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The Global Legal Monitor is an online publication from the Law Library of Congress covering legal news and developments worldwide. It is updated frequently and draws on information from official national legal publications and reliable press sources. You can find previous news by searching the Global Legal Monitor.

Azerbaijan: Tax Reform Proposed

(Aug. 31, 2016) On August 4, 2016, the President of Azerbaijan, Ilham Aliyev, issued a decree approving the Basic Principles of the Tax Reform Planned for 2016 and Guidelines for Streamlining Tax Collection. The decree orders the Taxation Ministry to draft, within the next three months, a detailed proposal that would bring current tax legislation in line with the approved Principles. (President of Azerbaijan Approved Directions for the 2016 Tax Reform, VESTI.AZ (Aug. 5, 2016) (in Russian).)

Reportedly, the reform will focus on changing the existing process of tax administration and collection. It will result in using simplified tax declaration forms; the development of new methods for risk assessment; and the improvement of services provided to taxpayers, including the creation of a call center at the Tax Ministry where, among other services, taxpayers would be able to register a business, establish a tax identification, receive copies of documents, and report the termination of or change in their business activities. (E. Rustamova, Tax Reform Will Discipline Azerbaijani Bureaucrats, ECHO.AZ (Aug. 10, 2016) (in Russian).)

Extension of the use of electronic payments and gradual restriction of cash payments is one of the Basic Principles. The document provides for the adoption of a regulation that would precisely list activities where operations without using electronic cash registers would be allowed. Fixed monthly tax liability will be established for such businesses. (United States-Azerbaijan Chamber of Commerce (USACC), Azerbaijan Announces Massive Tax Reform (Aug. 8, 2016).) The Principles foresee the possibility of conducting electronic audits and web registration and publication of audit findings, together with the introduction of the voluntary tax disclosure concept. It is proposed that the number of reasons for unscheduled inspections and reviews will be decreased. For example, desk tax audits by the tax authorities would be prohibited after 30 days from the filing of a tax return by the taxpayer. (Id.)

The calculation of value-added tax will also change. Instead of the current unified 18% VAT tax rate applicable to all taxable goods and services, lower tax rates will be introduced for some specific categories of goods, such as food and clothing for children and school supplies, and for certain services, including medical services, for socially disadvantaged groups of the population. Different taxation rules will be introduced for the production and processing of agricultural products, as well as for retail and wholesale trade operations. The current calculation of VAT, which takes into consideration the value of annual retail sales, will be changed in order to be based on the amount goods are marked up for sale. (Tax Reforms Will Simplify Business in Azerbaijan, GAPP.AZ (last visited Aug. 26. 2016) (in Russian).) The Principles prescribe that nonresidents of Azerbaijan will be able to receive VAT refunds due them at any border crossing point when exiting the country, not just at the national airport in the capital city as is currently the practice. (USACC, supra.)

Another declared goal of the reform is to bring Azerbaijani tax legislation in line with international law. This will require introducing tax transfer pricing, Common Reporting Standards, and effective tax controls over the activities of tax residents in offshore and low-tax jurisdictions and amending anti-avoidance rules. (Id.)

The United States-Azerbaijan Chamber of Commerce has characterized the reform as a “positive initiative that will enhance Azerbaijan’s attractiveness as a destination for investors.”  (Id.)

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Japan: New Act Targets Hate Speech Against Persons from Outside Japan

(Aug. 31, 2016) In Japan, “hate speech” against people with a specific ethnic origin has become a social issue. (Summary of Press Conference by Minister of Justice After Cabinet Meeting (Jan. 16, 2015), Ministry of Justice (MOJ) (in Japanese).)  The MOJ released a report on hate speech in March 2016 that stated that there were 1,152 confirmed cases of hate speech in Japan during the three and half years ending in September 2015.  (Human Rights Education Promotion Center, Public Foundation, Report on Investigation of Results of the Actual Condition of Hate Speech (Mar. 2016), at 33,  MOJ website (in Japanese).)  To improve the situation, the Diet (Japan’s parliament) enacted the Act on the Promotion of Efforts to Eliminate Unfair Discriminatory Speech and Behavior Against Persons Originating from Outside Japan (Anti-Discriminatory Speech Act) in June 2016.  (Act No. 68 of 2016, MOJ website.)

