(e) "Operation" shall mean the pursuit of economic activities.
(f) "Economic activities" shall mean activities of an industrial, commercial and professional character.
With regard to international maritime transport, including inter modal operations involving a sea-leg, nationals of the Member States or of the Republic of Azerbaijan established outside the Community or the Republic of Azerbaijan respectively, and shipping companies established outside the Community or the Republic of Azerbaijan and controlled by nationals of a Member State or Azerbaijani nationals respectively, shall also be beneficiaries of the provisions of this Chapter and Chapter III if their vessels are registered in that Member State or in the Republic of Azerbaijan respectively in accordance with their respective legislation.
Article 26.
1. Notwithstanding any other provisions of this Agreement, a Party shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system. Where such measures do not conform with the provisions of this Agreement, they shall not be used as a means of avoiding the obligations of a Party under this Agreement.
2. Nothing in this Agreement shall be construed as requiring a Party to disclose information relating to the affairs and accounts of individual customers or any confidential or proprietary information in the possession of public entities.
3. For the purpose of this Agreement, "financial services" shall mean those activities described in Annex III.
Article 27.
The provisions of this Agreement shall not prejudice the application by each Party of any measure necessary to prevent the circumvention of its measures concerning third country access to its market, through the provisions of this Agreement.
Article 28.
1. Notwithstanding the provisions of Chapter I of this Title, a Community company or an Azerbaijani company established in the territory of the Republic of Azerbaijan or the Community respectively shall be entitled to employ, or have employed by one of its subsidiaries or branches, in accordance with the legislation in force in the host country of establishment, in the territory of the Republic of Azerbaijan and the Community respectively, employees who are nationals of Community Member States and the Republic of Azerbaijan respectively, provided that such employees are key personnel as defined in paragraph 2, and that they are employed exclusively by companies, or branches. The residence and work permits of such employees shall only cover the period of such employment.
2. Key personnel of the abovementioned companies herein referred to as "organizations" are "intra-corporate transferees" as defined in (c) in the following categories, provided that the organization is a legal person and that the persons concerned have been employed by it or have been partners in it (other than majority shareholders), for at least the year immediately preceding such movement:
(a) Persons working in a senior position with an organization, who primarily direct the management of the establishment, receiving general supervision or direction principally from the board of directors or stockholders of the business or their equivalent, including:
- Directing the establishment or a department or subdivision of the establishment,
- Supervising and controlling the work of other supervisory, professional or managerial employees,
- Having the authority personally to hire and fire or recommend hiring, firing or other personnel actions;
(b) Persons working within an organization who possess uncommon knowledge essential to the establishment's service, research equipment, techniques or management. The assessment of such knowledge may reflect, apart from knowledge specific to the establishment, a high level of qualification referring to a type of work or trade requiring specific technical knowledge, including membership of an accredited profession;
(c) An "intra-corporate transferee" is defined as a natural person working within an organization in the territory of a Party, and being temporarily transferred in the context of pursuit of economic activities in the territory of the other Party; the organization concerned must have its principal place of business in the territory of a Party and the transfer be to an establishment (branch, subsidiary) of that organization, effectively pursuing like economic activities in the territory of the other Party.
Article 29.
1. The Parties shall use their best endeavours to avoid taking any measures or actions which render the conditions for the establishment and operation of each other's companies more restrictive than the situation existing on the day preceding the date of signature of this Agreement.
2. The provisions of this Article are without prejudice to those of Article 37: the situations covered by such Article 37 shall be solely governed by its provisions to the exclusion of any other.
3. Acting in the spirit of partnership and cooperation and in the light of the provisions of Article 43 the Government of the Republic of Azerbaijan shall inform the Community of its intentions to submit new legislation or adopt new regulations which may render the conditions for the establishment or operation in the Republic of Azerbaijan of subsidiaries and branches of Community companies more restrictive than the situation existing on the day preceding the date of signature of this Agreement. The Community may request the Republic of Azerbaijan to communicate the drafts of such legislation or regulations and to enter into consultations about those drafts.
