Inauguration of Baku Arbitration Centre and Its Regional Impact

The official launch of the Baku Arbitration Centre (“The Centre”) on 24–25 October 2025 is set to be a pivotal moment for the legal landscape of Azerbaijan and the wider region. Announced as part of the Azerbaijan Arbitration Days 2025 in Baku, this two-day inauguration event is drawing advocates, in-house counsel, and academics from across the Caucasus, the Turkic world, and beyond. This development represents the culmination of years of groundwork, including legal reforms and professional networking, with the aim of positioning Baku as a new hub for resolving commercial and investment disputes. The Centre's launch coincides with a period of significant geopolitical and economic reorientation, as businesses seek neutral and efficient venues for conflict resolution in the context of expanding trade routes and investments in the South Caucasus region.

I. Baku’s Strategic Importance and Its Concurrence with the Launch’s Timing

The selection of Baku as the host of a regional arbitration centre was not accidental. Azerbaijan's capital is strategically located at the crossroads of Europe and Asia, sitting on the western shore of the Caspian Sea. Its position has historically establish a vital link between international trade and the city, placing it in a predominant position along the Silk Road. Today, this role has been revived in huge projects such as the "Middle Corridor" – a trans-Caspian trade route linking Europe to China and South Asia – in which Azerbaijan plays a key transit role.

This was foreshadowed during the 2024 Azerbaijan Arbitration Days, where participants explicitly proposed the establishment of a regional arbitration centre in Baku, "emphasising its strategic location as a transit hub connecting Asia and Europe". Therefore, the timing is a significant opportunity, as Baku's growing profile as a safe and neutral venue amidst shifting geopolitical currents provides alternatives to traditional routes disrupted by conflict or sanctions.

The domestic context is also of equal importance. Azerbaijan has recently implemented substantial legal reforms to create an arbitration-friendly environment, aligning with global standards in time for the Centre's debut. It should be noted that a new Law on Arbitration was adopted in late 2023 and entered into force on 25 January 2024. This modern law, largely based on the UNCITRAL Model Law, "regulates both international and domestic arbitrations" and brings Azerbaijan's framework closer to contemporary international practices of the arbitration-friendly world. The reform was a crucial prerequisite as it not only rectified the shortcomings of the 1999 arbitration law, but also explicitly paved the way for establishing a new arbitral institution in the country.

I. Legal and Institutional Framework of the Baku Arbitration Centre

The Baku Arbitration Centre has been founded on a robust legal and institutional basis that has been meticulously established over the past two years. As mentioned, Azerbaijan's new Arbitration Law (2024) represents the core of the nation's updated dispute resolution regime. The law is composed of 59 articles, which are organised into eight chapters, thus mirroring the structure of the 2006 UNCITRAL Model Law. The scope of the Act encompasses a wide range of topics, including arbitration agreements, the composition of tribunals, interim measures, the enforcement of awards, and court support. It is important to note that the law addresses previous gaps that had hindered arbitration in Azerbaijan. Under the 1999 statute, translation issues and a lack of procedural integration meant that even basic features, such as interim relief or evidence-taking, were practically unworkable in local courts. The recently enacted legislation has addressed these concerns and incorporated contemporary provisions, including arbitrator immunity when acting in good faith and the authority for tribunals to mandate security for costs.

Furthermore, it delineates non-arbitrable matters (for example, family and criminal cases) and refines the grounds for challenging awards on public policy grounds. Of particular note is the legislation's delineation between domestic and international arbitration, with the imposition of quality standards on domestic arbitrations. For instance, ad hoc arbitration is no longer permitted for purely domestic cases, which are now required to go through accredited institutions. This strategic manoeuvre virtually guarantees the new Centre a role in handling local disputes, while allowing flexibility for international cases. As commentators observed at the time, the reform "represents a significant step towards modernising the country's arbitration framework" and aims to establish Azerbaijan as a competitive arbitration jurisdiction in the region. In this regard, The Centre is established within a legal framework meticulously calibrated to facilitate its operation within the region and beyond, characterised by accommodating judicial bodies of Azerbaijan and contemporary legislative instruments.

The Baku Arbitration Centre has been set up to provide a safe and desired legal hub to arbitrators, lawyers and all parties to resolve their disputes. The Centre was started by the Azerbaijan Arbitration Association (“AAA”), a non-profit organization that has been encouraging arbitration in the country. The first head of the AAA, Professor Kamalia Mehtiyeva, is also the President of the Baku Arbitration Centre. Prof. Mehtiyeva is a well-known expert on arbitration (having worked at a major international firm and as a lawyer in international court cases) and she combines her knowledge and insights on regional developments with expertise from around the world, which is exactly what The Centre is promoting.

