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Azerbaijan - Monitoring report

Date of the monitoring visit: from 23 to 25 February 2021
Report adopted on: 17 June 2021
Files : Report CG(2021)40-21 | Recommendation 461 (2021) | Resolution 473 (2021)  
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This report follows the third monitoring visit to Azerbaijan since the country ratified the European Charter of Local Self-Government in 2002.

 

It welcomes some improvements that were identified in Azerbaijan such as the ratification of Article 10.3 of the Charter following the adoption of the previous Congress recommendation; the improvement of the quality and transparency of the work of municipalities; the use of the delegation of functions to municipalities for the first time in 2020; and the increased representation of women and youth in municipal councils after the last municipal elections in 2019.

 

Nevertheless, major concerns remain as to a number of factors that impair the development of local self- government in Azerbaijan. Local authorities do not conform with basic democratic principles and do not benefit from the principles of autonomy laid down in the Charter. To quote a few examples, municipalities in Azerbaijan are not considered state institutions which exercise public services as part of overall public administration but rather an expression of civil society; the distribution of powers and functions between municipalities and local executive authorities as well as their factual relations remain ill-defined; the powers of municipalities is not full and exclusive; no separate law exists on the capital city, and Baku remains the only capital city in the Council of Europe area with no directly elected governance; consultation of municipalities and of their weak national associations is not an established practice and is not regulated in detail in the legislation; it remains a challenge for municipalities to hire qualified staff, also due to non-competitive salaries and limited personal development opportunities; municipal own revenues are largely insufficient to fulfil the functions entrusted to municipalities by legislation; the legislation still provides that municipalities must report to parliament on their activities, andthe right to judicial protection is limited and not used by municipalities. Finally, in the context of the COVID-19 pandemic, municipalities have been completely side-lined and their budget has been considerably reduced.

 

Consequently, the recommendation invites the Azerbaijani authorities, among other things, to unambiguously recognise municipalities as state institutions exercising public power as part of the overall public administration; to amend the Law on the Status of Municipalities and the other laws transferring tasks and functions to municipalities by ensuring that the powers and duties entrusted to municipalities are full and exclusive; to adopt a law on the status of the capital city and establish a unified and democratically elected municipal government in Baku; create a legislative framework for consultation of municipalities and their associations in the process of drafting legislation relevant to them; to complete the process of repealing from legislation the obligation for municipalities to report to parliament on their activities and adopt a law regulating reporting by municipalities; to reduce financial dependence of municipalities from the state by increasing and making sustainable their own revenues, to ensure that the right to judicial protection of municipalities is guaranteed in practice. Lastly, national authorities are called, in dealing with the COVID-19 pandemic, to make sure that municipalities are involved and that their financial resources are not disproportionately impacted.

 

A resolution has also been elaborated which invites the Congress to continue to closely follow the state of progress of local democracy in Azerbaijan and to expand its political dialogue with Azerbaijani authorities in the framework of post monitoring process.

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Article ratified Ratified with reservation Non ratified
Compliance Partial compliance Non compliance To be determined
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Article 2
Constitutional and legal foundation for local self government - Article ratified

The principle of local self government shall be recognised in domestic legislation, and where practicable in the constitution.

Local self-government is recognised in the Constitution (Section IV, Chapter IX), although not as part of the state power (which is regulated in Section III) nor part of the public administration. While acknowledging the position of the government which considers municipalities as part of the state power and as institutions of the public administration, the rapporteurs note that neither the Constitution nor the corresponding legislation, beginning with the Law on the Status of Municipalities, include the main features of the Charter’s definition of local self-government, since they do not establish the right of local authorities to regulate and manage local public affairs nor the concept of the interest of the local population.

 

The constitutional and legislative recognition of the principle of local self-government, which refers to the right of local authorities to regulate and administer local affairs in an autonomous way, is an indispensable requirement of the Charter. Against this background, the independence of municipalities means the possibility to decide autonomously on a substantial share of local issues, not, like in the context of Azerbaijan, their exclusion from the state structure and from the public administration without being provided with any significant power.21 To fulfil the obligations stemming from Article 2 of the Charter, Azerbaijan should therefore unambiguously recognise municipalities as state institutions exercising public power and as part of the overall public administration.

 

The Charter does not contain any specific obligation as far as to regional self-government and the organization of public administration are concerned. In Azerbaijan only one regional tier of government exists, the Nakhichevan Autonomous Republic, regulated in Chapter VIII of the Constitution, as part of the state power. The state administration includes also administrative districts, that are territorial offices of the central administration. Furthermore, 10 economic regions (zones) have been in place for 15 years, which however are mere branches of the central government implementing economic planning at territorial level. Given the strong centralization of the state structure and the asymmetric structure affecting the Nakhchivan Autonomous Republic, a moderate decentralization by introducing elected regional governments as provided for in the Framework on Regional Democracy could be considered in order to enhance tailor-made solutions and policies in the diverse regions of the country.

 

The organization of the local government in the capital city represents a unique case among the Council of Europe’s member states. Baku is the only capital city without an elected city government accountable to the local population. According to the Charter, the role of central government authorities should be limited to the regulation and (proportionate) administrative supervision of (the capital city’s) municipal government, while in the case of Baku the central government manages the city directly through the Baku City Executive Authority. Furthermore, article 5.9 of the Law on Territorial Structure and Administrative Territorial Division assumes the adoption of a law on Baku city, but this has not been the case so far.

 

The Congress delegation was informed that the issue of possibly setting up an elective city council and mayoral institution in Baku is not on the political agenda. The main reason is reportedly the strategic importance of the city for the national government and its development strategy: infrastructural and beautification works would allegedly be slowed down if decisions are not taken and implemented centrally.

 

The rapporteurs, weighing up the reasons given by the Azerbaijani authorities for sustaining the current system of the capital’s administration, do not see any compelling argument for depriving the capital of local self-government and recall Congress Recommendation 219 (2007) on the “Status of capital cities” and Recommendation 133 (2003) on the “Management of capital cities”, establishing the conditions for setting up a democratically elected municipality in the capitals of the Council Europe member states.

 

While the principle of local self-government is formally recognised in legislation, including in the constitution, its very concept and its design do not correspond to those laid down in the Charter. In order to assess compliance with Article 2, the formal recognition of the principle in domestic legislation is not sufficient. Rather, the core elements of the principle as defined by the Charter have to be enshrined in legislation. According to the Contemporary Commentary on the explanatory report to the European Charter of Local Self-Government22 (Paragraph 22) these core elements, as stated in the preamble of the Charter, are: a) “local authorities endowed with democratically constituted decision-making bodies”; b) “a wide degree of autonomy with regard to their responsibilities”; c) “ways and means by which those responsibilities are exercised and the resources required for their fulfilment”. These elements are not safeguarded in the pertinent legislation.

 

For these reasons, the rapporteurs conclude that Article 2 of the Charter is not respected in Azerbaijan.


21 See also the Venice Commission’s Opinion on the Draft Amendments to the Constitution of the Republic of Azerbaijan (CDL- AD(2009)010) as well as the Joint Opinion on the Revised Draft Law making amendments to the Law “On the Status of Municipalities” of the Republic of Azerbaijan, no. 752/2013 (CDL-AD(2014)022 by the Venice Commission and the Directorate of Democratic Governance of the DG of Democracy of the Council of Europe.

 

22 Contemporary Commentary by the Congress on the explanatory report to the European Charter of Local Self-Government, adopted by the Committee on the Honouring of Obligations and Commitments by member States of the European Charter of Local Self- Government (Monitoring Committee) on 7 December 2020 (CG-FORUM(2020)02-05final).

Article 3.1
Concept of local self government - Article ratified

Local self-government denotes the right and the ability of local authorities, within the limits of the law, to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population.

The Azerbaijani legal framework on local self-government points to the autonomy of the municipal level, to the extent that it even places it outside the administrative structure of the country. It also lays down a series of public functions that municipalities are entitled to manage, albeit subsidiarily. However, autonomy of municipalities, often framed even in terms of “independence” does not mean that they are in a position to “regulate and manage a substantial share of public affairs under their own responsibility and in the interest of the local population”, as required by Article 3.1 of the Charter. In practice, in the context of Azerbaijan, autonomy of municipalities means that they are completely irrelevant in determining any aspect of local life, as all power and resources are vested and exercised by the local executive authorities. Even if they were fully exercised in practice, the range of responsibilities of municipalities laid down in the Constitution and statutes is too narrow to correspond to the requirement of Article 3.1 of the Charter.

 

Although the Charter does not specify what local public affairs must be regulated and managed by municipalities, the most important local matters that greatly affect the life of the local community should, as a general principle, be decided and managed by local governments. The explanatory report to Article 3.1 of the Charter states that “the intention of the Charter is that local authorities should have a broad range of responsibilities which are capable of being carried out at local level”. This is not the case in Azerbaijan, as the vast majority of local public services are delivered by the local executive bodies of the state administration, which are directly subordinate to the central government authorities.

 

Such division of powers and duties raises serious and even broader concerns about the democratic deficit that the organization of local government reveals, as all significant local powers are exercised by non- elected peripheral offices of the government while democratically accountable elected bodies (municipal councils), have extremely limited functions and weight and “fail to account for any substantial share of public affairs”, as noted by the Congress in its first Recommendations 126 (2003). The overall situation has not significantly changed since then.

 

More specifically, as local self-government is not defined by the Constitution which merely refers to it as being “carried out by municipalities”, which are elected bodies (Article 142(I) and (II)), the constitutional regulation does not include the main components of the Charter’s definition of local self-government. Neither the Constitution nor the Law on the Status of Municipalities provide for the right of municipalities to regulate and manage local public affairs nor for the concept of the interest of the local population.

 

In fact, the Constitution and the following legislation, in particular the Law on the Status of Municipalities, are ambiguous in referring to local self-government: on one hand, they provide a list of powers attributed to municipalities, also in some potentially significant areas such as social services, education and economic development but on the other hand the activity of municipalities is restricted to what is not already covered by the state administration and in any case municipalities cannot interfere with the implementation of programmes of state bodies in the same areas (local social protection and social development programmes, local economic development programmes, Articles 4.3 and 5.2 of the Law on the Status of Municipalities). During the consultation procedure, the national authorities explained in this regard that municipalities are also identified as “executors of most of the State programme and national action plans adopted over the past years”.

 

Following this ambiguity, local executive power is exercised by the heads of local executive bodies, as provided for by the Constitution (Article 124) and the subsequent legislation. The scope of responsibility of these bodies is determined by the President of Azerbaijan, who also appoints the heads of these bodies. This is singular not only in terms of splitting local functions between the state administration and locally elected bodies, but also with regard to the division of law-making powers between the parliament and the president when it comes to defining the powers and duties of public authorities in the field of overall public administration.

 

Due to the formal separation of tasks and institutions, there is no formal hierarchical relationship between the municipalities and the respective local executive authorities, even though administrative boundaries frequently overlap. Nonetheless, many experts and stakeholders interviewed by the Congress delegation reported on the informal influence of the executive authorities over municipalities. Some sources refer to the practice whereby local executive authorities ask municipalities to report on a regular basis on the sale of land and on their financial situation, despite the fact that there is no legal basis for this.

 

The functions of local governments are typically not full and exclusive since municipalities and local executive authorities carry out many parallel functions. In such a situation, if both local governments and local bodies of the state administration have tasks in a specific area, it is obvious that the level with more means, resources and political power prevails.

 

The Charter also requires that local authorities should have discretionary power even as regards delegated powers, so as to adapt their exercise to local conditions. However, as a first step it is necessary to define clearly the administrative nature of municipalities’ responsibilities, distinguishing the delegated powers from other functions, since central government should ensure the proper financial means necessary to implement the delegated tasks.

 

The municipal level can be brought to a degree of autonomy corresponding to the requirement of Article 3.1 of the Charter only if the Law on the Status of Municipalities and the other laws transferring tasks and functions to municipalities are amended by ensuring that the powers and duties entrusted to municipalities are full and exclusive and that the municipalities have full discretion to exercise their initiative with regard to any matter not excluded from their competence.

 

The delegation refers to the Contemporary commentary23 affirms that “the Charter is an international treaty of regional scope that is binding like any other treaty. Consequently, the ratifying countries are required to implement it in accordance with the “pacta sunt servanda” principle, a long-standing principle of international law, and in the manner laid down by the UN Vienna Convention on the Law of Treaties (1968)”.

 

For these reasons, the rapporteurs conclude that Article 3.1 of the Charter is not respected in Azerbaijan.


