1. FUNDAMENTAL RIGHTS AND GUARANTEES

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               The content of guarantees, benefits and rights

Act legislation 

1

Foreign investors in the Republic of Uzbekistan are:

•  foreign states, administrative bodies or territorial authorities of foreign states;
•  international organizations those having been established by agreements or other treaties between states, or those being subjects of public international law;
•  legal entities, any other partnerships, organizations or associations those having been established in accordance with and operating under the legislative acts of foreign states;
•  individuals being citizens of the foreign state, persons without citizenship, and citizens of the Republic of Uzbekistan permanently residing abroad.

Article 4 of the Law of the Republic of Uzbekistan «On foreign investments»

2

Foreign investors may make investments in the territory of the Republic of Uzbekistan in the following ways:

•  share participation in the authorized capital or other property of business companies and partnerships, banks, insurance organizations and other enterprises established jointly with legal entities and (or) individuals of the Republic of Uzbekistan;
•  establishing and developing business companies and partnerships, banks, insurance organizations and other enterprises fully owned by foreign investors;
•  acquiring property, shares and other securities, including debt obligations, issued by residents of the Republic of Uzbekistan;
•  contributing intellectual property rights, including copyrights, patents, trademarks, utility models, industrial designs, firm names, know-how and goodwill;
•  acquiring concessions, including concessions to explore, develop, extract or utilize natural resources;
•  acquiring property rights in trading and service sector facilities, in housing together with the land on which it is located, as well as rights to own and to use the land (including on the basis of a lease) and natural resources.

Foreign investors may make investments in the territory of the Republic of Uzbekistan in other forms that do not contradict legislation in force.

Article 5 of the Law of the Republic of Uzbekistan «On foreign investments»

3

Foreign investors may establish on the territory of the Republic of Uzbekistan enterprises with foreign investments and shall enjoy all rights, guarantees and advantages provided for by the legislation of the Republic of Uzbekistan.

An enterprise with foreign investments may be created either by establishment of such an enterprise, or by purchasing stockholdings (portions, shares) in an earlier established enterprise without foreign investments, or by purchasing such enterprise entirely, including a purchase made through privatization. Parts1 and 3 of the Clause 6 of the Law of the Republic of Uzbekistan "On foreign investments".

Parts1 and 3 of the Clause 6 of the Law of the Republic of Uzbekistan "On foreign investments".

4

It shall be  established that from April1, 1998 the enterprises with foreign investments subject to the state registration by the Ministry of Justice of the Republic of Uzbekistan and its regional branches, are considered being the newly established enterprises which should meet the following criteria:

•  the amount of the authorized capital of the enterprise cannot be less than the Uzbek soums equivalent to 150 thousand US dollars;
•  one of the enterprise's party should be a foreign legal entity;
•  share of foreign investments shall constitute not less than 30% of the charter fund of an enterpriseIt shall be determined that the following entities belong to the industrial enterprises with foreign investments: foreign, affiliated and joint ventures corresponding to specified conditions and have more than 60 percent from total amount of proceeds  in authorized activity on a share of own manufacture and (or) service of released production

It shall be determined that production enterprises with foreign investments shall apply to foreign, subsidiary, affiliated, and joint enterprises conforming to the abovementioned conditions and within their charter activity the share of their own production output and (or) services of manufactured products shall constitute over 60 percent of general volume of revenues gained from business operations.

Paragraphs 1-4 of the Clause 1 of the Decree of the President of the Republic of Uzbekistan as of 30.11.1996 № UP-1652 "On additional incentives and privileges granted to the enterprises with foreign investments".

5

It shall be  established that from July 1, 2002 newly founded enterprises with the foreign investments, on the territory of the Republic of Karakalpakstan and Khorezm region being subject to the state registration by the according regional branches of the Ministry of Justice of the Republic of Uzbekistan, are the enterprises which have their authorized capital equal to not less than the amount equivalent to 75 thousand US dollars, at that meting the other established criteria. 

6

An enterprise with foreign investment may establish in the territory of the Republic of Uzbekistan subsidiaries and branches with the status of a legal entity, as well as representative offices and other separate subdivisions without the status of a legal entity in compliance with the requirements of legislation of the Republic of Uzbekistan.

Subsidiaries, branches, representative offices and other separate subdivisions of the enterprises with foreign investments may be established outside the Republic of Uzbekistan.

Article 7 of the Law of the Republic of Uzbekistan "On foreign investments".

7

The State guarantees and protects all rights of foreign investors in process of their conducting investment activities in the territory of the Republic of Uzbekistan.