The Centre's leadership also works closely with the legal and business communities in Azerbaijan. At the 2024 Baku Arbitration Days, the Chairman of the Supreme Court, Dr. Inam Karimov, said that the new law is part of bigger changes to the law system and that state courts are "willing to help at different stages of the process of solving disagreements". This also shows that the domestic law system of Azerbaijan supports the new institution. The private sector has further emphasised its positive attitude towards a new Arbitration Center. Mammad Musayev, the head of the Entrepreneurs Confederation of Azerbaijan, expressed his contentedness about the development of arbitration as a way to solve business disputes that was easy for businesses to use. These endorsements are of particular significance as they possibly reflect that local courts will probably follow the Centre's rulings, and that businesses will be more likely to include arbitration clauses in their contracts.

Operationally, the The Centre is expected to issue its own set of arbitration rules (though at launch these may still be in draft or adapted from established models). Preliminary indications suggest that the Centre will adopt contemporary best practices, analogous to those employed by its regional counterparts. These include the streamlining of procedures for minor claims and the establishment of provisions for emergency arbitrators, practices that have become standard within institutions such as Istanbul Arbitration Centre (“ISTAC”) and others. The Centre's official website and materials highlight its commitment to "resolving disputes with expertise," and it has actively engaged with international arbitration networks even before opening – the Azerbaijan Arbitration Days conferences have featured representatives from UNCITRAL, the Vienna International Arbitral Centre (“VIAC”), and leading practitioners who provided input on shaping The Centre's services.

In May 2025, the Centre's team collaborated with the American Chamber of Commerce in Baku to host a masterclass on international arbitration. The purpose of the masterclass was for stakeholders to brainstorm their ideas on arbitration reform and best practices. This proactive approach suggests that The Centre's institutional identity will be characterised by openness, learning, and alignment with global standards. Accordingly, The Centre has been established with a robust foundation, underpinned by a UNCITRAL-based legal framework, guided by experienced leadership, and supported by both judicial authorities and business entities. This solid legal and institutional foundation suggests a promising trajectory for the Centre's credibility.

II.             A New Forum for the South Caucasus and Caspian Region

The Centre has genuine intentions to extend their borders well beyond of Azerbaijan. The establishment of it aims to address a significant gap in the South Caucasus and Caspian region, which has hitherto lacked a truly international arbitration hub. For a considerable period, parties involved in cross-border disputes in the Caucasus have utilised established foreign forums for the resolution of such disputes. A notable example of this practice is the frequent utilisation of International Chamber of Commerce (“ICC”) rules in Paris or Stockholm, or London Court of International Arbitration (“LCIA”) rules, by Georgian or Azerbaijani companies in dispute for the purpose of arbitration. While Georgia established the GIAC (“Georgian International Arbitration Centre”) in 2013 and Armenia maintains an arbitration court under its Chamber of Commerce, none have achieved broad international traction. As a 2016 analysis noted, the region "currently lacks an established international arbitration centre," which is precisely the niche Istanbul sought to occupy for Turkey. It is evident that Baku is assuming a pioneering role in the Caucasus region, with the potential to emerge as a prominent international arbitration centre. The Centre's stated mandate is to provide a neutral, professional forum that is comparable to those operating abroad, but which is based in the region. This approach is said to result in savings in terms of time and cost for local parties, while also leveraging regional expertise. Azerbaijan's relatively robust economy, largely attributable to its energy revenues, and Baku's well-developed infrastructure, position the city favourably to serve as a venue for hearings and case administration for neighbouring countries. It is noteworthy that even disputes between parties from other South Caucasus states could, in theory, be settled in Baku if the Centre builds a reputation for impartiality.

In the broader Caspian region, Baku's potential role is equally significant. The Caspian basin is abundant in natural resources and has seen a proliferation of infrastructure projects, including multinational pipeline agreements, oil and gas ventures, port investments, and logistics contracts. Disputes arising from these projects have frequently been referred to arbitration in distant cities; however, a local option could now be available. Azerbaijan itself is a party to numerous international energy consortia (such as the BP-led contracts for offshore oil fields, and the Southern Gas Corridor supplying Europe). The presence of an arbitral institution in Baku has the potential to influence the selection of such contracts as the preferred seat or at least the administering authority for disputes, particularly in instances where Azerbaijani law governs or local interests are implicated. Furthermore, Baku may be seen as a convenient intermediate location between the East and the West by Caspian littoral states such as Kazakhstan and Turkmenistan, that have similar legal traditions from the Soviet era.