23 https://rm.coe.int/contemporary-commentary-by-the-congress-on-the-explanatory-report-to-t/1680a06149

Article 3.2
Concept of local self government - Article ratified

This right shall be exercised by councils or assemblies composed of members freely elected by secret ballot on the basis of direct, equal, universal suffrage, and which may possess executive organs responsible to them. This provision shall in no way affect recourse to assemblies of citizens, referendums or any other form of direct citizen participation where it is permitted by statute.

Local self-government is exercised be two different and separate institutions, the local executive bodies that are part of the state administration and municipalities as elected organs that are not part of the administrative structure of the country.

 

Having regard to the municipal level only, the requirements of Article 3.2 are formally respected as municipalities consist of members elected by secret ballot in direct, equal and universal suffrage. Municipal councils elect a chairperson responsible to them and the legislation, including in particular the Law on Public Participation, provides for opportunities to resort to referendums and other forms of citizens’ involvement in local issues (see above).

 

As to the “responsibility” of the chairpersons to the councils, no information could be obtained by the delegation on the means of supervision of the chairperson by the council, such as the number of oral and written questions put to them, or whether the municipal charters provide for some reserved sitting time for discussing proposals (even less of proposal by the opposition, which generally does not exist in most municipalities).

 

Article 146 of the Constitution, as amended in 2016, provides that the municipalities and municipal servants bear civil responsibility for the damage caused to human rights and liberties, as well as the guarantees thereto, in the result of the activity or inactivity, which contradicts the legislation, committed by municipal servants. The Constitutional Court reported that this provision has been used a few times to suspend municipal councillors, notably in property cases regarding the distribution and selling of land plots that resulted in in property violations of the citizens. in any case the responsibility cannot go as far as to lose an elective mandate and members of municipal councils cannot be removed.

 

As the Contemporary commentary clearly points out (Paragraph 37), the two paragraphs of Article 3 of the Charter are closely related and “local self-government” is shaped in terms of “local democracy”. This means that the shortcomings highlighted with regard to Article 3.1 cast their shadow on Article 3.2 as well.

 

In light of this close link, the requirements of Article 3.2 of the Charter are only partly met in Azerbaijan.

Article 4.1
Scope of local self government - Article ratified

The basic powers and responsibilities of local authorities shall be prescribed by the constitution or by statute. However, this provision shall not prevent the attribution to local authorities of powers and responsibilities for specific purposes in accordance with the law.

As mentioned, a basic list of tasks and responsibilities of municipalities is laid down in the Constitution and in the legislation, which have set up a two-tiered system. The local executive authority is an extension of the executive power of the state. The legal status of local state administration in Azerbaijan is regulated mainly by the Law on Local Executive Authority and by the President’s Regulation from 2012, which has further strengthened the already dominant position of local executive authorities in local affairs.

 

According to Article 124 of the Constitution and of the Law on Local Executive Authority, the head of these authorities perform the following functions: carry out orders of the President of Azerbaijan; implement state programmes authorized by the President of Azerbaijan as well as local programmes; establish and dissolve local state administration departments, services, enterprises and organizations; appoint and dismiss their heads; annul any documents that run counter to existing legislation; organize elections, national referenda and public discussions as established by legislation; submit issues and proposals concerning local development to the appropriate executive bodies; execute other duties as established by the legislation.

 

Chapter 9 of the Constitution (Articles 142-146) lays down the main principles of local self-government, such as the legal status of municipalities, their basic powers and their relationships with other entities. The functions assigned to municipalities are the following: recognition of mandate of municipality members, loss of their mandate and termination of their mandate according to legislation; approval of in-house regulations of municipality; election of the chairman of municipality, his/her deputies, permanent and other commissions; establishment of local taxes and duties; approval of local budget and reports on its implementation; use and disposal of municipal property; acceptance and implementation of local programmes of social protection and social development; acceptance and implementation of local programmes of economic development; acceptance and implementation of local ecological programmes. Additional powers can be transferred to municipalities by the state administration, allocating appropriate financial resources to exercise them. In such case, the implementation of such functions is subject to control by the local or central executive authority.

 

In practice, as pointed out by the Committee of the Regions of the European Union the responsibilities carried out by municipalities are only the following:

  • maintenance of cemeteries;
  • local road maintenance (shared with local executive authorities);
  • renovation activities and gentrification (shared with local executive authorities)
  • parking;
  • allocation of land plots for individual house building (shared with local executive authorities)
  • parks and vegetation (shared with local executive authorities).24
  • Keeping record of family farms.

 

The Law on the Status of Municipalities pays attention to the adoption and execution of municipal programmes concerning social protection, social and economic development and the local environment. At the same time, almost all socio-economic functions fall within the scope of the local executive authorities, as mentioned above (Article 3). On some issues, local executive authorities are required to take into consideration the views and suggestions of municipalities, although it is not clear how this happens nor there seems to be a formal procedure to do so. The role of municipalities is limited in practice also because funding from state budget directly goes to the local executive authorities, and this branch of power rather than municipalities is responsible for submitting proposals to the state.

 

While the Constitution (art. 144) and the legislation formally lay down some – albeit limited – powers reserved to municipalities, the problem remains of ill-defined roles, responsibilities and competences of the local executive authorities and municipalities. The current framework leaves municipalities little discretion over a significant portion of the responsibilities granted to them by the Law on the Status of Municipalities. The division of powers and duties between the local executive authorities and the municipalities is so disproportionate and uneven that the latter are not in a position to carry out most of the functions they could perform according to legislation. A quicker and more effective transfer of functions would be possible if the local and executive authorities were democratically elected by the citizens.

 

It must be reminded that, Article 4.1 of the Charter “requires clarity and legal certainty for the regulation of the “basic powers and responsibilities” of local government bodies”(see the contemporary commentary in this respect) which is missing in the case of Azerbaijan, despite being provided for in legislation, as the provisions remain largely unimplemented.

 

For these reasons, the commitments under Article 4.1 of the Charter are to be considered as only partly respected in Azerbaijan.


24 https://portal.cor.europa.eu/divisionpowers/Pages/Azerbaijan.aspx

Article 4.2
Scope of local self government - Article ratified

Local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority.

As the explanatory report to the Charter suggests, Article 4.2 entails an understanding of local government according to which “local authorities”25 are “political entities acting in their own right to promote the general welfare of their inhabitants” and therefore “they have the right to exercise their initiative in these matters”. This means that in principle municipalities should have “the right to exercise their initiative on matters not explicitly excluded from their competence by law”, as further explained by the Contemporary Commentary (Paragraph 57).

 

This is not the situation in Azerbaijan, where there is nothing like a clause of general competence for municipalities. Their competences are listed in legislation and, as described above, severely limited in practice, to an extent that de facto no single function of municipalities is exclusive. Furthermore, from a legal point of view, it must be noted that since the local executive authorities are responsible for the implementation of decisions and policies of the central government and the President of the country has the power to define the competences of local executive authorities, the limits of municipal powers laid down in legislation might be influenced in practice by executive power.

 

This makes the current legal and factual situation not compatible with the obligation set by Article 4.2 of the Charter.


25 In this case municipalities, see above Fn 6 on terminology.

Article 4.3
Scope of local self government - Non ratified

Public responsibilities shall generally be exercised, in preference, by those authorities which are closest to the citizen. Allocation of responsibility to another authority should weigh up the extent and nature of the task and requirements of efficiency and economy.

Azerbaijan has not ratified Article 4(3) of the Charter.26


26 https://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/122/declarations?p_auth=gf3qG2It

Article 4.4
Scope of local self government - Article ratified

Powers given to local authorities shall normally be full and exclusive. They may not be undermined or limited by another, central or regional, authority except as provided for by the law.

As described above, the powers of municipalities are limited and by no means exclusive, as they are both legally and de facto undermined by especially the local executive bodies and overall by the current structure of powers as far as the local issues are concerned. The laws and the Regulation on Local Executive Bodies concentrate all important powers with regard to the implementation of state power at local level and locally relevant public services in the hands of local representatives of central governments and heads of executive bodies, which is contradictory to the text and spirit of Article 4 of the Charter overall and of Article 4.4 in particular. As the Contemporary Commentary puts it, limitations on the powers of municipalities must be provided by law, “be exceptional, based on objective reasons and interpreted narrowly” (Paragraph 67).

 

The Law on the Status of Municipalities makes clear that the powers of municipalities are by nature not “full and exclusive”: Article 4.2 states that the services provided by the municipalities are only supplementary and local social, economic and environment programmes may be aimed only at resolving issues not covered by the relevant state programmes. Therefore, the majority of local public services fall under the competence of both state and municipal structures,27 whereby the strongest level inevitably prevails. As recalled above (Article 3) the law also prevents municipalities from interfering with programmes carried out by the local executive authorities in key areas such as local social protection and local social and economic programmes. This way, municipalities are discouraged from introducing policies in many of the areas where they could have a role, because the central government already carries out a wide range of programmes in those categories through the local executive authorities and line ministries. For example, it is practically impossible for municipalities to participate in the maintenance or management of public schools, because the Ministry of Education is responsible for both tasks.

 

Article 4.4 of the Charter also discourages overlapping responsibilities, as in turn they can become a threat to the weakest level of government, which in the case of Azerbaijan is no doubt the municipality. “Higher-level authorities usually have more and better financial, organisational and human resources than local authorities” (Contemporary Commentary, Paragraph 67) and while in the context of Azerbaijan it is not legally appropriate to consider local executive authorities as “higher level authorities” as compared to municipalities due to the formal separation between the two, they do have “more and better financial, organizational and human resources” and “take control take control of the most attractive governmental responsibilities” (Paragraph 67), and “greater or even exclusive regulatory powers in various areas” (Paragraph 67), creating a de facto incompatibility with Article 4.4 of the Charter.

 

The current legal framework in Azerbaijan does not establish full and exclusive powers for municipalities nor does it provide for a clear definition of the responsibilities of the various actors and favours local executive authorities over municipalities in taking care of the local services.

 

In light of the above, the rapporteurs consider that Article 4.4 of the Charter is not respected in Azerbaijan.


27 See the table elaborated by M. Mamedova, H. Hafiz Bashir, B. Abil Nazir and H. Mirali Asad, Local Government in Azerbaijan, in: Local Government in Eastern Europe, in the Caucasus and Central Asia, Local Government and Public Service Initiative, Budapest 2002, p. 401, which exemplifies that competences of municipalities are always shared with the state (electricity, gas, town planning, local development, tourism), the local executive committees (sewage, heating, waste, street cleaning, administrative matters) or both (water supply, environmental protection, consumer protection). The list is still overall valid despite some changes and improvements (e.g. rural cemeteries). See also the list elaborated by the Committee of the Regions of the EU: https://portal.cor.europa.eu/divisionpowers/Pages/Azerbaijan.aspx.

Article 4.5
Scope of local self government - Article ratified

Where powers are delegated to them by a central or regional authority, local authorities shall, insofar as possible, be allowed discretion in adapting their exercise to local conditions.

 

Delegation of functions to municipalities has traditionally not been used in Azerbaijan. The possibility is provided for in the very Constitution (Article 144(II)), and in such case also the financing necessary to perform the task has to be transferred.

 

As mentioned above, the first and so far only case in which such delegation took place was in 2020, when the Cabinet of Ministers transferred from the Ministry of Ecology and Natural Resources to five municipalities a module type equipment for cleaning dirty water constructed in the shore of the Caspian. The delegation of functions was accompanied by the transfer of the financial resources necessary to manage them.

 

The rapporteurs were not able to collect first-hand information on how this delegation is working and is being implemented, and in particular it is not clear the extent of discretion that municipalities are given “in adapting their exercise to local conditions” as required by Article 4.5 of the Charter. In any case, no interlocutor pointed to any particular problem arising in this regard and all confirmed that the respective financial resources have been allocated in the State budget 2020.

 

The rapporteurs consider such first precedent an encouraging example of trust towards the municipalities and a demonstration of the fact that they can indeed be entrusted with tasks, including complex ones. They express the hope that this reportedly positive experience can be replicated more often and can open up new avenues for the balanced development of local self-government in the country.

 

As the possibility to delegate functions to municipalities is not only contained in legislation but is eventually also being implemented in practice, the conditions set out in Article 4.5 of the Charter can be considered to be met in Azerbaijan.

Article 4.6
Scope of local self government - Article ratified

Local authorities shall be consulted, insofar as possible, in due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly.