4. Where new legislation or regulations introduced in the Republic of Azerbaijan would result in rendering the conditions for operation of subsidiaries and branches of Community companies established in the Republic of Azerbaijan more restrictive than the situation existing on the day of signature of this Agreement, such respective legislation or regulations shall not apply during three years following the entry into force of the relevant act to those subsidiaries and branches already established in the Republic of Azerbaijan at the time of entry into force of the relevant act.
Chapter III. Cross Border Supply of Services between the Community and the Republic of Azerbaijan
Article 30.
1. The Parties undertake in accordance with the provisions of this Chapter to take the necessary steps to allow progressively the supply of services by Community or Azerbaijani companies which are established in a Party other than that of the person for whom the services are intended taking into account the development of the service sectors in the Parties.
2. The Cooperation Council shall make recommendations for the implementation of paragraph 1.
Article 31.
The Parties shall cooperate with the aim of developing a market oriented service sector in the Republic of Azerbaijan.
Article 32.
1. The Parties undertake to apply effectively the principle of unrestricted access to the international maritime market and traffic on a commercial basis:
(a) the above provision does not prejudice the rights and obligations arising from the United Nations Convention on a Code of Conduct for Liner Conferences, as applicable to one or other Contracting Party to this Agreement. Non-conference lines will be free to operate in competition with a conference as long as they adhere to the principle of fair competition on a commercial basis;
(b) the Parties affirm their commitment to a freely competitive environment as being an essential feature of the dry and liquid bulk trade.
2. In applying the principles of paragraph 1, the Parties shall:
(a) not apply, as from the entry into force of this Agreement, any cargo sharing provisions of bilateral agreements between any Member States of the Community and the former Soviet Union;
(b) not introduce cargo sharing clauses into future bilateral agreements with third countries, other than in those exceptional circumstances where liner shipping companies from one or other Party to this Agreement would not otherwise have an effective opportunity to ply for trade to and from the third country concerned;
(c) prohibit cargo sharing arrangements in future bilateral agreements concerning dry and liquid bulk trade;
(d) abolish upon entry into force of this Agreement, all unilateral measures, administrative, technical and other obstacles which could have restrictive or discriminatory effects on the free supply of services in international maritime transport.
3. Each party shall grant, inter alia, no less favourable treatment, for the ships operated by nationals or companies of the other Party, than that accorded to a Party's own ships, with regard to access to ports open to international trade, the use of infrastructure and auxiliary maritime services of the ports, as well as related fees and charges, customs facilities and the assignment of berths and facilities for loading and unloading.
4. Nationals and companies of the Community providing international maritime transport services shall be free to provide international sea-river services in the inland waterways of the Republic of Azerbaijan and vice versa.
Article 33.
With a view to assuring a coordinated development of transport between the Parties, adapted to their commercial needs, the conditions of mutual market access and provision of services in transport by road, rail and inland waterways and, if applicable, in air transport may be dealt with by specific agreements where appropriate negotiated between the Parties after entry into force of this Agreement.
Chapter IV. General Provisions
Article 34.
1. The provisions of this Title shall be applied subject to limitations justified on grounds of public policy, public security or public health.
2. They shall not apply to activities which in the territory of either Party are connected, even occasionally, with the exercise of official authority.
Article 35.
For the purpose of this Title, nothing in this Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of this Agreement. The above provision does not prejudice the application of Article 34.
Article 36.
Companies which are controlled and exclusively owned by Azerbaijani companies and Community companies jointly shall also be beneficiaries of the provisions of Chapters II, III and IV.
Article 37.
Treatment granted by either Party to the other thereunder shall, as from the day one month prior to the date of entry into force of the relevant obligations of the General Agreement on Trade in Services (GATS), in respect of sectors or measures covered by the GATS, in no case be more favourable than that accorded by such first Party under the provisions of GATS and this in respect of each service sector, sub-sector and mode of supply.
Article 38.
