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UZBEKISTAN LEGAL NEWSLETTER FOR MAY 2024

In May 2024, some of the most notable legal developments in Uzbekistan included changes in several competition acts, measures to implement the State Investment Programme in the second quarter of 2024, the introduction of rules for applying new incentives to business entities, the introduction of rules governing the engagement of foreign consultants by state authorities, initiatives aimed at developing the textile industry, and amendments to pharmaceutical legislation.

1. CHANGES IN COMPETITION LEGISLATION

The Cabinet of Ministers has adopted Resolution No. 256, setting several new competition law regulations. The Resolution and the approved regulations enter into force on 3 August 2024. The regulations, in particular, include the following:

a new Regulation on Determining and Recognising that a Business Entity or a Group of Persons Occupies a Dominant Position or Has Superior Bargaining Power in a Commodity or Financial Market. It follows from the regulation that the practice of maintaining the state registry of entities occupying a dominant position will be abolished. The final decision on whether an entity or group occupies a dominant position or has superior bargaining power is made by the head of the Competition Committee or its territorial departments by issuing a relevant order. Information about entities with a dominant position or superior bargaining power will be published on the website of the Competition Committee;
a Regulation on the Procedure for Recognising that a Digital Platform Operator Occupies a Dominant Position or Has Superior Bargaining Power and Determining Actions that Lead to the Restriction of Competition or Discrimination of the Rights and Interests of Consumers or Other Business Entities. The regulation establishes a separate procedure for recognising a dominant position or superior bargaining power of digital platform operators, which include online marketplaces, search engines, smart assistants, social networks, etc.
a new Regulation on the Procedure for Recognizing that a Business Entity is a Natural Monopoly. According to the Regulation, natural monopolies are business entities that operate and maintain network infrastructure in Uzbekistan in one of the following sectors: (i) transportation and distribution of electrical and thermal energy, (ii) transportation of oil and petroleum products through pipelines, (iii) transportation and distribution of gas through pipelines, (iv) state railway infrastructure services, (v) drinking water supply and sanitation, and (vi) air navigation and airport services;
a new Regulation on the Procedure for Identifying Anti-Competitive Agreements and Concerted Actions. This new regulation generally repeats the similar current regulation. Notably, it stipulates that if the Competition Committee identifies direct or indirect evidence of concerted actions or anticompetitive transactions, as described in the regulation, allegedly involved business entities must prove that no relevant anti-competitive agreements or concerted practices occurred;
a new Regulation on the Procedure for Obtaining Preliminary Consent to Economic Concentration (i.e. mergers and acquisitions). Based on the new regulation, an application for relevant clearance can now be submitted by any of the parties to a qualifying transaction. Also, fees for issuing consent have been changed. It is further provided in the new regulation that when issuing consent to economic concentration, the Competition Committee may request the parties to take certain structural or behavioural measures for maintaining the existing level of competition and market shares of competing entities. Such measures may include the request to alienate certain assets or to provide access to specific intellectual property to other entities;
a Regulation on the Procedure for Determining Monopolistically High and Monopolistically Low Prices in Financial Markets;
a Regulation on the Procedure for Forced Separation of Business Entities.

Resolution of the Cabinet of Ministers No. 256 of 1 May 2024

2. STATE INVESTMENT PROGRAM IN THE 2nd QUARTER OF 2024

The Cabinet of Ministers has adopted a Resolution on measures to implement the State Investment Program in the 2nd Quarter of 2024. The Program envisages the utilisation of foreign investments for USD 8.1 bln and, among other things, provides for the following lists of investment projects:

a list of projects implemented in the 2nd quarter of 2024 by the Republic 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 in the 2nd quarter of 2024 (Annex 5);
additions (new projects) to an earlier approved list of potential investment projects for 2024 (Annex 6).

