The International Journal
of Not-for-Profit Law

Volume 13, Issue 4, December 2011

Azay Guliyev1

Non-governmental organizations (NGOs) share similar and common features with other civil society institutions no matter which country they are functioning in. Thus, NGOs should take into account the effective laws of the state and abide by the existing legislation in their activities. In other words, NGOs should constantly feel their responsibility and accountability within the frame of their competences and activities.

In order to establish this responsibility in any country where civil society institutions exist, including Azerbaijan, there are laws and regulations constituting a legal framework for the functioning of NGOs. Some of these laws and regulations play an exceptionally direct role while others an indirect role in the regulation of the NGO sector.

The main law providing the legislative framework for the activities of the NGO sector in Azerbaijan is the Constitution of the Republic of Azerbaijan, adopted in 1995. Article 58 of the Constitution, providing for freedom of association, envisages a right for any citizen to associate with others and to form any union, including political parties, trade unions, and other public unions, or join the existing ones. Along with enshrining this right, this provision of the Constitution also fully guarantees the free functioning of these unions.

The Law of the Republic of Azerbaijan “On Grants,” adopted in 1998, has crucial importance in regulating the key sources of financing NGOs and in governing donor-recipient relations as a whole. Article 1 of the Law stipulates the spheres in which NGOs are directly involved and which are considered to be priority fields for financing, such as “programs related to humanitarian, social and environmental issues, works related to restoration of social facilities and infrastructure, education, healthcare, culture, legal consultations, information, publication and sports, as well as scientific, research and design programs, as well as other spheres constituting interest for the state and society.”

The Law “On Non-Governmental Organizations (Public Unions and Foundations),” adopted in 2000, brings clarification to a number of issues related to NGOs. This Law tries to regulate all spheres of NGO activities, from the issues that may emerge during their establishment to their relations with the public institutions. In addition, the Law bears the main principles for the functioning of NGOs, their reorganization, liquidation, and management.

Article 2 of the Law defines public unions and foundations:

A public union is a voluntary, self-governing non-governmental organization that does not aim at making profit as a major objective, and not distributing generated profit among its members, and that is created upon initiative of several individuals and/or legal entities having common interests, for purposes defined in foundation documents of such organization. A foundation is a non-membership, non-governmental organization that is founded by one or several individuals and/or legal entities on the basis of voluntary property shares, and is aimed at social, charitable, cultural, educational and other public activities.

Pursuant to the Law, NGOs are entitled to be involved inside and outside of the country in any activities which are not prohibited by the legislation of the Republic of Azerbaijan and are not contradicting to the objectives envisaged in the charter of the NGO. The organizational-legal forms of NGOs are identified in the Article 4 of the law, which states that “NGOs may be founded in any organizational-legal forms.”

One of the important and relevant issues related to NGO activities is linked to the title of a newly established entity. Article 3.1 of the Law “On Non-Governmental Organizations (Public Unions and Foundations)” stipulates that any NGO shall have a title indicating its organizational-legal form and the nature of its activities. The title of a non-governmental organization must be included in its charter. While indicating the title of a foundation, it is compulsory to use the term “foundation.” In principle, NGOs may use any title so long as this title is not in use by another NGO officially registered in the Republic of Azerbaijan in the order prescribed by the Law. Legislation does not provide for the language in which the title of NGOs shall be written. Nevertheless, given that the state language in Azerbaijan is Azerbaijani pursuant to the Constitution, the title of non-governmental organizations shall be indicated in Azerbaijani. The title of a NGO may be indicated in a foreign language alongside Azerbaijani.

The law provides for two ways of establishing a non-governmental organization: foundation and re-organization.

Pursuant to the Law “On Non-Governmental Organizations (Public Unions and Foundations),” the location of a non-governmental organization is determined according to its legal address indicated in its Charter (Article 3.2). Article 51 of the Civil Code stipulates that the place where the permanent body of the legal entity is functioning is considered to be the place where legal entity is based.

