Legal Reform in Tajikistan

The Bank’s recent assessments of commercial and financial laws in Tajikistan reveal some persistent gaps in the country’s legislative framework. On the implementation side, there is a degree of uncertainty as to the judiciary’s ability to enforce contracts and protect investor rights generally. Sustained efforts by the Tajik authorities will be needed to improve commercial legislation and increase capacity in the judiciary.

Access to Finance

Tajikistan’s legal framework for secured transactions encompasses the following acts: the 2006 Law on Pledge of Movable Property, the 2008 Law on Mortgage and the Civil Code (Part 1) of 30 June 1999, which entered into force on 1 January 2000 and contains provisions directly applicable to secured transactions.
The new Laws were a considerable improvement against the former regime, which was broadly modelled against the Russian regime and comprised many deficiencies.
 
EBRD Legal Reform Projects
 
Assistance in Developing a Secured Transactions Law
 
The EBRD's Secured Transactions Project produced an extensive analysis of existing laws in order to identify necessary reforms and the best ways of implementing them. The Tajik Government has yet to act on the Bank's recommendations.
 
In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Tajikistan.
 
 
 

Capital Markets

Tajikistan is now included in the EBRD Local Currency and Local Capital Market Development Initiative (LC2), for the specific purpose of trying to encourage local currency lending. Apart from strengthening the banking sector, no action related to local capital market development is considered, given the immaturity of the market.
Currently an opening of the Tajik Stock exchange with Ministry of Finance participation is envisaged. In this respect, in August 2011, the Iranian Foreign Ministry expressed that Iran is ready to establish a stock exchange in Tajikistan.
 
 

Contract Enforcement and Judicial Capacity

The EBRD Judicial Decisions Assessment 2010, which studied commercial law decisions in the courts of selected CIS countries and Mongolia, found the quality and predictability of commercial law decisions in Tajikistan to be well below the regional average, substantially behind Kyrgyzstan and Kazakhstan. Other indicators studied in the assessment, such as implementation of decisions and perceived impartiality of judges, also fared poorly. One conclusion to emerge from the assessment was that Tajik judges should receive practical, professionally-oriented commercial law training.
Throughout 2010 the EBRD conducted policy dialogue with the Judicial Training Centre (JTC) and the Council of Justice of Tajikistan (COJ). This culminated in an official request for EBRD assistance to design a commercial law judicial training programme for Tajik judges. The Bank worked with the JTC and the COJ to conduct a formal analytical assessment of the training needs of judges hearing commercial cases, as well as the institutional support required by the JTC to meet these needs. The EBRD recommended a 10 module course of training, together with a programme of institutional support to the JTC, regional apprenticeships for young judges with leadership potential, and a study on how to make judicial decisions accessible to the public. A project to implement these recommendations commenced in October 2011.
 
 

Corporate Governance

The 2007 EBRD assessment on corporate governance showed Tajikistan being in “Very Low Compliance” with the OECD Principles of Corporate Governance (see Chart 4), with a number of major shortcomings especially in the sections on “ensuring the basis for an effective corporate governance framework”, “disclosure and transparency” and “the responsibilities of the boards” (see Chart 5 below). Since the 2007 assessment, the Joint Stock Company Law has been amended and some improvements were enacted.
The 2010-2011 assessment on corporate governance of banks highlighted a number of recommendations on how to improve corporate governance of banks.
 

 

 

Debt Restructuring and Bankruptcy

Liquidation, bankruptcy, and reorganisation in Tajikistan is governed by the Law on Bankruptcy of Enterprises, which was adopted in 2003 (the "Insolvency Law"), along with the Law on Joint Stock Companies and the Law on Limited Liability Companies. The Insolvency Law replaced the Law on Bankruptcy of Enterprises of 1992, and represents an improvement over the former insolvency regime. Under these regulations, reorganisation of a legal entity may be initiated by the decision of its shareholders or by its authorised board, and liquidation may be commenced either at the behest of its shareholders or the court.
The Bankruptcy law was amended in May 2009 by the Law No 509 “On amendments and addendums to the Law of the Republic of Tajikistan” (the “Amendment Law No 509”). Amendment Law No 509 introduced additional steps in insolvency procedures depending on the size of the business. Consequently, there now exist distinct insolvency procedures, timelines, and claim minimums to initiate a bankruptcy case depending on the scale of the legal entity.
Despite these amendments, however, the Insolvency Law still lacks many basic qualities recognised as essential to an effective and efficient insolvency system under international standards.
 
 

Electronic Communications

The Government of Tajikistan is the policymaker for the electronic communications sector in Tajikistan and regulation is the responsibility of the newly formed Communications Service under the Government of Tajikistan. The Communications Service is understood to have emerged from a recent reorganisation of the Ministry for Transport and Communications. Broad policy for the sector is quasi-liberalisation: the state-owned incumbent TajikTelecom (TT) continues to hold a monopoly on local, domestic long-distance and international long-distance calling, while both the mobile and internet markets have been opened up to competition.
The sector is governed by the Law on Communications, drafted in 2002 and subsequently amended in 2006 and 2008.
 
EBRD Legal Reform Projects
 
Telecommunications Regulatory Development Programme
 
In 2004 The EBRD assisted the Tajik authorities in drafting a modern telecommunications law and establishing a clear, predictable and pro-competitive regulatory framework.
 
 

Energy and Resource Efficiency

Tajikistan continues to be very energy intensive. Low tariffs do not provide incentives to use energy efficiently and to invest in renewable energy (RE) projects. No energy efficiency law, policies or agencies are in place. Remaining challenges include the establishment of a legal and institutional framework and economic incentives for on-grid RE projects and support decentralised, off-grid private RE projects, in particular substitutes for wood-fired installations.
To date, there is no separate law on renewable energy. However, work is carried out
on the use of renewable energy. For example, the President stated in April 2009 that
15 mini-HPPs had been put into operation in January-March 2009 and that construction of 15 more would be completed by the end of the year.
 
 

Energy Legal and Regulatory Reform

Tajikistan performs poorly with respect to its grouping and well below average for electricity. The absence of an independent regulatory authority contributes largely to reduce the overall rating given to the country. In fact, one of the priorities of Tajikistan’s energy sector is the establishment of an independent regulatory body capable of effectively intervening in the planned restructuring of the sector. Moreover, the energy sector is increasing its focus on the development of regional cooperation and regional energy exchanges by strengthening regional energy trade. Hydro power is one of the promising export potentials of Tajikistan and it has a hydro power potential equal to an annual production of 527 billion kWh.
 

 

 

PPPs/Concessions

The results of the 2007/08 EBRD concessions sector assessment are based on the legislation that was in force during the time of the assessment (Concessions Law of 1997, as supplemented by the Regulations on Concession Agreements and on Auctions and Tenders). The Assessment found Tajikistan to be in low compliance with international standards (see Chart 2 below). There were however, some positive features aimed at adding fairness and transparency in that the Law provided for notification to all participants of the tender results and for the right to challenge them. The Law also provided for the registration of project agreements. The unilateral termination of an agreement by the Contracting Authority was limited to the event of misrepresentation by the concessionaire. The Law provided a reference to the "mutual advantage", and a declaration of "non-interference” in economic activity of the concessionaire".
 

 

 

Public Procurement

Public procurement in Tajikistan is regulated by the Law of the Republic of Tajikistan on Public Procurement of Goods, Works and Services, adopted in March 2006 (PPL). In the 2010 assessment PPL scored low to medium on compliance with international standards, as compared to other countries in the EBRD region.