Corporate Secrecy Shock in Azerbaijan

A new law that will surround company ownership in secrecy has caused dismay in Azerbaijan, with critics saying it contradicts every principle of open government.

Legislative amendments passed by parliament on June 13 mean that from now on, shareholders’ identities and the stakes they hold in companies will be kept confidential.

On the eve of the vote, the REAL movement, which campaigns for openness and democracy in Azerbaijan, organised a protest outside parliament.

Ilgar Mammadov, one of REAL’s co-founders, said the changes to the law reflected a desire by officials to conceal their own stakes in major companies.

“The global trend towards increased openness worries top leaders in Baku. In 2009, Panama made public all company ownership data, and this resulted in corruption scandals in Azerbaijan implicating the president's family,” Mammadov said. “They therefore now want to make Azerbaijan itself into something of an off-shore zone, thereby expanding the scope for corruption.”

Shahveled Chobanoghlu, an investigative journalist with the Azadliq newspaper who focuses on corruption issues, said the law was changed after a series of media investigations alleged links between members of President Ilham Aliyev’s family and large businesses.

He said the new law would stop many investigative journalists from doing their job.

“This law… is not for the benefit of society. It will not bring us anything good. No developing society would pass a law that limits access to commercial information,” he said.

IWPR tried to reach members of the presidential administration for comment. Both Elnur Aslanov, head of the department of political analysis and information, and Ali Hasanov, head of the public affairs and politics department in the administration, declined to make any comment, and no one else was available to speak.

Chingiz Genizade, who sits on parliament’s committee for legal policy, said the law had nothing to do with the president’s family or the business interests of officials.

“The public knows everything about the president’s family. There is no need to conceal it,” he said. “This law was passed to offer entrepreneurs a chance to build their businesses in safety. Of course, it will slightly limit access to information, but it will help businesses to develop rapidly.”

That did not convince Khalid Shukurov, a member of the Azerbaijan Lawyers Association, who described the law as “the start of a dangerous new system”.

“It moves this country from being an unofficial authoritarian regime to being an official totalitarian regime. The law does not serve democracy at all; it limits the acquisition and dissemination of information,” he said.

United States Secretary of State Hillary Clinton discussed governance and transparency issues when she met civil society representatives when she visited Azerbaijan in early June.

Fidan Najafova, deputy director of Open Society Institute Azerbaijan and director of the OSI’s Transparency of Oil Revenues and Public Finance programme, was among those invited to meet Clinton. She said the main issue discussed at the meeting was transparency of budget spending and open governance.

“This law goes against the commitment to open governance. I am disappointed by it,” Najafova said. “It also restricts journalists’ access to commercial information. From now on, journalists can be charged just for using the names of shareholders in their stories.”

Azerbaijan is among 55 countries that have signed up to the Open Government Partnership, joining last year. To become a member of the partnership, states must promise to open the work of government up to scrutiny, and allow their citizens access to information.

Galib Abbaszade, coordinator of the National Budget Group, a local NGO, said the law ran directly counter to those principles, since it would protect the privacy of businessmen and block public oversight over the incomes of elected and appointed officials and their relatives.

“All these factors contradict the values of the Open Governance Partnership, and may increase tensions in society because of the unfair distribution of revenues,” he said.

Abbaszade was one of a group of activists and journalists who, on June 6, signed a statement condemning the amendment.

“Preventing public access to information about commercial legal entities cannot be justified with the public-interest argument. This level of secrecy will cause mistrust and lack of confidence among participants in what purports to be a free market economy, and will probably increase organised crime,” the statement said.

Abbaszade said parliament should repeal the amendments and instead draft proposals for enhanced access to information.

Rashid Hajili, director of the Media Rights Institute, said the law would actually make it harder to do business in Azerbaijan.

“When businesses are deciding whether to go into business with other companies, they want to get as much information as possible,” he explained. “The first thing they’re interested in is finding out who the owner is. Unfortunately, now that this law has been passed, it will be impossible to find that out.”

Shukurov argued that commercial litigation would also be complicated by the new rules.

“If someone is accused of breaking the law, the case will not be open to the public, as it will relate to commercial information,” he said. “The public will have no right to follow the case in a transparent manner.”

Shahla Sultanova is a freelance journalist in Azerbaijan.