Foreign investors and foreign investments shall be granted fair and equitable treatment and full and constant protection and security. Such treatment can not be less favorable than that provided by international treaties signed by the Republic of Uzbekistan. The legal regime for foreign investments may not be less favorable than that provided for the investments being made by legal entities and individuals of the Republic of Uzbekistan.

Part 1 - 3 of the Article 9 of the Law of the Republic of Uzbekistan "On foreign investments".

8

•  determine, at his own discretion, the amount, type and sphere of investment;
•  conclude contracts with legal entities and individuals to perform an investment activity;
•  own, use and dispose of its own investments and outcomes of its investment activity. By the decision of a foreign investor, the rights to own, use and dispose of its own investments and outcomes thereof may be transferred to other legal entities and individuals in accordance with the procedure established by the legislation of the Republic of Uzbekistan. The mutual relations between the parties, while transferring these rights, shall be regulated by them on a contractual basis;
•  make, at his own discretion, decisions to patent abroad and in the Republic of Uzbekistan his inventions, utility models and industrial designs resulting from an investment activity in the Republic of Uzbekistan;
•  independently and freely dispose of revenue (including unimpeded repatriation thereof) received from an investment activity;
•  attract into the Republic of Uzbekistan funds in the form of credits and loans;
•  use funds in the national currency on its accounts to purchase foreign currency on the internal currency market;
•  acquire rights to land lots in the cases and on the conditions provided for by legislation;
•  use property and any property rights pertaining to it on the basis of ownership rights as security for all forms of obligation assumed by an investor, including obligations aimed at attracting loans in accordance with legislation of the Republic of Uzbekistan;
•  receive adequate compensation in the event of the requisition of his investment or other assets;
•  receive indemnification for damages caused as a result of the illegal actions (inaction) and decisions taken by state bodies, local authorities and officials thereof.
  The foreign investor shall also have other rights provided by the legislation of the Republic of Uzbekistan.

Article 10 of the Law of the Republic of Uzbekistan "On foreign investments".

9

Enterprises with foreign investments shall conduct, at their own discretion, export and import transactions in compliance with the requirements of legislation of the Republic of Uzbekistan. The export of products of their own manufacture shall not be subject to licensing or quotas.

Enterprises with foreign investments shall be entitled - without a license - to import products destined for their own production needs in accordance with the legislation of the Republic of Uzbekistan. Enterprises with foreign investments shall, at their own discretion, determine the list and the procedure for establishing and using the enterprises' funds.

Enterprises with foreign investments may acquire land lots in the cases and under the conditions provided by the legislation.

Part 4 - 5, 8, 11 of the Article 12 of the Law of the Republic of Uzbekistan "On foreign investments  

10

Foreign investors shall be granted concessions to explore, develop and exploit natural resources and to conduct other business activities in all spheres and kinds of activity provided they are not prohibited by the legislation of the Republic of Uzbekistan and meet the objectives of concluded concession contracts.

Article 13 of the Law of the Republic of Uzbekistan "On foreign investments".

11

Foreign investors and enterprises with foreign investments shall, in accordance with the legislation of the Republic of Uzbekistan, have the right to freely conclude labor contracts with citizens of any foreign state or persons without a citizenship, residing outside the Republic of Uzbekistan, for the purposes of effecting investment activities. Such persons shall be permitted to enter the territory of the Republic of Uzbekistan, remain there for the period of the labor contract with the receipt of the according multiple-entry visas.

The remuneration and other income received by such employees in a lawful manner may be transferred outside the Republic of Uzbekistan upon the payment of any applicable taxes and other mandatory fiscal obligations established by the legislation without any restrictions whatsoever.

Part 1-2 of the Article 14 of the Law of the Republic of Uzbekistan "On foreign investments".

12

Foreign investors, their representatives and foreign personnel being present in the Republic of Uzbekistan in connection with an investment activity shall have the right to freely move anywhere within the territory of the Republic of Uzbekistan.

Part 1 of the Article 15 of the Law of the Republic of Uzbekistan "On foreign investments".

13

The insurance of investments and risks of foreign investors shall be effected on a voluntary basis.

Foreign investors shall have the same rights as local investors to obtain any type of insurance from any insurance organization lawfully operating in the territory of the Republic of Uzbekistan. The insurance of a foreign investment against political and other risks may also be provided by international organizations, foreign state export credit agencies and other insurance companies.