For the purposes of Chapters II, III and IV, no account shall be taken of treatment accorded by the Community, its Member States or the Republic of Azerbaijan pursuant to commitments entered into in economic integration agreements in accordance with the principles of Article V of the GATS.
Article 39.
1. The most-favoured-nation treatment granted in accordance with the provisions of this Title shall not apply to the tax advantages which the Parties are providing or will provide in the future on the basis of agreements to avoid double taxation, or other tax arrangements.
2. Nothing in this Title shall be construed to prevent the adoption or enforcement by the Parties of any measure aimed at preventing the avoidance or evasion of taxes pursuant to the tax provisions of agreements to avoid double taxation and other tax arrangements, or domestic fiscal legislation.
3. Nothing in this Title shall be construed to prevent Member States or the Republic of Azerbaijan from distinguishing, in the application of the relevant provisions of their fiscal legislation, between tax payers who are not in identical situations, in particular as regards their place of residence.
Article 40.
Without prejudice to Article 28, no provision of Chapters II, III and IV shall be interpreted as giving the right to:
- Nationals of the Member States or of the Republic of Azerbaijan respectively to enter, or stay in, the territory of the Republic of Azerbaijan or the Community respectively in any capacity whatsoever, and in particular as a shareholder or partner in a company or manager or employee thereof or supplier or recipient of services;
- Community subsidiaries or branches of Azerbaijani companies to employ or have employed in the territory of the Community nationals of the Republic of Azerbaijan;
- Azerbaijani subsidiaries or branches of Community companies to employ or have employed in the territory of the Republic of Azerbaijan nationals of the Member States;
- Azerbaijani companies or Community subsidiaries or branches of Azerbaijani companies to supply Azerbaijani persons to act for and under the control of other persons by temporary employment contracts;
- Community companies or Azerbaijani subsidiaries or branches of Community companies to supply workers who are nationals of the Member States by temporary employment contracts.
Article 41.
1. The Parties undertake to authorize in freely convertible currency, any current payments between residents of the Community and of the Republic of Azerbaijan connected with the movement of goods, services or persons made in accordance with the provisions of this Agreement.
2. With regard to transactions on the capital account of balance of payments, from entry into force of this Agreement, the free movement of capital relating to direct investments made in companies formed in accordance with the laws of the host country and investments made in accordance with the provisions of Chapter II, and the liquidation or repatriation of these investments and of any profit stemming therefrom shall be ensured.
3. The provisions of paragraph 2 shall not prevent the Republic of Azerbaijan from applying restrictions on outward direct investment by Azerbaijani residents. Such restrictions shall not apply to subsidiaries and branches of Community companies. Five years after the entry into force of this Agreement, the Parties agree to consult over the maintenance of these restrictions, taking into account all the relevant monetary, fiscal and financial considerations.
4. Without prejudice to paragraph 2 or to paragraph 6, as from the entry into force of this Agreement, no new foreign exchange restrictions on the movement of capital and current payments connected therewith between residents of the Community and the Republic of Azerbaijan shall be introduced and the existing arrangements shall not become more restrictive.
5. The Parties shall consult each other with a view to facilitating the movement of forms of capital other than those referred to in paragraph 2 above between the Community and the Republic of Azerbaijan in order to promote the objectives of this Agreement.
6. With reference to the provisions of this Article, until a full convertibility of the Azerbaijani currency within the meaning of Article VIII of the Articles of Agreement of the International Monetary Fund (IMF) is introduced, the Republic of Azerbaijan may in exceptional circumstances apply exchange restrictions connected with the granting or taking up of short and medium-term financial credits to the extent that such restrictions are imposed on the Republic of Azerbaijan for the granting of such credits and are permitted according to the Republic of Azerbaijan's status under the IMF. The Republic of Azerbaijan shall apply these restrictions in a non-discriminatory manner. They shall be applied in such a manner as to cause the least possible disruption to this Agreement. The Republic of Azerbaijan shall inform the Cooperation Council promptly of the introduction of such measures and of any changes therein.