The Act declares that unfair, discriminatory speech and behavior against people who are legally residing in Japan and who are from or whose ancestors were from outside of Japan is not tolerated. (Id. Preamble.)  The Act includes an example of unfair, discriminatory speech and behavior: openly speaking in a manner that harms the life, person, freedom, reputation, or property of such individuals or significantly insulting such persons with the objective of encouraging or inducing discriminatory feelings against them.  (Id. art. 2.)

The Act obligates the government to implement measures to eliminate such speech and behaviors. (Id. art. 4.)  The government also must respond to requests for consultation from alleged victims.  (Id. art. 5.)

However, the Act does not have provisions on the punishment of a person who displays unfair, discriminatory speech and behavior.  Some commentators have criticized the Act as “toothless” and as “narrow” for excluding persons who do not reside legally in Japan from its coverage.  (Tomohiro Osaki, Diet Debates Hate-Speech Bill that Activists Call Narrow and Toothless, JAPAN TIMES (Apr. 19, 2016).)

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Israel: Gay Couple Recognized as Parents Without Genetic Testing

(Aug. 30, 2016) On August 7, 2016, the Tel Aviv Yafo Family Court recognized for the first time, without genetic testing, the parentage of a child born to a gay couple from a surrogate mother abroad. While determining that the plaintiffs had successfully proved their parentage by other means, the court held that by refusing to use genetic testing the plaintiffs had wasted the court’s time, and therefore they were not eligible for reimbursement for court-related expenses. (File No. 32901-05-14 Anonymous v. the Attorney General (rendered by the Tel Aviv Yafo Family Court on Aug. 7, 2016), Takdin Legal Database (in Hebrew).)


The plaintiffs are gay men who are residents and citizens of Israel. They have maintained a spousal relationship in a joint household for over 12 years and underwent a civil marriage ceremony in Canada in 2007. In May 2008, the couple had a baby girl born via a surrogate mother in the United States. In 2010 they contracted with a fertility clinic in the U.S. state of Connecticut to conceive a second child through a surrogate. Semen was taken from the first plaintiff, fertilized with a donor’s egg, and implanted in a surrogate, in accordance with a surrogacy agreement that had been previously signed between the surrogate, her husband, and the plaintiffs. The pregnancy resulted in the birth of a baby boy. (Id. Part A ¶¶ 1-5.)

Israeli authorities refused to register the plaintiffs as the child’s parents based solely on a decree previously issued by a U.S. court that recognized them as such, in the absence of genetic testing proving a genetic link between the first plaintiff and the child. (Id. Part A ¶¶ 6-7.) The plaintiffs petitioned the Israeli Supreme Court to order the authorities to register the child as the plaintiffs’ son based on the U.S. decree. The Supreme Court rejected their petition and referred the parties back to the family court for further evaluation of additional evidence and determination of the case. (Id. Part A ¶¶ 8-9.)

Supreme Court Decision

On January 28, 2014, an extended bench of seven justices issued a decision in response to petitions filed by the plaintiffs (HCJ 566/11) and by another same-sex couple (HCJ 6569/11). Both couples requested registration of children born from surrogates in the United States as their children, based on U.S.-issued birth certificates and declaratory judgments that had recognized them as parents of their respective children. (HCJ 566/11 & 6569/11 Meged & Tavak Aviram v. Ministry of Interior (decision rendered on Jan. 28, 2014), STATE OF ISRAEL: THE JUDICIAL AUTHORITY (in Hebrew).)

According to Court Deputy President Miriam Naor, who wrote the main decision, in the circumstances of HCJ 566/11 registration was denied because of the absence of genetic testing. Unlike in HCJ 566/11, in the second case results of genetic testing indicating a biological link between the child and one of the petitioners had been submitted. Israeli authorities, however, refused to register the non-genetic parent as the child’s parent in the absence of an adoption decree recognizing parentage. (Id.¶ 1.)

