Case Reference: #2024-AZ-0041

Client profile: Turkish industrial equipment manufacturer supplying oilfield services companies across the Caspian region. Annual revenue €120M.

Claim: $1,100,000 — two contracts for drilling equipment delivered to an Azerbaijani energy services contractor operating in the Absheron Peninsula oil fields. Equipment delivered, installation supervised, commissioning certificates signed. Payment: zero.

The situation

Azerbaijan's economy is dominated by hydrocarbon extraction. The country produces approximately 600,000 barrels of oil per day, and the energy sector accounts for roughly 50% of GDP. International companies supplying equipment, services, and expertise to Azerbaijan's oil and gas sector routinely extend significant trade credit — and routinely encounter payment delays that reflect the sector's cyclical cash flow patterns.

The distinction between cyclical delay and strategic non-payment is critical. In this case, the Azerbaijani contractor had continued to operate actively — winning new contracts, hiring additional staff, and expanding into Turkmenistan's offshore fields — while simultaneously failing to pay our client. The cash flow wasn't constrained. The payment wasn't prioritised.

The Azerbaijani legal framework

Azerbaijan's commercial legal system is based on civil law traditions, heavily influenced by its Soviet heritage and subsequent reforms modelled on Turkish and German commercial codes. The courts operate through a three-tier system: district economic courts, the Court of Appeal, and the Supreme Court. Commercial disputes between legal entities are handled by the economic courts.

For international creditors, the critical procedural question is enforcement. Azerbaijan is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means that arbitral awards from international tribunals (ICC, LCIA, etc.) are enforceable through Azerbaijani courts. Court judgments from foreign jurisdictions are enforceable only if Azerbaijan has a bilateral agreement with the relevant country — which it does with Turkey, Russia, and several CIS states, but not with most Western European countries or the United States.

This creates a practical imperative: if your contract with an Azerbaijani entity doesn't include an arbitration clause designating an international tribunal, your enforcement options narrow significantly. Our client's contract, fortunately, included an ICC arbitration clause with the seat in Istanbul.

Deployment

We engaged our Baku team — which includes a former judge from Azerbaijan's economic court system and a local vəkil (attorney) with fifteen years of energy sector litigation experience — to pursue a dual-track strategy.

Track one: direct engagement with the debtor's management in Baku. Our local representative met with the contractor's financial director at the company's offices near the Heydar Aliyev Centre. The meeting, conducted in Azerbaijani, established that the company acknowledged the debt in full but was "sequencing" payments to its creditors based on "operational priorities." Our client, being a Turkish supplier without local enforcement presence, was low in the sequence.

Track two: we filed for ICC arbitration in Istanbul, simultaneously applying for interim measures to prevent the debtor from dissipating assets. The ICC tribunal granted interim relief within 30 days, ordering the Azerbaijani contractor to maintain a $1.1 million reserve in an escrow account pending the arbitration outcome.

The combination changed the debtor's calculation. An ICC arbitration with interim measures signalled that we had both the legal infrastructure and the local capability to enforce. The debtor's "sequencing" suddenly moved our client higher in the priority order.

Resolution

Settlement reached 78 days after the ICC filing. The contractor paid $1,050,000 in two tranches — $700,000 within 14 days of the settlement agreement and $350,000 within 60 days. The remaining $50,000 was waived as part of the settlement. The ICC arbitration was withdrawn by consent.

Our client's CEO noted that they had spent eight months attempting to resolve the situation through direct negotiation and local intermediaries before engaging Intercol. The eight months of informal engagement had produced three meetings, multiple promises, and zero payment. The 78 days of structured enforcement produced $1.05 million.

The Azerbaijan intelligence note

Azerbaijan's commercial environment rewards creditors who demonstrate local capability and international enforcement infrastructure. The country's energy companies deal with international arbitration routinely — the sector's high-value disputes are almost always resolved through ICC or LCIA proceedings. This means that Azerbaijani debtors understand what an arbitration filing represents: not a threat, but a process that will produce an enforceable award.

For creditors without an arbitration clause, the enforcement pathway is more complex but not impossible. Azerbaijan's economic courts can hear direct claims from international creditors, and local counsel with court relationships can navigate the procedural requirements effectively. The key is engaging counsel who operates within Baku's legal ecosystem — not a London or Istanbul firm that "covers" Azerbaijan through occasional correspondence.

If you're owed money by an Azerbaijani entity, the enforcement pathway depends entirely on your contract structure and your local capability. Brief our Baku team for a jurisdictional assessment before the debtor's sequencing pushes you further down the list.