LAW OF THE AZERBAIJAN REPUBLIC

of December 15, 1998 No. 590-IQ

About natural monopolies

Article 1. Law purpose

This law determines the organizational and legal basis of state regulation connected with natural monopolies in the Azerbaijan Republic and is aimed at providing balance of interests of subjects of natural monopolies and consumers.

Article 2. The relations regulated by the law

This law governs the relations arising in the markets of products, works, services (further - goods) in which subjects of natural monopoly, consumers, relevant organs of the executive authority and local self-government participate.

Provisions of this law do not extend to field of activity of subjects of the natural monopolies which are not relating to natural monopolies, except as specified, provided by this law.

Article 3. Legislation on natural monopolies

The legislation on natural monopolies consists of the Constitution of the Azerbaijan Republic, this law, the Law of the Azerbaijan Republic "About anti-monopoly activities" and other regulatory legal acts.

Article 4. Basic concepts

The concepts used in this law have the following values:

* the natural monopoly - condition of the goods market in case of which the satisfaction of demand is more effective in the conditions of lack of the competition owing to technology features of production and made (implemented) subjects of monopoly goods cannot be replaced in case of consumption with other goods.

* the subject of natural monopoly - the business entity who is engaged in production (realization) of goods in the conditions of natural monopoly;

* the consumer - the physical person or legal entity acquiring made (implemented) subject of natural monopoly goods.

Article 5. Fields of activity of subjects of natural monopolies

1. Treat fields of activity of subjects of natural monopolies:

1.1. Oil transportation and oil products on bulk distribution lines;

1.2. Transportation services of natural gas on pipelines, its storage and distribution;

1.3. Services in transfer and distribution of electrical and heat energy;

1.4. Services in operation of the main and local railway tracks, road constructions and structures, traffic control and traffic safety, railway stations and passenger stations.

1.5. Services of the airports, operation of the airports, runways and constructions, aviation and aeronautical servicing of aircrafts;

1.6. Road maintenance, tunnels and stations of the subway, activities for traffic control and for traffic safety;

1.7. Services of water ports, operation of port installations, activities for transportation of goods and safety of navigation;

1.8. Services in electric and mail service, being in general use, activities for operation and control for transferring and accepting radio - and television stations, high-voltage installations;

1.9. Operation of the main constructions on water purification, bulk distribution lines, system of water supply systems and the installations mounted on them on pressure and regulation;

1.10. Aeration, operation of the station of mechanical clarification, pumping, main and rain collectors in sewer economy and operation of sewer lines;

1.11. Operation of the water storage basins, channels, collectors, pipelines and dikes relating to melioration and irrigation;

1.12. Services in heat supply.

2. In case of emergence in the fields of activity of competitors listed in the 1st part of this Article to the available business entities, the subjects performing activities in the conditions of the competition are not considered as the subject of natural monopoly and this law does not extend to them.

3. The list of subjects of natural monopoly is established by relevant organ of the executive authority.

Article 6. State regulation of activities of subjects of natural monopolies

1. Regulation of activities of subjects of natural monopoly is performed by relevant organs of the executive authority (further - the bodies regulating natural monopolies).

2. For the purpose of regulation of activities of subjects of natural monopoly the following methods can be applied:

2.1. Price regulation (rates) for goods;

2.2. Determination of consumers to which services shall be without fail rendered, and (or) in cases when subjects of natural monopoly have no opportunity to satisfy in full requests of consumers for goods, determination of the minimum level of their providing with these goods;

2.3. Ensuring reduction of production volume (realization) of goods in compliance with the indicators established according to requirements of this law.

3. The bodies regulating natural monopolies can apply according to the legislation and other methods.

Article 7. Bases for application of methods of regulation

The bodies regulating natural monopolies make the decision on application of methods of regulation specifically on separately taken subject of natural monopoly taking into account the stimulating role of such regulation in improvement of quality of the made or implemented goods and satisfaction of demand for these goods. In this case it is determined, costs are how reasonable, and the following is considered:

* costs of production or sales of goods, including salary, cost of raw materials and materials, overheads;

* taxes and other payments;

* the cost of the main production means, the needs for investment for their reproduction and the depreciation charges;

* the actual and predicted profit;

* compliance of quality and quantity of the made or implementable goods to demand of consumers;

* state grants and other measures of the state support.

Article 8. State control of activities of subjects of natural monopolies

1. The bodies regulating natural monopolies perform the state control of activities of subjects of natural monopoly according to this law and other regulatory legal acts of the Azerbaijan Republic. For the purpose of suppression or elimination of actions which can negatively affect consumer interests or interfere with the transition proved from the economic point of view from condition of natural monopoly to free competition, the bodies regulating natural monopolies take the measures provided by this law and other regulatory legal acts.

2. The body regulating natural monopolies exercises control of the following actions of subjects of natural monopoly:

2.1. Acquisition of property right or uses of fixed assets for production (realization) of goods to which state regulation is not applied according to this law (if book value of the fixed assets of the subject of natural monopoly raised in general on production of the specified goods is higher than 10 percent of the amount of the authorized capital of this subject on the last approved balance);

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