Anti-Corruption in Azerbaijan

By Gunduz Karimov* and Jamil Alizada* (Baker McKenzie Azerbaijan)

1. Domestic bribery (private to public)

1.1       Legal framework

The Law of the Republic of Azerbaijan, On Combatting Corruption, dated 13 January 2004 (the “Anti-Corruption Law”), and the Criminal Code of the Republic of Azerbaijan, effective on 1 September 2000 (the “Criminal Code”), are the principal laws in Azerbaijan intended to prevent and detect offenses related to corruption.

Recently, the Azerbaijani government promulgated new legislation aimed at combating corruption and creating a better legal environment. The National Strategy on Increasing Transparency and Combating Corruption, approved by Presidential Decree and dated 28 July 2007, is an example of the evolution of Azerbaijani anti- corruption legislation.

Under the Anti-Corruption Law, corruption is defined as the illicit obtaining by officials of material and other benefits, privileges, and advantages, through the use of their position, the status of the body they represent, their official powers, or the opportunities deriving from those statuses and powers. Corruption also includes the engagement of those officials by individuals or entities through the illicit offering, promising or giving of the said material and other benefits, privileges and advantages.

The Anti-Corruption Law lists the acts that are considered corruption as well as those that lead to corruption (literally, “create grounds for corruption”). The Anti-Corruption Law also governs other issues, such as the circumstances in which an official is authorized to accept gifts, financial disclosure by officials, and the like.

Both active and passive bribery are criminal offenses in Azerbaijan. It is noteworthy that Azerbaijani law does not distinguish between public sector and commercial bribery; offering a benefit to officers of commercial entities or their acceptance of a benefit in exchange for the performance or non- performance of official duties may constitute active or passive bribery.

Further, the Law on Ethical Standards of Public Officials, dated 31 May 2007 (the “Ethical Standards Law”), is an act that aims to establish ethical and moral rules of behaviour for public officials. The Ethical Standards Law requires government officials to be impartial and respect the rule of law. In addition, the Ethical Standards Law requires that officials refrain from accepting any undue or unlawful benefit or advantage, except for gifts whose value is within the legal limits and those that may be construed as expressions of simple hospitality, provided that the gifts or hospitality do not affect their impartiality.

1.2       Definition of bribery

The Criminal Code defines “passive bribery” as the solicitation or acceptance, directly or indirectly, by a public official of a material or other benefit, privilege or undue advantage for himself/herself or others, in consideration for acting or refraining from acting, or providing patronage when exercising official duties.

“Active bribery” is defined in the Criminal Code as an offer, assurance or gift of a material or other benefit, privilege or undue advantage for himself/herself or others, directly or indirectly, to a public official for himself/herself or others, in consideration for acting or refraining from acting when exercising official duties.

1.3       Definition of public official

The Anti-Corruption Law lists individuals who could be “subjects” of corruption offenses, that is, public officials. In particular, Section 2 lists the following types of public officials for the purposes of the Anti-Corruption Law:

  • Persons elected or appointed to a government position in accordance with the Azerbaijani Constitution or Azerbaijani laws
  • Persons representing state bodies based on special authorities
  • Civil servants occupying administrative positions
  • Persons occupying managerial or administrative positions in government agencies, government entities and other commercial legal entities in which the state owns the majority of shares
  • Registered candidates for elected governmental positions
  • Persons elected to a local government
  • Persons holding managerial and administrative positions in a local government
  • Any person holding managerial or administrative functions in non-state entities, who perform official duties delegated by the state

Although the Criminal Code generally restates the persons listed in Section 2 of the Anti-Corruption Law, it also includes the following in the category of public officials:

  • Certain military servicemen
  • Registered candidates for elected governmental positions
  • Members of municipalities and municipal servants
  • Managers and persons occupying managerial or administrative positions based on special authorities in state and municipal enterprises, institutions and organizations, and other commercial and non-commercial organizations
  • Persons engaged in business without establishing an entity
  • Officials of foreign state agencies; members of elected state bodies of foreign states; officials and other servants of international organizations; and members of international parliamentary organizations
  • Judges and other officials of international courts; foreign and local arbiters of arbitration tribunals; and foreign members of jury
  • Managers and employees of state and municipal enterprises; institutions and organizations; and other commercial and non- commercial organizations

1.4       Consequences of bribery

(a)        For the individuals involved

Prison sentenceActive (offering) bribes:Passive (accepting) bribes:
Public sectorDomesticup to 8 years of imprisonmentup to 12 years of imprisonment
  • Disqualification for up to three years for passive (accepting) bribery
  • Fines on individuals of up to AZN 4,000 (approximately USD 2,100)

Fines can be imposed only for active bribery and may be used as an alternative to imprisonment.