 

According to the national associations of municipalities and to the representatives of the Parliament met by the Congress’ delegation, municipalities are quite regularly consulted, especially but not exclusively through their associations, on central government plans or decisions that primarily affect the interests of municipalities. Representatives of the Parliament also affirmed that consultation procedures are normally activated on any draft legislation relevant to municipalities or to their association and that municipalities or their associations can also submit proposals for legislation. By way of example of the alleged good practice to consult national associations as well as individual municipalities when bills are discussed that are of municipal concern, representatives of the parliamentary committee on regional relations mentioned that the transfer of responsibility on cemeteries to municipalities took place following intense consultations. Legislation, however, remains silent on conditions and procedures of consultation, except in financial matters that directly concern municipalities (see below, Article 9). Reportedly, also a network of informal consultations is in place which makes it possible to bring municipal issues to the attention of state authorities at both central and regional level.

 

Very few examples of consultations – especially the formal ones – have been provided to the delegation despite several questions. The government pointed to the Ministry of Justice’s Instruction on “Assistance in organizing the activities of municipalities and methodological assistance to them” as an example of consultation with the national associations. The national associations of municipalities pointed out to the delegation that consultation with municipalities is improving and that (unspecified) draft laws are currently in the pipeline in the work of Parliament. According to the national associations the provision of subsidies and subventions to municipalities in the draft budget of the Republic of Azerbaijan are also discussed with municipalities and their national associations in the Milli Majlis, Ministry of Justice and other central executive bodies and inquiries are made to find out their opinion on specific issues. The Mayor of Saray told the delegation that he knows how to raise issues of concern and therefore he is not missing a formalised procedure for consultation.

 

This shows that while consultation is possible and takes place informally, it is not an established practice, nor is it perceived as an important element for the functioning of local self-government to the extent that deserves to be enshrined in legislation.

 

It must be reminded that consultation is a key principle of the Charter and municipalities should be consulted by state bodies in the discussion and approval of laws, regulations, plans and programmes affecting the legal and operational framework of local democracy, as reminded by the Contemporary Commentary (Paragraph 79). In order to raise awareness of the key importance of consultation as a procedural backbone for the functioning of (local) democracy, the Congress has adopted several recommendations and resolutions on the right of municipalities to be consulted. It has reminded that the right of local authorities (municipalities) to be consulted is “a fundamental principle of European legal and democratic practice”, as it contributes to good governance (Recommendation 171 (2005))28 and that local authorities (municipalities) should have an active role in adopting the decisions on all matters that concern them and in a manner and timing such that they have a real opportunity to formulate and articulate their own views and proposals, in order to exercise influence (Recommendation 328 (2012)).29 Therefore, consultation cannot be exercised only in practice and outside transparent procedural frameworks.

 

Next to the procedures to consult municipalities as such, prior to making decisions that might affect them, the Azerbaijani legislation provides for instruments that allow to consult citizens, including by means of referenda. The Law on Local Referenda defines the issues that may be decided by local referendum and establishes procedures for organizing referenda, publishing the results and enacting them into law.

 

Municipalities may hold a referendum on any issue within their competence at their own initiative or at the request of at least ten percent of eligible voters in the respective territory. Referenda are financed from local budgets. When a referendum is to be held, the municipality issues a resolution announcing the date of the referendum, the issue at stake and the order of financing. This resolution must be publicized in the local mass media within three days.

 

The Law on the Status of Municipalities provides for a number of instruments for direct participation of citizens, such as opinion polls, meetings of citizens (in municipalities with less than 500 inhabitants), popular initiatives, petitions by citizens and other forms, including neighbourhood committees, associations, and charitable organizations (Articles 26-30). It is curious that among the instruments for citizens participation also elections are mentioned (Article 27) and that some interlocutors, asked about participation, mentioned that citizens can listen to the meetings of the municipal councils, can call members of municipality on the phone and that mayors make themselves available for the press.

 

The Congress delegation could not get informed about the practical use of such instruments. The representatives of the national associations of municipalities explicitly stated that, overall, the level of citizen participation in local governance processes, including decision-making on local issues, is not high in the country. The practice to resort to participatory instruments is in any case extremely limited and they do not form part of the ordinary life of municipalities.

 

Due to the significant difference between the legal framework and the practice as far as consultation is concerned, the requirements of Article 4.2 of the Charter are met only in part in Azerbaijan.


28 Debated and approved by the Chamber of Local Authorities on 1 June 2005 and adopted by the Standing Committee of the Congress on 2 June 2005 (see Document CPL(12)5).


29 Debated and adopted on 18 October 2012 by the Congress (see Document CG(23)ll, explanatory memorandum).

Article 5
Protection of local authority boundaries - Article ratified

Changes in local authority boundaries shall not be made without prior consultation of the local communities concerned, possibly by means of a referendum where this is permitted by statute.

 

Municipal boundaries are determined by the Law on Municipal Territories and Lands, together with the list of all municipalities in Azerbaijan and their territories. According to this law, the State Land Committee and the local executive authorities draw up documents for urban planning and construction which clearly indicate municipal territories and land to be transferred to municipalities. Other laws also regulate issues of municipal property, such as the Law on Land Reform, whose article 7 is wholly devoted to the issue of municipal lands, the Law on the Management of Municipal Lands; the Law on Municipal Taxes; and the Law on the Merging of Municipalities. Also, the Model Municipal Charter specifies that territorial boundaries must be incorporated into all municipal charters.

 

According to the Law on the Status of Municipalities, the determination of or changes to municipal boundaries and the determination of and changes to municipal boundaries after municipalities have been established, consolidated, separated, re-established or abolished, are laid down by law, taking into consideration their socio-economic situation, historical and other local conditions and the opinions of the relevant territory’s population. All municipalities in the Republic of Azerbaijan have to be included in the State register of municipalities controlled by the Parliament and are entitled to the relevant certification.

 

Municipal boundaries are protected by law, since the territory of municipalities is fixed by statute and any change to them needs an in-depth analysis of social, economic and other conditions and the local community has to be consulted on such changes.

 

The delegation has been informed of the recent partial changes in the administrative areas of the Sharur and Sadarak provinces of the Nakhchivan Autonomous Republic. The Milli Majlis passed the respective law, which transfers the Demirchi village of the rural administrative district by the same name from its current Sharur Administrative Province to the Province of Sadarak.

 

Since the establishment of municipalities, their number (initially 2757) has been progressively reduced by means of successive amalgamation processes. The last wave of mergers took place in 2014 and reduced the number from 1718 to the current 1606. Mergers took place among the village municipalities and did not affect larger cities. According to information provided to the delegation, it is likely that further amalgamations might happen in the near future, as smaller municipalities often face problems in carrying out their functions due to especially financial and capacity reasons.

 

Merger of municipalities is an entirely voluntary procedure, which cannot be imposed onto municipalities. The government has however twice introduced changes to the legislation on “Joint activities and the merger, separation and abolition of municipalities” and has simplified the procedure in order to encourage voluntary mergers. Furthermore, the national associations of municipalities often provide information on the potential benefits of amalgamation.

 

As a consequence of the military intervention, in late 2020, in parts of the territory that were previously outside of governmental control, a transitional regime was adopted for those areas, which established a direct control by the government. Municipalities will be (re)formed in those territories too, which will lead to the increase of the total number of municipalities in the country by 915, according to first information received by the delegation. No information has been provided as to the procedures and the exact timing of this transition. The rapporteurs wish to recall that this process should be guided by the Charter and its principles and should therefore allow for a sufficient degree of involvement of the citizens and the municipalities concerned.

 

While the legislative framework is overall in line with the requirements of Article 5 of the Charter, consultation is not sufficiently guaranteed in practice nor a sufficient degree of involvement of the population by means of referenda and other participatory instruments is taking place. Awareness should be raised not only about the benefits of mergers of municipalities, but also about the requirements to achieve them in a democratic, inclusive and participatory environment.

 

For these reasons, the rapporteurs consider that the situation in Azerbaijan is compatible only in part with the requirements of Article 5 of the Charter.

Article 6.1
Appropriate administrative structures and resources for the tasks of local authorities - Article ratified

Without prejudice to more general statutory provisions, local authorities shall be able to determine their own internal administrative structures in order to adapt them to local needs and ensure effective management.

Article 6.1 of the Charter requires that the right conditions be provided for the office of local elected representatives in order to ensure free exercise of their functions. The Law on Municipal Service outlines the structure of the executive apparatus and the organization of municipal service and regulates the activities of municipal employees, their rights, duties, labour conditions and social benefits. Accordingly, municipalities have the right to determine their internal administrative structures and this organisational autonomy can be restricted only by law, in order to ensure the democratic operation of municipalities.

 

As to the structure, municipalities have a municipal assembly or council, consisting of elected councillors. The size varies from 5 (in municipalities with less than 500 inhabitants) to 19 (in a place with more than 100,000 inhabitants). The term of office of local councillors is 5 years. Although no official data are available on the representation of political parties on local councils, the Congress delegation was told that there is a low level of representation of political parties at local level and the vast majority of councillors are independent and do not belong to any party. In general, political parties have no local agendas and only recently the establishment of an opposition party (Real) has brought the issue to the fore, although predominantly in the bigger centres. There is instead a positive trend as far as representation of women and youth is concerned: in the 2019 municipal elections, 5,847 women have been elected, who make up 38.8% of the councillors, with an increase of 11% compared to the municipal elections in 2014. About 35% of municipalities are led by women. The 2019 municipal elections also witnessed the election of 6.012 young persons (39.9%), which increased their presence in municipalities by 10.3% compared to 2014 municipal elections.

 

Members of municipalities (councillors) can be dismissed only in specific cases provided for by law. According to article 22 of the Law on the Status of Municipalities these are: violation of the electoral procedures; resignation; failure to fulfil the legal requirements for the position; appointment to a position in a legislative, executive or judicial body; medical declaration of unfitness to fulfil official duties for more than four months; non-attendance of meetings, without due cause, for a period of time stipulated in the municipal charter.30

 

During the term of office, a member of the municipality (councillor) may not be dismissed on the initiative of the administration or transferred to a low-paid job as a disciplinary sanction at the place where he/she works under an employment contract without prior consent of the municipality and its head (Article 11 of the Law on the Status of a Member of the Municipality). The procedure for dismissal is regulated by Article 22 of the same law. Reference to the possibility to do so with consent of the head of the municipality raises concerns as to the effectiveness of the guarantee the provision is aimed to ensure. Information provided after the visit confirms that this sometimes occurs in practice, such as in the case of Sabail municipality and Binagadi settlement municipality. The information does not specify, however, neither the number of dismissals nor their frequency.

 

The council is presided over by the chair (sometimes referred to as “mayor”), who is elected by the council from among the municipal councillors. Municipal councillors cannot be removed from office and amendments to the Law on the Status of Municipalities adopted in 2014 specify the cases in which their powers can be suspended, as well as when a municipality can be early dismissed. This requires a decision by the Central Election Commission on an appeal submitted by the Milli Majlis of the Republic of Azerbaijan (Articles 22-1 and 22-2 of the Law on the Status of Municipalities).

 

Municipalities may establish standing and other committees in order to prepare in advance and review matters within their responsibility, assist the municipal assembly to implement its decisions and supervise the activities of municipal enterprises and organisations. Nevertheless, decisions on some issues are the responsibility of the municipal council, such as important organisational and personnel matters or the imposition of local taxes and levies. As far as the main operational rules are concerned, meetings are convened by the chair. The council takes its decisions by a simple majority of voting councillors, with the exception of decisions on local taxes and levies, for which a two-thirds majority is required.

 

All municipalities have drafted their charters following the template included in the Model Municipal Charter, as provided by the respective law. This has no doubt helped municipalities to establish their organizational document, considering the low capacity of especially small and rural municipalities. At the same time, the consequence of the support found in the model charter is that all municipal charters look quite the same and municipalities have in practice little opportunities to adapt their internal administrative structure to local needs. The room for discretion that legislation must leave to municipalities in order for them to choose and set up their own organisational structure is therefore very limited in practice. Legally, it hast to be reminded that the municipal charters are registered by the relevant local executive authority (Article 8.3 of the Law on the Status of Municipalities).