The right of natural persons to become participants of NGOs functioning in the Republic of Azerbaijan does not depend on their nationality (citizenship). Thus, both nationals of the Republic of Azerbaijan and aliens and stateless persons may become participants of the NGOs functioning in the Republic of Azerbaijan. By contrast, the number of legal entities that may become participants of non-governmental organizations is rather limited. For example, bodies of public authorities and local self-governance may not become participants (founders, members, or assistants) of non-governmental organizations.

A Charter of a NGO is considered to be the main foundation document of it. All relevant information related to NGO shall be reflected in the Charter, such as its objective, organizational structure, order of management, and other issues related to its activities. Pursuant to the Article 13 of the Law “On Non-Governmental Organizations (Public Unions and Foundations),” the following issues must be clarified in the charter of any NGO:

1. Title and place of location of a NGO;
2. Objectives of its activities;
3. Management order;
4. Sources of formation of its property;
5. Order for adoption of a Charter, as well as making changes and amendments to it;
6. Order for liquidation of a NGO;
7. Rules for using its property in case of liquidation.

This information must be included in the charters of both public unions and foundations.

When necessary, changes and amendments may be made to the Charters of NGOs. The legislation provides general instructions for administering these processes. According to the Article14.1 of the Law “On Non-Governmental Organizations (Public Unions and Foundations),” changes and amendments to the charter of a NGO may be done upon the decision of its supreme governing body.

A non-governmental organization may have any type of property at its disposal (ownership or operational use) not prohibited by legislation. Pursuant to the Article 24 of the Law “On Non-Governmental Organizations (Public Unions and Foundations),” the following are the sources of NGO property:

1. Lump sum or regular membership fees paid by the founders or members of public unions;
2. Voluntary property fees and donations;
3. Proceeds obtained as a result of sales of goods, rendering services, and implementing works;
4. Dividends and other income received from shares, bonds, other securities, and deposits;
5. Income generated as a result of the use and sales of its own property;
6. Grants;
7. Other revenues not prohibited by legislation.

Like all other organizations, NGOs may also generate income. This has been stipulated in different laws. Article 22.2 of the above-mentioned law, for example, indicates that a non-governmental organization may not share the generated income among its founders and members; and it may be involved only in entrepreneurship activities that are directed toward attaining the objectives prescribed in its charter.

Another important Law related to the activities of NGOs is the “Law on State Registration and State Registry of Legal Entities” adopted in 2003. This Law sets forth the order for state registration of entities intending to acquire a legal status. Article 8.1 of the Law provides for registration of non-governmental organizationsintendingto obtain the status of legal entity to be performed as a rule within 40 days. In exceptional cases, if there is a necessity for additional verification, this term can be extended for no more than 30 days. In the submitted documents contain deficiencies which do not form a basis for refusal of state registration, the relevant executive authority of the Republic of Azerbaijan will return these documents to the applicant and set a period of additional 20 days for elimination of these deficiencies.

According to the legislation, NGOs not intending to acquire the status of legal entity shall submit the notification on foundation of the organization to the Ministry of Justice in a written form no later than 30 days from the adoption of a decision on foundation. It is considered to be the legal basis for their activity.

The Labour Code also contains certain provisions related to NGOs, or to be more precise, provisions regulating activities of people working for NGOs on the contractual basis (alongside contractors, there are also volunteers working for the civil society institutions). The Labour Code creates no problem, because it requires only that NGOs, like other organizations, sign contracts with their employees. These contracts shall be in line with the requirements of the Articles 42-53 of the Labour Code and the sample forms reflected in the Enclosure 1 to the Labour Code.

As we have already mentioned, there are also volunteers in NGOs having no remuneration alongside the employees working on a contractual basis. The legal state of this category of workers is not regulated according to the Labour Code, which can lead to certain problems.

