Azerbaijan received full-right country status related to Initiative in the conference dedicated to International Output Industry Transparency Initiative which was held in Qatar, Doha February 16-18. Thus, between 25 candidate countries Azerbaijan was the first to be approved as a full-right country status.
The offers of IOITI activity appraisal in IOITI executed countries was first faced in 2006. The main goal of the appraisal was to identify the transparency and reporting in the countries which was connected to the Transparency process. In 2007 September, in IOITI Administration 3rd meeting it is decided to candidate Azerbaijan and as well as other fourteen countries to the full-right membership of the IOITI. In the same meeting Azerbaijan representative in the Administration, CEO of the Oil Fund Shahmar Movsumov informed that Azerbaijan is ready to pass the appraisal stage. And that established the base of the IOITI appraisal in Azerbaijan.
IOITI Administration identified the 7 international auditing companies to carry out the appraisal processes in candidate countries. They are Coffey Int. Dev. Ltd., ECON, The ID Group, Goldwyn Int Strategies, Hart Nurse Limited, Oxford Policy Management, PriceWaterHouseCoopers and Accountability companies. Also, criteria are created by IOITI Consulting Group.
In 2008, July 17, reunion held in Oil Fund with the participation of the IOITI parties – IOITI Government Commission, EITI NGO Coalition, together with the representatives of the local and foreign companies of the extractive industries. In the reunion many topic were discussed including preparation for appraisal, selection of the appraising company among the list of the companies offered by Administration, as well as amendments to Mutual Agreement Memorandum offered by EITI Coalition were discussed. After discussion, based on the NGO Coalition proposal a trilateral workgroup were established related to the appraisal issues. According to the Coalition Committee Decision NGOs were represented by Gubad Ibadoglu, Sabit Bagirov and Ingilab Ahmedov, Government Committee was represented by 1 member from Ministry of Economical Development, 1 member from Tax Ministry and 1 member from Oil Fund and companies were represented by members from BP, Chevron and SOCAR. Workgroup held first meeting on July 4 and identified the activity plan.
To choose appraising company it is suggested to base on the “criteria how to choose the auditing company and activity range” document which was prepared by IOITI Secretary. According to the suggestion it is intended to mark max 30 points for the appraising company’s suggestion quality, max 10 points for the level of the specialists which will be involved to appraisal process, max 10 points to the suggested deadline, max 50 points to the financial value of the suggestion. In the first meeting coalition representatives showed their opposition to max 10 points to the level of the specialists and suggested 30 points for the given criterion, after discussions they came to the conclusion and increased the point to 15. Beyond this, it is also decided to send an official letter to EITI Administration to get feedback if activity plan has been replaced by the trilateral memorandum or not, which was suggested by the Coalition.
In October 2008, workgroup carried out tender between seven companies to select the company that will carry out the appraisal in Azerbaijan. Four companies responded to the tender, they were Coffey International Development, Goldwyn International, Hart Group and ECON. In November 2008 workgroup discussed the offers and decided Coffey International Development to carry out the appraisal. Between December 8-10 a seminar was held related to the appraisal which was financially backed by Revenue Watch Institute, Norway Embassy and Oil Fund. In this seminar EITI representative introduced and informed about 18 indicators in appraisal process which is prepared by International Consulting Group.
Later on December 22-23, appraisal indicators related trainings were held for Coalition members, which was the decision of the Coalition Committee. During the event Ingilab Ahmadov, Coalition Expert informed about the appraisal process and its possible outcomes. Later, 18 indicators about EITI Membership, Preparation, Publicity and Propagation stages have been clearly explained to the participant and discussed. At the end of the discussion, it is decided to prepare general document that will unanimously express the Coalition opinion. And this task was charged to Coalition Committee coordinator, Azer Mehdiyev.
On January 13, 2009 a meeting was held between EITI Coalition current structure, former structure, as well as their members and Coffey International company representatives which will carry out appraisal process in Azerbaijan. The main reason of the event was to identify the position of the Coalition regarding to the International Transparency Initiative appraisal process in Azerbaijan. Tim Roofer, Coffey International representative, Trond Kubberud, IPAN oil-gas industry specialist, chief of “balance-audit”, Ali Nabiyev participated in the event, all of them was in, evolved into consortium which will held the appraisal process in Azerbaijan. Coalition Committee members Mirvari Gahramanly, Dunya Sakit, Ogtay Gulaliyev, Ilham Huseinly, Committee coordinator Azer Mehdiyev, former structure of the Committee Telman Zeynalov, Sevgim Rahmanov, Aslan Valiyev, Committee members Zohrab Ismayilov, Vugar Bayramov, Razi Nurullayev, Ilham Shaban also participated in the event. We also inform that appraising company met former Committee structure members Sabit Bagirov, Ingilab Ahmedov and Mirvari Qahramanly separately.
During the meeting International EITI Secretary intended to learn Coalition opinion related to appraisal indicators. Coalition member Z. Ismayilov expressed his ideas about 18 appraisal indicators and added the lack of multilateral workgroup for the execution of the EITI, workgroup plan, also indicated that companies are not willing to give individual reports, government’s less efforts to resolve issues that creates a barriers for EITI processes. Because of all these shortages caused many issues such as Coalition reports left unimproved, companies many and repeating mistakes left incorrect, and other moments are still not discussed with the participation of all parties. Beyond these companies is not reporting social aids, as well as governmental payments for the physical face Income Tax. But EITI involves any kind of payments. Then Z. Ismayilov also talked about the companies reports based on the international audit opinions, he noted that coalition opinion is negative about this issue: ”most of the reporting companies, mainly local companies are not internationally audited. For example, the biggest local company SOCAR has not been audited yet as well as Government Institutions. This is based on the transition to International Accounting Standards, but this process also is being held for years.”
