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General legal newsletter for April 2022

Some of the most notable legal developments in Uzbekistan in April 2022 were the issuance of the Presidential Decree No.UP-101, providing for significant measures for improvement of the сcountry’s competitive and investment environment; the adoption of the Laws on Insolvency and Non-Bank Credit Organizations; new measures to support exporters and to develop the sphere of intellectual property.

1. IMPROVEMENT OF THE COMPETITIVE AND INVESTMENT ENVIRONMENT

The President has issued a Decree envisaging measures for improvement of the competitive and investment environment, the acceleration of privatization, the reduction of the state’s role in the national economy, and wider implementation of public-private partnership (PPP) projects. Some of such measures include:
In the sphere of competition policy:

legal entities, individual entrepreneurs, or groups of persons whose sale proceeds for the last calendar year did not exceed 10,000 times the baseline calculation value (approx. USD 240,000) shall not be recognized as occupying a dominant position in a commodity or financial market and shall not be subject to competition law sanctions;
within 1 month from the date of this Decree, the Cabinet of Ministers shall submit to the Parliament a new Law of Competition. It shall provide for, among others, rules for the imposition of financial sanctions for competition law infringements on business entities (currently, sanctions are applied only to individuals – managers of infringers);
the monopoly of state-owned enterprises and state establishments in particular spheres, as listed in Annex 1 to the Decree (e.g. the medical examination of drivers) will be abolished.

In the sphere of taxation and customs:

the rate of the personal income tax for individuals – non-residents will be reduced from 20% to 12% (except for income related to dividends, interest, and freight contracts).
some tax and customs incentives granted to specific entities will now apply to all entities in relevant sectors, based on the list set in Annex 2 to the Decree;
a large number of tax and customs benefits of a various nature, as provided in Clause 9 and Annex 3 to the Decree, are going to be abolished;
till 1 August 2022, the Cabinet of Ministers shall review individual tax and customs incentives provided under resolutions of the President and the Cabinet of Ministers and to consider their cancellation.

In the sphere of privatization:

purchasers of state assets and non-agricultural land are allowed to pay a relevant purchase price in installments over a period of up to 3 years; purchasers whose first payment is not less than 35% of the total value are allowed to use the purchased objects as collaterals for attracted loans;
throughout 2022, measures will be taken to privatize shares in some large state-owned enterprises, including 49% of shares in the hydrocarbons extraction monopolist JSC “Uzbekneftegaz”; 51% of shares in the electricity generation monopolist JSC “Thermal Power Plants”; 51% of shares in Uzbekistan’s national air carrier JSC “Uzbekistan Airways”; shares in some large enterprises in the automotive industry, including JSC “UzAuto Motors”, JSC “UzAuto Motors Powertrain”, and LLC “Samarkand Automobile Plant”.

In the sphere of PPP:

the Decree instructs various state agencies to develop proposals for the implementation of PPP projects in district heating, water supply, power energy and gas distribution, the management of international airports, public transportation in Tashkent, railway transportation, and some other spheres;
Annex 7 to the Decree provides for an inventory of large PPP projects envisaged to be implemented in 2022-2024 (please refer to our Legal Alert for the list in English).

Presidential Decree No. UP-101 of 8 April 2022

2. LAW ON INSOLVENCY

A Law on Insolvency has been adopted. It replaces the Law on Bankruptcy of 5 May 1994. Some of the most significant novelties of the new Law include:

insolvency procedures for individuals have been introduced. The relevant rules will enter into force on 1 January 2023;
two types of insolvency are distinguished for legal entities: temporary insolvency and permanent insolvency. Generally, temporary insolvency is where at the date of applying to court, a debtor has been unable to perform its obligations for more than 3 months (or 6 months for specific categories of debtors). In relevant cases, court may apply one of the procedures for restoring the debtor’s solvency as envisaged by the Law. Permanent insolvency is where at the date of applying to court and based on financial reports for the last calendar year (or the year preceding it, if the court application is submitted in the first quarter of a year), obligations of a debtor exceed its total assets. In such cases, court may resolve on the bankruptcy of the debtor and the initiation of its liquidation;
court shall now consider a case on insolvency no later than within 2 months from the date of acceptance of a relevant claim (previously, 1 month). In exceptional circumstances, this term may be extended for a period not exceeding 1 month;
detailed rules have been set for the imposition of subsidiary liability on persons legally or actually managing a company, if their misdoings have led to company’s insolvency;
a special procedure for insolvency of developers engaged in buyer-funded construction has been established.