NGOs, like other institutions, are not exempted from taxes. Nevertheless, there are certain concessions envisaged by the state for non-profit organizations. According to the existing legislation, NGOs having state registration benefit from the tax concessions provided in the tax legislation. Thus, pursuant to the Article 165.1.2 of the Tax Code of the Republic of Azerbaijan, “ Zero (0) rate VAT shall be applied for the provision of following works, services and transactions: import of goods, provision of goods, implementation of works and rendering services to grant recipients on the expense of financial aid (grants) received from abroad.” This provision in the tax legislation creates serious problems for NGOs in practice, as the procedure of zero (0) rate taxation is a very complicated one. Thus, according to the Article 175.7, “Operations, as per which VAT is deducted at zero (0) rate, are considered the operations liable to VAT, and VAT amount, paid by cashless transfer by VAT deposit account (with exception of payments made in cash to the bank account of the provider of goods, works and services) when buying goods (works, services) by the persons, carrying out such operations are to be compensated according to the provisions of this Code.”Thus, NGOs have hard times trying to reimburse the amounts paid as VAT for delivering goods, implementing works, and rendering services from the grant money. Mainly, they face serious problems while reporting to the donors providing grants.

Pursuant to the Tax Code, the following shall be exempted from profit tax: (1) income of charitable organizations, except for the income from entrepreneurial activity; and (2) grants, membership fees, and donations received by non-commercial organizations.

Besides the above-mentioned, all the income of NGOs, including income generated through entrepreneurial activity, is subject to profit tax. In regards to the property tax, it is envisaged to exempt only public organizations of disabled persons (Article 199). In all other cases NGOs must pay taxes on the same basis as other institutions and organizations.

A Law adopted on 27 December 2001, “The Law on Public Procurements,” sets forth the economic, legal, and organizational grounds for public procurements in the Republic of Azerbaijan. It establishes the principles and rules for efficient and thrifty use of public funds during public procurements, and for creating equal and transparent conditions and opportunities for all contractors during tendering period. The Law does not create any hindrance for participation of NGOs in public procurements. Thus, Article 8.1 of the Law stipulates that except the cases indicated in regulations governing public procurements, all resident and non-resident legal or physical persons or union of legal persons, irrespective of state, shall be entitled to take part in public procurement procedures held in the Republic of Azerbaijan. Nevertheless, a number of terms included in the Law and factual situations make it impossible for NGOs to participate in public procurements.

When we analyze the position of NGOs in the legislation of Azerbaijan as institutions, it becomes clear that there is a sufficient legal framework for their comprehensive involvement in the social and political life of the country. Alongside the abovementioned functions, NGOs may observe presidential, parliamentary, and municipal elections held in the Republic of Azerbaijan.

Pursuant to the Law “On Freedom of Assembly,” NGOs may hold meetings, demonstrations, pickets, and rallies.

Pursuant to the Law “On Mass Media,” NGOs are entitled to establish mass-media outlets (Article 41). The reality of Azerbaijan today proves that NGOs are able to actively exercise this provision of the law.

Pursuant to the Law “On Prevention of Disability, Rehabilitation and Social Protection of the Disabled,” in the cases provided for in the legislation, public institutions and other entities shall settle the issues related to the interests of the public organizations of the disabled with involvement and participation of the public organizations of the disabled (Article 51).

Pursuant to the Law “On Protection of Environment,” NGOs may develop and promote programs aimed at protection of the environment; protect rights and interests of citizens in the field of environmental protection; carry out public monitoring in the field of environmental protection; participate in discussions of the environmental draft laws; demand temporary or permanent termination of activities of an enterprise that affects environment and human health and limitation of the activities, location, construction, reconstruction, and operation of such enterprises, buildings, and installations, hazardous from an ecological point of view; bring to a court the claims of those endangered by violation of environmental protection regulations that caused health and property damage; and so on.

Summarizing all the above-stated, it is possible to say that all legal procedures are in place for the functioning of the NGOs in the territory of the Republic of Azerbaijan. Some gaps and shortcomings existing in the legislation are eliminated periodically through changes and amendments to the laws. At the same time, new requirements arise alongside the development of the society which necessitate improvement of the legislative framework for NGO activities in our country. From this viewpoint, I believe that the process of improvement of the legislative framework for the efficient functioning of NGOs and adoption of new and needed laws will go on in the future in order to eliminate all the problems that remain in this field.

Notes