United States Department of State
Transparency of the Regulatory System
Uzbekistan has a substantial body of laws and regulations aimed at protecting the business and investment community. Primary legislation regulating competition includes the Law on Competition, the Law on Guarantees of the Freedoms of Entrepreneurial Activity, the Law on Private Enterprise, and the Law on Investments and Investment Activities. In addition, there is a body of decrees, resolutions, and instructions, which is complicated, and in some cases contradictory or not fully consistent with international norms. In some cases, the government may require businesses to comply with decrees or instructions that are not publicly available. To avoid problems with tax and regulatory measures, foreign investors often secure government benefits through Presidential Decrees and GOU resolutions. These, however, have proven to be easily revocable.
For additional information, please review the World Bank’s Regulatory Governance assessment on Uzbekistan: https://rulemaking.worldbank.org/en/data/explorecountries/uzbekistan .
Practices that appear as informal regulatory processes are not associated with nongovernmental organizations or private sector associations, but rather with influential local politicians or well-connected local elites.
Most rule-making and regulatory authority exists on the national level. Businesses in some regions and special economic zones can be regulated differently, but relevant legislation must be adopted by the central government and then regulated by national-level authorities.
Not all local legal, regulatory, and accounting systems are transparent and fully consistent with international norms. Although the GOU has started to unify local accounting rules with international standards, many local practices are still document- and tax-driven, with an underdeveloped concept of accruals.
Uzbekistan is just beginning to develop its Environmental, Social, and Governance (ESG) regulations. In 2021, the country presented its first ever ESG report, which described the progress of ongoing reforms in various areas, such as Infrastructure for Growth, Active Governance & Strong Civil Society, and Sustainable Livelihoods. Key findings of the report include that GOU efforts to work with international NGOs on the issue of forced labor in the agricultural sector are re-positioning the country as an attractive partner for reliable textiles sourcing, and that the GOU is making efforts to reduce greenhouse gas emissions and achieve the goals of the Paris Agreement. (Uzbekistan’s ESG report can be reviewed here: https://changeinuzbekistan.com/report/ ).
Parliament and GOU agencies publish some draft legislation for public comment, including draft laws, decrees and resolutions on the government’s development strategies, tax and customs regulation, resolutions of regional governments, and other legislation. Public review of the legislation is available through the website https://regulation.gov.uz .
Uzbekistan’s laws, presidential decrees, and government decisions are available online. Uzbekistan’s legislation digest ( http://www.lex.uz/ ) serves as a centralized online location for current legislation in effect. As of now, there is no centralized nor comprehensive online location for Uzbekistan’s legislation, similar to the Federal Register in the United States, where all key regulatory actions or their summaries are published. There are other online legislative resources with executive summaries, interpretations, and comments that could be useful for businesses and investors, including http://www.norma.uz/ and http://www.minjust.uz/ru/law/newlaw/ .
Formally, the Ministry of Justice and the Prosecutor’s Office of Uzbekistan are responsible for oversight to ensure that government agencies follow administrative processes. In some cases, however, local officials have inconsistently interpreted laws, often in a manner detrimental to private investors and the business community at large.
In April 2023, a new Constitution of the Republic of Uzbekistan was adopted through a nation-wide referendum. The new Constitution strengthens the social orientation of the state and, among other changes, elevates the role of local self-governance. Later, the Parliament, the President’s office and the GOU started the process of bringing the regulatory system into conformity with the Constitution by drafting and adopting new laws, decrees, and regulations. For example, now the Constitution provides citizens with the right to vote, or the Ombudsperson, with the right to submit legislative proposals to the Parliament.
