ARTICLE 1. PURPOSE OF THE LAW

This Law determines organizational and legal basis of state regulation of natural monopolies and is aimed to ensure coordination of the interests of consumers and natural monopolists.

ARTICLE 2. RELATIONS GOVERNED BY THE LAW

This Law governs the relations occurring at the markets of goods, works, services (hereinafter commodities) where natural monopolists, consumers, corresponding bodies of executive power and local self government bodies participate.
Unless as otherwise provided in this Law, the provisions of this Law shall not apply to the activities of the natural monopolists not related to the natural monopoly.

ARTICLE 3. LEGISLATION ON NATURAL MONOPOLIES

The legislation on natural monopolies consists of the Constitution of the Republic of Azerbaijan, this Law, Law of the Republic of Azerbaijan on Anti-Monopoly Activity and other normative acts.

ARTICLE 4. MAIN CONCEPTS

The terms used in this Law shall have the following meanings:
natural monopoly - situation on the commodities market when due to technological peculiarities of the production satisfaction of demand is more efficient in absence of competition and the commodity produced (sold) by natural monopolists can not be replaced by another commodity;
natural monopolist - entity engaged in production (sale) of the commodity under conditions of natural monopoly;
consumer - legal entity or individual that acquires the commodity produced (sold) by natural monopolist.

ARTICLE 5. SPHERES OF ACTIVITY OF NATURAL MONOPOLISTS

1. The spheres of activity of natural monopolists are:
1.1 Transportation of oil and oil products through main pipelines;
1.2 Services of transportation of gas through pipelines, gas storage and distribution;
1.3 Services of transmission and distribution of electric and heating energy;
1.4 Operation of main and local railroads, railway structures and buildings, activity connected with management and safety of traffic, services of railway stations;
1.5 Services of airports, operation of airports, landing strips and installations, aviation and air navigation services to aircrafts;
1.6 Operation of subway roads, tunnels and stations, activity connected with management and safety of subway traffic;
1.7 Services of sea port, operation of sea port installations, activity connected with cargo loading, and unloading and safety of sea navigation;
1.8 Mail and Electronic mail services for common use, operation and control of radio and television receiving and transmission stations, high frequency installations;
1.9 Operation of main water cleaning installations, main pipelines, water pipeline network and pressure and regulating installations;
1.10 Operation of aeration and mechanical cleaning stations for sewage system, pump stations, main and rain collectors and sewage lines;
1.11 Operation of water reservoirs, canals, collectors, pipelines and junctions for melioration and irrigation system;
1.12 Services of heating supply.
2. Should entities competing with the entities engaged in the activity specified in paragraph 1 of this Article emerge, such entities functioning under conditions of competition shall not be deemed monopolists and this Law shall not apply to such entities.

ARTICLE 6. STATE REGULATION OF ACTIVITIES OF NATURAL MONOPOLISTS

1. Regulation of the activities of the natural monopolists is carried out by the corresponding bodies of executive power (hereinafter bodies regulating natural monopolists).

2. The following methods are applied in order to regulate activities of the natural monopolists:
2.1 Regulation of prices (tariffs) for commodities;
2.2 Identification of consumers provision of services to which is obligatory and/or determination of minimal level of provision of commodity to consumers in case when natural monopoly can not fully satisfy consumers' demand in the commodity.
2.3 Ensuring observance of levels of commodity production (sale) determined in accordance with this Law.
3. The bodies regulating natural monopolies shall have the right to apply other methods which are in conformity with legislation.

ARTICLE 7. GROUNDS FOR APPLICATION OF REGULATORY MEASURES

The bodies regulating natural monopolies shall take decision on application of regulatory measures on case-by-case basis to specific natural monopolists, considering the importance of such measures as incentive for increase of quality of produced (sold) commodity or satisfaction of consumers' demand. In such case the validity of expenses shall be determined and the following shall be considered:
* production and sale costs of commodity, including labor, raw materials and materials, additional expenses;
* taxes and other payments;
* value of fixed assets, investments for refund of fixed assets, depreciation;
* actual and projected income;
* correspondence of the quantity and quality of the commodity to consumers' demand;
* other measures connected with state aid and donations.

ARTICLE 8. STATE SUPERVISION OVER ACTIVITIES OF NATURAL MONOPOLISTS

1. The bodies regulating natural monopolies shall exercise supervision over the activities of natural monopolists in accordance with this Law and other legal acts of the Republic of Azerbaijan. The bodies regulating natural monopolies shall undertake measures specified in this Law and other legal acts to prevent or eliminate actions having negative impact on consumers' interests or disrupting the economically grounded transition of natural monopoly to the condition of free competition.

