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Hospitality Law in Azerbaijan

19 September 2023 20:01 (UTC+04:00)
Hospitality Law in Azerbaijan

As soon as I received a job offer from a Hotel Management Company with the largest portfolio in the South Caucasus, the first question flashed through my mind was that what do hospitality lawyers essentially do? While doing preliminary research, firstly I found a source that described the hospitality law as the legal and social practice concerning the treatment of individuals who visit an establishment, meaning restaurants, hotels, motels, and other public accommodations. Another one stated that the hospitality law governs and regulates the activities of the professionals, guests & other related entities.

However, my four years of tenure as a de-facto in-house legal counsel at the Hotel Management Company proved that such definitions are far from being explanatory enough. Below I intend to present a broader insight on the scope of the law that is practiced by the hospitality industry stakeholders.

Accordingly, hospitality law in Azerbaijan can be elaborated as follows:

Contracts

Legal professional is involved in reviewing, commenting and advising the License/Franchise and (or) Management Agreements within the framework of hotel/restaurant development projects. These agreements are mostly executed for the term of 20-30 years and are very difficult to withdraw from. Therefore, negotiating the License/Franchise and (or) Management Agreements is arguably the most important practice where a hospitality lawyer must take the lead and spend most of the resources in order to facilitate the best possible deal for the owner.

Another hospitality-specific instrument is the Sales Agreement that mainly implies individual accommodation, group, agency, and event sales agreements. Due to constant change of the guest markets and the industries they represent (e.g., group of medical professionals), these agreements must by regularly reviewed and adjusted in accordance with the necessity.

Procurement of goods and services are also crucial part of the daily hotel and restaurant operations. Any deficiency in quality, timely delivery, etc. and any other breach of the supplier obligations might end up with decreased customer satisfaction, which in its turn will affect the revenues. Therefore, the hospitality lawyer must frequently review and revise the purchase agreement templates in order to minimize the risks of any shortage.

Corporate

As a long-established hospitality tradition hotels and restaurants replace their General Managers from time to time. GMs might also voluntarily or involuntarily change their workplaces due to reasons applicable to any other employees in the labor market. Lawyers under such circumstances must support the employer to ensure the smooth transition of the management to avoid operational interruption.

Additionally, large hotel and restaurant ownerships occasionally require changes in corporate structures. Changes tend to include multi-practice legal matters, such as corporate legal solutions, allocation of labor, etc. In-house counsel’s contribution in these projects is pivotal to prevent any loopholes.

Hotel Development

Acquisition transactions are conventional part of the hospitality ownership. It is quite common that owners acquire title over another property or an owning company to expand their business. Hospitality lawyers play an important role in different stages of these transactions, such as, due diligence, contract negotiation, etc.

Intellectual Property and Copyrights

The hotels that are managed by the global management companies operate Food and Beverage (as well as Spa, etc.) outlets under international brands. This is also the case applicable to managed/franchised stand-alone or chain restaurants. Under relevant agreements owners are always required to register the IP rights over the Hotel or F&B brands to ensure that they’re protected. The same practice can also be followed by the owners that are not contractually obliged to ensure the security of their brands.

Hotels and restaurants provide entertainment services, such as, playing music, or broadcasting TV channels in the rooms or public areas. Whether music playlists are purchased from approved vendors, as it is the case for branded hotels, or they are created by the hotels and restaurants themselves, an agreement with the accredited Public Association(s) must be reached to pay the relevant royalties. Owners must also sign broadcasting agreements only with the distributors that maintain necessary license to re-distribute private TV-channels for commercial purposes.

All aforesaid fall within the scope of in-house legal team, which must protect the owner from potential lawsuits or penalties.

The industry-specific regulations

As the hospitality industry was hit by the COVID-19 the most, hotels and restaurants were subject to severe scrutiny to minimize the risks of infection. The government was consistently adopting or amending multiple cross-cutting COVID-19 regulations depending on the pace of the spread of the coronavirus. As the businesses were subject to heavy penalties for breaching the regulations, hotel and restaurant owners as part of their daily routine had to follow the developments to adjust their operations with the new rules. Hospitality lawyers were one of the key parts, and as the liaison between the regulators, clients, and the business they represent, they were responsible for making sure that their businesses generate revenue by strictly following the laws.

The common practice

Aside from the hospitality-related disciplines, hotels and restaurants practice the areas of law that are relevant to any business, including but not limited to:

Criminal justice:

Death, certain fraud, theft, etc. cases require the involvement of law enforcement and hospitality lawyers step-up to ensure the proper cooperation.

Labor and HSE:

Hotels and restaurants tend to have complex labor structures due to variety in employee positions, number of employees, organizational chart, workplace characteristics, etc. Such structures are sometimes accompanied with challenges that need legal solution.

Permits and licenses:

Lawyers are responsible for communication between their business and regulators to acquire permits and licenses as required by the law for the purposes of F&B operations, construction works, radio communication, etc.

The above-mentioned are the unexhaustive list of the hospitality lawyer’s practice. The hotel and restaurant owners are recommended to allocate sufficient resources for legal support to safeguard their business.

About the author

Ruslan Bayramov is a Founding Partner at Legalize Law Firm. For four years he was Group Legal Manager at the largest Hotel Management Company in the South Caucasus for its portfolio. During his term Ruslan led contractual negotiations with multinational hospitality companies, such as, Marriott International Inc., Accor Hotels, and Hyatt Worldwide. He is also specialized in corporate law, eCommerce, and AML/CFT Compliance. For further info about the author and Legalize Law Firm please visit https://www.legalize.az/en

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