The leadership of Uzbekistan consistently emphasizes that changes are critical for improving the business climate and unlocking the economic potential of the country in general. Thus, on August 8, 2023, Uzbekistan adopted the Law on Anti-Corruption Examination of the Legislation (ZRU-860), which gives the Anti-Corruption Agency the right to conduct an anti-corruption examination of any piece of legislation if it may lead to corruption. The Presidential Decree of January 9, 2024, abolished the requirements for obtaining 22 types of licenses and significantly simplified the business licensing procedure by introducing a remote compliance assessment procedure. The Presidential Decree of February 19, 2024, recognizes the dominance of reference norms in legislation, many of which are irrelevant or not finalized, and calls to increase the role of directly applicable laws to eliminate abuses in the interpretation of regulatory norms. Earlier, in 2021-2023, Uzbekistan adopted laws and regulations to streamline business-related legislation and abolished over ten thousand inefficient or outdated laws and regulations.
The regulatory system reform is still in progress. The government’s “Uzbekistan 2030” development strategy includes a range of reforms to further improve the business environment; suppress unlawful interference by government authorities in the activities of businesses; decentralize and democratize the public administration system; and expand public-private partnerships. Meanwhile, current legislation still contains unclear or incomplete definitions and references, which leave room for misinterpretation. In some cases, private businesses may face difficulties associated with the enforcement of legislation. More information on Uzbekistan’s regulatory system can be viewed in the World Bank’s Global Indicators of Regulatory Governance ( https://rulemaking.worldbank.org/en/data/explorecountries/uzbekistan ).
The Ministry of Justice and the system of Economic Courts are formally responsible for regulatory enforcement, while the Institute of Business Ombudsperson was established in May 2017 to protect the rights and legitimate interests of businesses and render legal support. The state body responsible for enforcement proceedings is the Bureau of Mandatory Enforcement under the General Prosecutor’s Office. Several GOU policy papers call for expanding the role of civil society, non-governmental organizations, and local communities in regulatory oversight and enforcement. The government also publishes drafts of business-related legislation for public comments, which are publicly available. However, the development of a new regulatory system, including enforcement mechanisms outlined in various GOU reform and development roadmaps, has yet to be completed. There have been cases where legally binding court decisions awarding financial damages to a business have not been enforced.
Uzbekistan does not meet generally accepted standards of fiscal transparency. In 2023, the GOU demonstrated notable progress in ensuring its compliance with fiscal transparency requirements set by domestic legislation (Presidential Decree UP-154 of June 2022). The public can obtain at least generalized national and local budget information from various open sources, including the Open Budget web portal ( https://openbudget.uz ). The portal was improved during the reporting period. However, it still does not provide detailed information on budget amendments adopted during the fiscal year, detailed national and regional budget implementation reports, off-budget accounts, etc., primarily due to capacity issues and the ongoing process of adjusting budgeting procedures. The GOU understands the importance of fiscal transparency and strives for it. A special report of Uzbekistan’s Parliament, issued at the end of December 2023, noted a low degree of transparency in the activities of the ministries of agriculture, transport, mining, geology, and culture. A Presidential Decree dated February 21, 2024, obliged the GOU to publish reports on the annual and semi-annual income and expenditures of state and local budgets in a form accessible to the public. Although the necessary regulatory framework is already in place, improving the capacities and skills of government employees to fully ensure transparency standards objectively may require more time.
International Regulatory Considerations
Uzbekistan is not currently a member of the WTO or any existing economic blocs although it is pursuing WTO accession. In 2020, Uzbekistan assumed observer status in the Eurasian Economic Union. No regional or other international regulatory systems, norms, or standards have been directly incorporated or cited in Uzbekistan’s regulatory system – although GOU officials often claim the government’s regulatory system incorporates international best practices. Uzbekistan joined the CIS Free Trade Zone Agreement in 2014, but that does not constitute an economic bloc with supranational trade tariff regulation requirements.
