An amendment has been proposed to the Law of the Republic of Azerbaijan “On Private International Law” clarifying the applicable law governing financial lease (leasing) agreements involving a foreign element.
The amendment adds new Article 25.1.3-1 to the Law, providing that where the parties have not expressly agreed on the governing law of a financial lease agreement, the law of the country in which the lessor is established, domiciled, or principally conducts its business will apply. Article 25 of the Law sets out default conflict-of-law rules applicable in the absence of a choice-of-law clause. The newly introduced provision aligns financial leasing with other specifically regulated contract types, such as sale, insurance, carriage, and loan agreements, for which the Law already identifies the governing law by reference to the characteristic performer of the contract.
In practice, the amendment increases legal certainty in cross-border leasing transactions by establishing a clear connecting factor for determining the applicable law. For example, if an Azerbaijani company enters into a financial leasing agreement with a leasing company incorporated in Germany, and the agreement does not contain a governing law clause, Azerbaijani courts might apply German law to the contractual relationship under the new provision.
The proposed amendment will be particularly relevant for companies and businesses involved in international asset financing transaction.