According to Naor, the U.S. decrees recognizing parentage in both cases had been issued based on affidavits by the respective petitioners, surrogates, the surrogates’ husbands, and the physicians who performed the in-vitro fertilization and implantation of the fetuses in the uteruses of the respective surrogates. (Id. ¶¶ 2-3.)

Naor made the following determinations:

HCJ 566/11:

  1. Biological Link as a Basis for Establishment of Legal Status of a Child Born to Surrogates Abroad

The petitioners requested recognition of the child as an Israeli national by birth. Under the conditions enumerated by the Nationality Law 5712-1952, a child of an Israeli national who is born abroad may acquire nationality by birth. (Nationality Law, 5712-1952, § 4(A) (2), SEFER HAHUKIM [BOOK OF LAWS, the official gazette, SH] 1952 No. 95, p. 146, as amended). Such nationality therefore requires proof of a “biological-genetic link” between the Israeli national biological parent and the child born abroad. As surrogacy conducted abroad is not currently regulated under Israeli law, in the absence of a biological link to the child, the surrogacy arrangement by itself cannot serve as a basis for the creation of legal status and does not entitle the child to Israeli nationality. (Id. ¶ 14.)

  1. Genetic Testing

Genetic testing had previously been recognized by the Israeli Supreme Court as an efficient, simple and reliable way to prove biological parentage. A family court judgment recognizing biological parentage based on genetic testing may therefore constitute a “public document” that qualifies as evidence for the purpose of registering and granting the child Israeli nationality. (Id. ¶ 15.)

  1. Other Means of Proving Biological Parentage

Recognizing genetic testing as the main method of proving biological parentage, however, does not exclude other means of proof. According to Naor, the family court is authorized to determine that there exists a “biological link” where “… a substantive hearing on the affidavit of the treating physician was added to the petition, … while examining the quality of the treatment clinic and the medical terminology mentioned in the affidavit, including a cross-examination of the expert, if the state has requested this, would satisfy the family court that there exists a biological link between one of the petitioners and the child. (Id. ¶ 16.)

Naor noted, however, that “…the [petitioners’] refusal to perform a genetic test remains puzzling.” (Id. ¶ 16.)

Naor further stated that although the petitioners’ wish not to know or disclose which of the partners was the biological parent was understandable, such a wish could not negate the need for proof of a biological link of at least one Israeli parent for the purpose of the child’s acquisition of Israeli nationality by birth. While it may be possible to obtain a “blind test” that does not identify the specific parent but that indicates that at least one of the petitioners was a biological parent, this solution does not resolve all problems that may arise. Such problems include a situation where the child needs genetic information for medical purposes. (Id. ¶ 21.) However, a “blind test” is not necessary in either of the current petitions, Naor concluded. This is because in HCJ 566/11 the petitioners themselves knew who gave semen for the in-vitro fertilization, and in HCJ 6569/11 the petitioners conducted genetic testing. (Id.)

HCJ 6569/11:

  1. Registration That Does Not Create Legal Status Does Not Require Proof of Biological Link

Unlike HCJ 566/11, HCJ 6569/11 does not involve recognition of legal status in Israel. The child subject of this petition had already received Israeli nationality by birth based on the biological parentage of one of the petitioners, which had been proven by genetic testing. The petition centers on the registration of the non-biological parent as the child’s other parent. (Id. ¶ 26.)

According to the Population Registry Law 5725-1965 (SH 5725 No. 466 p. 270), registration can be based on presentation of a “public document” or other documents as prescribed by the law. According to Naor, the birth certificate and the court decree presented by the petitioners constitute “public documents,” the presentation of which requires the registering official to register the non-biological parent without the need to present a decree of adoption. The documents would not be sufficient, however, for registration of the biological parent, because such registration would create for the child, rather than reflect, a legal status in Israel, such as that of citizenship. (Id. ¶ 36.)