Legal System and Judicial Independence
Uzbekistan’s contemporary legal system belongs to the civil law family. The hierarchy of Uzbekistan’s laws descends from the Constitution of the Republic of Uzbekistan, constitutional laws, codes, ordinary laws, decrees of the president, resolutions of the Cabinet of Ministers, and normative acts, in that order. Contracts are enforced under the Civil Code, the Law “About the Contractual Legal Base of Activities of Business Entities” (No. 670-I issued August 29, 1998, and last revised in 2022), and several other regulations.
Uzbekistan’s contractual law is established by the Law on Contractual Base for Businesses (Law 670-1 of 1998, last updated in 2022). It establishes the legal basis for the conclusion, execution, change, and termination of economic agreements, the rights, and obligations of business entities, and the competence of relevant public authorities and state bodies in the field of contractual relations. Economic disputes, including intellectual property claims, can be heard in the lower-level Economic Court, and appealed to the Supreme Court of the Republic of Uzbekistan. Economic court judges are appointed for five-year terms. This judicial branch also includes regional, district, town, city, Tashkent city (a special administrative territory) courts, and arbitration courts.
Formally the judicial system in Uzbekistan is independent. Recent reforms (the Law on Courts ZRU-703 and the Law on Reforming the Supreme Judicial Council ZRU-717) have tightened the requirements for judicial candidates, improved the independence and authority of the Supreme Judicial Council of Uzbekistan, and simplified court proceedings. The Law on International Commercial Arbitration (ZRU-647 of February 16, 2021) established procedures for setting arbitration agreements, appointing arbitrators, and conducting arbitration proceedings. In 2020, the President ordered additional measures to eliminate corruption in the courts and ensure the independence of judges (Decree UP-6127).
In the recent past, cases of government interference and corruption were quite common. Judges could interpret legislation in favor of government officials or state-owned enterprises. There have been fewer such cases in recent years, largely due to attracting more public attention to the issue. Businesses note that in some cases when court rulings were not in favor of the government or state-owned enterprises, the sentences were lighter than expected, and the Bureau of Mandatory Enforcement was not able to ensure timely execution of court decisions. There were cases when lower-level courts ruled in favor of local governments which failed to compensate plaintiffs for the full market value of expropriated and demolished private property, as required under the law.
Court decisions or enforcement actions are appealable though a process that can be initiated in accordance with the Economic Procedural Code and other applicable laws of Uzbekistan and can be adjudicated in the national court system.
In general, and mainly due to the judicial reforms launched in 2021, observations of U.S. and other foreign investors have not revealed notable cases of non-transparency or prejudice in rulings of Uzbekistan’s Economic courts during the reporting period.
Laws and Regulations on Foreign Direct Investment
Several laws, presidential decrees, and government resolutions relate to foreign investors. The main laws are:
- Law on Investments and Investment Activities (ZRU-598, December 25, 2019)
- Law on Guarantees of the Freedoms of Entrepreneurial Activity (ZRU-328, 2012)
- Law on Special Economic Zones (ZRU-604, February 17, 2020)
- Law on Production Sharing Agreements (№ 312-II, 2001)
- Law on Concessions (№ 110-I, 1995)
- Law on Investment and Share Funds (ZRU-392, 2015)
- Law on Public-Private Partnership (ZRU-537, 2019)
The GOU adopted nearly one hundred laws, over six hundred presidential decrees and resolutions, thousands of government resolutions, and other judicial decisions. New legislation that deserves investors’ attention includes laws, decrees, and resolutions that frame government investment priorities, as well as amendments and changes to certain licensing, certification, and taxation rules. Other legislation focused mainly on the harmonization of public administration and governance with the GOU’s current development priorities may have a lesser impact on the investment environment.
Recently adopted legislation that could affect foreign investors includes:
- The Law on Bringing National Legislation into Compliance with World Trade Organization Agreements, (ZRU-908, of February 15, 2024). The law harmonizes some national legislation with WTO requirements. For example, it brings the national intellectual property system into compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
- The Law on Privatization of State Property (ZRU-907, of February 14, 2024). The law defines the principles and procedure for the sale of state assets (real estate, state shares in businesses, state unitary enterprises and institutions) to individuals and non-state entities. The State Assets Management Agency is designated as the entity responsible for determining the process of sale of state assets.
- The Law on the State Budget for 2024 (ZRU-886, of December 25, 2023). The law and subsequent legislation set budget revenue targets and spending appropriation levels for the 2024 fiscal year (which, in Uzbekistan, coincides with the calendar year), and introduced new – and amended some existing – tax rates.
- The Law on Ratification of the Agreement of the Organization of Turkic States on Establishing the Turkic Investment Fund (ZRU-875, of November 1, 2023). The Agreement (signed in March 2023) creates a new international financial organization to finance the investments of micro, small, and medium-sized enterprises to projects in manufacturing, infrastructure, transport, agriculture, information and communications technology, and tourism sectors.
- The Law on Amendments to the Legislation on Licensing Cryptocurrency Operations (ZRU-866, of September 6, 2023). The law made the National Agency for Prospective Projects responsible for issuing crypto mining permissions and setting license fees for entities that operate with crypto currencies. The law also mandates large fines for unauthorized crypto currency operations.
- The Law on Competition (ZRU-850, of July 3, 2023). The law replaces an older Competition Law adopted in 2012, and contains new definitions and rules related to antimonopoly compliance.
- The Law on Amendments to the Legislation for Improving the Investment Climate in the Republic of Karakalpakstan (ZRU-845 of June 12, 2023) and subsequent Presidential Decree (UP-129 of August 8, 2023) provide additional privileges and tax incentives for investors and businesses that operate in Karakalpakstan, an autonomous republic within Uzbekistan.
- Presidential Decree UP-25 of February 1, 2024, approves the establishment of International Digital Technology Center in Uzbekistan. The Decree introduces a special attractive legal regime for foreign companies operating in the Center for a period of up to five years.
- Presidential Resolution PP-291 of September 2, 2023, transfers to the National Agency for Prospective Projects from the Ministry of Economy and Finance the authority to regulate capital markets.
- Presidential Decree UP-111 of July 21, 2023, created the positions of “Investment Managers” within the Ministry of Industry, Investments and Trade to assist investors at all stages of their projects. The Decree also established an Investor Center to improve online, and “single window” based public services to investors.
As of now, there is no real “one-stop-shop” website for investors that provides relevant laws, rules, procedures, and reporting requirements in Uzbekistan. In December 2018, the GOU created a specialized web portal for investors called Invest Uz ( http://invest.gov.uz/en/ ), which provides some useful information. The website of the Ministry of Industry, Investments and Trade ( https://miit.uz/en ) offers some general information on laws and procedures, but mainly in the Uzbek and Russian languages.
Competition and Antitrust Laws
Competition and anti-trust legislation in Uzbekistan is governed by the new Law on Competition (ZRU-850, of July 3, 2023), which replaced the older version of the law adopted in 2012. By law, the State Competition Promotion and Consumers Protection Committee is the state body authorized to regulate competition related issues. The committee is independent from the government, reports to the President and the Parliament, and is responsible for advancing competition, controlling the activities of natural monopolies, protecting consumer rights, and regulating the advertising market. The law, among other provisions, defines criteria for identifying a dominant market position, introduces the concept of superior bargaining power, and sets antimonopoly compliance requirements as well as fines for non-compliance. There were no significant competition-related cases involving foreign investors in 2023.
Expropriation and Compensation
Private property is protected against baseless expropriation by legislation, including the Law on Investments and Investment Activities and the Law on Guarantees of the Freedoms of Entrepreneurial Activity. Despite these protections, however, the government potentially may seize foreign investors’ assets due to violations of the law or for arbitrary reasons, such as a unilateral revision of an investment agreement, a reapportionment of the equity shares in an existing joint venture with an SOE, or in support of a public works or social improvement project (similar to an eminent domain seizure). By law, the government is obligated to provide fair market compensation for seized property, but many who have lost property allege the compensation has been significantly below fair market value.
