The government is also pursuing green energy projects in this region. The ceasefire has largely held, but tensions remain high, particularly along the international border, which has not been fully demarcated. The funds assets totaled USD 45 billion as of January 1, 2022. Overview Operating in the Azerbaijani market requires patience and a long-term perspective. In 2012, OPIC provided loan insurance to Viator Microcredit Azerbaijan LLC (USD 500,000), NBCO Vision Fund Azercredit LLC (USD 2 million), and FinDev again (USD 1 million). While a number of workers still work without contracts in Azerbaijans informal economy, recent tax and customs reforms have provided incentives for individuals to register their employment to benefit from state financial support. By a decision of the Cabinet of Ministers, requisition is possible in the event of natural disaster, an epidemic, or other extraordinary situation. The United States signed a double taxation treaty with the USSR, to which Azerbaijan is considered a successor state. The Ministry of Energy is the authorized body to organize RES auctions. Parties may select arbitrators of any nationality, the language of the proceedings, the national law to be applied, and the arbitration procedure to be used. SOCAR is also responsible for negotiating Production Sharing Agreements (PSAs) with all foreign partners for hydrocarbon development. The relatively limited supply of highly skilled labor is one of the biggest challenges in Azerbaijans labor market. A working party on Azerbaijans succession to the WTO was established on July 16, 1997 and Azerbaijan began negotiations with WTO members in 2004. Office of the Special Envoy for Critical and Emerging Technology, Office of the U.S. The Ministry of Digital Development and Transport has discussed plans to create other special economic zones, including a petrochemical complex and regional innovation zones to boost telecommunications sector development. In 2013, OPIC signed a memorandum with Turan Bank for a loan in the amount of USD 7 million with a term of seven years for SME financing. Demining these territories as part of reconstruction efforts remains a priority of the Azerbaijani government. Azerbaijan does not require that private companies establish internal codes of conduct to prohibit bribery of public officials, nor does it provide protections to NGOs involved in investigating corruption.