PRIVATE BUSINESS

Despite numerous measures to simplify registration and doing business in Azerbaijan and a significant improvement of the investment climate in the country, this has not yet resulted in a complete or at least maximum solution of problems in this area. Perhaps the most painful subject for Azerbaijani entrepreneurs today is the subject of inspections. Their number, randomness and, let's face it, the visible presence of "personal interest" of those conducting the inspections have made many business people quite angry.

On 1 May 2011, Azerbaijan launched the long-awaited coordination network - the Justice Ministry's unified information register of inspections. But that's not all. The next step is going to be even more significant. The draft law "On the protection of the interests of entrepreneurs and management of inspections conducted in the field of entrepreneurship", which has been prepared under the orders of President Ilham Aliyev, is already being discussed by the Milli Maclis.

In favour of entrepreneurs 

The document, setting out the aims and principles of inspections in the field of entrepreneurship, the rules for organizing and conducting them, the duties and responsibilities of the inspection body, as well as the requirements related to the protection of the rights and interests of entrepreneurs, has already been discussed at a joint meeting of the parliamentary committee on economic policy and legal policy.

So, what innovations are in store for business people after the adoption of the law?

Currently, there are about 35 inspection bodies functioning in Azerbaijan. The rules under which they operate are mainly determined by the Cabinet of Ministers, but in some cases they are approved by the bodies themselves. In some cases, such rules do not even exist. The main purpose of the draft law is to introduce uniform rules for inspections of businesses and to prevent illegal interferences in business activities.

First, in order to provide prompt access to complete information on the regularity, sequence and results of inspections, all the information must be incorporated into a single register. There should also be an electronic record of inspections. The results of the inspections that are not listed in the register will have no legal effect, i.e. no action can be taken in respect of the violations and deficiencies identified during such inspections. In fact, the idea of creating a coordinating body that would ensure transparency in this area emerged in 2008 during a project implemented with the support of the International Finance Corporation (IFC, part of the World Bank).

It is also noteworthy that unclear or contradictory provisions of certain regulatory acts will be interpreted in favor of entrepreneurs. The draft law also prohibits the inspection bodies from adopting regulations relating to the organization and implementation of inspections. The list of inspection bodies and their areas of supervision will be determined by appropriate bodies of executive authority (to be defined later). And very importantly, the goal for the future is to drastically reduce the number of inspection bodies because according to international practice, there are only two to three bodies conducting inspections in every country...

The draft law pays special attention to the professional level of auditors. Thus, prior to the inspection these individuals must undergo a course on verification procedures and comply with the rules of ethical conduct. Another aspect that will be of help in preventing corruption in the process of inspections is the requirement not to pay fines in cash.

Risk groups 

Under the draft law, during inspections business are to be divided into groups of high, medium and low risk, and the frequency of scheduled inspections will be adjusted depending on the results of this division. The entrepreneurs that do not commit offenses over a certain period of time will be transferred into the low-risk group, which will mean that inspections will be conducted less frequently. The duration of planned inspections of large businesses should not exceed 10 days, of medium-sized and small business five days. Unscheduled inspections of big business shall not exceed five days, and of medium-sized and small businesses three days. By the way, according to the draft law unplanned inspections will be conducted not at the discretion of a supervisory authority, but only in specific cases when required by law, e.g. if the decision to eliminate violations identified in a previous inspection has not been executed or it was necessary to verify the performance of the decision on the limitation of business activities in case of the presence of applications based on specific facts, etc. 

Another important aspect is the fact that a limitation of business activities is seen as a last resort. In other words, no inspection body will have the right to demand that a businessman suspend or terminate the business without proper procedures and legally sound decisions. According to the draft law, the main purpose of the inspection is not to punish business people for offenses, but to ensure the integrity of life, health, property, the environment and public property interests.

In other words, if the draft law is adopted and implemented by relevant authorities consistently and punctually, it will resolve the very topical issues of the business community regarding chaotic and sometimes unnecessary and biased inspections.