Resolution of the Cabinet of Ministers No. 286 of 20 May 2024

3. PRINCIPLES OF APPLYING INCENTIVES TO BUSINESS ENTITIES

The President has adopted a Resolution on the procedure for applying new incentives to business entities. It is provided in the Resolution that new incentives, including subsidies, tax and customs benefits, and preferences, shall apply to business entities depending on their sustainability rating: for AAA rating — in the amount of 100%; AA — 90%; A — 80%; BBB — 70%; BB — 60%; B — 50%. If the sustainability rating of an entity goes down, the same level of incentives remains applicable for the following 3 months. If it goes up, the amount of incentives corresponding to a new rating category will apply starting the following month. The rules do not apply to newly established business entities for 6 months from the date of their establishment and to business entities registered in a number of specific regions.

Starting 1 January 2025, the registry of all incentives (terms, types, applicability, etc.) will be maintained on the website https://subsidiya.mf.uz. Until 1 October 2024, the Ministry of Economy and Finance shall develop procedures (methodology) for monitoring and evaluating the effectiveness of provided incentives and for refunding subsidies in case of their unjustified receipt or improper use.

Presidential Resolution No. PP-193 of 24 May 2024

4. RULES FOR STATE AUTHORITIES TO ENGAGE FOREIGN CONSULTANTS

The President has signed a Resolution regulating the procedure for the engagement of foreign consultants by state authorities. According to the Resolution, the Agency for Strategic Reforms acts as a coordination body. Foreign consultants are engaged based on tri-party contracts between the Agency, a state authority - customer, and a foreign consultant after conducting necessary public procurement procedures (except for engagements for implementing reforms envisaged by the Strategy “Uzbekistan — 2030”). Foreign consultants shall meet the qualification criteria set in the Resolution. Consultancy contracts are concluded for one year with prolongation allowed. They shall provide for consultants' tasks and set relevant key performance indicators.

The Resolution also instructs the Agency and some other state bodies (i) within two weeks from the date of the Resolution, to develop a standard form agreement concluded with foreign consultants; (ii) within two months from the date of the Resolution, to revise previously concluded contracts with foreign consultants and to amend or terminate them to comply with the requirements of the Resolution; (ii) till 1 July 2024, to create a unified electronic register of foreign consultants.

Presidential Resolution No. PP-198 of 29 May 2024

5. DEVELOPMENT OF TEXTILE INDUSTRY

The President has signed a Decree on the development of the textile industry. It aims at increasing the yarn processing up to the level of 100% by the end of 2027, ensuring the effective operation of specialised small industrial zones in the Andijan and Namangan regions and industrial technopark in the Tashkent region, and facilitating the transformation of the country into a textile hub with at least 10 strong local textile brands. The Decree, among other things, provides for the following measures:

a list of imported materials, components and spare parts necessary for the production of textile products and not produced in Uzbekistan that are exempt from customs duties until 1 January 2027 (Annex 1);
the requirement for a monthly prepayment for electricity consumption is abolished for textile enterprises;
buildings and structures constructed in specialised textile industrial zones will be transferred to business entities for up to 7 years based on payments in installments or for rent;
JSC “Entrepreneurship Development Company” will partially compensate textile manufacturers for interest on foreign currency loans taken for purchasing equipment used in the production and dyeing of fabrics, knitted fabrics, and sewing and knitwear products;
the Industrial Development Fund will contribute 15% of the cost of equipment to the authorised capital of newly created enterprises (up to 25% of shares) for implementing projects worth up to USD 10 mln for the production of fabrics, knitted fabrics, dyeing and finishing products, towels, and curtains.

Presidential Decree No. UP-71 of 1 May 2024

6. CHANGES IN PHARMACEUTICS REGULATION

A Law introducing some amendments to the pharmaceutics regulation has been adopted. It enters into force on 31 May 2024 and introduces the following changes:

the state registration of medicinal substances is abolished;
the Ministry of Healthcare becomes responsible for setting the procedure for classifying medicines as prescription or non-prescription ones;
information about prescription and non-prescription medicines shall be specified in the instructions for their medical use and the State Registry of Medicines, Medical Products, and Medical Equipment Approved for Use in Medical Practice;
business entities are allowed to manufacture certain types of precursors, as determined by the Cabinet of Ministers based on List IV, after getting a relevant license.

Law No. ZRU-928 of 30 May 2024

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Kosta Legal Law Firm

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