Azerbaijan: Secured Transactions: New Possibilities

Last Updated: 26 February 2018
Article by BM Morrison Partners LLC

Law on Encumbrance of Movables, dated 2 May 2017, came into effect on 28 May 2017. According to it, creditors (obligees) are given tools for prioritising their claims in movables by making encumbrances public. To place claims into the public domain, creditors can record them in the encumbrances' register, have them into possession, acquire control of the encumbered items (such as moneys in bank accounts), and, also, use a combination of those options.

The Law deals with contractual and non-contractual (e.g., seizure by court order) encumbrances on a "first- come, first-served" basis save for some exceptions. The ranking of contractual encumbrances may be altered by the security holders' agreement though.

As opposed to non-contractual encumbrances, making contractual encumbrances public is not mandatory and depends on a security provider's consent.

The register of encumbrances of movable property (the Register) will, when established, be maintained by the Financial Market Supervisory Authority (chamber) of the Republic of Azerbaijan. It would serve to record, on a fee basis, encumbrances in movable property (other than securities), including claims and rights, not registered in any of the existing official title registers (e.g., an official register for vehicles with engine capacity 50 cubic centimetres and more and designed maximum speed above 50 km/h). It will be run in an electronic form only and used to record the creation of an encumbrance, changes and objections to it, and also its termination.

Contractual (consensual) encumbrances, to include, among others, pledges, leases, and liens, would be recorded by creditors (obligees or beneficiaries) subject to a consent of a security provider. This notwithstanding, encumbrances existing by the effective date of the Law can be recorded upon a notification to a security provider within nine months of the Register's launch.

The validity of the online recordings in the Register will last from the entry becoming visible to others for a period specified in the entry.

Entries made to record contractual encumbrances would have to specify, among others, the parties to a contract, detailed description of concerned property, secured obligation, and whether the security provider is a new customer or not, and, should the customer be individual, his/her gender.

Besides recordation, encumbrances can be made public by:

  • taking possession of cash, jewellery, unregistered securities, warehouse certificates, bill of lading; and
  • acquiring control (including, arguably, the right of direct debiting) over security provider's proceeds on bank or deposit accounts run by notaries. However, in this case, creditor's claims would be subordinated to other payments (of alimonies, taxes, bank loan repayments, etc.) prioritized on the basis of Sub-Section 965 of the Civil Code of the Republic of Azerbaijan.

The Law restates the possibility provided by the Civil Code to create an encumbrance over a movable item (as opposed to a bulk of movables) yet to come into ownership of its grantor.

The Law allows for the pledge (as well as other encumbrances) of movables within arguably a property complex and establishes the rules for defining the priority of such pledge vis-à -vis a hypothec over such complex.

The Law ensures the survival of the priority of secured creditors' claims to the movable property mixed with other movables whether or not by preserving its original state. Such claims are measured by the value the property had prior to commingling.

The priority of secured claims established pursuant to the Law (i.e., by, among others, filing with the Register) survives any disposition of the concerned property. Although the Law does not assure the survival in relation to the claim not recorded in the Register, such is generally guaranteed by the Civil Code.

Pursuant to the Law, enforcement (foreclosure) can be through a sale (a public auction and otherwise) or claiming ownership of encumbered property. This, however, as well as a sale, other than by a public auction, should not be possible in relation to pledges (by virtue of the limitations imposed by the Civil Code).

Enforcement by one secured creditor would trigger higher ranked claims of other creditors who may join the enforcement processes (cross default).

Enforcement is required to be notified to an obligor or, if different, a security provider and, if any, other known secured creditors no later than seven business days before the sale. During that period, the security provider would have the right of first refusal for acquiring the property on sale. The sale is required to be for an adequate price. Should the property be sold for a price below adequate (reasonable) price, the creditor could be held liable for damages caused by such sale to the security provider, other secured creditors, and persons having rights in such property.

Within five business days of completion of the sale, the enforcing creditor must notify the security provider and obligor of the allocation of the sale proceeds and, within ten business days thereof, pay the balance, if any, to the obligor (security provider). A failure to do so would make the failing creditor liable for damages caused by the failure to the security provider.

Should the sale proceeds be insufficient to pay the secured claim, a foreclosure upon other property of an obligor would be possible subject to a parties' agreement on this, but without attaching priority to the creditor's residual claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions