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UZBEKISTAN LEGAL NEWSLETTER FOR FEBRUARY 2024

Some of the most notable legal developments in February 2024 included the adoption of a Presidential Decree on the implementation of Strategy “Uzbekistan - 2030” in 2024, the approval of the State Investment Program for the first quarter of 2024, and the adoption of a new Law “On Privatisation of State Property”. There were also legal acts on the abolishment of specific requirements for business entities, harmonising some legal requirements with the WTO rules, new rules for accrediting representative offices of foreign business entities, the formation of a unified register of incentives granted to investors, and the establishment of the International Centre for Digital Technologies.

1. IMPLEMENTATION OF STRATEGY “UZBEKISTAN — 2030” in 2024

The President has signed a Decree on the implementation of Strategy “Uzbekistan — 2030” in 2024, which, among other things, provides for the following:

as a part of the Strategy, it is envisaged that in 2024 measures will be taken: (i) to ensure GDP growth by 6% and investment growth of at least 30% of GDP; (ii) to launch 309 major projects across economic sectors for a total amount of USD 18 bln; (iii) to ensure that the annual inflation rate does not exceed 9% and the fiscal deficit – 4%; (iv) to facilitate reduction of bank rates by 2-3%;
the following legal acts are, among others, intended to be developed in 2024: (i) on radical reform of the activities of local municipalities, envisaging further decentralisation of public administration; (ii) on the abolishment of the concept of “bodies of economic governance,” i.e. major state-owned enterprises will be deprived of all regulatory functions with relevant functions being distributed amongst line ministries; (iii) on the abolishment of licenses and permits across different industries, including, in particular, licenses related to the mining and sale of oil and gas; (iv) a new Law “On Subsoils”; (v) on tariff reform in the oil, gas, and power energy sectors; (vi) on approval of a unified master plan for the power energy infrastructure and rules for the use of main and distribution power lines; (vii) a new Law “On Automobile Roads”;
till 1 April 2024, it is envisaged (i) to launch circulation of green (renewable energy) certificates based on free market principles; (ii) to approve a regulation on the implementation of projects for international trade in greenhouse gases;
starting from 1 May 2024, new mandatory payments and fees for citizens and business entities may only be introduced by Laws;
starting from 1 July 2024, for businesses launching local manufacturing in cooperation with well-known international brands (i) costs of implementing international standards and environmental certification are compensated; (ii) where the share of local manufacturing processes (localisation) is at least 60%, raw materials necessary for the manufacturing are exempted from customs duties; (iii) state fees for works permits necessary for attracted specialists of international brands (such as technologists, designers, marketing specialist) are not payable;
the exemption of goods specified in Annex to Presidential Resolution No. PP-5262 of 21 October 2021 (mainly fabrics) from import customs duties is extended till 1 January 2027;
lists of practical measures/projects for 2024 (i) in the sphere of education, health, and social services (Annex 1 to the Decree); (ii) across the economic sectors (Annex 2); (iii) for saving water resources and protecting the environment (Annex 3); (iv) in the sphere of public administration (Annex 4); and (v) in the sphere of international cooperation (Annex 5).

Presidential Decree No. UP-37 of 21 February 2024

2. STATE INVESTMENT PROGRAM IN THE 1ST QUARTER OF 2024

The Cabinet of Ministers has adopted a Resolution on measures for the implementation of the State Investment Program in the 1^st Quarter of 2024. The Program envisages the utilisation of foreign investments for the total amount of USD 7.2 bln and, among other things, provides for the following list of investment projects:

a list of large production facilities planned to be commissioned in the 1^st Quarter of 2024 (Annex 3);
a list of projects being implemented in the 1^st Quarter of 2024 on behalf of Uzbekistan or with the attraction of foreign loans under a state guarantee of Uzbekistan (Annex 4);
a list of projects implemented with the attraction of foreign direct investments and loans being implemented in the 1^st Quarter of 2024 (Annex 5);
a list of potential investment projects for 2024 (Annex 6);
a list of new investment projects in the 1^st Quarter of 2024 for which the attraction of external state debt is needed (Annex 7).

Resolution of the Cabinet of Ministers No. 92 of 14 February 2024

3. NEW LAW ON PRIVATISATION OF STATE PROPERTY

The President has signed a new Law on Privatisation of the State Property. It will enter into force on 16 May 2024 and, among other things, provides for the following:

the following types of state property are covered: state-owned immovable property, state shares, state unitary enterprises, and state establishments;
decisions on privatisation are generally made as follows: (i) in respect of large enterprises as per a relevant list approved by the President – by the President, (ii) in respect of other republican property – by the Cabinet of Ministers, (iii) in respect of municipal property except for immovable property – by regional councils of people’s deputies upon consultation with the State Assets Management Agency and the head (khokim) of a relevant region; (iv) in respect of municipal immovable property – by heads (khokims) of regions upon consultation with a relevant regional council of people’s deputies;
the State Assets Management Agency and/or its regional divisions choose a privatisation method for privatised state property; they may attract professional (economic, financial, investment, legal, etc.) consultants to assist with the privatisation;
the Law establishes the following privatisation methods: auction, competitive bidding, a public invitation to negotiations, competitive dialogue, stock exchange trades, contribution of state property into the charter capital of a business entity, and lease of a state unitary enterprise, or a state establishment with subsequent privatisation;
state property may also be privatised directly at a market value based on a relevant decision of the President (this seems to apply to any state property and not only large enterprises included in the special list);
payment for the privatised property shall generally be made within one month. Legal acts may provide for a longer term of payment, which shall not exceed 3 years (other than in exceptional circumstances).