To illustrate this point, one may consider a hypothetical dispute between a European investor and a Central Asian state. In such a scenario, Baku could emerge as a geographically and culturally intermediate location, potentially deemed acceptable by both parties involved. This approach aligns with the The Centre 's vision of functioning as a "transit hub" for disputes, encompassing not only goods but also services. The Centre has adopted a multilingual approach, offering proceedings in multiple languages, including but not limited to Azerbaijani, English, and Russian. Furthermore, the Centre has assembled a panel of arbitrators that includes regional and international names. The objective of these measures is to attract cases that have a connection to the Caucasus/Caspian region, but which previously had no choice except to go abroad.

It is possible to discern the sectors in which The Centre perceives itself to have a comparative advantage at an early stage in the programming process. The inauguration conference, scheduled for October 2025, will feature panels on energy, construction, and investment arbitration. Themes such as energy and construction are not merely incidental; rather, they are of pivotal significance to the Caspian economy and are also a frequent source of disputes. In a 2024 conference panel bearing the apt title of "Building the Silk Way," speakers deliberated on Azerbaijan's role in major Silk Road revival projects (including the ambitious Digital Silk Way fiber-optic project) and even put forward the concept of a "Green Silk Road" initiative for sustainable infrastructure. The conclusion drawn was that the establishment of a regional arbitration centre in Baku would be a natural fit to handle conflicts arising along these new Silk Road corridors. In addition, a panel discussion focused on the subject of gas and electricity pricing disputes explored the intricacies of energy contracts in the context of volatile markets and geopolitical shifts. These discussions highlight that Baku's arbitral forum is being customised to address the specific requirements of the region's economy. For instance, the resolution of a pricing dispute under a long-term gas supply contract or a delay claim under a construction project in the Caspian could now be a viable prospect in Baku, where arbitrators with a familiarity with the civil law tradition and regional context are at hand.

To sum up, The Centre is set to become the preferred arbitration venue for the South Caucasus and Caspian regions, a function that has hitherto gone unfulfilled. The success of this initiative will signify the establishment of a reputable regional alternative for parties spanning from Baku to Tbilisi to Aktau, thereby reducing their reliance on distant tribunals. This could also reinforce the rule of law locally, as more disputes are resolved under the eyes of regional legal communities. The Centre's capacity to demonstrate its practical efficacy is, of course, a prerequisite for attaining this status, a subject to be addressed subsequently. Nevertheless, the conceptual framework and the demand for such a forum are evidently in place.

III.           Bridging Central Asia and the “Middle Corridor”

As said before, The Centre has expressed its ambition to extend its influence beyond the Caucasus region, with a view to complementing other new institutions in the broader Eurasian landscape. The timing of The Centre's launch is opportune: the Middle Corridor – the overland and Caspian Sea route connecting China to Europe via Central Asia, the Caucasus, and Turkey – has gained momentum as an alternative to routes through Russia. Azerbaijan is strategically located at the centre of this trade route, with its port and rail infrastructure serving as a crucial gateway between Central Asia and the West. It can thus be concluded that the establishment of a dispute resolution hub in Baku would be a logical progression in view of the burgeoning trade and investment flowing along this route. The organisers of the Centre have emphasised this outlook; the 2025 Arbitration Days programme specifically highlighted the Middle Corridor as "a key link" for international commerce and a focus area for The Centre's services. In practice, this signifies that the Centre is anticipated to oversee disputes involving Central Asian parties or projects. For instance, in the event of a Turkish and Kazakh company entering into a joint venture to construct infrastructure in Uzbekistan, it could be considered prudent to designate Baku as the designated arbitration seat. This would be viewed as a neutral midpoint (geographically and legally) as opposed to selecting either party's home turf.

Notwithstanding the aforementioned points, it is important to acknowledge that The Centre 's foray into Central Asia is not without competition. In recent years, a number of Central Asian states have established their own arbitration forums with a view to attracting disputes. In 2018, Kazakhstan established the Astana International Financial Centre (“AIFC”) Court and International Arbitration Centre, which introduced common-law judges and contemporary arbitration regulations with the objective of establishing itself as a regional hub. It is widely acknowledged that Astana's IAC has achieved significant progress since its establishment in 2018. The IAC has had a substantial impact on Kazakhstan's legal landscape, rapidly consolidating its position as a regional leader in commercial dispute resolution by offering a model grounded in international best practices. Similarly, Uzbekistan launched the Tashkent International Arbitration Centre (“TIAC”) in 2019, which boasts a panel of internationally renowned arbitrators and even a zero administrative fee policy to attract cases in its early years. These developments are indicative of a broader trend: emerging economies across Eurasia are establishing local arbitration institutions to address disputes arising from foreign investment and cross-border trade, instead of relying exclusively on established entities such as the ICC or LCIA. Baku represents the latest entrant in this trend, targeting a geographic and cultural space that is somewhat similar to that of Istanbul, Astana, and Tashkent, yet with its own unique advantages.