Committee member Ogtay Gulaliyev emphasized the trilateral agreement memorandum 12th article which was introduced as a workgroup plan by Government Commission: ”in this article, it is expressed that the memorandum doesn’t set up legal responsibilities for the parties. But workgroup plan needs to be exact with shift and should set up legal commitment for the parties. In Azerbaijan, multilateral workgroup has not been set up. The parties come together only when audit reports are being declared, and it is characterized as a formal meeting. The representatives of such companies are not responding to the discussions about the important issues as they say that we don’t have enough authority. During the memorandum signing process government promised to improve its and other introduced reports, but it is still a promise. Beyond this, we cannot say that the operations to achieve understandable and comprehensive reports are not sufficient.” Committee member also noted that the companies are not willing to cooperate with the coalition, and indicated the sample of SOCAR, as SOCAR did not responded to the queries sent to. Committee member Dunya Sakit wanted to answer the appraising group’s question, on which query left unanswered by the SOCAR. He noted that they sent a query to learn the oil portion that belongs to Azerbaijan according to the “Treatment of the Century”. He said: ”it is shown as values in the report. Coalition experts has doubts about the oil portion is the same with the treatment or not. We intended to clarify this issue but SOCAR didn’t respond to the query, consequently, we didn’t make it.” Committee member also supported the opinions of the other regarding to the lack of the multilateral workgroup and plan.
Committee Member Ilham Huseynly also shared the opinions of these colleagues and also said that it is important to evaluate Coalition suggestions in order to make EITI processes formal in Azerbaijan.
Coffey International met government commission and other companies and concluded the meeting sending preliminary report to the parties of the multilateral agreement Memorandum. One of Agreement party SCEITI Coalition sent its suggestions to Appraising group after getting acquaintance with the report. Coalition valued appraising group’s operation and also emphasized that it is expedient to have some issues or to have some issues to be shown preciously in the document. One of these issues was the importance of the multilateral committee establishment shown on the 4th article of the report. Coalition considers that it is important to show this issue on the report: ”it is very important to establish multilateral group. We think that lack of multilateral group caused many issued left unattended such as EITI process and left issues undecided. Continue without multilateral group can barrier the voice of the citizen community in future”. Second important issue is about the 8th appraisal indicator:”it is reported that NGO Coalition didn’t have utters. But in fact, in meetings we declared that not discussing the coalition suggestions relating to establishment of the trilateral group, not improving report forms, not creating workgroup sign government’s insufficient activity to resolve barriers in EITI process.
Coalition still supported the position that companies should involve their SSPF payments to the report and that doesn’t violate the EITI rules: ”EITI requires companies to involve every kind of payments to the report that is made to government. Consequently, coalition suggestion is based on this issue.” In another hand, coalition compromised in the approval of the forms with one term in order not to barrier the preliminary report preparation: ”it is decided to review this after a while in the meeting of memorandum parties. But this is still left unintended.” We note that the two suggestions by coalition – establishing workgroup and approval of the plan have been accepted by the government commission as important indicators of the appraisal process. Thus, on January 9, government commission sent letter to EITI to get feedback about “work plan about the EITI applications in Azerbaijan”. The letter was discussed by coalition at the same day. Committee considered this negative as the workgroup plan has not been accepted yet, and also said that it is impossible to discuss this issue in such a small time range. It is decided to establish trilateral group to create workgroup plan during the discussions. Committee sent response letter showing the position of the committee to Shahmar Movsumov, Head of Government Committee, and Oil Fund CEO asking to consider the coalition’s position. It is shown in the statement: ”To create plan and to adapt the positions of the parties it is necessary to create workgroup with the participation of Agreement Memorandum parties. Plan should be created by workgroup by discussing it with the parties of the agreement memorandum together.
On January 30, Memorandum parties received letter from government commission related with the formation of the multilateral workgroup. It stated in the letter: ”as you know Azerbaijan is in the last stage of the appraisal process and we reviewed and responded the first report of the appraising group. At the same time appraising party also sent the report to the International EITI Secretary and private appraising commission attached to EITI International Administration also reviewed the report. Preliminary results show that it is expedient to formalize multilateral group (Agreement Memorandum Parties) and its 3 time meeting in a year. You may send your feedback about the issue by 17:00, February 3, 2009. Otherwise it will be accepted as satisfactory feedback from your.
In the second letter of the commission it is noted that “the so planned multilateral group which will monitor the EITI processes in Azerbaijan will be responsible for the whole liabilities of the Mutual Agreement Memorandum parties. Multilateral group also will be responsible for plan (Plan has been already suggested to Memorandum parties.) as well as other issues that will be emerged during EITI process.”
Coalition Committee responded to letter and said that it is positive to have multilateral group having members from Mutual Agreement Memorandum and supports this initiative: ”Coalition accepts that it takes time to resolve procedures in the manner of establishing Multilateral Group. We – at the same time, also want to express that we don’t barrier the EITI processes as the EITI Coalition of the Social Community, as we consider the principal agreement upon Multilateral Group to be shown on the total report. We also consider that the issues related to establishment of the multilateral group shown below are also important and should be indicated in the total report:

• Deadline for the establishment of the Multilateral Group
• Regulations of the Mutual Group to be agreed by the parties
• Importance of indicating group’s structure, number of representing members, groups authority, rights and the responsibilities of the parties, formation of the group’s work and decision making rules in the report.
• Importance of Creating the plan, its acceptance and behaviors to the plan.”

International EITI Secretary made a decision to grand Azerbaijan a full-right membership status based on the report from Coffey International EITI process appraisal. Thus, 17th February 2009, EITI International Administration confirmed Azerbaijan as a member country and made 4 terms: to create multilateral group, to formalize plan, to improve company reports and socialize the EITI reports. These are accepted as the responsibilities of the Azerbaijan Government. The deadline to establish multilateral group in Azerbaijan was set for 15th of August, 2009. EITI Administration decided to review other issues in the meeting that will be held in Baku on October. In 20 April, 2009, on the meeting between Agreement Memorandum parties they decided to establish Multilateral Group (MG) and then Working Plan regarding to the EITI Coalition suggestion. It is also suggested to create workgroup of 9 people (3 from each) to organize the work plan to establish MG. this idea has been accepted buy Coalition Committee on 24th of April and Azer Mehdiyev, Zohrab Ismayilov and Ogtay Gulaliyev have been elected to represent the Workgroup. At the same time Coalition Committee also created the main principles and suggestions on the process of establishment of the MG and distributed to the related parties. The issues below have been accepted as base principals of the MG formation period by Coalition Committee in the process of MG creation, considering non-agreement situations, and discussions:

• Name – MG is known as EOTI administration in Azerbaijan
• Parties – MG consists of representatives from agreement memorandum(government commission, companies and Social Community EITI Coalition)
• Representation – 3 members from each party will represent the parties. Every year members can be rotationally substituted. For this parties assign 3 members as candidates(substitution)
• Decision-making mechanism – consensus principals are main in this issue.
• Control of the group meetings – chairman of the meetings will be in term of turns.
• Formation of group activity – group activity bases on the regulation. Regulation is accepted by MG. Regulation consists issues about formation of the group and its activities, obligations and functions, members authority and responsibilities, formation of its work principles and other issue.
• Secretary – EOITI secretary is operating attached to MG.

After a while NGO Coalition protested the activities because of slow discussions (3 meetings in 4 month), Government Commission delaying and not fulfilling the responsibilities on time (MG was decided to be established on 15th of August.). On 22nd of August, in the meeting of Workgroup the initial variant of the “Agreement on Formation of the MG and its activity” was created and introduced to the parties. This agreement was discussed with the participation of the Agreement Memorandum parties and there were some kind of agreements but they didn’t come to unanimous agreement at the end. It is decided to continue discussions. On the next discussions held on August 28 and September 4, EITI Coalition Committee either agreed or suggested the compromised version of the issues which are not accepted by Government Commission and companies. For example, NGO Coalition compromised the Government commission to act as a chairman on MG meetings, to hold meetings 2 times in a year and in other issues.
Government Commission expressed its opinion about the establishment of the MG on September 15 meeting. There are many agreements about the document but still there are two issues left non-agreed between the parties (23 September 2009). NGO Coalition insists on to give authority to MG for the selection of the auditing company and appraising group, but government commission insists on to give authority to Selection Group. At the same time the parties have not been agreed on the EITI Secretary Activity status and its location. Right now, the discussions is being held between the parties.
17:44 / 04.11.2009

Last correction date of the file: 27/1/2010 - 0:7:15

Other language version of the file: /az/