Member News

Post date: Wednesday, 11 January, 2017 - 16:35
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Dentons – a TEAS member company – has launched the latest edition of its Global Energy Game Changers publication, entitled Focus on Europe (see http://bit.ly/dentonsglobal). Produced by its Global Energy Team, this is a compendium of insightful analysis into the most important issues facing the energy industry.

This invaluable publication covers continent-wide regulatory reform, the regulation of new cross-border power flows, the challenges facing the oil and gas industry, infrastructure sharing, disputes under investment treaties and the impact of Brexit. It also takes an in-depth look into the issues shaping the business environment in one of most important energy regions. Topics include:

•           Quantum viewpoints – trends and projections for the energy industry

•           EU Energy Union – a progress report

•           Making the single EU electricity market work – ACER and cross-border capacity allocation

•           Smart Grids – prospects and challenges

•           Stormy weather in the UK North Sea

•           “Help! I'm in a bad contract, get me out of here!” Disputes after the oil price crash

•           Energy and communications infrastructure sharing: an idea whose time has come

•           Solar suits against Western European governments

•           Brexit and the energy sector: initial thoughts

Dentons has also issued a Client Alert on New Amendments to the Tax Code, following a Presidential Decree on 16 December. This includes the definition of income; transfer pricing provisions; advance assessment of taxation liabilities; reduced scope of permitted cash transactions; tightening of the regulation of cash transactions; the issuance if electronic invoices; income tax exemptions; the depreciation rate of machines and equipment; new withholding taxes; and the VAT status of electronic trade. Go to http://bit.ly/dentonstax to read the full alert.

Following another Decree on 16 December, Dentons has issued a further Client Alert on non-cash settlements, including situations where this payment form is mandatory. Visit http://bit.ly/dentonsnoncash for this essential information.

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Post date: Thursday, 13 October, 2016 - 10:26
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Dentons Baku office – a TEAS member company – has issued a client alert at http://bit.ly/dentonsprocurement in the wake of a new decree specifying the new regulations for public procurement from the State Budget. The main objective of the new measures is to reduce the use of imported goods by state organisations until 1 January 2018.

Exceptions include imported goods (works and services) using funds borrowed from foreign lenders and guaranteed by the State, foreign grants, procurement for the defence and national security purposes, and the procurement of drugs and medical supplies.

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Post date: Thursday, 21 July, 2016 - 12:35
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Following the approval of a law On the Implementation of Special Financing for Investment Projects in Connection with Construction and Infrastructure Facilities by Azerbaijani President Ilham Aliyev on 15 March, leading law firm Dentons (a TEAS member company) has issued a client alert. The new law introduces options for the potential financing of Build-Operate-Transfer (BOT) projects, and the full alert can be read at http://bit.ly/dentonsbot.

Dentons also issued a client alert on the new law regarding licenses and permits, aimed at protecting and promoting local entrepreneurship and encouraging business transparency, which was passed on 21 April. To see this, go to http://bit.ly/dentonslicensesandpermits, and in a similar vein it issued a client alert on additional investment incentives, focusing on tax dispensations regarding the Garadagh Industrial Parkand other measures aimed at attracting foreign investment. Go to http://bit.ly/dentonsincentives to see the full text.

Furthermore, Dentons has published the tenth edition of its business guide to Succeeding in Azerbaijan, distilling the guidance emanating from more than 20 years of its Azerbaijani office. Visit http://bit.ly/dentonsdoingbusiness2016 to download this publication.

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Post date: Friday, 20 May, 2016 - 15:38
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Following the approval of a law On the Implementation of Special Financing for Investment Projects in Connection with Construction and Infrastructure Facilities by Azerbaijani President Ilham Aliyev on 15 March, global law firm Dentons Baku office (a TEAS member company) has issued a client alert. The new law introduces options for the potential financing of Build-Operate-Transfer (BOT) projects, and the full alert can be read at http://bit.ly/dentonsbot.

Dentons has also issued a client alert on the new law regarding licenses and permits, aimed at protecting and promoting local entrepreneurship and encouraging business transparency, which was passed on 21 April. To see the alert, go to http://bit.ly/dentonslicensesandpermits.

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Post date: Friday, 1 April, 2016 - 10:42
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Dentons Baku office – a TEAS member company – has issued several Client Alerts in the wake of new laws passed in the Milli Majlis (Azerbaijani Parliament) following the recent AZN currency devaluation. These relate to state guarantees for loans to deposit insurance funds, an extension to deposit insurance coverage by the Central Bank of Azerbaijan, currency controls, and incentives to promote investments. Go to http://bit.ly/dentonscurrencycontrol and http://bit.ly/dentonsinvestmentpromo to read the alerts.