2. The body regulating natural monopolies shall supervise the following activities of natural monopolists:
2.1 acquisition of property rights or right to use of fixed assets required to produce (sell) commodity to which no state regulation is applied pursuant to this Law (in case when the balance sheet value of fixed assets of the natural monopolist used to produce such commodity is more than 10% of the charter capital of the natural monopolist recorded in the last approved balance sheet of the natural monopolist);
2.2 transfer from the natural monopolist to other business entities through sale, lease or other transactions of the property right or right to use fixed assets used for production (sale) of the commodities to which the state regulation is applied pursuant to this Law (in case when the balance sheet value of fixed assets of the natural monopolist used to produce such commodity is more than 10% of the charter capital of the natural monopolist recorded in the last approved balance sheet of the natural monopolist);
2.3 transfer of the fixed assets to other producers under leasing;
2.4 investments of natural monopolists into the activities not regulated in this Law.

3. The natural monopolists shall apply to the body regulating natural monopolies in order to receive permission to carry out transactions specified in paragraph 2 of this Article.
The corresponding body of the executive power shall set the rules for consideration of such applications and submission of corresponding documents and information.

4. The body regulating natural monopolies may refuse to permit the transaction when such transaction may negatively affect interests of consumers, or when the applicant has not submitted all the required documents or information in such documents is incorrect.

5. In order to clarify the issue, the body regulating natural monopolies has the right to request from the applicant submission of additional documents, and only in such case it shall have the right to prolong the term of consideration of the application. Such written request shall be served to the applicant not later than 10 days after submission of application.
In all cases, the body regulating natural monopolies shall notify the applicant about its decision on the issue not later than 15 days after submission of application or additional documents.

6. The applicant shall have the right to apply to the court when the body regulating natural monopolists refuses to give permit for the transaction or has not responded about its decision within the established term.

7. A person or group of persons shall within 15 days notify the body regulating natural monopolies about acquisition of 10% of the votes of the entire stocks (shares) of the charter capital of the natural monopolist in result of acquisition of stocks (shares) or other transactions (mortgage, transfer of management, etc.) and about all other cases of changes in the votes hold by such persons.

ARTICLE 9. AUTHORITIES OF THE BODIES REGULATING NATURAL MONOPOLIES

The bodies regulating natural monopolies shall have the following authorities:

* to supervise the observance of this Law within the scope of their authorities;
* to maintain the state registry of natural monopolists;
* to determine the regulatory methods to be applied to natural monopolists on a case-by-case basis;
* to take decisions on application of regulatory measures having obligatory force for natural monopolists;
* to request information from executives of natural monopolists in order to perform authorities set forth in legislation;
* to consider issues connected with violation of this Law and to take appropriate decisions in the order specified in the legislation and within the scope of their authorities;
* to impose fines (financial sanctions) on natural monopolists and their executives;
* to issue mandatory instructions on payment to the state budget of revenues received by natural monopolists in result of law violation, to order conclusion of agreements with consumers which are required to be served in the mandatory order, issue instruction on making changes in the agreements of natural monopolists;
* to apply to the corresponding body of executive power in order to solve financial issues connected with the regulation of natural monopolists;
* to exercise other authorities specified in legislation.

ARTICLE 10. DUTIES OF NATURAL MONOPOLISTS

1. Natural monopolists shall implement decision of the bodies regulating natural monopolies issued within the authorities specified in this Law.

2. Natural monopolists shall in the order stipulated in legislation submit to the bodies regulating natural monopolies reports on their activities, investment projects, other documents and information in a timely manner.

3. Natural monopolists having potential to produce (sell) corresponding commodity shall have no right to refuse to conclude with the consumers agreement on sale of such commodity.

4. Upon violation of this Law natural monopolists (their executive officers) pursuant to the decisions of the bodies regulating natural monopolies shall:
4.1 stop violation of this Law;
4.2 restore the situation that existed before violation or implement other instruction specified in the decision;
4.3 terminate or change transactions which do not comply with this Law;
4.4 enter into agreements or change the agreements with consumers which are required to be served in the mandatory order;
4.5 transfer to the state budget revenues received in result of violation of this Law.

ARTICLE 11. RESPONSIBILITY OF NATURAL MONOPOLISTS

1. Following fines (financial sanctions) shall apply to natural monopolists:
1.1 upto 500 amounts of minimal salary for untimely submission of documents and other information required for performance of authorities by bodies regulating natural monopolists;
1.2 upto 600 amounts of minimal salary for non-submission of information specified in paragraph 7 of the Article 8 of this Law;
1.3 upto 1000 amounts of minimal salary for submission of incorrect information;
1.4 upto 15000 amounts of minimal salary for changes in prices (tariffs) established by the corresponding body of executive power;
1.5 upto 10000 amounts of minimal salary for violation of decisions of the bodies regulating natural monopolies.

