Azerbaijan

1.1 Advantages

• In favorem validitatis. Ambiguity in an arbitration agreement is construed in favour of its validity.
• Enhanced referral threshold. Courts must refer parties to arbitration unless the agreement is manifestly void or inoperable – a higher bar than the UNCITRAL Model Law standard.
• Competitive fees. Filing fee USD 500; administrative costs from USD 800 (disputes up to USD 50,000).
• BAC Rules available in six languages. Azerbaijani, Turkish, Russian, Italian, French, and Farsi.
• Strategic seat at the heart of the Middle Corridor (Trans-Caspian International Transport Route).

1.2 Disadvantages 

The Baku Arbitration Centre (BAC) is a newly established institution with a limited track record; judicial familiarity with the 2024 Law on Arbitration (the Law)  is still developing.

1.3 Distinctive features

BAC Rules adopt the substantive rules method for the governing law of the arbitration agreement in international arbitrations: in the absence of party choice, the rule that upholds validity to the greatest extent applies, without reference to any national law.

City-named identity (Baku, not Azerbaijan) signals neutrality in the tradition of leading global institutions.

2.1 Legal framework

The Law on Arbitration (adopted 26 December 2023, in force 25 January 2024) governs both domestic and international arbitration seated in Azerbaijan. It replaced the prior statute and introduced an accreditation regime for arbitral institutions, simultaneously codifying enforcement proceedings. Court functions are distributed across three tiers:

2.2 What qualifies under domestic law as “international arbitration”? Is there a specific statute?

An arbitration is international where:

• the parties have places of business in different states;
• the place of arbitration or performance is outside the parties’ home state; or
• the parties agree the subject matter relates to more than one state.

2.3 Ratification of the New York Convention

Ratified and in force for Azerbaijan on 29 May 2000. No reciprocity reservation applies.

2.4 Ratification of the ICSID Convention

Ratified 18 September 1992 and in force 18 October 1992.

2.5 Other treaties relating to arbitration

Forty-nine bilateral investment treaties (BITs) (including with the United States, United Kingdom, Germany, France, China, Turkey, Russia, and United Arab Emirates) and 55 double tax treaties. International treaties prevail over domestic law in case of conflict, except the Constitution and acts adopted by referendum.

2.6 Choice of forum for intra-EU dispute settlement

Not applicable; Azerbaijan is not an EU Member State.

2.7 Is the municipal law governing arbitration based on UNCITRAL Model Law?

The Law is substantially based on the UNCITRAL Model Law, with the referral threshold raised from “null and void, inoperative or incapable of being performed” to “manifestly void” or “manifestly inoperable.”

2.8 Recent amendments or reforms in arbitration laws

The Law on Arbitration replaced the prior legislation, which was focused exclusively on international arbitration and lacked institutional support. The reform also encompassed the codification of enforcement proceedings. The Law additionally performs a pedagogical function by delineating the role of arbitral institutions and the relationship between institutional rules and the Law’s provisions.

3.1 Presence of local arbitration institutions

The BAC is Azerbaijan’s sole accredited permanent arbitral institution, registered by the Ministry of Justice as a private, non-governmental, non-commercial entity. Its Arbitration Rules entered into force on 18 October 2025. The 2024 Law prohibits state bodies, political parties, religious organisations, the Bar Association, and the Chamber of Notaries from establishing institutions.

3.2 Does the London Court of International Arbitration (LCIA) have a local office?

There is no local office in Azerbaijan.

3.3 Does the Permanent Court of Arbitration (PCA) have a local office?

There is no local office in Azerbaijan.

3.4 Does the ICC International Court of Arbitration have a local office?

There is no local office in Azerbaijan.

3.5 Does the International Centre for Dispute Resolution (ICDR) have a local office?

There is no local office in Azerbaijan.

3.6 Agreement entered into with local offices of international arbitration institutions

The BAC has concluded a Memorandum of Understanding with Jus Mundi for global dissemination of non-confidential materials.