The question therefore arises as to how The Centre will fit into this broader regional arbitration landscape. The phenomenon may be attributable to both cooperation and healthy competition. It is worthy of note that the inauguration of The Centre is being attended by prominent figures, including Professor Ziya Akıncı, President of the ISTAC, and leaders of other international institutions. This attendance is indicative of a commitment to fostering collaboration and strengthening international ties. In June 2025, ISTAC itself noted a cooperation agreement with the Permanent Court of Arbitration in The Hague, showing that regional centres are seeking global linkages. It is anticipated that The Centre will enter into memoranda of understanding with sister institutions, with a view to sharing best practices and promoting each other's events. Collectively, these measures are expected to raise the profile of arbitration across the Silk Road region. The Centre and AAA have already established collaborative relationships with organisations such as VIAC and UNCITRAL for the purpose of training and conference participation, thereby signifying a willingness to acquire knowledge and incorporate new practices.

IV.           Conclusion: Outlook for Baku as a Regional Arbitration Hub

The official launch of the Baku Arbitration Centre is a significant milestone that reflects both Azerbaijan's aspirations and a broader regional trend towards localised dispute resolution. In the span of just a few years, Azerbaijan has updated its laws, cultivated an arbitration community, and now opened the doors of an institution that could significantly alter the dispute-resolution map of the Caucasus, Caspian, and Central Asia. While it is premature to declare the The Centre a success, the groundwork laid so far – modern legislation, institutional support, and strategic vision – gives it a fighting chance to thrive. If Baku can leverage its geographical and economic strengths as effectively in the legal arena as it has in energy and transport, we may soon see it handling a steady stream of cases that previously would have gone to Paris, London or Moscow. The strategic importance of Baku as a nexus between East and West is now being reflected in a strategy to make it a legal nexus as well. This has significant long-term ramifications. The establishment of a vibrant arbitration centre in Baku could potentially serve as a catalyst for the influx of foreign investment into Azerbaijan and the broader region. This potential development would be underpinned by the assurance that disputes can be adjudicated in a manner that is both equitable and within the territorial jurisdiction of the host country. Furthermore, it has the potential to stimulate a positive spiral of legal reforms within the region, as neighbouring countries observe the advantages of aligning their arbitration frameworks with the possibility of integrating with or utilising The Centre 's services.

It is evident that The Centre's regional role will undergo a process of evolution in congruence with the developments experienced by other institutions. Rather than considering it in isolation, it is more appropriate to view it as part of an emerging network of arbitration hubs spanning Eurasia, from Istanbul to Nur-Sultan (Astana) to Tashkent. In the next five to ten years, it is possible that a considerable volume of dispute resolution may be observed to have been transferred by this network from traditional power centres to alternative venues in closer proximity to the locations where business activity is taking place. For users of arbitration – companies, investors, states – greater choice is invariably beneficial, as it enables them to select a forum that is optimally suited to the particularities of the transaction and the cultural and legal comfort zones of the parties involved. Baku's provision of legal services, combining civil law traditions with an international outlook, will be a pertinent option for consideration. The long-term prospects of this forum will be contingent on its ability to carve out a niche, for example as the specialist forum for Caspian energy and infrastructure disputes. In addition, the forum's ability to consistently deliver justice will also be a determining factor.

In conclusion, it is evident that the establishment of the Baku Arbitration Centre has been instrumental in catalysing the region's growth. This underscores Azerbaijan's commitment to aligning with global legal standards and taking a leadership role in the Caucasus's development as more than just an energy exporter but also a centre of commerce and law. Notwithstanding the challenges faced, The Centre's forward momentum is noteworthy. As stakeholders convene in Baku in October 2025 to celebrate this inauguration, there is a sense of cautious optimism in the air – a perception that a new chapter is beginning for dispute resolution between East and West. Should the Centre remain committed to its mandate of neutrality, efficiency, and expertise, it has the potential to become a permanent fixture in the international arbitration landscape. The transition from launch to legacy will be subject to close observation by practitioners and policymakers. For the time being, Baku has made a notable foray onto the stage as an arbitration venue. The forthcoming years will serve to demonstrate the extent of its potential in establishing itself as a regional arbitration hub with a global reach.