 

No structural public administration reforms have taken place since Azerbaijan has gained its independence. However, over the last years, single measures have been taken by the Ministry of Justice to bring the work of local self-government bodies in line with new requirements, especially by expanding the use of the internet in the administrative life of municipalities and by introducing electronic forms of payment. As of 2015 it is prohibited to accept local taxes and fees by cash at municipal offices and local taxes and fees can be paid in banks or in local post offices only. The municipalities currently equipped with computers and connected to the internet are 2/3 of the total and measures are being taken to include all municipalities in this process, which is a short-term goal of the government. Another important practical step has been the implementation of the Automated Municipality Information System (AMIS) Programme, which, inter alia, connects municipalities to the Government Payments Portal of the Central Bank which facilitates electronic payments and helps a more transparent transfer of money. Measures have also been taken to combat corruption and to increase professionalism in the public service.

 

Municipalities have the power to establish independent bodies such as local companies or agencies to improve the delivery of local services. The Law on the Status of Municipalities provides that municipalities may establish independent legal entities to engage in economic activities and other activities not prohibited by law and have the power to determine the purposes, conditions and rules of activity of such legal entities, regulate the prices and tariffs of their products (services), approve their charters, appoint and dismiss their heads, and listen to their activity reports (Articles 34 and 35). The delegation has been informed by National Authorities during the consultation procedure that over the last couple of years this possibility is being used increasingly by municipalities, which have established new enterprises in various fields of activity.

 

In 2015, a Law on Public Legal Entities was adopted (and subsequently specified by a Decree of the President of the Republic of Azerbaijan) providing that such entities are non-state or non-municipal organizations established on behalf of the state and municipality or by a public legal entity with the purpose to engage in activities of national and public significance, such as commercial activities. Unlike government agencies, the public legal entities are granted the right to participate in entrepreneurial activities. They are not funded by the state budget, but rather through the self-funding principle. While the transfer of certain responsibilities of the state to the public legal entities could represent a possible step towards more decentralization, it does not seem that municipalities have made use of this possibility so far.

 

The rapporteurs consider that in Azerbaijan the conditions set out in Article 6.1 of the Charter are partly met and encourage authorities to redouble their efforts to allow a real degree of organizational and also political differentiation among municipalities and to support them in creating proper working conditions for the benefit of the local communities.


30 See the critical comments put forward in the Joint Opinion of the Venice Commission and the Directorate of Democratic Governance on the revised draft law making amendments to the Law “on the Status of Municipalities” CDL-AD(2014)022 paras. 24-27.

Article 6.2
Appropriate administrative structures and resources for the tasks of local authorities - Article ratified

The conditions of service of local government employees shall be such as to permit the recruitment of high-quality staff on the basis of merit and competence; to this end adequate training opportunities, remuneration and career prospects shall be provided.

Staff can work for municipalities on two different contractual bases: tenured civil servants and officials working on an employment contract. The law provides for the incompatibility between the position of municipal officer and that of member of legislative, executive or judicial bodies. Salaries are determined in accordance with the organizational chart approved by each municipality. Other working conditions, such as hours, vacation, retirement benefits and social security, are regulated by the appropriate labour legislation. Individual municipal governments may assign additional payment to municipal employees according to their financial capabilities. The head of the appropriate municipal division is responsible for the employment and dismissal of municipal personnel.

 

In 2015 the Law on Municipal Services has been amended introducing new rules on the selection of personnel. Municipal staff is now hired based on an evaluation by a commission consisting of five persons after a selective process (competition). It is also provided that relatives of the head of the municipality and his/her deputies cannot be hired by the municipality.

 

Municipal officials can be dismissed only in cases explicitly detailed in law. According to article 21 of the Law on the Status of Municipalities, these are: conviction by a court; health reasons; if a court has judged a staff member not to be responsible for his or her actions; termination of citizenship, or if the person becomes a citizen of a foreign state or makes a similar commitment to a foreign government; death.

 

In 2016, Article 146(I) of the Constitution has been amended and the civil liability for municipal staff has been established if they cause damage to the rights of citizens. No information was provided on the amount of such cases. The authorities informed the delegation that litigation regarding municipalities affects in most cases property disputes and that in this area it is not infrequent that citizens sue the municipality on damages caused to their (property) rights. It must be recalled that one of the main reason for complaints regarding local issues is the still incomplete legislation on separation between state and municipal land and it would be unfair to hold municipal staff liable for damages caused by the inactivity of the legislator rather than by their blameworthy conduct. During the consultation procedure, Azerbaijani authorities informed the rapporteurs that a joint working group was set up in order to intensify cooperation between the Centre for work with municipalities of the Ministry of Justice and the State service for Property Affairs (Ministry of economy) in order to ensure compliance with legislation in the field of municipal land management, increase efficiency and provide methodological assistance to municipalities.

 

The executive body of a municipality is referred to by law as the “executive apparatus”. It consists of the municipality’s executive departments in accordance with the municipal charter and is managed by the chair of the municipal council, who appoints the chief official. Many municipalities, in particular in rural areas, do not have sufficient well-trained staff capable of preparing and executing the council’s decisions.

 

The opportunity to adapt the internal administrative structure of municipalities to local needs is further restricted in practice by the severe difficulty in hiring qualified staff. Recent amendments and additions to the Law on Municipal Service related to the staffing of municipalities as well as several training programmes coordinated by the Ministry of Justice have reportedly started to improve the situation, which however remains not satisfactory.

 

For example, since municipalities are not labelled as a part of public administration, their officials are not considered as public servants, but the Law on Municipal Service nevertheless provides that admission to the municipality service is arranged by competition. Furthermore, municipal staff has in principle the right and the opportunity to participate in the vocational training available to their counterparts in the state administrative structure. While state officials may attend vocational training courses sponsored by the state, municipal employees are participating much less frequently due in particular to the lack of financial resources and to the limited support received by their municipalities that traditionally do not invest in training of their staff. All in all, working for municipalities remains less attractive than working in the state administration. Salaries remain not competitive and personal development opportunities are limited.

 

The Law on Rules of Ethical Conduct of Municipal Servants contains the basic ethical rules that apply to municipal employees, focusing in particular on the prevention of corruption and of conflicts of interest, on the secrecy of information connected to the public responsibilities. The anti-corruption plans developed in the country31 generally affect municipal staff too. The government has recently adopted a promising 2019-2025 Civil Service Development Strategy, which contains a series of measures targeted towards the professional development of civil servants. The delegation could not receive information as to whether and to what extent this strategy extends to municipal staff or is only targeting state employees. It would be in any case advisable to include municipal personnel in the strategy.

 

Despite some efforts in improving professionalism of the staff, including recruitment on a merit-basis, adequate training opportunities, remuneration and career prospects, as required by Article 6.2 of the Charter, are not provided. After the remote meetings, the rapporteurs were informed by the Government that a work was underway to provide local self-governments with highly qualified personnel. The rapporteurs will keep a follow-up on this issue. However, they conclude that at the moment of the monitoring, the situation in Azerbaijan is of only partial compliance with this provision.


31 See inter alia http://www.oecd.org/corruption/acn/Azerbaijan_Report.pdf and the Fourth Evaluation Round – Second Compliance Report on Azerbaijan, adopted by GRECO at its 82nd Plenary Meeting (March 2019), GrecoRC4(2019)3, available at https://rm.coe.int/fourth-evaluation-round-corruption-prevention-in-respect-of-members-of/168094f9b1

Article 7.1
Conditions under which responsibilities at local level are exercised - Article ratified

The conditions of office of local elected representatives shall provide for free exercise of their functions.

Consult reply indicated at article 6.1

Article 7.2
Conditions under which responsibilities at local level are exercised - Non ratified

They shall allow for appropriate financial compensation for expenses incurred in the exercise of the office in question as well as, where appropriate, compensation for loss of earnings or remuneration for work done and corresponding social welfare protection.

Azerbaijan has not ratified Article 7(2) of the Charter.

 

The rapporteurs note, however, that Article 15 of the Law on the Status of Municipalities, referred to above under Article 7.1, if consistently applied, should be sufficient to fulfil the requirements of Article 7.2, whose aim is simply to ensure that local elected representatives receive “appropriate financial compensation” and to avoid conditions preventing, limiting or even excluding potential local candidates from standing for office because of financial considerations.

Article 7.3
Conditions under which responsibilities at local level are exercised - Article ratified

Any functions and activities which are deemed incompatible with the holding of local elective office shall be determined by statute or fundamental legal principles.

As mentioned above, the legislation lays down the functions and activities which are deemed incompatible with the holding of the elective mandate in the municipal councils. The Electoral Code also provides that local elected representatives cannot at the same time hold another position at local level or in regional or national government or in State or municipally owned enterprises.

 

This provision is fulfilled.

Article 8.1
Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of local authorities may only be exercised according to such procedures and in such cases as are provided for by the constitution or by statute.

Article 146(III) of the Constitution provides that the state shall supervise the activities of municipalities, but the text does not specify what kind of supervision is exercised over local governments. The Law on the Status of Municipalities clarifies the nature of the administrative supervision of the activities of municipalities and provides that “the relevant executive body must monitor compliance with the Constitution and laws by municipalities, municipal bodies and municipal officials” and that “relevant municipal commissions and voters may be involved in the implementation of administrative control over the activities of municipalities” (Article 52), although no information exists as to how the involvement of municipal commissions and of voters takes place.

 

The Law on the Status of Municipalities only states that the “relevant executive body” shall exercise legal supervision over municipalities but it fails to specify which particular administrative authority is the “relevant” one. The Azerbaijani authorities stressed in their comments that by way of Decree of the President of the Republic of Azerbaijan no. 162/1999 and Order of the President of 27 September 2003 formulated in application of the Law on Administrative Supervision over Activities of Municipalities, the competences of the “relevant bodies of executive power” are carried out only and directly by the Ministry of Justice. The legal supervision of municipalities is therefore exercised by the Ministry of Justice, more specifically by its Centre for Working with Municipalities, which, in addition to its supervisory work, provides methodological support for and legal advice to municipalities. The methodological reason for the supervisory power on legality being vested with the Ministry of Justice seems to be the fact that the charters of municipalities must be registered with that Ministry.

 

The Ministry of Justice also reports yearly to Parliament on its supervision activity on municipalities. According to Article 9 of the Law on Administrative Control over the Activities of Municipalities, the Ministry of Justice prepares an annual report on the implementation of administrative control over the activities of municipalities and presents it to parliament. Through this report, the Ministry can also make proposals for changes in the laws governing the activities of municipalities.

 

The Law on the Administrative Control over the Activities of Municipalities provides that the purpose of the central government supervision of municipalities is to guarantee the compliance of municipalities and their officials with the country’s Constitution and laws, decrees of the President and decisions of the Cabinet of Ministers. Pursuant to these rules, the supervision extends to overseeing and checking the legality of the work and actions of municipalities. The same law also states that the supervisory body may consider any request by individuals or legal entities that claim that a municipality has caused them damage. Although insufficient information is available about how this procedure is handled in practice (see above, Article 6.2), it is a strange piece of legislation because any dispute relating to the legal liability of municipalities (such as legal claims for damages caused by their actions) should be subject to the jurisdiction of the ordinary courts and not to the supervision by state bodies in the first place.

 

Municipalities are obliged to forward their decisions no later than 5 working days after the date of their adoption to the Centre for Working with Municipalities in the Ministry of Justice for legal and administrative control. The Ministry has no power to suspend municipal decisions, but it can only recommend changes if it finds them unlawful or inappropriate. Municipalities can reapprove their decisions and in case of further disagreement a court case can be started. According to information provided by the Ministry of Justice, most cases of recommendations issued by the Centre for Working with Municipalities by way of supervision regard financial decisions. For example, the Law on the Fundamentals of Municipal Finance (Article 8.2) states that not more than 50% of the municipal budget can be spent for salaries, but in practice this is often the case. In general, litigation is reportedly limited.

 

Another constitutional provision (Article 146(IV)) states that municipalities are obliged to submit reports to the Parliament in cases and in the manner prescribed by law. This rule was inserted into the Constitution in 2010 after a national referendum the previous year. The Law on the Status of Municipalities was amended accordingly by adding a new provision stipulating that municipalities are obliged to report to the Parliament on the implementation of the additional powers assigned to them by law and on the use of state budget funds transferred to their budget by law. In its Opinion on the draft amendments to the Constitution of the Republic of Azerbaijan, the Venice Commission stressed that: “the rationale behind the obligation for the municipalities to submit reports to the Milli Majlis is unclear. It suggests some form of control by the Legislature. [...] This unusual form of supervision may undermine the independence of local self- government”.32

 

After the Congress recommended to clarify the issue of reporting, in 2019 the process to amend the Law on the Status of Municipalities started, with a view of providing that reporting to Parliament is only on delegated powers and no (longer) on own powers of municipalities, and according to the authorities met by the delegation, no reporting of this kind has taken place so far. In any case, the very existence of a reporting to Parliament remains questionable and its purpose unclear, as it is difficult to imagine how the Parliament will supervise the activities of municipalities in this way. Even if the national authorities highlighted during the consultation process that this reporting should not be seen as an oversight of municipalities, the rapporteurs consider though that such an unusual process appears incompatible with the legislative function of a Parliament and with the aim of the Charter.