4.1 Requirements as to content and form

Must be in writing. The requirement is satisfied by:

• content recorded in any form;
• electronic communications accessible for subsequent use;
• implied written form where one party alleges the agreement and the other does not object; and
• by contractual reference to a document containing an arbitration clause.

4.2 Validity of arbitration agreements

Any ambiguity in interpreting the arbitration agreement shall be construed in favour of upholding the validity and existence of the arbitration agreement.

4.3 Special formalities

Ambiguity is resolved in favour of validity. Institutional rules form part of the agreement. Variations of the BAC’s name (including BAC, BIAC, or Azerbaijan Arbitration Centre) do not affect validity.

4.4 Governing law

Determined by the arbitral tribunal in the absence of party choice. For international BAC arbitrations, the substantive rules method applies: the rule that upholds validity to the greatest extent governs, without reference to any national law.

5.1 Applicable restrictions

All commercial disputes where parties may dispose of the subject matter are arbitrable unless excluded. Non-arbitrable matters:

• criminal and administrative offences;
• public law disputes;
• family law;
• legal status of persons;
• labour disputes;
• environmental disputes;
• inheritance;
• intellectual property registration;
• competition law and consumer protection (including consumer loans);
• ownership rights over Azerbaijani real estate;
• insolvency;
• liquidation of Azerbaijani legal entities;
• disputes involving individuals acting outside entrepreneurial capacity;
• claims against carriers under contracts of carriage; and
• leases of real estate in Azerbaijan.

Carrier claims and real estate lease disputes may be submitted to local (domestic) tribunals but not to international arbitration. Ad hoc arbitration is restricted to international disputes; domestic disputes must be administered by an accredited permanent institution.

6.1 Stay of proceedings

Courts must stay proceedings and refer parties to arbitration unless the agreement is manifestly void, inoperable, or incapable of being performed. Arbitral proceedings may continue while a parallel court action is pending.

6.2 Anti-suit injunctions

Available under the Civil Procedure Code.

7.1 Restrictions on the parties’ freedom to choose arbitrators

Parties freely determine the number (must be odd; default: three). There is no nationality restriction in international arbitration. In domestic arbitration: minimum age 25; higher education degree required (sole/presiding arbitrator must hold a law degree); and at least three years’ professional experience. Ineligible are civil servants, judges, Members of Parliament, persons with criminal convictions, and others listed in the Law.

7.2 Requirement of arbitrator independence and impartiality

Continuing statutory disclosure obligation: arbitrators must disclose circumstances giving rise to doubts as to impartiality and independence before and throughout proceedings. The BAC has adopted and translated the IBA Guidelines on Conflicts of Interest into Azerbaijani.

7.3 Mandatory rules applicable to the appointment process

There are not any mandatory rules applicable to the appointment process.

7.4 Appointment mechanism in the absence of party agreement or applicable institutional rules

Grounds: reasonable doubts as to impartiality/independence, or failure to meet agreed requirements. Procedure: written statement to the tribunal within 15 days; if unsuccessful, application to the commercial court within 30 days (decision final, no appeal). In BAC proceedings, challenges are resolved within the institutional framework without court intervention. Substitute arbitrators are appointed by the same method as the replaced arbitrator.

7.5 Mandatory rules applicable to the replacement process

There are mandatory rules applicable to the replacement process. Under Article 19.1 of the BAC Rules, a substitute arbitrator shall be appointed or chosen in accordance with the procedure applicable to the nomination and appointment of the arbitrator being replaced, even if a party had previously failed to exercise its right to appoint or to participate in the appointment. In exceptional circumstances, the Arbitration Commission may, at the request of a party, either appoint the substitute itself or, after the closure of hearings, authorise the remaining arbitrators to proceed and render an award. Where an arbitrator is replaced, the proceedings shall resume at the stage where the replaced arbitrator ceased to perform his or her functions, unless the arbitral tribunal decides otherwise.

