Manual for Azerbaijan companies Rena Safaralieva



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International businesses willing to work in countries with rampant corruption operate in a difficult 

situation. Mining industries especially  (oil and gas, ferrous metals, diamonds,  forestry,  etc.)   face a 

difficult  challenge: how to work  in  countries that are rich in  natural resources,  but are notorious for 

corruption (for example, Azerbaijan, Angola, Nigeria), while following the strict anti-corruption 

legislation  of  their home countries.  

 

In due time, companies operating in transitional countries are exposed to pressure from the public in their 



home countries, who demand measures be taken to reduce corruption in the countries in which they work. 

It is expected that BP/AMOCO and Netherlands Royal Dutch/Shell  will take active steps in this 

direction

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  in response to pressure from civil society. For example, the Caspian Revenue Watch project,  



funded by Soros Foundation is one of the first attempts of the civil society to monitor  expenditure of the 

Oil Funds  in Azerbaijan and Kazakhstan.

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Oil companies operating in Azerbaijan work under PSAs which are ratified by the Milli Majlis 

(Azerbaijan Parliament) and thus acquire  the status of the law.  Foreign companies outside of the oil 

sector, like local companies,  face arbitrary interpretation of the  inconsistent legislation by local public 

officials.   Immunity granted to international companies also extends to subcontractors.  In addition, 

multinationals have already demonstrated their firm stance  towards corrupt practices and are harassed  to 

a much smaller extent than local companies. Unfortunately, outside of the oil sector, foreign companies 

are not that well protected,  which is likely one of the factors behind the low level of  foreign investment 

in the non-oil sector of Azerbaijan.  As mentioned above, corruption has  left its stain in  all countries. It 

suffices to recall the scandals surrounding the U.S. companies Enron and Arthur Andersen.  

 

Multinationals, as a rule, are willing to subcontract to local companies provided the latter meet all the 



requisite professional criteria and adhere to  Western  business ethics principles and standards in their 

practices. This is very important for investing companies,  as even a remote affiliation   with an unethical 

business might undermine their  hard-earned reputation and affect profits.   

 

According to Transparency Azerbaijan research, issues of particular concern to international companies in 



regards to contracting are:  

 



bribery;   

 



gifts and entertainment;   

 



facilitation payments;   

 



tax evasion;   

 



non-compliance with legislation.    

 

International organizations and companies can help local businesses, if the latter demonstrate  their 



commitment to help themselves.  

 

International anti-corruption legislation 

 

Until very recently the tax regime in many countries turned a blind eye towards  companies paying bribes 



as a means of conducting business abroad. In Germany, for example,    legislation allowed companies to 

deduct bribes as legal business expenditures,  while domestic bribery,   was viewed as a major criminal 

offence. Many governments applied a double standard in their policies on bribery. In 1977,  the U.S. 

Congress adopted the Foreign Corrupt Practices Act which declared bribes paid to foreign public officials 

as a means of doing business as a criminal offence.

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 Adoption of the Anti-Corruption Act by the US 



Congress put US companies in a disadvantageous position, as compared with companies from other 

countries.   

 

                                                 



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 Alec Appelbaum, Battle Lines Forming in Struggle over Corruption in Caspian Basin, July 20, 2001, in Business and 

Economies, August 15, 2001, Eurasia Net Business and Economics

www.eurasianet.org/departments/business/articles/eav072001/shtml  

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 More details can be found at  www.eurasianet.org  



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 More details  can be found at 

http://www.usdoj.gov/criminal/fraud/fcpa.html

  



According to the US Department of Commerce

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, between  mid-1994   and late-1997, 39 out  of 139  



commercial international contracts world-wide totaling 64 billion  U.S. dollars have been concluded  due 

to bribes. U.S. companies have lost contracts totaling 11 billion US dollars due to their refusal to pay 

bribes.  

 

Following the U.S. initiative, the OECD developed the  International Anti- Bribery Convention, which 



was adopted in 1997 and ratified two years later.

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 This Convention makes bribery to foreign public 



officials a criminal offence.  This  Convention was ratified by the parliaments of all 29 member countries, 

as well as five non-member states.  Among other international instruments  designed to combat 

corruption,  the Council of Europe Criminal and Civil  Law Conventions, which our country has recently 

joined, should be mentioned.

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The anti-corruption legal framework in Azerbaijan 

 

In June 2000, the president of the Azerbaijan signed a decree tasking the government to draft a national 

anti-corruption law and program. Despite the fact that the adoption of this law and program constitutes an 

integral part of obligations of Azerbaijan to join the Council of Europe

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, the program has  not yet been 



finalized,  

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 and adoption  of the Law was delayed.



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 According to experts, the  Law contains some minor 

deficiencies, for example, the Article  10.1  prohibits  public officials from accepting any gifts of over 50 

conventional units (i.e.,  U.S. dollars), however, this prohibition does not extend to officials’ immediate 

family members and relatives. Nevertheless, adoption of the Law is   a significant step in combating 

corruption in our country. 

 

 

Transparency International and Transparency Azerbaijan 

 

Transparency International (TI) leads the international anti-corruption movement.  This international non-



governmental organization has  national chapters and chapters in the process of formation  in over 100  

countries world wide. It is funded by subsidies from governments of many countries and  private sector 

donations. Initially a working group was established  with  headquarters  in Berlin, Germany.  Mr. Peter  

Eigan led a group of enthusiasts who  recognized the need to combat this negative social phenomenon. 

Transparency International releases several types of products, the most well known being the  annual 

Corruption Perception Index.   TI does not expose individual cases. Rather, in an effort to make long-term 

combat against corruption, TI focuses on prevention and reforming  governance systems.  

 

Transparency Azerbaijan  (TA) is  the  national  chapter of TI in our country. The main goals pursued by 



TI are gradual enhancement of transparency  in the systems of public and private administration and 

reduction of corruption by  means of joint efforts  of all sectors of the society: all branches of power, 

public sector, civil society and media.

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 Let’s Clearly Agree  And Recognize That Corruption Is A Crime, Commentary of W. Daily,  U.S. Minister of Commerce,  



U.S. Information Service, U.S. Embassy in Azerbaijan,    19  November  1997 

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 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 



www.oecd.org

  

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  See site 

www.coe.int.org

  

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 See Opinion 222, concerning obligations of Azerbaijan before Council of Europe, 



www.assembly.coe.int/documents/adopttext/ta00/eopi22.htm

  

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 The deadline  to adopt the law expired in January  2000 and the program in January 2003  

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 Please see footnote 2 above  



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 More information can be found on: Transparency International 

www.transparency.org

 (in English); Transparency Azerbaijan 

www.transparency-az.org

www.admin.coris.web.org



.  (the last two sites have information on corruption in Azerbaijan  and 

beyond in English, Azeri and Russian)   

 




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