Profitable, high-profile foreign businesses have reported more instances of alleged expropriation, but smaller companies are also impacted. Under the previous administration, large companies with foreign capital in the food processing, mining, retail, and telecommunications sectors claimed the government expropriated their property. In cases where it is determined that the property of foreign investors was expropriated for arbitrary reasons, the law obligates the government to provide fair compensation in a transferable currency. However, in most cases the alleged expropriations occurred based upon court decisions after the owners were convicted for breach of contract, failure to complete investment commitments, or other violations, making them ineligible to claim compensation. Expropriations supported by decisions rendered by Uzbekistan’s Economic Court can be appealed to the Supreme Court of the Republic of Uzbekistan in accordance with the Economic Procedural Code or other applicable local law. But reviews usually are quite slow. The support of strong local attorneys and legal advisors can be critical for ensuring the right protection of investors’ interests in such litigation.
There were several cases in recent years when investors claimed the government imposed excessive import controls for the supplies of enterprises with foreign investment, which were alleged to be measures applied for indirect expropriation.
Dispute Settlement
ICSID Convention and New York Convention
Uzbekistan is a member of the International Center for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
By law, foreign arbitral awards or other acts issued by a foreign country can be recognized and enforced if Uzbekistan has a relevant bilateral or multilateral agreement with that country. According to the new Law on International Commercial Arbitration, the arbitral award, regardless of the country in which it was made, is recognized as binding, and must be enforced upon submission of a written application. Implementation of the law shall be in full compliance with existing bilateral agreements of Uzbekistan with foreign states and multilateral agreements.
Investor-State Dispute Settlement
Dispute settlement methods are regulated by the Economic Procedural Code, the Law on Arbitration Courts, and the Law on Contractual Basics of Activities of Commercial Enterprises. The Law on Guarantees to Foreign Investors and Protection of their Rights requires that involved parties settle foreign investment disputes using the methods they define themselves, generally in terms predefined in an investment agreement. Investors are entitled to use any international dispute settlement mechanism specified in their contracts and agreements with local partners, and these agreements should define the methods of settlement.
The Law on Guarantees to Foreign Investors and Protection of their Rights permits resolution of investment disputes in line with the rules and procedures of the international treaties to which Uzbekistan is a signatory, including the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the 1992 CIS Agreement on Procedure for Settling Disputes Arising Out of Business Activity, and other bilateral legal assistance agreements with individual countries. Currently there is no such bilateral treaty that covers U.S. citizens.
If the parties fail to specify an international mechanism, Uzbekistan’s economic courts can settle commercial disputes arising between local and foreign businesses. The economic courts have subordinate regional and city courts. Complainants may seek recognition and enforcement of foreign arbitral awards pursuant to the New York Convention through the economic courts. When the court decides in favor of a foreign investor, the Ministry of Justice is responsible for enforcing the ruling.
Since the GOU launched reforms aimed at improving the business environment, investment disputes have been more limited in scope, but still exist, including several long-unresolved investment disputes involving U.S. companies.
Post is aware of many commercial or investment disputes involving foreign investors, which occurred nearly a decade ago. These included alleged asset seizures, expropriations, or liquidations; lengthy forced production stoppages; pressure to sell off foreign shares in joint ventures; and failure to honor contractual obligations. These cases involved a variety of sectors, including food production, retail, catering, mining, telecommunications, agriculture, and chemicals. Although government actions in such cases were taken under the guise of law enforcement, some observers have claimed arbitrary or extralegal motives were involved.