  1. Judicial Determination on the Status of the Non-Biological Parent

Although a decree from the family court was not necessary in order to obtain registration of the non-biological parent, such a decree may offer real benefit as it may eliminate possible future legal conflicts regarding inheritance, custody, alimony, and other matters. (Id. ¶¶ 33-44.)

Supreme Court Conclusion

Naor rejected petition HCJ 566/11 and directed the petitioners to the family court to prove biological parentage either by genetic testing or other means. After biological parentage is proven, she held, the petitioners may reapply for “receipt of [legal] status for their son in Israel and for their registration as the child’s parents in the population register.” (Id. ¶ 50.) This conclusion was supported by all the justices.

Naor accepted petition HCJ 6569/11, however, insofar as the non-biological parent should be registered as the father of the child in the population register based on the foreign birth certificate and court order that recognized him as the child’s parent. (Id.) This decision was supported by five justices with two dissenting. Justice Amnon Rubinstein opined that registration based on presentation of foreign legal documents, without a determination by an Israeli family court, may be “misleading.” (Id. Rubinstein ¶ J.)  Similarly, Justice Hanan Melcer held that foreign-issued documents cannot constitute a basis for registration in the absence of prior authorization by an Israeli court.  (Id. Melcer ¶¶ 6-7.)

Family Court Decision

The family court decision was rendered on August 7, 2016, by Judge Naftali Shilo. Shilo noted that based on the Supreme Court determination in HCJ 566/11, in special cases it is possible to prove paternity without genetic testing. (File No. 32901-05-14 Anonymous v. the Attorney General, supra, Hearing and Determination ¶ 1.) According to Shilo, the plaintiffs submitted numerous legal and medical documents to prove the child’s genetic link to the first plaintiff. These included a surrogacy agreement, a U.S. court decree recognizing the plaintiffs’ parentage of the child, confirmation of their involvement in the fertilization procedures conducted by the clinic, medical records, blood test results, and the surrogate’s ultrasound test results. (Id. ¶ 2.)

Evidence Needed to Prove Parentage

Although the best and strongest evidence under the circumstances was undoubtedly genetic testing, Shilo noted, as a general rule the Israeli legal system does not require presentation of the best possible evidence. (Id. ¶¶ 5-6.) Shilo determined that the plaintiffs met the burden of proof needed to prove that the first plaintiff was the biological father of the child. As indicated by the medical expert in the case, the chance that plaintiff No. 1 was not the child’s parent was only about one percent. According to Shilo, even if it was only 60%, such evidence would be sufficient for a civil procedure. (Id. ¶¶ 10-11.)

 Court Fees

While accepting their request for recognition of parentage, Shilo rejected the plaintiffs’ request for compensation for their trial expenses. He held that the delay in the procedures and the costs associated with bringing to Israel twice the head of the U.S. clinic and recruitment of a court-appointed medical expert were all necessitated by the plaintiffs’ refusal to resolve the matter in a direct and inexpensive way of genetic testing. The plaintiffs’ request for payment of expenses was therefore denied. (Id. ¶ 6.)

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Estonia: Court Confirms Russian Not a School Language

(Aug. 29, 2016) On August 26, 2016, an Estonian second instance Circuit Court, whose jurisdiction includes the capital city of Tallinn, confirmed the legality of a decision issued by a lower court earlier this year to reject consideration of a complaint submitted by the parents of two Tallinn city high school students objecting to the use in their schools, whose student bodies are predominantly ethnic Russians, of the Estonian language as the language of instruction. The original court decision cited the 2014 ruling of the State Court of Estonia (the highest court in the country) under which the local administration and school boards cannot appeal government resolutions concerning the choice of language of instruction. (Court Confirmed Ban on Teaching in Native Language in Two Russian High Schools, POSTEMEES.EE, (Aug. 26, 2016) (in Russian).) Fifteen similar cases were reviewed by different Estonian courts in the last three years with the same result. (Estonian Court Confirmed the Ban on Teaching in the Russian Language in Russian Schools, NEWSRU.COM (Aug. 26, 2016) (in Russian).)