Law No. ZRU-907 of 2 February 2024

4. HARMONISATION OF LEGISLATION WITH WTO RULES

A Law on harmonising specific Uzbek law regulations with the rules of the World Trade Organization has been adopted. It, among other things, provides for the following:

beer, natural and sparkling wines produced abroad may now be advertised in Uzbekistan (previously, only locally produced ones could be advertised);
where rights to objects of industrial property (inventions, utility models, and industrial designs) are used insufficiently within three years from the date of the registration of a patent or applying for a patent (whichever term expires later) that leads to insufficient supply of relevant goods and services in local markets, a person/entity may apply to court with a claim that a patent holder grants him a non-exclusive license (provided that the patent holder has refused to grant the license voluntarily on reasonable commercial terms);
a trademark registration certificate may be invalidated fully or partially if it is recognised that its holder has engaged in unfair competition;
confidential information provided for the state registration of a medicine containing new chemical components may not be disclosed and used for commercial purposes without the applicant’s consent within six years from the registration date. Relevant information may be disclosed and used for commercial purposes based on a court decision where (i) there is insufficient supply of the medicine to the population within 12 months from the date of registration; (ii) competition law violations have been identified;
state fees for a number of public services provided to local and foreign applicants have generally been equalled.

Law No. ZRU-908 of 15 February 2024

5. LIBERALISATION MEASURES FOR BUSINESS ENTITIES

A Law liberalising specific requirements for business entities has been adopted. It, among other things, envisages the following:

results of an on-site tax inspection and a tax audit may now be appealed directly to court (previously, they had to be appealed to a higher tax authority first);
the requirement that limited liability companies, joint-stock companies, and partnerships shall notify creditors and make a publication in a newspaper about reducing their charter capital has been abolished. Creditors may now send claims to terminate or to satisfy obligations early and to pay damages within 30 calendar days after they have found out about the decrease (rather than within 30 days from the date of the notification or publication).

Law No. ZRU-910 of 20 February 2024

6. ACCREDITATION OF OFFICES OF FOREIGN BUSINESS ENTITIES

The Cabinet of Ministers has approved a regulation establishing a new procedure for the accreditation of representative offices of foreign business entities. It will enter into force on 9 May 2024. Based on the new regulation, an application for the accretion is submitted to the Ministry of Investments, Industry, and Trade as the accreditation body either in writing to a local Centre for Public Services or electronically through the Unified Portal of Interactive Public Services. Applications are reviewed within five business days. The accreditation fee of 48 times the baseline calculation value (approx. USD 1,300) shall be paid within one month from the approval date. Representative offices are accredited for a period from 1 to 3 years. The accreditation term may be extended based on a relevant application.

As with the previous rules, foreign employees of a representative office are subject to personal accreditation. It is to note that the new regulation establishes that the number of foreign employees in a representative office may not exceed 40% of the total number of employees and exceed 5.

Resolution of the Cabinet of Ministers No. 76 of 7 February 2024

7. UNIFIED REGISTER OF PREFERENCES AND BENEFITS FOR INVESTORS

The Cabinet of Ministers has adopted a Resolution on forming a unified register of preferences and incentives provided to domestic and foreign investors. The register will start to be maintained by the Ministry of Investments, Industry, and Trade, starting from 1 July 2023 and will be published on the website of the Ministry. It is envisaged that all incentives available to investors in each industry will be covered.

Resolution of the Cabinet of Ministers No. 77 of 7 February 2024

8. INTERNATIONAL CENTRE FOR DIGITAL TECHNOLOGIES

On 1 February 2024, the President signed a Decree on establishing the International Centre for Digital Technologies. Aimed to spur the development of the IT sector and to attract IT businesses in Uzbekistan, the Decree provides for the creation of the International Centre for Digital Technologies “ENTERPRISE UZBEKISTAN” on the territory of the IT-Park. Starting from 1 June 2024, as an experiment, a special legal regime will be established on the territory of the Centre for five years. Specifics of the special regime are yet to be clarified by a dedicated state commission. Still, it is envisaged to cover: the production and testing of digital products, customs procedures for and taxation of relevant businesses, employment relations, financial operations, protection of personal data, protection of IP, and dispute resolution. A special Presidential Resolution is intended to be adopted in this regard. Until 1 December 2024, a draft of the Law “On the International Centre for Digital Technologies” will be developed.

Presidential Decree No. UP-25 of 1 February 2024

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Sincerely,
Kosta Legal Law Firm

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