By the Law on International Commercial Arbitration, which entered into force in August 2021, foreign arbitral awards, including those issued against the government, regardless of the country in which such awards were made, are recognized as binding, and must be enforced upon written application to the court. Foreign arbitral awards or other acts issued by a foreign country also can be recognized and enforced if Uzbekistan has a relevant bilateral or multilateral agreement with that country. If international arbitration is permitted, awards can be challenged in domestic courts. The cases of investor-government dispute proceedings resulting in damages awarded to an investor are not common. In most such cases the government resolves the case out of court and pays the awards on time. However, claiming court-ordered compensation from some SOEs can be a more time-consuming process.
Although in many cases investor-state disputes in Uzbekistan have been associated with immediate asset freezes, nearly all such asset freeze actions have been followed by formal legal proceedings.
International Commercial Arbitration and Foreign Courts
Alternative dispute resolution institutions of Uzbekistan include arbitration courts (also known as Third-Party Courts), and specialized arbitration commissions. Businesses and individuals can apply to arbitration courts only if they have a relevant dispute-settlement clause in their contract or a separate arbitration agreement. The Civil Procedural Code and the Commercial Procedural Code also have provisions that regulate arbitration. The Law on International Commercial Arbitration, drafted in late 2018 entered into force in August 2021. It states that contractual and non-contractual commercial disputes can be referred to international commercial arbitration by agreement of the parties. The parties can determine the number of arbitrators and the language or languages that can be used in the arbitration. The interim measure prescribed by the arbitration court shall be recognized as binding. The award must be made in writing.
The main domestic arbitration body is the Arbitration Court. General provisions of the Law on Arbitration Courts are based on principles of the UNCITRAL model law, but with some national specifics – namely that Uzbekistani arbitration courts cannot refer to non-Uzbekistani laws. According to the Law, parties of a dispute can choose their own arbiter and the arbiter in turn choses a chair. The decisions of these courts are binding. The Law says that executive or legislative bodies, as well as other state agencies, are barred from creating arbitration courts and cannot be a party to arbitration proceedings. Either party to the dispute can appeal the verdict of the Arbitration Court to the general court system within thirty days of the verdict. Separate arbitration courts are also available for civil cases, and their decisions can be appealed in the general court system. Arbitration courts do not review cases involving administrative and labor/employment disputes.
The Tashkent International Arbitration Center (TIAC) under the Chamber of Commerce and Industry of Uzbekistan was created in late 2019 as a non-governmental non-profit organization. The main function of this organization is to facilitate dispute resolution for businesses, including foreign investors. The Center may employ qualified arbitration lawyers, both local and foreign. The Center has the right to resolve disputes through mediation or other alternative methods permitted by the law.
The Law on International Commercial Arbitration was approved by Parliament in 2020, signed by the president in February 2021, and entered into force in August 2021 (ZRU-674). According to the law, the arbitral award, regardless of the country in which it was made, is recognized as binding, and must be enforced upon submission of a written application. Implementation of the law shall be in full compliance with existing bilateral and multilateral agreements of Uzbekistan with foreign states.
Bankruptcy Regulations
The Law on Insolvency regulates bankruptcy procedures. By the law, both the debtor and creditors can initiate the insolvency case through court. The court has 2 months to review the case, but this term can be extended by another month in certain circumstances. The applicant must pay a court fee at seven minimum wages (one minimum wage is 1,050,000 s’om or $84 as of March 2024) to the court’s deposit account. This amount shall be added to the claim. The interests of creditors can be represented by committees of creditors. After filing the court case, the creditor cannot apply to the debtor directly. Monetary judgments are usually made in local currency. An insolvent entity may initiate a pre-trial sanitation process by notifying the founders and creditors. For the period of pre-trial rehabilitation, the entity would be exemption from paying taxes, fines, penalties for back taxes, other mandatory payments, and loans repayments. It also has the right to change the profile of its business, buy out overdue debts, or attract financial assistance. In some cases, the debtor may apply for state support. Bankruptcy itself is not criminalized except false bankruptcy, non-disclosure of bankruptcy, and premeditated bankruptcy cases.
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