Factors aggravating liability include the following:

  • The commission by officials of illegal acts in exchange for a bribe
  • The category of the bribe
  • A criminal act committed by a group of persons in a preliminary conspiracy, or by “an organized group, or accompanied with the extortion”

(b)        For the company/legal entity

Today, Azerbaijani criminal law does not apply to legal entities. Although articles contemplating corporate criminal liability have been drafted and incorporated into the Criminal Code, they have not yet entered into legal force. Thus, some amendments of the Criminal Code envisage the potential liability of legal entities for bribery (both active and passive) committed for the benefit of the legal entity or in its interests.

Legal entities may be: subject to fines; prohibited from engaging in certain activities; and dissolved and made subject to special confiscation. Section 11.2 of the Anti-Corruption Law further provides that legal persons may likewise be fined if they are found guilty of corruption.

1.5       Political contributions

Contributions to political parties are governed by the Law on Political Parties, dated 3 June 1992. Generally, the law prohibits financing of political parties, including by means of donation, from, inter alia: individuals who did not disclose or indicate the details of their identity cards; foreigners; local and foreign legal entities; and foreign states.

1.6       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

Under Azerbaijani law, a public officer is allowed to accept small gifts and acts of simple courtesy (or hospitality). The value of such gifts may not exceed AZN 55 (approximately USD 30) within one year.
Any gift exceeding that value belongs to the agency employing the official.

Laws do not define acts of simple courtesy (or hospitality). Persons providing such courtesy or hospitality should assess whether an act would be considered reasonable and not affect the official’s impartiality under the circumstances.

With respect to covering meals and travel expenses, pursuant to Section 20.1.5 of the Law on State Service, dated 21 July 2000, public officials may visit foreign countries at the expense of such countries only with the permission of higher officials of the state bodies in which the employees work. When a government employee travels abroad to attend an event or function in his or her capacity as a public official, the visit is considered a “secondment.” Pursuant to Order No. Q-01 of the Minister of Finance, On the Rules of the Secondment of Employees, dated 18 January 2012, Azerbaijani government institutions may second their employees at their own expense or at the expense of a hosting party.

Secondment expenses may include reasonable travel, meal and accommodation costs and should not be treated separately from simple courtesies in the context of the Anti-Corruption Law. Daily allowances approved by Resolution No. 14 of the Azerbaijani Cabinet of Ministers, On Approval of the Rates of Travel Allowances, dated 25 January 2008, might help determine the reasonableness of secondment expenses.

2. Domestic bribery (private to private)

2.1       Legal framework

As discussed in Section 1.1 above, the Criminal Code is the one of the principal laws intended to prevent and detect bribery offenses. There is no distinction in Azerbaijan between bribery in the public and private sectors.

2.2       Definition of private bribery

Azerbaijani law does not have a separate definition of private bribery, and the definition of active and passive bribery found in the Criminal Code applies.

Additionally, as stated in the list in the Criminal Code (see Section 1.3), the definition of “public officials” includes, inter alia, managerial and other decision-making personnel of commercial entities. Thus, for the purposes of bribery offenses, managers (and other decision-making personnel) of commercial entities are considered “public officers.”

2.3       Consequences of private bribery

(a)        For the individuals involved

Prison sentenceActive (offering) bribes:Passive (accepting) bribes:
Private sector:up to 8 years of imprisonmentup to 12 years of imprisonment
  • Disqualification for up to three years for passive (accepting) bribery
  • Fines on individuals of up to AZN4,000 (approximately USD2,500)

Fine can be imposed only for active bribery and may be used as an alternative to imprisonment.