Foreign investment insurance shall secure insurance protection and guarantees against political and other risks, including the following:

•  the expropriation of property as well as any legislative or administrative measures taken leading to the seizure or alienation of property, loss of control over property or over income received in connection with the concerned property concerned;
•  the introduction of restrictions on the transfer of foreign currency outside the country;
•  the introduction into legislation of the amendments those discriminate certain groups of investors;
•  the interference by state bodies, local authorities and officials thereof with the contractual relations of investors;
•  war, civil unrest or similar events;
•  other types of political and other risk related to foreign investors and foreign investments

Parts 1-2, 4 of the Article 16 of the Law of the Republic of Uzbekistan "On foreign investments".

14

The State guarantees and protects the rights of foreign investors who perform investment activity within the territory of the Republic of Uzbekistan.

The state guarantees and protects rights of the foreign investors who are carrying out investment activity on territory of the Republic of Uzbekistan No discrimination shall be allowed against foreign investors on the basis of their citizenship, place of residence, religion, place of conducting business activities, nor on the basis of the country of origin of foreign investors or investments, taking into consideration the implementation of international treaties signed by  the Republic of Uzbekistan.

Legislative acts, including departmental normative acts, shall not be retroactive if they cause damages to foreign investors or foreign investments.

•  increase of size of the income tax received in form of dividends paid to the foreign investor; additional requirements complicating procedure of repatriation or reducing the size of incomes (profit) of a foreign investor, transferred outside the Republic of Uzbekistan, except for cases of suspension by authorized state body of repatriation  of the foreign investor’s means on condition of non-discriminatory application of the legislative acts in cases of insolvency and bankruptcy of  an enterprise with foreign investments or protection  rights of creditors, crimes or the administrative offences accomplished by the foreign investor-individual, or other necessity of suspend such repatriation according to judicial or  arbitral award;

•  introduction of quantitative restrictions upon volumes of making the investment and other additional requirements concerning the size of investments, including raising the level of minimal size of foreign investments into enterprises with foreign investments;
•  introduction of restrictions on share participation of a foreign investor in authorized capitals of enterprises;
•  introduction of additional procedures for registration and prolongation of visas of foreign investors – individuals, and also other additional requirements on realization of foreign investments.

Order of application of positions of parts- 4 and 5 of this Article is determined by the Cabinet of the Republic of Uzbekistan.

All contracts on foreign investments, first of all the private ones, in part of providing the unconditional guarantees of their implementation are under the control of the corresponding bodies duly authorized by the Government of the RU.

In case while performing their legal prerogatives,

 state bodies and bodies of the government in regions find out infringement of legislation done by a foreign investor, they can take only those measures for which they are authorized also which are directly connected to elimination of a concrete infringement. State bodies or bodies of the government in regions cannot use the fact of presence of infringement as the basis for intervention or restriction of other lawful activity of a foreign investor. Worsening conditions for investing are considered introduction of amendments and addenda into legislation as well as adoption of new legislative acts by the Republic of Uzbekistan, foreseeing:

•  increase of the tax rate for income gained in form of dividends paid to a foreign investor;
•  introduction of additional requirements complicating the procedure repatriation or reducing the income (profit) of a foreign investor subject to transfer outside Uzbekistan excluding cases of suspension of repatriation of a foreign investor’s monetary means by an authorized state body based on non-discriminative application of legislative acts in cases of insolvency and bankruptcy of an enterprise with foreign investments or protection of creditors’ rights or administrative law violations committed by a foreign investor as an individual person as well as any other necessity to suspend such a repatriation in accordance with court or arbitrary decision;
•  introduction of quantitative limitations for investing volumes and other additional requirements related to investments’ volumes including those in form of increase of minimal size of the foreign investment into enterprises with foreign investments;
•  introduction of limitations related to share participation of a foreign investor in the charter fund (charter capital) of enterprises;
•  introduction of additional procedures related to formalizing and prolongation of visas for foreign investors as individual persons as well as other additional requirements related to making foreign investments.

Parts 1 - 9 of the Article 3 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors". The Law of the Republic of Uzbekistan «On guarantees and measures of protection of the rights of foreign investors» as of 16.09.2005.More in detail about the order application of the guarantee established by  part-4 of the Article 3 of the Law of the Republic of Uzbekistan «On guarantees and measures of protection of the rights of foreign investors» see the decision of the Cabinet of the Republic of Uzbekistan as of 2.08.2005 №180 «On measures  of realization of the Decree of the President of the Republic of Uzbekistan «On additional measures to  stimulate attraction of direct private investments » №DP-3594 as of 11.04.2005 years ».