Law No. ZRU-763 of 12 April 2022

3. NEW LAW ON NON-BANK CREDIT ORGANIZATIONS

A new Law on Non-Bank Credit Organizations and Microfinance Activities has been adopted. The Law, among others, provides for the following:

the following types of non-bank credit organizations are distinguished: microfinance organizations, pawnshops, and mortgage refinancing organizations;
microfinance organizations in particular may generally provide small loans to individuals and legal entities as well as to engage in the Islamic financing, financial lease, factoring services, and provision of guarantees with certain limits being set;
rules for the Islamic financing are developed by the Central Bank based on regulations of international organizations setting standards in the area;
microfinance organizations and pawnshops may have any legal form as allowed by law, except for the form of a joint-stock company; mortgage refinancing organizations may only be established as joint-stock companies;
there are requirements for the minimum amount of the charter capital of non-bank credit organizations: UZS 2 bln (approx. USD 180 thsd) for microfinance organizations; UZS 25 bln (approx. USD 2,25 mln) for mortgage refinancing companies; and UZS 500 mln (approx. USD 45 thsd) for pawnshops;
microfinance and mortgage refinancing organizations are subject to the registration with the Central Bank; pawnshops may start to operate after notifying the Central Bank;
the Law sets minimum requirements for the content of agreements for small loans, as concluded by micro-finance organizations and pawnshops;
the Central Bank monitors how non-bank credit organizations comply with the Law and may apply some sanctions, including fines of up to 5% of an infringing organization’s equity capital .

Law No. ZRU-765 of 20 April 2022

4. SUPPORT FOR EXPORTERS

The President has issued a Decree providing for measures to supporting exporters. The following is, among others, envisaged:

from 1 April 2022 till 1 April 2023, local enterprises exporting high value-added products to the European Union or the countries neighboring with Uzbekistan will be able to get a state subsidy covering relevant transportation costs (up to 70% or up to 50% respectively). A special state commission will prepare and publish a list of relevant products at www.exportportali.uz;

where goods or services are exported based on invoices (i.e. without concluding an export contract), the amount of a prepayment shall be not less than 50% (previously, 100%), except for some special goods.

Presidential Decree No. UP-97 of 6 April 2022

5. DEVELOPMENT OF THE SPHERE OF INTELLECTUAL PROPERTY

The President has signed the Resolution for Further Development of the Sphere of Intellectual Property, which, among others, provides for the following:

by 1 October 2022, the Ministry for Information Technologies and other state bodies shall develop and launch the information system “Register of Copyright Infringements”, which will contain information on websites where copyright is infringed;
by 1 September 2023, the Ministry of Justice shall develop and launch an online trading platform for the sale of IP rights;
the Strategy for the Development of the Sphere of Intellectual Property for 2022 – 2026 and the Roadmap for its implementation have been approved (Annex 1 and Annex 2 to the Resolution). Some measures envisaged by the Strategy are:

wider introduction of pre-trial dispute resolution procedures for IP-related disputes;
analysis of the possibility to introduce the “ex officio” protection into the customs legislation (i.e. the customs authorities may get broader powers to suspend the export/import of goods where an infringement of IP rights is suspected, investigate relevant infringements, and apply sanctions);
the full digitalization of procedures for the registration of IP rights;
the compilation of a register of pharmacologically active substances and medicinal products registered as IP objects;
greater cooperation the World Intellectual Property Organization and wider use of its online platform “WIPO Alert”.

Presidential Resolution No. PP-221 of 26 April 2022

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Have a good day!

Sincerely,
Kosta Legal Law Firm