7. Without prejudice to paragraphs 1 and 2, where, in exceptional circumstances, movement of capital between the Community and the Republic of Azerbaijan cause, or threaten to cause, serious difficulties for the operation of exchange rate policy or monetary policy in the Community or the Republic of Azerbaijan, the Community and the Republic of Azerbaijan, respectively, may take safeguard measures with regard to movements of capital between the Community and the Republic of Azerbaijan for a period not exceeding six months if such measures are strictly necessary.
Chapter VI. Intellectual, Industrial and Commercial Property Protection
Article 42.
1. Pursuant to the provisions of this Article and of Annex II, the Republic of Azerbaijan shall continue to improve the protection of intellectual, industrial and commercial property rights in order to provide, by the end of the fifth year after the entry into force of this Agreement, for a level of protection similar to that existing in the Community, including effective means of enforcing such rights.
2. By the end of the fifth year after entry into force of this Agreement, the Republic of Azerbaijan shall accede to the multilateral conventions on intellectual, industrial and commercial property rights referred to in paragraph 1 of Annex II to which Member States are parties or which are de facto applied by Member States, according to the relevant provisions contained in these conventions.
Part V. Legislative Cooperation
Article 43. Legislative Cooperation
1. The Parties recognize that an important condition for strengthening the economic links between the Republic of Azerbaijan and the Community is the approximation of the Republic of Azerbaijan's existing and future legislation to that of the Community. The Republic of Azerbaijan shall endeavour to ensure that its legislation will be gradually made compatible with that of the Community.
2. The approximation of laws shall extend to the following areas in particular: customs law, company law, banking law, company accounts and taxes, intellectual property, protection of workers at the workplace, financial services, rules on competition, public procurement, protection of health and life of humans, animals and plants, the environment and legislation regarding the exploitation and utilization of natural resources, consumer protection, indirect taxation, technical rules and standards, nuclear laws and regulations and transport.
3. The Community shall provide the Republic of Azerbaijan with technical assistance for the implementation of these measures, which may include inter alia:
- The exchange of experts;
- The provision of early information especially on relevant legislation;
- Organization of seminars;
- Training activities;
- Aid for translation of Community legislation in the relevant sectors.
4. The Parties agree to examine ways to apply their respective competition laws on a concerted basis in such cases where trade between them is affected.
Part VI. Economic Cooperation
Article 44. Economic Cooperation
1. The Community and the Republic of Azerbaijan shall establish economic cooperation aimed at contributing to the process of economic reform and recovery and sustainable development of the Republic of Azerbaijan. Such cooperation shall strengthen existing economic links, to the benefit of both parties.
2. Policies and other measures will be designed to bring about economic and social reforms and restructuring of the economic and trading systems in the Republic of Azerbaijan and will be guided by the requirements of sustainability and harmonious social development; they will also fully incorporate environmental considerations.
3. To this end, cooperation will concentrate, in particular, on economic and social development, human resources development, support for enterprises (including privatization, investment and development of financial services), agriculture and food, energy, transport, tourism, environmental protection, regional cooperation and monetary policy.
4. Special attention shall be devoted to measures, as in conformity with the legislation in force in the Republic of Azerbaijan capable of fostering cooperation among the Independent States of the Transcaucasus region, and with other neighbouring states, with a view to stimulating a harmonious development of the region.
5. Where appropriate, economic cooperation and other forms of cooperation provided for in this Agreement may be supported by technical assistance from the Community, taking into account the Community's relevant Council regulation applicable to technical assistance in the Independent States, the priorities agreed upon in the indicative programme related to Community technical assistance to the Republic of Azerbaijan and its established coordination and implementation procedures.
Article 45. Cooperation In the Field of Trade In Goods and Services
The Parties will cooperate with a view to ensuring that the Republic of Azerbaijan's international trade is conducted in conformity with the rules of the WTO.
Such cooperation shall include specific issues directly relevant to trade facilitation, including:
- Formulation of policy on trade and trade-related questions, including payments, and clearing mechanisms,
- Drafting of relevant legislation,
- Assistance to prepare for the Republic of Azerbaijan's eventual accession to the WTO.