At the statutory level, Article 24 of the Law on Arbitration provides that if the authority (mandate) of an arbitrator terminates under Articles 22 or 23, in the absence of a contrary agreement between the parties, a substitute arbitrator shall be appointed in accordance with the rules applicable to the appointment of the arbitrator being replaced — which, in a BAC-administered arbitration, means Article 19 of the BAC Rules applies. Where the parties have agreed to the administration of arbitral proceedings by a permanent arbitral institution, and unless the rules of that institution establish a different procedure, recourse to the courts to decide on the challenge shall not be permissible. The same exclusion of court intervention applies to the termination of an arbitrator's authority (mandate).

7.6 Mandatory disclosure obligations

If an arbitrator is unable to perform their functions or fails to act without undue delay, their mandate terminates upon resignation or party agreement. In case of controversy as to the grounds, each party may request the commercial court (Articles 10.1 and 10.2) to decide on the termination of the mandate. The court’s decision on termination is final and subject to no appeal.

Where parties have agreed to administration by a permanent arbitral institution, and unless the institution’s rules establish a different procedure, recourse to the courts is not permissible.

7.7 Grounds for challenge

Under Article 24 of the Law on Arbitration, if the authority (mandate) of an arbitrator terminates under Articles 22 or 23, in the absence of a contrary agreement between the parties, a substitute arbitrator shall be appointed in accordance with the rules applicable to the appointment of the arbitrator being replaced. In a BAC-administered arbitration, this means the replacement procedure set out in Article 19 of the BAC Rules applies accordingly.

7.8 Mandatory rules governing the challenge of arbitrators

There are not any mandatory rules governing the challenge of arbitrators.

7.9 Removal

If an arbitrator is unable to perform their functions or fails to act without undue delay, their mandate terminates upon resignation or party agreement. In case of controversy as to the grounds, each party may request the commercial court to decide on the termination of the mandate. The court’s decision on termination is final and subject to no appeal.

Where parties have agreed to administration by a permanent arbitral institution, and unless the institution’s rules establish a different procedure, recourse to the courts is not permissible.

7.10 Liability and immunity of arbitrators

Arbitrators are exempt from liability for acts performed in good faith. Resignation is not actionable unless proven unreasonable.

8.1 Interim measures

8.1.1 Overview of interim measures

Commercial courts may grant interim measures before or during arbitral proceedings regardless of where the arbitration is seated; where the seat is outside Azerbaijan or undetermined, the Baku commercial court has jurisdiction. Arbitral tribunals may independently order:

• maintenance or restoration of the status quo;
• prevention of harm to proceedings;
• preservation of assets; and
• preservation of evidence.

Conditions: irreparable harm and reasonable probability of success on the merits. Security may be required; the requesting party bears liability for wrongly granted measures. Measures may be modified, suspended, or terminated.

8.1.2 Relevance of availability of emergency arbitrator mechanism 

The competent court is Baku Appellate Court. Enforcement applies irrespective of the country of origin and covers emergency arbitrator orders equally; the Law draws no distinction between measures issued by a constituted tribunal and those of an emergency arbitrator. Grounds for refusal: incapacity; lack of notice; excess of jurisdiction; wrong composition; non-compliance with security requirement; suspension/termination of the measure; public policy and non-arbitrability (court’s own motion). No review of the substance of the measure. Court-ordered measures and arbitral interim measures are complementary; both tracks may be pursued simultaneously.

Available before constitution of the tribunal and appointed normally within two days of the application.

8.2 Taking of evidence

The arbitral tribunal, or a party with the approval of the arbitral tribunal, may request from the tribunal, or a party with tribunal approval, may request commercial courts to assist in taking evidence. Azerbaijani procedural rules govern the manner of taking evidence.

