UZBEKISTAN LEGAL NEWSLETTER FOR APRIL 2024

In April 2024, significant legal developments in Uzbekistan included the introduction of streamlined procedures for implementing investment and public-private partnership projects in Tashkent, the acceleration of privatisation of state assets, and the establishment of rules governing the functioning of the Agency for the Development and Regulation of the Energy Market.

 1.  IMPLEMENTATION OF INVESTMENT PROJECTS IN TASHKENT 

The Cabinet of Ministers has adopted Resolution No. 149, establishing a procedure for implementing investment projects for USD 10 mln or more on specially allocated land plots in Tashkent. The Resolution envisages two modalities for implementing investment projects: (i) through the incorporation of a special purpose company by specialised JSC “Company Tashkent Invest” (CTI) and an investor based on a relevant shareholders agreement; (ii) through the conclusion of a simple partnership agreement between CTI and an investor.

The following procedure is generally established. The Cabinet of Ministers allots land plots to CTI for implementing investment projects for up to 49 years. CTI then prepares relevant master plans and design documentation for the projects, determines a project modality, and submits prepared documentation for tendering the projects with accompanying land plots through the online trading platform “E-Auktsion”. The period of implementation of an investment project may not exceed 4 years. If a project is implemented by incorporating a project company, CTI’s share may not exceed 50%.

Annex 2 to the Resolution of the Cabinet of Ministers No. 149 of 25 March 2024

 2.  SIMPLIFIED PROCEDURE FOR PPP PROJECTS IN TASHKENT  

Resolution No. 149 also establishes a simplified procedure for implementing public-private partnership (PPP) projects worth up to USD 1 mln in Tashkent. The procedure applies to projects related to the following objects: (i) parks, squares, boulevards, and alleys; (ii) coastal areas of rivers, canals and open reservoirs; (iii) territories under bridges and overpasses; (iv) territories between roadways; (v) underground pedestrian crossings; (vi) subterranean metro areas; (vii) parking lots; (viii) highways; (ix) parking meters; (x) vacant land plots; (xi) buildings and structures that are not used or used for low capacity; (xii) unfinished buildings and structures. Relevant projects will be implemented by JSC “Company Tashkent Invest” (CTI) as a public partner. To initiate projects, CTI submits relevant proposals for consideration by the municipality (khokimiyat) of Tashkent, which, in turn, after conducting public discussions, submits confirmed proposals for final approval by the Cabinet of Ministers. After the proposals are approved, CTI develops terms for each project and a relevant PPP agreement and initiates the tendering of the projects and associated land through the online trading platform “E-Auktsion”. Project concepts and project evaluation documents do not have to be prepared.

A PPP object may be leased to a private partner for up to 10 years, provided that upon the expiry of a PPP agreement, the object reverts to the khokimiyat of Tashkent. Projects are registered in a special PPP registry within 3 days of concluding relevant agreements. Project information must also be published on CTI’s website and the Open Data Portal (https://data.egov.uz/eng). The list of the relevant PPP projects envisaged to be implemented in 2024-2025 is provided in Annex 6 of the Resolution.

Annex 3 to the Resolution of the Cabinet of Ministers No. 149 of 25 March 2024

 3.  DECREASING STATE PARTICIPATION IN THE ECONOMY

The President has signed a Resolution on decreasing state participation in the national economy, which, among other things, provides for the following:

• the lists of state-owned assets intended to be privatised through public trades, including a list of privatised shares in 247 state-owned enterprises (Annex 1 to the Resolution); a list of 1028 privatised real estate objects (Annex 2); a list of 12 state-owned enterprises subject to IPO and SPO on the local stock market (Annex 3);
• where state assets (excluding those in Tashkent and the regional centres) are not sold through public trades within 3 months, their initial value shall be gradually reduced to 10% of the value, regardless of the relevant book value or net assets. If they remain unsold for 3 months, alternative privatisation methods shall be used;
• starting from 1 May 2024, to facilitate the privatisation of non-agricultural lands and industrial development, the initial price of land plots (excluding those in Tashkent and the regional centres) put up for auction and not sold within 3 months shall gradually be reduced to 30% of the value and, if within 6 months, to 10% of the value with the option for buyers to pay in installments for a period of up to 10 years. Land plots within industrial zones shall be put on auction only after the necessary infrastructure is provided;
• disputes arising under privatisation and lease agreements for state-owned assets and land plots shall first be attempted to be resolved by parties through mediation. The State Assets Management Agency, the Supreme Court, and a number of other state institutions are instructed to develop procedural rules accordingly;
• within 1 month from the date of the Resolution, the Ministry of Construction and the Cabinet of Ministers are instructed to approve a plan for the adoption of master plans for cities and towns;
• the Ministry of Economy and Finance is, among other things, instructed: (i) to develop and submit to the Cabinet of Ministers proposals for reforming the Committee on Roads and engaging private entities in activities related to the construction and maintenance of roads; (ii) till 1 July 2024, to study the veterinary services market and to develop proposals on engaging private entities in the provisions of such services, including through public-private partnerships; (iii) within 2 months from the date of the Resolution, to conduct a study on the market of services for the construction of water facilities and to develop proposals on transferring state-owned JCS “Uzsuvqurilish” and its subsidiaries, operating in the market, to private investors.

Presidential Resolution No. 162 of 19 April 2024

 4.  PRIVATISATION OF LARGE STATE-OWNED ENTERPRISES

The President has issued a Resolution to accelerate the transformation (involving, among other things, the enhancement of a corporate structure and governance) and privatisation of large state-owned enterprises. It, among other things, provides for the following:

• a list of large enterprises whose shares will be publically traded on the international stock market with the involvement of professional consultants in Annex 1 (shares of 7 enterprises, including 51% of shares in JSC “Thermal Power Plants”, 100% of shares in JSC “Dekhkanobad Potash Plant”, and 75.2% of shares in LLC “Samarkand Automobile Plant”) and a list of large enterprises up to 5% of shares of which will be sold through IPO and SPO on the international stock market in Annex 2 (4 enterprises, including JSC “Navoi Minning and Metallurgical Combine”, JSC “Almalyk Minning and Metallurgical Combine”, JSC “Uzbektelecom”, and JSC "Uzbekhydroenergo");
• consultants advising on the transformation and privatisation of the relevant enterprises are attracted by JSC “Investment Company “UzAssets” and the State Assets Management Agency. They may be engaged based on direct agreements without conducting public procurement procedures;
• starting from 1 July 2024, new corporate governance rules and ethical standards shall be introduced in large state-owned enterprises and banks (no clear definition is given, but these may include enterprises listed in, among others, Presidential Decree No. UP-6096 of 27 October 2020 and Presidential Resolution No. PP-83 of 1 March 2023) with a corporate secretariat being established under the supervisory boards of these enterprises to maintain corporate governance standards.

Presidential Resolution No. 163 of 19 April 2024

 5.  OPERATION OF THE ENERGY MARKET REGULATOR 

The Cabinet of Ministers has adopted a regulation on the functioning of the Agency for the Development and Regulation of the Energy Market (the “Agency”), as established by Presidential Decree No. UP-166 of 29 September 2023. According to the Regulation, the Agency is an independent executive body regulating the electricity market and is accountable to the Cabinet of Ministers. Some of its key functions include:

• ensuring the gradual creation of competitive wholesale and retail electricity markets;
• developing relevant market rules and regulations for subsequent approval by the Cabinet of Ministers;
• participating in the formation and implementation of long-term investment policies for the market;
• licensing the activities of electricity market participants and monitoring their compliance with licensing conditions;
• starting from 2026, setting tariffs and charges for the transmission and distribution of electricity;
• setting standards for permissible technological losses in main and distribution electrical networks;
• participating in the development of an online trading platform for concluding wholesale and retail transactions with electricity and developing proposals to ensure its effective operation;
• examining such documents prepared by other state authorities as regulatory documents affecting the sector, balances of the production and consumption of electricity, and feasibility studies for projects in the electricity sector, including PPP projects. 

Resolution of the Cabinet of Ministers No. 252 of 30 April 2024

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Kosta Legal Law Firm