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Post date: Wednesday, 17 February, 2016 - 10:37
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The Baku office of global law firm Dentons – a TEAS member company – has issued a Client Alert regarding amendments to the Azerbaijani Tax Code, which come into effect on 1 January 2016. Go to http://bit.ly/dentonsaztaxcode2016 to find out more.

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Post date: Wednesday, 18 November, 2015 - 16:42
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Dentons Baku office – a TEAS member company – has issued a Client Alert on the latest Decision of the Constitutional Court of Azerbaijan summarising issues related to mortgaging marital property, the application of statute of limitations and the scope of judicial review by the Supreme Court of Azerbaijan.

On 15 July 2015 the Constitutional Court of Azerbaijan issued a ruling in the case of Mammadova et al. vs. Bank Technique, a case where the claimants requested the court to partially invalidate a mortgage agreement over certain marital property (a house) on the grounds that the specific consent of one of the spouses was not procured, even though the relevant spouse had granted a general power of attorney to her husband, which at the time of entering into the mortgage agreement was valid. This decision was proceeded by a series of decisions by lower courts, including those of the Guba First Instance Court, which rejected the claimant’s claims and refused to invalidate the mortgage agreement; the Sumgayit Appellate Court, which reversed and remanded the decision of the Guba First Instance Court; and, finally, the Supreme Court, which reversed and remanded the decision of the Sumgayit Appellate Court. However, the Constitutional Court not only reversed the decision of the Supreme Court and remanded the case, it also affirmed several fundamental principles related to marital property under Azerbaijani law.

Namely, the Court was asked to clarify whether the property rights of Ms Mammadova, protected under Article 29 of the Constitution of Azerbaijan, were violated by the decision of the Supreme Court, which seemed to agree with the respondent, Bank Technique, in that the mortgage agreement was valid in relation to the mortgaged marital property despite the absence of specific consent by Ms Mammadova to mortgage such property, as required by law in relation to property held in common. (Paragraph IV of Article 29 of the Constitution of Azerbaijan states that no one can be deprived of his/her property without a decision of the court.)

For the full text of the ruling, go to http://bit.ly/dentonsmarital

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Post date: Tuesday, 17 November, 2015 - 17:08
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The Baku office of global law firm Dentons – a TEAS member company – has advised the EIB on a €50m loan to the International Bank of Azerbaijan (IBA), the largest bank in Azerbaijan, to finance projects promoted by SMEs and midcaps. The loan corresponds to the objectives of the EIB’s mandate for lending outside the EU, which focuses on the development of the local private sector, particularly providing support to SMEs, development of social and economic infrastructure and climate change mitigation and adaptation.

The framework agreement between the Republic of Azerbaijan and the EIB entered into force on 15 January 2014, enabling the EIB to commence lending operations within the country. The IBA transaction involved only the second loan by the EIB within Azerbaijan. Dentons’ role was to advise on matters of Azerbaijani law concerning the execution of the financing documents and the issuance of an Azerbaijani legal opinion on the capacity and authority of the IBA to execute, deliver and perform the financing contract, as well as the validity and enforceability thereof.

Timothy Stubbs, the Moscow-based partner, introduced the matter to Baku. Partner Kamal Mammadzada led Baku team with assistance from associate, Ulvia Zeynalova-Bockin and paralegal, Sabina Kerimova. For more information, go to www.dentons.com.

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Post date: Friday, 31 July, 2015 - 10:54
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Securities Markets Law

New categories of professional participants in securities markets

Professional participants in securities markets are defined to include investment companies, stock exchanges, clearing houses, investment fund depositaries and a central depositary.  They are to be created in the form of joint stock companies and will be subject to licensing.

An investment company is defined as a joint stock company having a license to engage in the activities of an investment company and the sole activity of which consists of rendering primary and auxiliary investment services.  Investment companies will be issued a single license for a range of activities, including those of a broker, dealer and underwriter, subject to the limitations set forth in the terms of the license.

Certain licenses will be issued for an unlimited period of time

Unlike current requirements, according to which a license is issued for five years, the activities of stock exchanges, clearing houses and depositaries will be licensed for an indefinite period of time.