15

Legislation may provide, along with general guarantees and measures to protect foreign investors, additional guarantees and safeguards, including those ensuring the unconditional execution of the obligations of the partners of foreign investors.

Additional guarantees and safeguards may be granted to foreign investors on a case-by-case basis when investing:

•  in priority sectors ensuring the sustainable economic growth and progressive structural adjustments of the county's economy;
•   in priority projects ensuring the strengthening and expansion of the export potential of the Republic and its integration in international economic relations;
•   in projects in the sphere of small and medium-size entrepreneurship, the implementation of which is aimed at processing raw materials, manufacturing consumer goods, providing services and ensuring employment.

Additional guarantees and safeguards for foreign investors may include ensuring guarantees by the Government of the Republic of Uzbekistan, assisting in funding investment projects, creating special tax and payment regimes, carrying out state monitoring over the implementation of projects concerned and taking other measures in accordance with the legislation.

 Additional guarantees and safeguards shall be granted to foreign investors by special decisions of the Government which shall particularly envisage the conditions of and the procedure for investing, using and ensuring the return on foreign investments.

Article 4 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

16

Foreign investments and other assets of foreign investors in the Republic of Uzbekistan shall not be subject to nationalization. Foreign investments and other assets of foreign investors shall not be subject to requisition except in the event of a natural calamity, emergency, epidemic or epizootic. A decision on requisition shall be taken by the Cabinet of Ministers of the Republic of Uzbekistan provided that the following requirements, when requisition takes place, are met:

•   the requisition affects the minimum amount of the investment or other assets necessary to implement the purpose connected with the specific case;
•  the requisition is executed on a non discriminatory basis and in accordance with the procedure established by the legislation;
•   the requisition is accompanied by indemnification adequate to the damages incurred.
• The State is the guarantor of the timely execution of indemnification. The foreign investor shall be entitled to contest in court or in arbitration the following:
•  the legitimacy of the purpose for executing the requisition; - the amount of the requisition;
•  the valuation of the investments and other assets subject to the requisition;
• the adequacy of the indemnification to be paid;
•  the procedure observed by the state bodies and local authorities while executing the requisition.

Article 5 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

17

Revenues of the foreign investor generated in the Republic of Uzbekistan may be re-invested on the territory of the Republic of Uzbekistan or used in any other way at the foreign investor's discretion.

Enterprises with foreign investments in accordance with the legislation shall have the right:

•  to open, use and dispose of accounts in any currency in any bank on the territory of the Republic of Uzbekistan and outside it;
•  to receive and repay loans in foreign currency 

Parts 1-2 of the Article 6 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

18

Foreign investors shall be guaranteed the free transfer of funds in foreign currency into and from the Republic of Uzbekistan - without any restrictions whatsoever - provided that they have paid all taxes and other mandatory payments in accordance with the procedure established by the legislation of the Republic of Uzbekistan. Such transfers shall include:

•   the initial and additional funds to maintain or to increase the level of foreign investments; - the revenue from investments;
•   the funds received in accordance with this Law as indemnification for damages incurred;
•   the payments effected in connection with the execution of contracts; - the profits received from the sale of all or part of a foreign investment;
•  the payments resulting from a dispute settlement, including any judicial or arbitral decisions;
•   the salaries of and other remuneration to employees; - the funds from other sources received in accordance with legislation. 

Part 1 of the Article 7 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

19

The foreign investor shall have the right to terminate an investment activity in the Republic of Uzbekistan in accordance with the procedure established by the legislation. Upon termination of an investment activity, the foreign investor shall have the right to freely repatriate his assets, in the form of money or in kind, received as a consequence of the termination of the investment activity without prejudice to the requirement that the foreign investor comply with any pre-existing obligations towards the Republic of Uzbekistan or other creditors.

Article 8 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

20

Legislative acts, including departmental normative acts and judicial decisions, somehow influencing the interests of foreign investors must be made available to them, whereas in cases directly foreseen by the legislation of the Republic of Uzbekistan those acts must be published.

State bodies and local authorities must provide, upon the request of a foreign investor, the information of interest thereto in accordance with the procedure foreseen for by legislation.

Article 9 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".

21

In case of any inconsistency between the provisions of the Laws "On foreign investments", "On guarantees and measures of protection of the rights of foreign investors" and other legislative acts or international treaties signed by the Republic of Uzbekistan, the provisions being most favorable for foreign investors shall prevail          

Article 22 of the Law of the Republic of Uzbekistan "On foreign investments" and Article 12 of the Law of the Republic of Uzbekistan "On guarantees and measures of protection of the rights of foreign investors".