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Disorder In The Court, Part II

Since its independence from the Soviet Union in 1991, oil-rich Azerbaijan has been popular with foreign investors. They've committed some $60 billion to long-term oilfield development there. But the country of eight million is burdened by a judicial system that's corrupt and lacks independence. Azerbaijan, therefore, is a high-risk environment under the U.S. Foreign Corrupt Practices Act.

We noted yesterday some of the causes of judicial corruption -- underpaid and overworked judges, complex and slow court procedures, and anti-corruption enforcement monopolized by a single agency. Those symptoms describe very well the condition of Azerbaijan's judicial system. To start with, according to Transparency International's 2007 country report, judges' salaries are low and their workload is heavy. Even after a big recent pay raise, local judges make the annual equivalent of $11,635 -- compared to $23,800 in Estonia. As for their workload, there are only about 4 judges per 100,000 people. That's the lowest number in the region. Germany, by the way, has more than five times as many judges per capita.

Predictably, court litigation is extremely time-consuming. TI says, "This is especially ruinous for private companies, which usually prefer to drop a case or 'negotiate' with the judge. Parties in litigation have many opportunities to drag out a case because the legis­lation prevents a court from proceeding to a deci­sion if the other party does not appear in court. There is no punishment for the defaulting party. On average about 5 per cent of businesses use courts in Azerbaijan, compared with 30 per cent in Europe and Central Asia."

Fuad Mustafayev, deputy chairman of the opposition Popular Front Party, told TI that judges in Azerbaijan pass judgments based on two principles: for political reasons or, in a judi­cial equivalent to the construction "tender," they rule in favor of the highest bidder. Lawyers complain that they have been turned into "brokers" rather than legal defenders.

The judicial branch also lacks independence and is not accountable to the public. Supreme Court judges owe their positions to the executive branch, as does the general prosecutor. Court officials can decide whether or not to hear a case without referring to legal provisions or giving any explan­ation. Judges may also pass judgments that do not reflect the laws of Azerbaijan or which con­flict with statutory civil rights. The judicial council annually reviews the results of monitoring organized by the Ministry of Justice to evaluate judges? performances. "None has been fired for corrupt practices, however, though such cases are numerous accord­ing to civil society data." TI said.

An additional flaw is that bailiffs are not actually part of the judicial system, but fall under the executive branch. TI says that "bailiffs lack the power, skills, resources and initiative to enforce decisions. . . . Failure to enforce court decisions further undermines trust in the justice system. When a decision is not implemented the bailiff is legally expected to prepare a fresh dossier for the judge, prior to a petition to the prosecutor?s office to institute a charge of failing to respect a court ruling. This is rarely done in practice."

Azerbaijan demonstrates again that where the rule of law is under attack, corruption flourishes. That's why companies trying to maintain an effective FCPA compliance program will want to mark the country with a big red flag.

View Transparency International's 2007 Global Judicial Corruption Report here.

Full post as published by The FCPA Blog on February 19, 2008 (boomark / email).