 

Financial supervision is exercised by the Ministry of Finance. According to Article 32.2.2 of the Law on the Budget System, municipalities and their national associations are required to submit proposals, by March 15 each year, for the implementation of projects on the adoption and implementation of local social protection, environment, economic and social development programmes, as well as the allocation of subsidies from the state budget to finance additional powers delegated to municipalities by legislative and executive authorities. The Ministry of Finance considers the proposals within 30 days and the relevant municipalities are informed about their acceptance. The law does not specify whether rejection of the proposals can be appealed, and no information has been provided in this regard as to the practical implementation of this provision.

 

The financial and economic management of municipalities is monitored by the Chamber of Accounts, a body that carries out the financial supervision of the spending of state budget transfers by municipalities. The Chamber of Accounts may exercise external state financial control in the form of audit, analytical activity and monitoring in municipalities and legal entities with shares of municipalities as an auditee. At the same time, the Chamber of Accounts has the authority to forecast, calculate and analyse the implementation of municipal revenues and expenditures within analytical activities. It is not clear to the rapporteurs whether this type of scrutiny also extends to the spending of local revenues and to the efficiency of local governments’ financial management.

 

According to the law, local governments are obliged to carry out internal audits. The municipalities monitor the implementation of the local budget and at least once a year involve independent auditors for this purpose. In this area, the Chamber of Audits allows the activities of independent auditors.

 

The Law on the Budget System contains a provision stating that if a municipality receives a subsidy from the state budget its draft budget has to be submitted to the relevant executive authority (Section 35(2)). According to the authorities, such provision has no control function: as the allocations are given based on requests by municipalities, it is normal that state authorities are informed on how the money is used. No relevant information is available about the consequence of such reporting and the provision specifies neither the objective of this rule nor the power of the executive authorities in this connection. The rapporteurs consider it essential that such an obligation on municipalities does not result, in practice, in a hierarchical relationship between them and the respective executive authority. It must be recalled that state subsidies make up an important share of the municipal budget (see below, Article 9).

 

The rapporteurs note that the legal framework on supervision is not sufficiently clear. The Law on the Status of Municipalities does not specify that the competent authority is the Ministry of Justice, nor the meaning and the procedures of the possible involvement of “relevant municipal commissions and voters in the implementation of administrative control over the activities of municipalities”. Furthermore, and even more importantly, the law regulating reporting by municipalities has not yet been adopted. As to financial supervision, the de facto relationship between municipalities and local executive authorities in case of state subsidies remains unclear and potentially problematic. In this respect, the comments made by national authorities in the framework of the consultation procedure state that allocations from the State budget are provided to municipalities on the basis of their request, and that it aim at covering budget deficits or contributing to finance municipal budgets.

 

The rapporteurs refer to the Contemporary Commentary which provides that “from the perspective of local self-government, Article 8 is probably one of the most relevant, since “supervision” is the very opposite of autonomy, to the same extent as control is the very opposite of freedom or self-administration. The greater the supervisory powers of the higher levels of government are, the smaller the actual scope of local self- government will be” (Paragraph 126).

 

They also point to the Recommendation issued by Committee of Ministers of the Council of Europe to member States on supervision of local authorities’ activities,33 which contain key principles and guidelines in the area of supervision. According to the Committee of Ministers, the 12 Principles of Good Democratic Governance are applicable to supervision. These principles include openness and transparency, the rule of law and competence and capacity. Administrative supervision should be governed by following principles and guidelines: a) the activities subject to supervision should be clearly specified by law; b) compulsory automatic administrative supervision should be limited to activities of a certain significance; c) administrative supervision should normally take place after the exercise of the competences (a posteriori); d) a priori administrative supervision should be kept to a minimum and normally be reserved for delegated competences; e) the law should define the time limit or period granted for the supervisory authority to perform the supervision; f) in the case of a priori supervision, absence of a decision by the supervisory authority within a specified time should mean that the planned activity may take effect.

 

These conditions are overall not given in Azerbaijan. For these reasons the rapporteurs consider that the requirements of Article 8.1 of the Charter are not met.


32 Opinion 518/2008 (Paragraph 37).

 

33 Recommendation CM/Rec(2019)3 of the Committee of Ministers to member States on supervision of local authorities’ activities (adopted by the Committee of Ministers on 4 April 2019 at the 1343rd meeting of the Ministers’ Deputies). This recommendation includes an appendix with Guidelines on the improvement of the systems of supervision of local authorities’ activities.

Article 8.2
Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of the activities of the local authorities shall normally aim only at ensuring compliance with the law and with constitutional principles. Administrative supervision may however be exercised with regard to expediency by higher-level authorities in respect of tasks the execution of which is delegated to local authorities.

The practical operation of state supervision over municipalities is not entirely clear. On the one hand, the Law on the Administrative Supervision of Municipalities restricts this activity to the compliance with the Constitution, the laws, decrees of the President and decisions of the Cabinet of Ministers, this way introducing a legality control within the framework of Article 8.2 of the Charter. On the other hand, a number of other provisions and reported practices prove evidence of the existence of a broader control and influence which include the merit and may change the import of local decisions for reasons of expediency or policy assessment.

 

The latter are for example the provisions that refer to the possible involvement of voters in the implementation of administrative control over the activities of municipalities; the reference in the Law on the Status of Municipalities to the “relevant executive body”, which might open space for the local or central executive authorities, which are in any case in charge of the supervision of delegated activities carried out by municipalities; the fact that the Centre for Work with Municipalities of the Ministry of Justice might issue (non-binding) recommendations to municipalities without specifying whether these are only on legality (in which case they should be binding, although municipalities should retain the right to challenge them in ordinary courts) or also on merit (which would explain why municipalities may decide not to follow them, safe the right of the Ministry of Justice to challenge in court the decision of a municipality not to comply with the recommendation). Not least, the provision of the obligation for municipalities to report to Parliament is inconsistent with a control on mere legality, as it is not for Parliament to check legality, nor to discuss the work of individual municipalities. Several sources report that, in practice, there are many interventions by the central government on the work of local self-government institutions.34 The rapporteurs refer to the Contemporary Commentary which reminds that “checks on expediency are not prohibited by the Charter but are severely restricted, for they are held to be in contradiction with the very meaning of local self- government” (Paragraph 134).

 

It follows that the commitments required by Article 8.2 of the Charter are not fulfilled according to the rapporteurs.


34 Subgroup on Local Government and Public Administration reform of the Working Group 1 of the CSF EAP, Update on Public Administration and Local Governments Reforms in Eastern Partnership Countries, 2017, p. 25.

Article 8.3
Administrative supervision of local authorities' activities - Article ratified

Administrative supervision of local authorities shall be exercised in such a way as to ensure that the intervention of the controlling authority is kept in proportion to the importance of the interests which it is intended to protect.

Article 8.3 of the Charter establishes the proportionality principle as far as supervisory activities are concerned, by providing that the intervention of the supervisory authority must be proportionate to the importance of the interests it intends to protect. Such proportionality shall be subject to judicial control.

 

Intervention by the supervisory authority should therefore be limited to the extent necessary, taking into account the relevance of the public interest at stake, or the seriousness of the legal violation allegedly committed by the local authority. As specified by the Contemporary Commentary, the supervisory authority “should first consider the possibility of “de minimis” action (warnings, requests, negotiations) before using more intrusive powers, such as annulling or suspending a decision, plan or project adopted at local level” (Paragraph 139).

 

According to the Venice Commission and the Directorate of Democratic Governance of the Council of Europe, the wide discretion given to the supervisory bodies, enabling these bodies to conduct a complete supervision over all the activities of the municipality, is in breach of the principle of proportionality guaranteed by Article 8.3 of the Charter. The Commission and the Directorate recommended that the principle of proportionality be adequately taken into account and clearly stated by the law, recalling the Committee of Ministers’ Recommendation R(98)12 on supervision of local authorities’ action, according to which administrative sanctions concerning local authorities representatives (including dissolution) should only exceptionally be allowed, and associated with effective guarantees to enable the free exercise of the local electoral mandate.35 The rapporteurs note that the principle of proportionality has not been introduced in the Law on the Status of Municipalities.

 

As reported by the interlocutors met by the delegation, litigation on state supervision is practically non existing. The Constitutional Court informed the delegation that between 2004 and 2020 only
17 constitutional complaints were lodged related to the verification of the constitutionality of acts by municipalities, despite the fact that also individual complaints can be submitted. The Court rejected them (in a Chamber composition) as the issues were not of constitutional relevance and were mainly concerned with the disputing of facts. In practice, although municipalities – like any other subject – can file a constitutional complaint with the Constitutional Court, they do not take advantage of this opportunity.

 

For the Constitutional Court there are objective and subjective reasons for this. The objective reason is that most disputes over municipalities are related to the fair allocation of land and are therefore considered in civil proceedings, where the parties are citizens and registry offices. The subjective reason is the alleged “lack of competition” between municipalities and local executive authorities. The rapporteurs are of the view that such a lack of litigation does not necessarily mean that supervision works well, but rather that the autonomy of municipalities is so restricted, that they are not in a factual position to challenge formal or informal, proportionate or disproportionate check carried out by state authorities over their activities.

 

Several interlocutors met by the delegation confirmed that legislative changes are in preparation which will clarify aspects such as the minimum number of residents in the concerned municipality in order to prompt control by state authorities.

 

Given the still incomplete legal framework regulating supervision and reporting, and the overall very limited position of municipalities, the rapporteurs consider the conditions of Article 8.3 to be met only in part in Azerbaijan.


35 Joint Opinion of the Venice Commission and the Directorate of Democratic Governance on the revised draft law making amendments to the Law “on the Status of Municipalities” CDL-AD(2014)022 Paragraph 61.

Article 9.2
Financial resources of local authorities - Article ratified

Local authorities' financial resources shall be commensurate with the responsibilities provided for by the constitution and the law.

Article 9.2 requires that “any new task assigned or transferred to local authorities must be accompanied by the corresponding funding or source of income to cover the extra expenditure” (Contemporary Commentary, Paragraph 150). As it is difficult to pre-determine in abstract terms the commensurability between revenues and mandatory functions, the consolidated interpretation of the Charter requires that “any transfer of powers and tasks be based on careful calculation of the actual service delivery costs to be met by local authorities” (ibidem), with a view to safeguarding the interests and the autonomy of local authorities.

 

In Azerbaijan, the Constitution and the laws entrust a number of functions to municipalities that, albeit limited especially if compared to the standards of other countries including in the region, are anyway more numerous and significant than they perform in practice. Article 144(I) of the Constitution and article 4, 5 and 6 of the Law on the Status of municipalities establish that municipalities be responsible for programmes in the area of local social security and social development; local economic development; and local ecological programmes, including more specifically preschool and school education, health, culture, use of local water sources, planting and renovation, waste collection, transportation, construction and maintenance of local roads, social protection of the people in need and protection of cemeteries.

 

In reality, however, most of these activities remain under the authority of local executive bodies and other government-led institutions. Furthermore, the activities that are entrusted to municipalities in an exceptional manner, such as the construction and maintenance of roads in the municipality area, are often not sufficiently financed from the central budget to execute the duties in full scale. The government pointed out that in other cases municipalities are allocated the full amount of funds for road construction and maintenance, mentioning the positive example of Bakikhanov which has received subsidies for 227,000 AZN to this end.

 

According to the Law on the Budget System, municipalities may receive subsidies and grants from the state budget when it is impossible to finance local social-economic development programmes from local budget funds. Another provision states that a proportion of the local budget expenditure can also be covered by central government subsidies if it is secured by municipal revenues (i.e., the local budget deficit). This means that the state government is obliged to ensure the budgetary independence of local governments and compliance of local budgets with state standards. To this end, the government may allocate the necessary funds to local budgets, and if it passes a resolution that results in increased local expenditures, it must determine a sum to be transferred to the municipality in compensation. As mentioned, this process increases financial dependence of municipalities from the state.