In 2015, school boards of several high schools where the majority of students are ethnic Russians and native Russian speakers submitted a petition to the Estonian Government requesting permission to conduct instruction in the Russian language in all subjects. The petition was supported by the Tallinn City Council but rejected by the central government. (Id.)

The petition was based on a provision of the Estonian Basic Schools and Upper Secondary Schools Act of 2010, which gives school boards and local administrations some flexibility in selecting other than the Estonian language as the language of instruction in a municipal school. While the Law requires schools to conduct at least 60% of education in Estonian and provides for varied opportunities for non-native Estonian speakers to learn the Estonian language, it allows for some exemptions under which an entire school or particular classes can be taught in another language. Such permission can be granted by the national government to school boards and local administrations on a case-by-case basis. (Basic Schools and Upper Secondary Schools Act, art. 21, RIIGI TEATAJA I [OFFICIAL GAZETTE] 2010, No. 41, item 240.) This rule is based on a constitutional provision that states, “[t]he language of instruction in national minority educational institutions shall be chosen by the educational institution.” (Constitution of the Republic of Estonia (June 28, 1992, in force on July 3, 1992), art. 37, Office of the President website.) However, the same article of the Constitution states that “[t]he provision of education shall be supervised by the state,” and that norm serves as the basis for the government intervention in the matter. (Id.)

Reportedly, the Estonian government is active in implementing a language policy aimed at avoiding the use of any language other than Estonian. Since 2004, the National Language Inspection (Keeleinspektsioon), a government agency within the Ministry of Education with the responsibility to ensure proper implementation of legislation regulating the use of the Estonian language, has fined teachers whose knowledge of the Estonian language is deemed to be wanting. (Estonian Court Confirmed the Ban on Teaching in the Russian Language in Russian Schools, supra). It was also reported that the hourly wages of municipal employees vary depending on their Estonian language skills. (Salary of Hospital Personnel Who Do Not Speak Estonian Is Lower than that of Their Peers, NEWSRU.COM (Feb. 11, 2015) (in Russian).)

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Indonesia: Regulation on Shell Companies Issued

(Aug. 29, 2016) On August 19, 2016, Indonesia’s Ministry of Finance issued a regulation designed to support the tax amnesty program already adopted by the House of Representatives at the end of June under Law No. 11 on Tax Forgiveness. The amnesty program is aimed at encouraging the repatriation of Indonesian assets from abroad. (Ayomi Amindoni, Govt Issues Rule on Shell Companies, Aims for Asset Repatriation, JAKARTA POST (Aug. 22, 2016); Constance Johnson, Indonesia: Tax Amnesty Passed, GLOBAL LEGAL MONITOR (July 6, 2016); Law No. 11 of 2016 on Tax Forgiveness, LEMBARAN NEGARA REPUBLIK INDONESIA [GAZETTE OF THE REPUBLIC OF INDONESIA], No. 131, 2016, (in Indonesian).)

The new regulation focuses on Indonesian holdings in foreign special purpose vehicle (SPV) companies. According to Sri Indrawati, the Minister of Finance, it is hoped that holders of assets in SPVs will join the tax amnesty program to take advantage of the offer of exemptions from value-added tax for those who move their assets and businesses back to Indonesia before the end of the year.  She suggested that “taxpayers are expected to declare or repatriate their assets through the overseas SPV companies, as well as shift their business base to Indonesia.”  (Amindoni, supra.)

The Ministry had previously issued several regulations to implement other aspects of the Law on Tax Forgiveness. Regulation 118, for example, is on procedures for the tax amnesty, while Regulation 122 permits the transfer of assets into forms such as gold bars. ( Id.; Regulation No. 118/PMK.03/2016 on the Implementation of Law No. 11 of 2016 on Tax Forgiveness (July 15, 2016), Directorate-General of Taxation of the Ministry of Finance website; Regulation No. 122/PMK.08/2016 on Procedures for the Transfer from Abroad of Taxpayer Assets and Their Placement Outside the Financial Market for Tax Forgiveness (Aug. 8, 2016), PAJAK ONLINE.COM (both in Indonesian).)

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