Factors aggravating liability include the following:

  • The commission by officials of illegal acts in exchange for a bribe
  • The category of the bribe
  • A criminal act committed by a group of persons in a preliminary conspiracy, or by “an organized group, or accompanied with the extortion”

(b)        For the company/legal entity

Please see Section 1.4 (b).

2.4       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

It is not clear whether the rules applicable to government officials, as discussed in Section 1.6, apply to officers of private entities. As a matter of practice, prosecuting authorities do not closely scrutinize gifts and hospitality to officers of private entities.

3. Corruption of foreign public officials

3.1       Legal framework

Corruption of foreign public officials is regulated by the same provisions, as provided above, of the Criminal Code.

3.2       Definition of corruption of foreign public officials

Azerbaijani law does not define the corruption of foreign public officials. The definitions of corruption and bribery per the Anti- Corruption Law and the Criminal Code apply in this case.

3.3       Definition of foreign public official

Azerbaijani law does not define foreign public official; however, the definition of “public official” in the Criminal Code includes the following:

  • Officials of foreign state agencies
  • Members of elected state bodies of foreign states
  • Officials and other servants of international organizations
  • Members of international parliamentary organizations
  • Judges and other officials of international courts
  • Foreign arbiters
  • Foreign members of juries

3.4       Consequences of corruption of foreign public officials

(a)        For the individuals involved

Prison sentenceActive (offering) bribes:Passive (accepting) bribes:
Public sector:up to 8 years of imprisonmentup to 12 years of imprisonment

  • Disqualification for up to three years for passive (accepting) bribery
  • Fines on individuals of up to AZN 4,000 (approximately USD 2,100)

Fines can be imposed only for active bribery and may be used as an alternative to imprisonment.

Factors aggravating liability include the following:

  • The commission by officials of illegal acts in exchange for a bribe
  • The category of the bribe
  • A criminal act committed by a group of persons in a preliminary conspiracy, or by an organized group, or accompanied with the extortion

(b)       For the company/legal entity

Please see Section 1.4(b).

3.5       Limitation applicable to hospitality expenses (gifts, travel, meals, entertainment, among others)

It is unlikely that the rules applicable to Azerbaijani government officials, as discussed in Section 1.6, will apply to foreign public officials.

4. Facilitation payments

A facilitation payment is considered a bribe under Azerbaijani law.

5. Compliance programs

5.1       Value of a compliance program in mitigating/eliminating the criminal liability of legal entities

Azerbaijani law does not recognize a compliance program as an instrument to mitigate or eliminate the liability of legal entities.

5.2       Absence of a compliance program as a crime

Azerbaijani law does not recognize the absence of a compliance program as a crime.

5.3       Elements of a compliance program

N/A

6. Regulator with jurisdiction to prosecute corruption

The Anti-Corruption Commission of the Republic of Azerbaijan is vested with powers to participate in state anti-corruption policy, oversee the implementation of national anti-corruption action plans, gather information relating to corruption, and put forward proposals regarding the same.

The Anti-Corruption Department under the General Prosecutor of the Republic of Azerbaijan, established by the president of the Republic of Azerbaijan on 3 March 2004 (the “Anti-Corruption Department”), is authorized to conduct criminal investigations of corruption crimes.

In addition, the Anti-Corruption Department conducts investigations of embezzlement crimes.


Baker McKenzie – CIS, Limited The Landmark Building
90A Nizami Street Baku AZ1010
Azerbaijan

Gunduz Karimov

Gunduz Karimov focuses his practice on dispute resolution, intellectual property law, pharmaceuticals and healthcare, and compliance matters. In particular, he represents clients in commercial disputes, international disputes and tax litigation. He also advises on trademark prosecution, patent and trademark enforcement, antitrust and regulatory matters.

gunduz.karimov@bakermckenzie.com

Tel: +994 12 497-18-01

Baker McKenzie – CIS, Limited The Landmark Building
90A Nizami Street Baku AZ1010
Azerbaijan

Jamil Alizada

Jamil Alizada regularly advises on corporate and commercial transactions, intellectual property, and banking and finance matters.

jamil.alizada@bakermckenzie.com

Tel: +994 12 4971801