8.3 Appointment or challenge of arbitrators

Commercial courts: appoint the sole or third arbitrator where parties fail to agree within 30 days; intervene where agreed appointment procedures break down; and decide escalated challenges (within 30 days of rejection; decision final, no appeal). In BAC proceedings, court intervention is excluded where institutional rules provide a procedure. When appointing, the court considers qualification requirements and, in international arbitration, the advisability of a neutral nationality.

8.4 Other available assistance

• Jurisdiction challenges (ad hoc proceedings only). Commercial court, with appeal to appellate court (final).
• Minimal curial intervention. Courts may only intervene in the specific circumstances enumerated by the Law.
• Waiver. Failure to object in time constitutes irrevocable waiver.

9.1 Domestic scope of sovereign immunity from jurisdiction

Azerbaijan follows the restrictive sovereign immunity doctrine under customary international law. There is no standalone statute codifying the jurisdictional immunity of foreign states or immunity from execution. Issues should be assessed case by case under general principles of public international law and applicable BIT provisions.

9.2 Immunity from execution

Azerbaijani legislation does not contain detailed provisions specifically addressing execution against foreign sovereign property, nor does it appear to have enacted a standalone foreign state immunity statute. As a result, Azerbaijani courts would likely rely on customary international law principles and applicable treaty obligations when determining whether foreign state assets may be attached or executed against. Under modern international practice, a key distinction is drawn between sovereign assets used for governmental functions — such as embassy property, central bank assets, and diplomatic accounts — which are generally immune from execution, and commercial assets used for private-law activities, which may be subject to enforcement measures. Notably, however, Azerbaijan has prepared a draft enforcement Code which is expected to enter into force before the end of 2027, and which may introduce more comprehensive provisions in this area.

• Seat and hearings. Parties freely agree on the seat; the BAC Rules default to Baku. No requirement to hold hearings at the seat; the tribunal may meet anywhere convenient.
• Oral hearings. The tribunal has discretion to proceed on documents or hold oral hearings; if any party requests an oral hearing, the tribunal must comply unless the parties have previously agreed to a documents-only procedure.
• Virtual hearings. Expressly endorsed under BAC Rules (videoconference; secure electronic platforms). Expedited proceedings default to virtual unless the tribunal decides otherwise.
• Expedited procedure. Submissions capped at 20 pages; documents-only is the default (party must request hearing); final award targeted within six months.
• Non-participation. Claimant default leads to termination of proceedings. Respondent default leads to proceedings continue (not treated as admission). Failure to appear at hearing or produce evidence leads to award rendered on available evidence.
• Minutes. Mandatory unless parties agree otherwise; signed by presiding arbitrator and secretary; prescribed statutory content.
• Representation. Foreign counsel may appear freely; no Azerbaijani Bar admission required.
• Equal treatment. All communications to the tribunal must be simultaneously copied to all parties.

No statutory confidentiality duty under Azerbaijani law. Confidentiality in BAC proceedings derives from the Rules (contractual).

• Default regime. All proceedings are confidential by default, binding on parties, representatives, witnesses, experts, third-party funders, tribunal members, tribunal secretary, and the BAC. Protected material includes the existence of the arbitration, pleadings, evidence, submissions, awards, and tribunal deliberations.
• Exceptions. Disclosure permitted only: to protect or pursue a legal right; for enforcement or set-aside proceedings; or by tribunal order on application. No general public interest or regulatory exception; parties subject to regulatory or stock exchange disclosure requirements should negotiate an express carve-out.
• Enforcement. The tribunal may issue sanctions, costs awards, or damages for breaches and may take protective measures for trade secrets.
• Transparency. The BAC may publish anonymised awards under an opt-out model; materials are disseminated globally through Jus Mundi.

The tribunal may render partial and interim awards. Consent awards carry the same legal force as merits awards. Under BAC Rules, draft awards are submitted to the Secretariat within 90 days of the last submission and reviewed for form before issue.