 

The same applies with regard to the local executive authorities. The Law on the Budget System also guarantees that if the revenues of municipalities fall or their expenditure rises as a result of the decisions taken by executive authorities, the local executive authorities that take such decisions have to compensate them with increased amounts. In spite of these formal guarantees, when municipalities fulfil the functions of local executive bodies they often do not receive sufficient central government support, which raises additional concern as to whether the principle of concomitant financing applies in practice.

 

It appears that the relationship between activities and funding is caught in a vicious circle. Municipalities cannot perform most of the tasks that in principle the laws would attribute to them because they lack the commensurate financial means, and the absence of sufficient financial means is due to their inability to perform the tasks they are supposed to carry out. This in a way results in extremely limited responsibilities and equally limited financial resources, that can of course not be read as fulfilling the requirement of commensurability between financial resources and responsibilities required by Article 9.2 of the Charter, but rather the opposite.

 

In light of the above, the rapporteurs consider Article 9.2 of the Charter not to be respected in Azerbaijan.

Article 9.8
Financial resources of local authorities - Article ratified

For the purpose of borrowing for capital investment, local authorities shall have access to the national capital market within the limits of the law.

Based on the Constitution and the relevant legislation, Azerbaijani municipalities are private subjects. This allows them to more easily establish companies and to freely operate on the markets, at least in principle. During the consultation process, the government informed the delegation that, especially in the last couple of years, municipalities have started to set up enterprises operating in various fields.

 

The Law on the Status of Municipalities establishes that municipal authorities may coordinate the participation of legal entities and individuals in the complex socio-economic development of the municipal territory (Article 36.2). No specific information was provided in this regard.

 

The Law on the Fundamentals of Municipal Finance establishes in Article 14.3.2 that municipalities have the right to receive short-term and long-term loans from banks and other credit companies that have their seat in the Republic of Azerbaijan.

 

In 2013 the Cabinet of Ministers passed a Resolution (no. 148) on “Approval of rules of registration of indicators financial and economic activity of the municipal companies and the organizations”. Under the new rules, companies and the organizations legally subordinated to municipalities shall draw up quarterly and annual financial reports on their activities and must submit them to the relevant authorities and ensure their publication.

 

Based on the information provided, the rapporteurs consider that, as the criteria are met in legislation but not in practice, the commitment under Article 9.8 of the Charter seems to be partially met in Azerbaijan.

Article 9.7
Financial resources of local authorities - Article ratified

As far as possible, grants to local authorities shall not be earmarked for the financing of specific projects. The provision of grants shall not remove the basic freedom of local authorities to exercise policy discretion within their own jurisdiction.

According to the Law on the Budget System (Article 35(2)), if a municipality receives a subsidy from the state budget, its draft budget has to be submitted to the relevant executive authority. While the aim of such provision is to allow for control over the use of earmarked funds, the scope and the consequences of such control remain unclear. Given the uneven position of municipalities, the rapporteurs expect that this mechanism does not create a de facto hierarchical relationship between municipalities and the respective executive authority, which would contradict the principle of budgetary autonomy of the levels of government.

 

The legislation provides for the financing of the transfer of powers. For 20 years since the establishment of municipalities, there have been no cases of transfer of powers to municipalities, with very minor exceptions, and in some cases the powers were transferred without being accompanied with financial transfers. For example, although the maintenance of cemeteries was entrusted to municipalities, no funds were allocated accordingly, and until 2018 their maintenance had to be carried out at the expense of the municipal budget. According to interlocutors met by the delegation, the “Rules for Construction and Management of Cemeteries” approved by Resolution No. 522 of the Cabinet of Ministers in December 2018 have improved but not yet solved the issue.

 

In 2020, as mentioned, the first case of transfer with financial support took place, when modular sewage treatment plants installed on the shores of the Caspian Sea, owned by the Ministry of Ecology and Natural Resources, were transferred to 5 municipalities: Buzovna, Binagadi, Bilgah, Pirshagi and Sumgayit. To that end, a limited liability company (Azsu Ecological Plant LLC) was established to manage these plants and other fixed assets. For this purpose, the mentioned municipalities were allocated 3.8 million AZN from the 2020 state budget.

 

As mentioned under Article 9.1, transfers from the state budget in form of dotation (non-earmarked transfers) and subvention (earmarked transfers), albeit insufficient to compensate the limited own revenues of municipalities, have increased in the last years and amount to 5.46 million AZN in 2020 (4.7 million dotation, 760 thousand subventions). The state budget 2020 includes a significant increase of subsidies and subventions allocated to the municipal budget (see respective table under Article 9.1). This confirms a shift in the financing of municipalities further increasing the financial dependence from the government.

 

Furthermore, as mentioned under Article 9.4, despite improvements that have made criteria more transparent and more differentiated, the allocation of general grants is not such that it enables municipalities to know in advance how much they are to receive in transfers and to strengthen their planning capacity. Overall, both the amount and the criteria for transferring state grants result in strengthening the dependence of municipalities from the state budget. Such a de facto hierarchical relationship does not comply with the standards required by the Charter and contributes to limit municipal freedom to exercise policy discretion within their jurisdiction as required by Article 9.7.

 

Article 9.7 is therefore only partly respected in Azerbaijan.

Article 9.6
Financial resources of local authorities - Non ratified

Local authorities shall be consulted, in an appropriate manner, on the way in which redistributed resources are to be allocated to them.

Azerbaijan has declared itself not bound by Article 9.6 of the Charter, which establishes that local governments must be consulted, in an appropriate manner, on the way in which redistributed resources are to be allocated to them.

 

It must be noted, however, that interlocutors met by the delegation, including the national associations of municipalities, the Chamber of Accounts and representatives of the Parliament, were unanimous in mentioning that consultation of municipalities, mainly through their national associations but also individually, is regularly taking place, especially in financial matters. As mentioned, no example or detailed information was provided to the delegation in this regard. However, the rapporteurs point out that if such consultation happens regularly and effectively as the authorities claim, there should be no obstacle in formalising such processes in legislation and in ratifying the provision of Article 9.6 of the Charter, as this would be easily considered to be fulfilled based on such practice.

Article 9.5
Financial resources of local authorities - Non ratified

The protection of financially weaker local authorities calls for the institution of financial equalisation procedures or equivalent measures which are designed to correct the effects of the unequal distribution of potential sources of finance and of the financial burden they must support. Such procedures or measures shall not diminish the discretion local authorities may exercise within their own sphere of responsibility.

Azerbaijan has declared itself not bound by Article 9.5 of the Charter.

 

Despite the fact that the Law on the Budget System provides the legal basis for covering local budget deficits from the state budget, no standardised financial equalisation procedures or equivalent measures exist with regard to the municipal level of government in Azerbaijan and existing criteria for state subsidies do not differentiate based on population or performance among municipalities.

 

The rapporteurs remind that the absence of a consistent financial equalisation system is an obstacle to both a less differentiated performance in the different territories of the country and to the real development of the municipal level more in general.

Article 9.3
Financial resources of local authorities - Article ratified

Part at least of the financial resources of local authorities shall derive from local taxes and charges of which, within the limits of statute, they have the power to determine the rate.

The Charter also requires that a proportion of local revenues should come from local taxes, and municipalities must be able to determine the rate applicable. These are two sides of the same coin, as local taxes are not only an important source of funding for local authorities, but also represent the precondition for the ability to make political choices and thus to create political accountability.

 

As mentioned above (Article 9.1), the revenues from municipal taxes remain insufficient. While the right to impose taxes and levies is in theory one of the municipalities’ most important powers, a great majority of these sources of income do not in practice help to form sustainable sources of revenue for municipalities. In spite of the legal entitlement, and of some improvements due to the reforms that introduced electronic payments, municipal taxes are still not imposed, or not collected, in an efficient way, due to the poor human resource situation of local governments. Shortage of staff and equipment, and lack of expertise make it close to impossible to exercise the municipal right to levy taxes in an efficient way. Administrative shortcomings, such as the absence of a reliable registry of private homes for the imposition of property taxes, may also make it difficult to obtain sufficient resources.

 

Furthermore, also some legal obstacles make it difficult to establish a functioning financial autonomy of municipalities. For example, taxes on land are still difficult to be collected, especially in some parts of the country. The land forming part of the property transferred from the state to municipalities is specified in the List of Municipalities of the Republic of Azerbaijan annexed to the Law on Lands and Territories of Municipalities. The law provides the transfer to municipalities of the state-owned utilities, social and cultural premises necessary for them to carry out their tasks and functions, in the manner specified. According to the definition provided by the Law on the Status of Municipalities, municipal property consists of “assets of the local budget created from local taxes and payments; municipal non-budget funds; municipal land; municipal enterprises and organisations; the municipal housing stock and buildings other than dwellings; roads that do not belong to the state or are personal property; municipal educational, health, cultural and sports organisations, and other movable and fixed property” (Article 33.1). The law also recognises the municipalities’ right to exercise property rights in respect of all municipal properties, including the right to lease and privatise them in accordance with the rules.

 

Despite improvements as compared to the previous monitoring, the legislation providing that the State Land and Mapping Committee must submit maps of the municipal lands to the body in charge of the State Registry of Municipalities and must indicate the size and the borders of each municipal territory is still not fully implemented. The process is in fact not entirely completed, apparently due to the lack of precise data to identify and define the boundaries of municipal property, in particular municipal land. Consequently, the transfer of property to municipalities has not yet been fully completed, which has an impact on the ability of municipalities to collect all the land and property taxes they are entitled to. The delegation was informed that the Cabinet of Ministers is working on achieving full documentation of buildings and land plots with a view to resolving the remaining problems, which apparently are more acute in some municipalities than in others.

 

Not only are municipal taxes limited in scope and amount as described above, but financial autonomy of municipalities is limited also as far as determination of tax rates is concerned. As pointed out by the Contemporary Commentary, “in the light of Article 9.3, a tax is a genuine local tax only if the local authority is entitled to determine the rate, “within the limits of statute”. Consequently, the applicable tax legislation may determine a band of tax rates, within which the local entity may freely determine the actual rate. Moreover, “local authorities should also have the power to approve internal by-laws or regulations for determining the technical and operational aspects of tax collection (types of rate, deductions, tax relief programmes, etc.), so that the general provisions of the law are suited to local circumstances and needs” (Paragraph 157).

 

In Azerbaijan, municipalities have in practice very limited power to determine the rates of local taxes. These are determined on the basis of the Tax Code, which is approved by the central government, and in most cases leaves no room to municipalities to tailor the rates on their specific demographic, geographic or socio-economic situation. Another example come from tariffs for advertisements owned by municipalities, which are determined by the Cabinet of Ministers in accordance with the Law on Advertising.

 

Article 9.3 of the Charter is fulfilled only in minor part and only on paper in Azerbaijan, to an extent that makes the overall situation only partly compatible with the Charter’s requirements.

Article 9.1
Financial resources of local authorities - Article ratified

Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers.

Article 9.1 of the Charter lays down the two fundamental principles as far as financial arrangements for the local self-government are concerned: municipalities should have their own financial resources and they should be free to decide how to spend these resources.

 

Financial autonomy of municipalities is a constitutional principle in Azerbaijan. Article 144(I) of the Constitution establishes that municipal councils can impose local taxes and levies, approve local budgets and possess, use and dispose of municipal property. More detailed rules on municipal finances are laid down in the Law on the Status of Municipalities (Articles 32-46) as well as in a triad of laws: the Law on the Transfer of Assets to Municipalities, the Law on Municipal Finance and the Law on Municipal Territory and Lands. The Law on the Transfer of Assets establishes standards for determining municipal property and transferring it to municipal ownership. The Law on Municipal Finance defines principles of local finance, the basis for the local budget and the division of powers between the municipal council and local executive bodies. This law also regulates legal issues concerning the adoption, implementation and monitoring of local budgets. The Law on Municipal Territory and Lands impacts on the municipal revenues but as the issue of municipal demarcation is not entirely completed so far, it results in further diminishing the municipal own resources. A number of other laws are relevant, such as the Tax Code, the Law on Budget System, the Law on Advertising and others.

 

The Azerbaijani budget system is divided in three levels, formally separated from one another: the central government budget (state budget), the budget of the Nakhichevan Autonomous Republic and the local (municipal) budget. The share of municipal revenues amount to 0.15 percent of the consolidated state budget: 34.97 million AZN out of a state budget of 24.1 billion AZN in 2020. Therefore, while each level, including municipalities, has the right to determine income and expense in line with existing legislation and budget classification (Law on Budget System, Article 3), in practice taxing and spending autonomy for municipalities remains irrelevant, despite a slight increase in annual revenues of municipalities as compared to the last monitoring in 2012. 