The review of an application for the issuance of the applicable license is conducted in two stages – initial and final.  There will also be a special procedure for the licensing of branches of foreign investment companies in Azerbaijan.  Only branches of foreign investment companies that have received the license in question may engage in the following services in the territory of Republic of Azerbaijan:

Primary investment services

  • The acceptance and execution of clients’ orders in relation to transactions with securities or derivative financial instruments
  • The management of individual investment portfolios
  • The provision of investment advice
  • The placement and underwriting of securities (with and without an underwriting commitment)
  • Transacting with securities and derivative financial instruments for their own account in the capacity of a member of a depository and stock exchange
  • Margin trading

Auxiliary investment services

  • The management of clients’ securities accounts, including executing transactions related to encumbering securities and derivative financial instruments
  • Lending funds or securities to investors for trading with securities and derivative financial instruments 
  • Conducting investment and financial analysis related to securities and derivative financial instruments
  • Acting as a security trustee for secured bonds
  • Foreign exchange activities in relation to conducting primary investment services

New minimum charter capital requirements will be promulgated by the regulator.

New qualification requirements for directors of professional participants in securities markets

In general, the laws of Azerbaijan do not require directors serving on the supervisory board or executive officers of professional participants in securities markets to possess any special qualification, nor does a prior criminal record normally disqualify a director or officer from such a position.  That will change with the introduction of new qualification requirements for such directors of investment companies, stock exchanges, clearing houses and central depositaries, including the introduction of educational requirements and requirements related to relevant professional experience.

New merger controls

Along with the general requirements contained in various other acts of legislation (e.g., antimonopoly consent), the prior written consent of the regulator must be obtained for the acquisition (whether directly indirectly) of a major shareholding in a professional participant in securities markets (i.e., 10 percent or more). Further, such consent would also be required each time a purchase will cause the purchaser’s shareholding to equal or exceed the thresholds of 25 percent, 50 percent or 75 percent, subject to the condition that no person may own more than 50 percent of the charter capital of more than one investment company.

Creation of a Clearing House Compensation Fund

One of the mandatory options that clearing houses must select in order to reduce the risks related to the activity of clearing transactions executed in the after-hours trading system is the establishment of a clearing house compensation fund (other options include the insurance of assets, obtaining guarantees or security for assets, etc.).

The Clearing House Compensation Fund shall be financed from a range of sources, including membership dues paid by the members of the clearing fund and income from investing in funds. Such funds may then be used to settle the mutual obligations of the members of the clearing house vis-à-vis each other in relation to transactions concluded during after-hours trading, where a member is unable to settle.

Amendments to the Civil Code

A new concept of derivative financial instrument was introduced into the Civil Code, defined as a contract to buy, sell or swap underlying assets.  Securities, foreign exchange, interest spots, profitability, derivative financial instruments, commodities, financial indices, credit risk, etc. may serve as underlying assets.

The proposed amendments provide for three types of derivative financial instruments – futures, options and swaps.

Futures are derivative financial instruments for the sale and purchase of a predetermined type and amount of an underlying asset at an agreed date and price.  Options are derivative financial instruments that grant a unilateral right to its holders to buy, sell or swap an underlying asset. Finally, swaps are derivative financial instruments under which two parties exchange the same type of underlying asset.

Consequently, derivative financial instruments will not be considered to be securities and will avoid regulation under the existing securities regulations (advertising, registration, etc.). That said, please note that the regulator is charged with preparing special rules on the placement and circulation of derivative financial instruments in a standardized form over stock exchanges.

Finally, derivative financial instruments are expressly excluded from the Azerbaijani gaming laws.

Advertising Law

The new Advertising Law contains certain restrictions related to the advertisement of securities in Azerbaijan, an activity which is defined as information distributed using various means and methods in any form for the purpose of attracting the attention of the consumer to the subject-matter of the advertisement, creating and maintaining interest in and increasing awareness about the product and stimulating the sale thereof.

These restrictions include, along with a previously effective prohibition to advertise unregistered securities, restrictions related to advertisement of securities before a decision about the sale of such securities is adopted, as well as providing information that contradicts information contained in the prospectus.

Law stated as at 15 July 2015.

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Post date: Friday, 17 July, 2015 - 15:34
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Global law firm Denton’s ­– a TEAS member company – has published the ninth edition of its invaluable guide to doing business in Azerbaijan. Entitled Succeeding in Azerbaijan, it is based on the collective knowledge and experience gained during the many years that the Baku branch has advised clients in Azerbaijan.

The Denton’s guide highlights some of the principal issues of interest to those currently in, or wishing to enter, this market. It serves as a good, practical introduction to the legal and business environment in the country. This edition was officially launched on 1 June 2015 at the Denton’s Baku annual client breakfast briefing held during the Caspian International Oil and Gas Exhibition. To download the full guide in pdf format, go to http://bit.ly/dentons2015

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