12.1 Requirements as to content and form

In writing; signed by majority (reasons for absent signatures stated); reasons required unless waived; dated; stating the seat. Dissenting opinions documented.

12.2 Time limit

No statutory limit. BAC Rules: 90-day draft submission target; six-month target under Expedited Procedure.

12.3 Remedies

The tribunal allocates and apportions costs (costs follow the event, subject to discretion); may order security for costs; awards interest on costs; may decide ex aequo et bono if authorised. Substantive remedies (damages, specific performance, declaratory relief) are governed by the applicable substantive law chosen by the parties, which must in all cases be applied together with the relevant trade usages.

13.1 Interpretation and correction of awards

Party request within 30 days of receipt; tribunal responds within 30 days. Own-initiative correction within 30 days of rendering. Additional award for unresolved claims: request within 30 days; tribunal renders within 60 days.

13.2 Challenge of an award

The competent court is the commercial court. The time limit is three months from receipt (extended where the award is obtained by fraud or criminal conduct). At the party’s request, the grounds are: incapacity; lack of notice or inability to present case; award beyond scope; wrong composition or procedure. At the court’s own motion, the grounds are: non-arbitrability; conflict with the Constitution or public policy (defined as fundamental, imperative principles underpinning Azerbaijan’s political, economic, and legal framework). The court may remit rather than set aside. No merits review. The arbitration agreement survives set-aside unless declared void.

13.3 Recognition and enforcement proceedings

Voluntary execution within the period stated; compulsory enforcement application to the commercial court if not executed within three months. Refusal grounds mirror set-aside grounds.

13.4 Cost of enforcement

Court filing fees are governed by the Civil Procedure Code.

13.5 Enforcement of orders of emergency arbitrators

Enforceable before the Baku Appellate Court on the same basis as measures of a constituted tribunal (Article 32 draws no distinction).

14.1 Process for enforcing New York Convention awards

The competent court is the Supreme Court. Documents required are a notarially certified award or institution-authenticated counterpart; original or certified arbitration agreement; certified Azerbaijani translation if in a foreign language. No reciprocity reservation: the Law applies to awards from any country, including non-Convention states. Pending set-aside proceedings abroad: the Supreme Court may adjourn and order security.

14.2 Grounds for resisting enforcement of New York Convention awards

At the party’s request: incapacity; lack of notice or inability to present case; award beyond scope; wrong composition or procedure; award not yet binding or suspended/set aside. Own motion: non-arbitrability; public policy (interpreted restrictively: fundamental violations only, not errors of law or fact). No merits review.

14.3 Enforcing non-Convention awards

The same framework applies. Azerbaijan’s universal approach exceeds its New York Convention obligations, consistent with the in favorem validitatis philosophy of the Law.

15.1 Applicable to counsel

No Azerbaijani Bar admission is required; foreign counsel appear freely. Counsel are bound by BAC confidentiality obligations. BAC staff, arbitrators, and tribunal-appointed persons cannot be compelled to testify in any related proceedings.

15.2 Applicable to arbitrators

Continuing statutory disclosure obligation. Arbitrators are exempt from liability for good faith conduct. Parties irrevocably waive objections not raised within 15 days of knowledge of the relevant breach.

Third-party funders are expressly recognised in the BAC Rules and subject to the same confidentiality obligations as parties. Under Article 55.1, the confidentiality obligation applies to the parties and any party representative, witness or expert, third-party funder, the members of the Tribunal and Emergency Arbitrator, any person appointed by the Arbitral Tribunal, and the Baku Arbitration Centre. Contrary to what was previously stated, disclosure of third-party funding arrangements is in fact required under the BAC Rules. There is no dedicated regulatory framework for litigation finance in Azerbaijan beyond the BAC Rules, and the market remains nascent.

