On December 27, 2022, the Law of the Republic of Azerbaijan on Public-Private Partnership was adopted. Although there have been few instances of public-private partnership projects in Azerbaijan, namely in renewable energy industry, this is the first law prescribing public-private partnership regulations in Azerbaijan (Public-Private-Partnership or PPP).
According to this law on PPP, a public-private partnership is a joint activity of a public partner and a private partner based on an agreement concluded in accordance with the Law on the provision of public services, as well as the creation and management of infrastructure related to the provision of those services.
Public-private partnership is implemented on the basis of the principles of rule of law, protection of free competition, increase of transparency and efficiency, equality of rights and protection of interest and risk balance between the parties.
According to the law, public-private partnership in Azerbaijan can take place through a competition or direct negotiations organized by the Ministry of Economy of the Republic of Azerbaijan (hereinafter the Authorized Body), as well as, on the basis of a private initiative of the applicant.
Authorized Body creates and manages an electronic database of status reports on public-private partnership projects in Azerbaijan, conditions and criteria for selection of the competition winner, basic terms of the public-private partnership agreement, preparation and implementation of public-private partnership projects, including ongoing and completed projects within the framework of the public-private partnership agreement and of project implementation. The Authorized Body prepares the list of public-private partnership projects on the basis of valid strategic documents and, after approval by the Cabinet of Ministers of the Republic of Azerbaijan, places it annually in the electronic database and on its official website, as well as publishes it in the media.
The public-private partnership project is subject to the incentive measures provided for in the Law of the Republic of Azerbaijan "On Investment Activity", as well as concessions on tax and other state payments, additional financial support, guarantees, exemptions and compensations.
Within the framework of Azerbaijani public-private partnership project, the private partner can be given the following state support and guarantees provided in the set of conditions of the competition by the government in agreement with the Cabinet of Ministers of the Republic of Azerbaijan:
- organization of the provision of goods, materials, raw materials, equipment for the implementation of the public-private partnership project;
- ensuring the minimum level of revenues of the public-private partnership project;
- guarantee of the purchase of certain volumes of the products produced, the services provided, and the works performed within the framework of the public-private partnership project;
- provision of subsidies and (or) loans, capital investment;
- ensuring the level of regulated prices;
- Provision of temporary exclusive rights on the territory of the Republic of Azerbaijan or a part of it for the provision of services, execution of works, sale of products;
- in the cases provided for in the public-private partnership agreement, compensation for the expenses incurred by the private partner and the lost benefit.
According to the Law on Public Private Partnership in Azerbaijan, the maximum duration of the public-private partnership project is set at 49 (forty-nine) years.
At Caspian Legal Center, we provide advisory services regarding establishing public-private projects in Azerbaijan, being one of the very few law firms in Azerbaijan with such experience. The new Law on PPP, provides general framework for public-private projects in Azerbaijan, sets main conditions, requirements, specifies relevant bodies, determined procedures, relieves certain legality questions and concerns, and at the same time, requires detailed attention due to complicated nature of PPP projects. Particularly, compulsory application of several imperative provisions of the Civil Code vis-a-vis the Law on PPP and the Law on Public Procurement, necessitates detailed analysis in order to prevent further validity and enforceability questions, inter alia. If you have any question on PPP regulations and need legal and tax advisory support in PPP Projects in Azerbaijan, please contact us.