2. Fines imposed in accordance with this article shall be paid to the state budget within 30 days after taking the corresponding decision. In case natural monopolists fail to pay the full amount of fine in due time interest at the rate of 0.5% of unpaid amount shall accrue for each day of delay.

ARTICLE 12. RESPONSIBILITY OF OFFICIALS OF NATURAL MONOPOLISTS AND BODIES REGULATING NATURAL MONOPOLIES

1. Executive officers of the natural monopolists shall bear responsibility in accordance with the legislation of the Republic of Azerbaijan for non-performance of the decisions of the bodies regulating natural monopolies.

2. Officials of the bodies regulating natural monopolies shall bear responsibility in accordance with the legislation of the Republic of Azerbaijan for violation of this Law.

3. Fines and financial sanctions imposed on natural monopolists and their executive officers do not relieve them to perform duties arising from this Law and orders of the bodies regulating natural monopolies.

ARTICLE 13. COMPENSATION OF DAMAGES

Natural monopolists or other business entities which suffered losses due to violation of this Law by bodies regulating natural monopolies (including unjustified decisions fixing prices) shall have the right to demand compensation of damages in the order set forth in the civil legislation.

President Heydar Aliyev
Republic of Azerbaijan

Baku, December 15, 1998

RESOLUTION OF THE PRESIDENT OF THE REPUBLIC OF AZERBAIJAN ON APPLICATION OF THE LAW OF THE REPUBLIC OF AZERBAIJAN ON NATURAL MONOPOLIES

In connection with Law of the Republic of Azerbaijan on Natural Monopolies entering into force and in order to ensure implementation of the said law I resolve:

1. The Cabinet of Ministers of the Republic of Azerbaijan shall within one month:
* submit to the President of the Republic of Azerbaijan proposals on bringing the existing legislation to the conformity with the Law of the Republic of Azerbaijan on Natural Monopolies;
* ensure the conformity of the legal acts of the Cabinet of Ministers of the Republic of Azerbaijan and corresponding bodies of executive power with the said law and report to the President of the Republic of Azerbaijan about this;
* make proposals on corresponding bodies of executive power that will exercise authorities of "the corresponding bodies of executive power" specified in paragraph 1 of the Article 6 and "[t]he bodies regulating natural monopolies" specified in paragraph 3 of the same article of the Law of the Republic of Azerbaijan on Natural Monopolies;
* make proposals on corresponding bodies of executive power that will exercise authorities of "[t]he bodies regulating natural monopolies" specified in Article 7 of the Law of the Republic of Azerbaijan on natural Monopolies;
* make proposals on corresponding bodies of executive power that will exercise authorities of "[t]he bodies regulating natural monopolies" specified in paragraph 1 of the Article 8; "[t]he body regulating natural monopolies" specified in first subparagraph of the paragraph 2; first subparagraph of paragraph 3; paragraphs 4; 5; 6 and 7 of the same article; "[t]he corresponding body of the executive power" specified in subparagraph 2 of the paragraph 3 of the same article;
* make proposals on corresponding bodies of executive power that will exercise authorities of "[t]he bodies regulating natural monopolies" specified in first paragraph of the Article 9 of the Law of the Republic of Azerbaijan on Natural Monopolies and of "the corresponding body of executive power" specified in paragraph 10 of the same article;
* make proposals on corresponding bodies of executive power that will exercise authorities of "the bodies regulating natural monopolies" specified in paragraphs 1; 2 and 4 of the Article 10 of the Law of the Republic of Azerbaijan on Natural Monopolies;
* make proposals on corresponding body of executive power that will exercise authorities of the "bodies regulating natural monopolists" specified in subparagraphs 1.1; 1.3 and 1.5 of paragraph 1 of the Article 11 of the Law of the Republic of Azerbaijan on natural Monopolies and of "the corresponding body of executive power" specified in subparagraph 1.4 of the paragraph 1 of the same article;
* make proposals on corresponding bodies of executive power that will exercise authorities of "the bodies regulating natural monopolies" specified in Article 12 and 13 of the Law of the Republic of Azerbaijan on Natural Monopolies;
* resolve other matters within its competence arising from the law of the Republic of Azerbaijan on Natural Monopolies.

2. This Resolution shall become effective from the date of promulgation.

President Heydar Aliyev
Baku, March 12, 1999

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)