16.1 Applicable regulatory requirements

The BAC Rules expressly require, as part of the Notice of Arbitration, a disclosure of any third-party funding agreement, including the full name and contact details of the third-party funder. The same obligation applies to the Respondent, who must include in its Response a disclosure of any third-party funding agreement, with the name in full and contact details of the third-party funder. Disclosure of any third-party funding arrangement and the name and address of the funder is also required in applications for joinder of additional parties. Beyond these procedural disclosure obligations within BAC-administered arbitrations, there is no dedicated regulatory or legislative framework governing litigation finance or third-party funding in Azerbaijan.

16.2 Overview of the third-party funding market

The third-party funding market in Azerbaijan is nascent. There is no standalone statute or regulatory body governing litigation finance, and no known body of domestic case law addressing third-party funding arrangements. The primary framework applicable to funded parties in BAC arbitration is therefore the BAC Rules themselves, which impose disclosure and confidentiality obligations on funders. As the BAC develops as an institution, it is anticipated that market practice around third-party funding will evolve accordingly.

17.1 Types of specialist arbitration

Azerbaijan is primarily associated with energy (hydrocarbons and renewables), infrastructure, construction, and Middle Corridor transport and logistics disputes. The BAC is specifically designed to serve these sectors, with an arbitrator roster spanning London, Paris, Geneva, Dubai, Cairo, Istanbul, Seoul, Venice, and Baku.

17.2 Key legal principles

The tribunal applies parties’ chosen law and must in all cases respect the contract terms and relevant trade usages (FIDIC, INCOTERMS, petroleum industry practices). Amiable composition is available if authorised. The BAC Rules provide joinder, consolidation, and coordination mechanisms, which are essential for multi-party, multi-contract energy and infrastructure disputes. 

The key threshold is that international arbitration of carrier claims under contracts of carriage is non-arbitrable; Middle Corridor logistics claims must be structured accordingly.

17.3 Types of claim and defences typically brought in that area

• Hydrocarbons. Price revision; PSA cost recovery; stabilisation clause breaches; expropriation (BIT/ECT); Caspian field delimitation; force majeure. Defences: regulatory necessity; sovereign immunity; exhaustion of local remedies.
• Renewables and construction. EPC delay and cost overrun; performance guarantee failures; PPA breaches (curtailment, tariff revision); grid connection delays; PPP availability payment disputes. Defences: force majeure; employer-caused delay; shared regulatory risk; notice deficiencies; exclusion clauses.
• Middle Corridor logistics. Cargo loss/damage; delivery delay; freight and demurrage; interoperability agreement breaches; JV contribution disputes. Defences: inherent vice; force majeure; convention liability caps; shipper contributory negligence.

17.4 Issues and strategic considerations to take note of

BIT claims offer a parallel track independent of contractual forum clauses; the BAC Rules apply to treaty-based disputes, except that emergency arbitrator provisions are unavailable in treaty arbitrations. The default seat is Baku, aligning supervisory jurisdiction with the BAC’s home legal system. BAC fees are cost-competitive: administrative costs are capped at USD 47,725 for disputes over USD 100 million. Dedicated information security rules (cybersecurity protocols, secure channels) address the needs of high-value energy and infrastructure proceedings.

The 2024 Law and codification of enforcement proceedings represent a systemic reconfiguration of Azerbaijan’s dispute resolution framework; ad hoc arbitration is now restricted to international disputes; the BAC Rules entered into force on 18 October 2025.

The Alat Free Economic Zone creates a parallel regulatory context; practitioners advising FEZ investors should review its specific dispute resolution regime.

The Armenia-Azerbaijan peace framework — if fully implemented — will reopen the Zangezur corridor and generate a new wave of infrastructure and logistics contracts requiring neutral dispute resolution; the BAC’s city-named identity positions it credibly for third-country and Armenian parties.

The BAC’s partnership with Jus Mundi and the launch of the Baku Arbitration Law Journal (biannual, Azerbaijani and English) are building international profile and transparency simultaneously.