Article 46. Industrial Cooperation
1. Cooperation shall aim at promoting the following in particular:
- The development of business links between economic operators of both sides;
- Community participation in the Republic of Azerbaijan's efforts to restructure its industry;
- The improvement of management;
- The development of appropriate market-based commercial rules and practices, as well as the transfer of know-how;
- Environmental protection.
2. The provisions of this Article shall not affect the enforcement of Community competition rules applicable to undertakings.
Article 47. Construction
The Parties shall cooperate in the field of construction industry.
This cooperation shall, inter alia, aim at modernizing and restructuring the construction sector in the Republic of Azerbaijan in line with the principles of a market economy and duly taking into account related health, safety and environmental aspects.
Article 48. Investment Promotion and Protection
1. Bearing in mind the respective powers and competences of the Community and the Member States, cooperation shall aim to establish a favourable climate for private investment, both domestic and foreign, especially through better conditions for investment protection, the transfer of capital and the exchange of information on investment opportunities.
2. The aims of cooperation shall be in particular:
- The conclusion, where appropriate, between the Member States and the Republic of Azerbaijan of agreements for the promotion and protection of investment;
- The conclusion, where appropriate, between the Member States and the Republic of Azerbaijan of agreements to avoid double taxation;
- The creation of favourable conditions for attracting foreign investments into the Azerbaijani economy;
- To establish stable and adequate business law and conditions, and to exchange information on laws, regulations and administrative practices in the field of investment;
- To exchange information on investment opportunities in the form of, inter alia, trade fairs, exhibitions, trade weeks and other events.
Article 49. Public Procurement
The Parties shall cooperate to develop conditions for open and competitive award of contracts for goods and services in particular through calls for tenders.
Article 50. Cooperation In the Field of Standards and Conformity Assessment
1. Cooperation between the Parties shall promote alignment with internationally agreed criteria, principles and guidelines followed in the field of quality. The required actions will facilitate progress towards mutual recognition in the field of conformity assessment, as well as the improvement of the quality of Azerbaijani products.
2. To this end the Parties shall seek to cooperate in technical assistance projects which
- Promote appropriate cooperation with organizations and institutions specialized in these fields;
- Promote the use of Community technical regulations and the application of European standards and conformity assessment procedures;
- Permit the sharing of experience and technical information in the field of quality management.
Article 51. Mining and Raw Materials
1. The Parties shall aim at increasing investment and trade in mining and raw materials.
2. The cooperation shall focus in particular on the following areas:
- Exchange of information on the prospects of the mining and non-ferrous metals sectors,
- The establishment of a legal framework for cooperation,
- Trade matters,
- The adoption and implementation of environmental legislation,
- Training,
- Safety in the mining industry.
Article 52. Cooperation In Science and Technology
1. The Parties shall promote cooperation in civil scientific research and technological development (RTD) on the basis of mutual benefit and, taking into account the availability of resources, adequate access to their respective programmes and subject to appropriate levels of effective protection of intellectual, industrial and commercial property rights (IPR).
2. Science and technology cooperation shall cover:
- The exchange of scientific and technical information;
- Joint RTD activities;
- Training activities and mobility programmes for scientists, researchers and technicians engaged in RTD on both sides.
Where such cooperation takes the form of activities involving education and/or training, it should be carried out in accordance with the provisions of Article 53.
The Parties, on the basis of mutual agreement, can engage in other forms of cooperation in science and technology.
3. The cooperation covered by this Article shall be implemented according to specific arrangements to be negotiated and concluded in accordance with the procedures adopted by each Party, and which shall set out, inter alia, appropriate IPR provisions.
Article 53. Education and Training
1. The Parties shall cooperate with the aim of raising the level of general education and professional qualifications in the Republic of Azerbaijan, both in the public and private sectors.
2. The cooperation shall focus in particular on the following areas:
- Updating higher education and training systems in the Republic of Azerbaijan including the system of certification of higher educational establishments and diplomas of higher education;