 

A chart on the annual budget of municipalities is available on the 41st page of the report.

 

The growth trend was initially much stronger as shown by the rate between 2012 and 2014 but has been severely slowed down by the devaluation that took place in 2015, which again penalized municipalities disproportionately as compared to other levels. Data for 2020 show that the annual budget for municipalities decreased due to the effect of the COVID-19 pandemic.

 

The municipal budget is formed by three sources of income: tax income, non-tax income and state transfers, in form of dotation or subvention. Projects implemented by municipalities on behalf of the government or submitted by municipalities to the approval of the government can be funded by the state on top of the ordinary budget.

 

According to the Tax Code, municipal taxes are the following: 1) land taxes on private individuals;
2) property taxes on private individuals; 3) mining tax on construction materials of local importance; 4) taxes on the profits of municipally owned enterprises and other bodies. The non-tax incomes are those produced by levies that municipalities can impose: levy on posting of street advertisements in the municipal owned territories, buildings and other premises; levy on disposal and letting of the municipal property; levy on fixed and mobile commerce, public catering and other services in the territories under ownership of municipalities; levy on hotels, sanatoria and health resorts and persons providing tourist services in the territories under ownership of municipalities; levy on parked cars in parking lots owned by legal and physical persons in the municipal territories.

 

Additional transfers from the state budget in form of dotation (unconditional financial aid) and subvention (earmarked transfers) amount to 5.7 million AZN (4.7 million dotation, 1 million subventions) in 2019, which accounts for 0.02% of the total state budget expenditures. This is due to the 2014 amendments to the criteria for both unconditional and conditional financial aid in the Law on the Budget System, which now include the number of residents in the municipality, their fiscal capacity, the geographical location of municipalities, the living standards and the socio-economic projects being implemented in the area. Further amendments have facilitated subventions from the state budget to the municipalities for the implementation of projects in the fields of local social protection, environment and economic and social development programmes.

 

The slight growth of municipal tax incomes is mainly due to the changes introduced in 2014 to the tax base of property tax of individuals. Since then, the property tax is no longer collected on the inventory value of a house owned by individuals, but on the surface of estate property. This increased the taxation of property because the inventory value could be calculated only on houses and flats that had a registration certificate from the state, thus excluding a number of properties from taxation, especially in rural areas, which had no such certificate – in fact most of the revenue came from the biggest urban areas (Baku, Ganja, Sumgayit, Mingachevir and Shirvan) and very little from rural municipalities. According to information received by the delegation, the change is not yet entirely completed, but it has doubled the income from property taxes of individuals, from 3.7 million AZN in 2012 to 7.6 million AZN in 2019.

 

The positive effect of the new criteria for calculating the property tax was however negatively compensated by amendments introduced in the Tax Code in 2016 (Articles 206.1-1 and 206.3), which established that part of the revenues from the land tax of individuals be deducted from the state budget. This way, if farmlands owned by individuals are not used for their intended (agricultural) purpose, the taxes levied on those lands are directed to the state budget. The delegation was informed that this way municipal revenues decreased by 15.4% from 6.5 million AZN in 2012 to 5.5 million AZN in 2020.

 

As mentioned, there has been an overall increase of state transfers (dotation and subvention), to the municipalities, although this source also remains insufficient to cover the needs of municipalities. In 2019, for example, a total of 4.95 million AZN was subsidized to 1,606 municipalities operating in the country, which makes on average about 3,000 AZN per municipality. As to earmarked financial assistance, this has been provided over the last two years only. Until then, only the subsidy mechanism was used. By Decision of the Cabinet of Ministers of May 13, 2020, modular sewage treatment plants installed on the shores of the Caspian Sea on the balance of the Ministry of Ecology and Natural Resources together with their property have been transferred to 5 municipalities: Buzovna, Binagadi, Bilgah, Pirshagi and Sumgayit. A limited liability company was established to manage the modular wastewater treatment plants and other assets. For this purpose, the mentioned municipalities were allocated 3.8 million AZN from the 2020 state budget in coordination with the Ministry of Ecology and Natural Resources and Azersu Open Joint-Stock Company.

 

The increase of state transfers, while positive in terms of amount of money managed by municipalities, has an adverse effect on their financial autonomy, as it makes municipalities financially even more dependent on the state budget. The dependence of the budget of the Nakhchivan Autonomous Republic on the state is much bigger, as state transfers amount to 75-80% of the budget. The share of local and regional budgets in state budget spending is around 2%.

 

A chart on the central government transfers to local and regional budgets is available on the 42nd page of the report.

 

The extremely low level of municipal revenues is insufficient to fulfil even the very limited tasks and functions entrusted to municipalities by legislation. The lack of funds prevents municipalities from improving their work in certain areas formally open for them, such as undertaking local public initiatives in education, healthcare and culture or the maintenance and development of sanitary facilities and more broadly socio- economic activities. Municipalities are heavily dependent on financial transfers from the state, and also are factually subordinated to the local executive authorities, which have much greater capacities in terms of personnel, finance and formal powers. In fact, local executive authorities rely on much stronger financial guarantees, including by the provision that reserves 50% of the collected tax income for the use of local executive authorities: in 2019, the total amount of such income received by local executive authorities was 28 million AZN.36 As confirmed by financial authorities, local executive authorities can simply apply to the state budget to cover their expenses should their resources not suffice. The same can in principle be done by municipalities too, but this is not frequently happening due to the political irrelevance of municipalities, which rather solicit local executive authorities to intervene with the government, as confirmed by local representatives.

 

A chart on the state subsidies to municipalities is available on the 43rd page of the report.

 

Financial dependence from the state is in sum the main weakness of Azerbaijani municipalities. Their financial autonomy provided by the law is not sufficient to safeguard their capability to carry out their functions, as their own resources are minimal and force them to either underperform or to rely disproportionately on state money. This is the main obstacle to their becoming properly involved in local administration in Azerbaijan. In the absence of sufficient revenues, they are not able to play a more significant role in local democracy. At the same time, as long as they are irrelevant in the overall governance of the country, the pressure to increase their financial dotation and autonomy will remain weak.

 

From the above, the rapporteurs conclude that the commitments established by Article 9.1 of the Charter are not met in Azerbaijan.


36 https://economy.gov.az/article/regionlarin-2019-2023-cu-illerde-sosial-iqtisadi-inkishafi-dovlet-proqraminin-icrasinin-birinci-ilinin- yekunlarina-hesr-olunan/30687

Article 9.4
Financial resources of local authorities - Article ratified

The financial systems on which resources available to local authorities are based shall be of a sufficiently diversified and buoyant nature to enable them to keep pace as far as practically possible with the real evolution of the cost of carrying out their tasks.

In order to protect local finances from negative effects in case of fluctuation in economic cycles, Article 9.4 requires a certain degree of diversification of income sources. As mentioned above (Article 9.1) over the last decade the municipal incomes have been impacted by the devaluation. More generally, this applies to the whole of Azerbaijani economy, which significantly relies on oil and gas.37

 

Legislation provides for diversification of municipal income sources and the right of municipalities to determine their spending priorities. However, the extremely limited functions carried out in practice by municipalities and their largely insufficient financial resources makes these rights much less significant in practice.

 

Diversification also derives from the transfer system. The Law on Budget System envisages transferring of special funds (earmarked or targeted funds) and general-purpose funds to the budget of municipalities, although the former (earmarked funds) has been implemented only once with regard to the transfer to five municipalities of the management of a module type equipment for cleaning dirty water.

 

Some steps have been taken to improve transfers of financial aids from the state budget municipalities, such as in particular the changes introduced in 2014 to the Law on Budget System which have introduced more differentiated criteria for unconditional financial aid. These now include the population size, the proportional weight of the municipality in the formation of the country’s financial resources, revenues, and expenditures, the geographical location, the living standards, and the socio-economic projects being implemented in the area.

 

Also the mechanisms for the allocation of conditional financial aid have been improved to facilitate state subventions for the implementation of projects in the fields of local social protection, environment, economic and social development programmes, as well as financing additional authorities of municipalities granted to them by the law and handed over by the local executive committees.

 

In practice, as the overall degree of financial autonomy of municipalities remains negligible, also the significance of the differentiation of their resources is far more limited than it could be based on the legislative provisions. In recent years, some improvements have been introduced to tackle the insufficient transparency in the calculation and distribution of subsidies and subventions from the state budget to local budgets, such as the amendments in the Laws on Budget System and on Local (Municipal) Taxes and Fees. Some difficulties however persist, as both block and special grants are not yet distributed in a predictable way on the basis of clear criteria, established in cooperation with the national municipal associations.

 

The rapporteurs therefore conclude that the current situation is in partial compliance with Article 9.4 of the Charter.


37 See Council of the European Union, Cooperation Implementation Report on Azerbaijan, 2020, 14189/20, SWD(2020) 365 final, p. 1.

Article 10.1
Local authorities' right to associate - Article ratified

Local authorities shall be entitled, in exercising their powers, to co-operate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest.

As of 2006, three national municipal associations exist in Azerbaijan, representing the interests of the various types of municipalities (villages, towns and cities). Although no exact data are available on the membership of these associations, all sources concur in indicating that most municipalities belong to one of them. The legal basis of municipal associations is the Law on the Status of Municipalities, which states that municipalities may create associations for the purpose of co-ordinating their activities and in order effectively to assert their rights and interests (Article 10). However, they may not be given the powers of municipalities and can therefore only exercise representative and co-ordinating functions. The associations must be registered in accordance with the law.

 

Interlocutors pointed out to the delegation that the associations are regularly consulted by Parliament and by the relevant Ministries on issues that are relevant to municipalities. However, legislation is not clear in this respect and no specific right of municipalities or municipal associations to be consulted on these matters or on decisions of the central government authorities affecting local government interests is expressly provided.

 

Only two exceptions seem to exist in legislation requiring consultation of the municipal associations. One is the case of boundary changes among municipalities. The other case in which consultation is required by law is the amendment introduced to Article 32.2.2 of the Law on Budget System by the law of June 20, 2014, according to which national associations of municipalities can submit proposals to the relevant executive authority to allocate subsidies to municipalities from the state budget. Even in such case, consultation remains indirect (proposals go through local executive authorities) and its effects are not specified, but it appears that no legal means exist to veto any decision by the state.

 

Associations are not obligatorily consulted on central government plans or decisions that primarily affect the interests of municipalities and presumably for this reason have no regular opportunities to influence the local government policies of the central government authorities. It appears that consultation happens arbitrarily and in an irregular fashion, mostly informally and often through the local executive authorities and/or political channels. For sure, no general right is established for municipalities and their associations to be consulted by state authorities in due time on all relevant issues, as required by the Charter.

 

Associations are said to provide assistance to municipalities on legal and administrative issues and to organise trainings for municipal staff. However, no information is available about their services or the professional support they provide to municipalities, so it is not surprising that they do not have the proper capacity to play an important and effective role. In fact, the national associations of municipalities do not play an important role in central policy-making or in representing local interests in Azerbaijan and it seems that they were only established in order to comply formally with the requirements of the Charter and that they do not engage in any significant activities.

 

Article 10.1 of the Charter also implies that municipalities shall be guaranteed a general right to co-operate with one another in order to deliver local services or discharge their responsibilities. This is particularly important in terms of delivering services, in view of the fact that many municipalities are too small or too weak (financially, organisationally and politically) to deliver all the services they are supposed to or to carry out any meaningful local strategy or policy. It is worth noting that the associations do not even have a website, which testifies of their role in practice.

 

Inter-municipal cooperation has not been outlined as problematic by any of the interlocutors met by the delegation. The mayor of Saray reported that a constant exchange is in place with the neighbouring municipalities, especially within the framework of the district municipal chairpersons council, but no specific forms of formalized co-operation were mentioned. It appears that also intermunicipal co-operation is carried out primarily through informal ways.

 

Based on the situation on the ground, whereby consultation takes place irregularly and as a matter of practice but is not sufficiently guaranteed in legislation, the rapporteurs are of the view that the commitments stemming from Article 10.1 of the Charter are only partly met in Azerbaijan.

Article 10.2
Local authorities' right to associate - Article ratified

The entitlement of local authorities to belong to an association for the protection and promotion of their common interests and to belong to an international association of local authorities shall be recognised in each State.

