Legal Reform in Uzbekistan

Uzbekistan continues to demonstrate strong growth. However monopolisation of power within the executive branch, state dominance of the economy, and the failure to establish a functionally independent judiciary has hindered Uzbekistan’s transition process. The Bank’s assessments of commercial and financial laws in Uzbekistan have revealed 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.

 

Access to Finance

Improving the business environment is critical. The high cost of doing business severely constrains foreign investment and competitiveness. In the World Bank Doing Business 2015 report, Uzbekistan moved up 8 places, but the country still has one of the lowest ratings for ease of doing business, ranking 141st out of 189 countries. A key initiative in the country has recently been headed by a partnership of The IFC, the Central Bank of the Republic of Uzbekistan, and the Institute of Forecasting and Macroeconomic Research to develop the credit information-sharing system in Uzbekistan and expand access to finance for entrepreneurs and smaller businesses.
 
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 Uzbekistan.
 
 
 
 

Capital Markets

The principal Uzbek laws related to capital markets are the Law on Securities and Stock Exchange of 1993, as amended in 1999 and 2002, a law on amendments to Law on Securities Markets went into effect in May 2014. The Law on Joint Stock Companies and Protection of Shareholders adopted in February 2014 and approved in April 2014.
 
 

Contract Enforcement and Judicial Capacity

The nation’s three principal courts are the Constitutional Court, the Supreme Court, and the High Economic Court. The Oliy Majlis selects judges for these courts based on presidential recommendations. The Uzbek president appoints regional, district, and city court judges, who serve five year terms.
 
 
 

Corporate Governance

At the time of the corporate governance assessment in 2007 the main laws governing the legal framework were:
 
The Law “On Joint Stock Companies and Protection of the Rights of Shareholders” dated 26.04.1996;
The Law “On Limited and Additional Liability Companies” dated 06.12.2001;
The Law “On private enterprises” dated 11.12.2003;
The Law “On Partnerships” dated 06.12.2001;
The Law “On state control of business entities” dated 24.12.1998;
The Law “On Public Funds” dated 29.08.2003;
The Law “On Non-state, Non-commercial Organizations” dated 14.04.1999;
 
One of the most recent legal development affecting corporate governance is the adoption of the Regulation “On procedures for use of special right in participation in management of joint-stock companies by the state” dated 24.07.2007.
 
 
 

Debt restructuring and bankruptcy

The 2003 Law on Bankruptcy of the Republic of Uzbekistan (as amended, the “Insolvency Law”) governs insolvency issues in Uzbekistan. This law scored “low compliance” when compared with international standards in the EBRD’s 2004 Insolvency Sector Assessment.
 
 

Electronic Communications

At the time of the 2008 assessment, the EBRD found that the Communications and Information Agency for Uzbekistan (the “Agency”) has responsibility for policy and regulation for the telecommunications sector. The Director General of the Agency is also the Deputy Prime Minister responsible for telecommunications, who also acts as Chairman of the Board of UzbekTelecom (the state-owned dominant national operator) and as Chairman of the State Commission on Radio Frequencies. The regulatory authority is therefore not separate from the ministry. The EBRD assessment found Uzbekistan to be in low compliance with international standards
 
 
 

Energy and resource efficiency

Uzbekistan’s legal framework for energy efficiency and renewable energy is set forth in  the Law “ n Rational Energy Utilization” amended in 2003 (energy efficiency
and renewable energy). Uzbekistan also ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change in December 2006.
 
 

Energy legal and regulatory reform

State electricity generation, transmission and distribution assets are managed by the
State Joint-Stock Company “Uzbekenergo” (SJSC Uzbekenergo). Uzbekenergo,
established on 22 February 2001 to take over from the abrogated Ministry of Energy
and Electrification, is directly subordinate to the Cabinet of Ministers. The electricity sector is governed the Law of the Republic of Uzbekistan “On Electricity” which came into force on 1 October 2009. Uzbekistan has largely stayed out of the regional electricity market, however it does benefit from and has taken advantage of its prime geographic location as many areas of the Kyrgyz Republic and Tajikistan are supplied with electricity through power lines that cross the Uzbek territory. It has  raised its transit tariffs and thus making difficult profitable exchanges between countries, in particular between Tajikistan and Turkmenistan. Uzbekistan was rated as in low compliance with international best practice.
 
 
 

PPP/Concessions

The Uzbek Law “On Concessions” was adopted in 1995. The Law is too vague as far as the majority of Core Areas are concerned. Its scope of application needs serious improvement (concession defined as an authorisation "for the performance of a certain kind of economic activity connected with the granting to such investor of property, plots of the land and subsoil on the basis of the conclusion of the concession agreement", discrimination against domestic investors, unclear definition of concerned sectors). In this respect, we note that other general pieces of legislation do contain certain interesting provisions (in particular the Uzbek Civil Code of 1996 and the Law “On Guarantees and Measures for the Protection of Foreign Investor’s Rights” of 1998). The Law “On Concessions” does not constitute a sufficiently solid legal basis for the development of PPP in the infrastructure and utility services in Uzbekistan.
 
In the most recent assessment of the PPP legal framework the country was rated to be in low compliance with international best practice.
 
 
 

Public Procurement

Public procurement in Uzbekistan is regulated by the Resolution of Cabinet of Ministers No 456, enacted on November 21st 2000 (“PPL”). In the EBRD 2010 assessment PPL scored low compliance in the region. In the assessment the Uzbekistan PP framework did not demonstrate any specific strengths; stability, with a score of 67 per cent compliance rate, is the strongest point of the local framework. Public procurement is fully centralised and thus well monitored. Local PP practice is of low to medium compliance with international standards, as substantial internal procurement rules were adopted by the Central Purchasing Body, setting standards for all procurements in Uzbekistan.
 
EBRD/UNCITRAL Public Procurement Initiative –
 - link to article ‘Current situation in CIS’