As mentioned above, national associations for each of the different category of municipalities exist and operate in Azerbaijan, although their impact and influence on determining policies for the local level and on assisting municipalities in better performing their tasks remain limited.

 

No limitations exist in the law with respect to the right of each municipality to join said associations and reportedly most municipalities are indeed members.

 

For these reasons, the rapporteurs conclude that the legal and practical situation is in compliance with the provision of Article 10.2 of the Charter.

Article 10.3
Local authorities' right to associate - Article ratified

Local authorities shall be entitled, under such conditions as may be provided for by the law, to co-operate with their counterparts in other States.

In 2019, the Law on the Status of Municipalities was amended to incorporate new standards to guide arrangement, by the appropriate executive authority, of municipality activities and experience exchanges with self-government bodies in other countries, as well as their associations and professional organisations to enhance the professionalism of the national municipality members and officials.

 

This change has allowed Azerbaijan to lift the previous declaration of not being bound by Article 10.3 of the Charter and to include this provision as part of the binding commitments under the Charter. The rapporteurs commend this move, which shows a positive attitude towards the Charter and a spirit of openness towards the development of local self-government.

 

The new Article 10-1 of the Law on the Status of Municipalities enables municipalities and associations of municipalities to enter into cooperation agreements with local self-government bodies of foreign countries and become members of specialized organizations of local self-government bodies. This can happen, however, only “in coordination with the relevant executive authority”. Also the exchange of experience with local self-government bodies of foreign countries, their associations and specialized organizations has to be organised by the relevant local executive authority.

 

The government informed the delegation that about 30 agreements are in place with municipalities in a dozen of foreign countries. No interlocutor mentioned to the delegation any practice in this regard, nor any problems faced by municipalities in international exchange and cooperation.

 

Given the dominant role of the local executive authorities in this regard, the rapporteurs consider the commitments under Article 10.3 of the Charter to be met.

Article 11
Legal protection of local selfgovernment - Article ratified

Local authorities shall have the right of recourse to a judicial remedy in order to secure free exercise of their powers and respect for such principles of local self-government as are enshrined in the constitution or domestic legislation.

Article 146(V) of the Constitution states that “the judicial protection of municipalities, and compensation for additional expenditures resulting from the decisions of state bodies, shall be guaranteed”. Article 50 of the Law on the Status of Municipalities, instead, in regulating the “judicial protection of local self- government”, focuses on the protection of the citizens’ right to local self-government, stating that “citizens living in the territory of the municipality, municipalities, municipal bodies and officials of municipal bodies shall file a lawsuit to invalidate acts of state authorities and state officials, municipalities, municipal bodies and officials of municipal bodies, legal entities established by municipalities, as well as public associations violating the rights of local self-government”. The same approach emerges in Article 53 of the same law, which ensures that “decisions and actions (or inaction) of municipalities, municipal bodies and their officials may be appealed in an administrative manner and/or in court”. Legislation seems more concerned with the right to challenge decisions by municipalities than with the right of municipalities to self-government, as this right does not belong to municipalities but rather to the citizens.

 

Such an approach derives from the peculiar condition of municipalities in Azerbaijan, which are not part of the system of state organisation but, rather, are a “special form of the social activity of the citizens”, as the Law on the Status of Municipalities states (Articles 2 and 3). Accordingly, municipalities have the same position as citizens, companies or NGOs as far as challenging laws and other legal acts is concerned.

 

Consequently, municipalities are entitled to lodge a direct complaint with the Constitutional Court, as everyone can do, “against acts of the state” that violate their rights. This right, however, is not used by municipalities and there are no precedents, as the delegation was informed by the Constitutional Court. In practice, therefore, this is not an effective remedy to safeguard the free exercise of the powers of municipalities. As the delegation has been told, there is apparently no tradition and culture of judicial challenge on the side of municipalities.

 

The Constitutional Court deals, inter alia, with issues regarding the “conformity of acts of municipalities with the Constitution and laws of the Republic of Azerbaijan, decrees of the President of the Republic of Azerbaijan, resolutions of the Cabinet of Ministers of the Republic of Azerbaijan” (Article 130(III)5 of the Constitution). Between 2004 and 2020, the Constitutional Court received 138 complaints from citizens on the verification of conformity of judicial acts on the activities of local self- government bodies (municipalities) with the Constitution and laws, 17 of which in 2020, against municipalities, 7 of which reached the plenum, while the others have been adjudicated in chamber. Nearly all cases were individual complaints on property disputes, which are the main source of litigation involving municipalities, since the separation between state land and municipal land is not regulated by law yet and in several cases it is not clear who owns certain parts of land and who can sell them or collect taxes on them. As mentioned, no case was brought by municipalities challenging laws or regulations.

 

Against this background, it has to be reminded that, for Article 11 to be fulfilled, “it is not enough if, in a given member State, local authorities are granted the right to bring legal actions in a court of law in the same manner as any other legal entity (for instance, a business) in order to defend its private rights or property. The Charter refers to the ability of local authorities (as cogs in the wheels of public administration) to bring actions under public law against other levels of government (inter-governmental litigation)” (Contemporary Commentary, Paragraph 211).

 

Some litigation arises by way of supervision over municipalities caried out by the Ministry of Justice (see above, Article 8). In case the recommendations issued by the Centre for Working with Municipalities on the compliance with laws and regulations are not followed by municipalities, the Ministry of Justice can take the issue to a court. According to information provided by the Ministry of Justice, by the national associations of municipalities and by the Constitutional Court, judicial cases of this kind are rare. In 2020, according to the annual Report on the implementation of administrative control over the activities of municipalities by the Ministry of Justice, the Ministry filed 13 lawsuits to annul the decisions of municipalities, two of which were settled and 11 were taken to court.

 

More frequent are complaints brought to (district or urban) courts by citizens and legal persons against acts of municipalities or of their officials, mostly regarding property and land issues due to the mentioned unclear division between state-owned and municipal-owned land and the resulting uncertainty in terms of ownership and lease.

 

According to information provided by the Ministry of Justice, no precedent exists so far in Azerbaijan in which a court has found an act or a measure by either municipalities of the state to be in violation of the European Charter of Local Self-Government.

 

As the right to judicial protection is provided essentially against, rather than for, municipalities and other litigation is substantially non-existent in Azerbaijan, the rapporteurs conclude that the commitments under Article 11 of the Charter are not fulfilled.

Article 12.1
Undertakings - Non ratified

Each Party undertakes to consider itself bound by at least twenty paragraphs of Part I of the Charter, at least ten of which shall be selected from among the following paragraphs:

 

– Article 2,

– Article 3, paragraphs 1 and 2,

– Article 4, paragraphs 1, 2 and 4,

– Article 5,

– Article 7, paragraph 1,

– Article 8, paragraph 2,

– Article 9, paragraphs 1, 2 and 3,

– Article 10, paragraph 1,

– Article 11.

177. As discussed earlier, Azerbaijan has made some reservations concerning the scope of the European Charter of Local Self-Government and stated that it is not bound by Article 4(3), Article 7(2), Article 9(5) and (6) and Article 10(3) of the Charter. The Congress delegation is convinced that Azerbaijan is currently failing to comply fully with these provisions of the Charter (as in the case of some other provisions) and consequently believes that the maintenance of these reservations could be justified. Nevertheless, as the proposals in this report show, the Azerbaijani authorities are strongly advised and encouraged to draw up and implement comprehensive decentralisation reforms that may lead to the withdrawal of all these reservations. 178. The representatives of the Minister of Justice informed the delegation that several state bodies had been instructed to submit proposals on the possibility of Azerbaijan’s accession of to the relevant articles of the Charter and that the matter would be considered in the near future. The rapporteurs welcome this positive information brought to their attention during the visit and will closely follow further developments in this respect. 179. At the same time, the representatives of the Minister of Justice added that it should be noted that, despite the fact that the Republic of Azerbaijan had not yet acceded to paragraph 3 of Article 10 of the Charter, certain measures had been taken towards its implementation. For example, the Law of 25 October 2011 had inserted a new paragraph into the Law on the Status of Municipalities providing for the right of municipalities and their associations, as agreed with the Ministry of Foreign Affairs, to conclude co-operation agreements with foreign local government bodies and to become members of specialised organisations of local government bodies.
Article 12.2
Undertakings - Non ratified

Each Contracting State, when depositing its instrument of ratification, acceptance or approval, shall notify to the Secretary General of the Council of Europe of the paragraphs selected in accordance with the provisions of paragraph 1 of this article.

177. As discussed earlier, Azerbaijan has made some reservations concerning the scope of the European Charter of Local Self-Government and stated that it is not bound by Article 4(3), Article 7(2), Article 9(5) and (6) and Article 10(3) of the Charter. The Congress delegation is convinced that Azerbaijan is currently failing to comply fully with these provisions of the Charter (as in the case of some other provisions) and consequently believes that the maintenance of these reservations could be justified. Nevertheless, as the proposals in this report show, the Azerbaijani authorities are strongly advised and encouraged to draw up and implement comprehensive decentralisation reforms that may lead to the withdrawal of all these reservations. 178. The representatives of the Minister of Justice informed the delegation that several state bodies had been instructed to submit proposals on the possibility of Azerbaijan’s accession of to the relevant articles of the Charter and that the matter would be considered in the near future. The rapporteurs welcome this positive information brought to their attention during the visit and will closely follow further developments in this respect. 179. At the same time, the representatives of the Minister of Justice added that it should be noted that, despite the fact that the Republic of Azerbaijan had not yet acceded to paragraph 3 of Article 10 of the Charter, certain measures had been taken towards its implementation. For example, the Law of 25 October 2011 had inserted a new paragraph into the Law on the Status of Municipalities providing for the right of municipalities and their associations, as agreed with the Ministry of Foreign Affairs, to conclude co-operation agreements with foreign local government bodies and to become members of specialised organisations of local government bodies.
Article 12.3
Undertakings - Non ratified

Any Party may, at any later time, notify the Secretary General that it considers itself bound by any paragraphs of this Charter which it has not already accepted under the terms of paragraph 1 of this article. Such undertakings subsequently given shall be deemed to be an integral part of the ratification, acceptance or approval of the Party so notifying, and shall have the same effect as from the first day of the month following the expiration of a period of three months after the date of the receipt of the notification by the Secretary General.

177. As discussed earlier, Azerbaijan has made some reservations concerning the scope of the European Charter of Local Self-Government and stated that it is not bound by Article 4(3), Article 7(2), Article 9(5) and (6) and Article 10(3) of the Charter. The Congress delegation is convinced that Azerbaijan is currently failing to comply fully with these provisions of the Charter (as in the case of some other provisions) and consequently believes that the maintenance of these reservations could be justified. Nevertheless, as the proposals in this report show, the Azerbaijani authorities are strongly advised and encouraged to draw up and implement comprehensive decentralisation reforms that may lead to the withdrawal of all these reservations. 178. The representatives of the Minister of Justice informed the delegation that several state bodies had been instructed to submit proposals on the possibility of Azerbaijan’s accession of to the relevant articles of the Charter and that the matter would be considered in the near future. The rapporteurs welcome this positive information brought to their attention during the visit and will closely follow further developments in this respect. 179. At the same time, the representatives of the Minister of Justice added that it should be noted that, despite the fact that the Republic of Azerbaijan had not yet acceded to paragraph 3 of Article 10 of the Charter, certain measures had been taken towards its implementation. For example, the Law of 25 October 2011 had inserted a new paragraph into the Law on the Status of Municipalities providing for the right of municipalities and their associations, as agreed with the Ministry of Foreign Affairs, to conclude co-operation agreements with foreign local government bodies and to become members of specialised organisations of local government bodies.

ACCESSION

to the Council of Europe 25 January 2001

RATIFICATION

of the European Charter of Local Self-Government 15 March 2002

CONSTITUTION | NATIONAL LEGISLATION

Local self-government is recognised in the Constitution (Section IV, Chapter IX), although not as part of the state power (which is regulated in Section III) nor part of the public administration. While acknowledging the position of the government which considers municipalities as part of the state power and as institutions of the public administration, the rapporteurs note that neither the Constitution nor the corresponding legislation, beginning with the Law on the Status of Municipalities, include the main features of the Charter’s definition of local self-government, since they do not establish the right of local authorities to regulate and manage local public affairs nor the concept of the interest of the local population.



26Ratified provision(s)
0Provision(s) with reservation(s)
7 Non ratified articles
4Compliant Provision(s)
13Partially Compliant Articles
9Non-compliant Provision(s)