Home Resources Newsletters UZBEKISTAN LEGA...

UZBEKISTAN LEGAL NEWSLETTER FOR OCTOBER 2023

Some of the most important legal developments in Uzbekistan in October 2023 included the adoption of a Presidential Decree on measures to accelerate the country’s industrial development and Presidential Resolutions initiating reforms of the currently state-controlled railway and drinking water supply sectors. Other significant legal changes were the issuance of a Resolution of the Cabinet of Ministers on accounting and managing the state's financial liabilities in PPP projects and the adoption of a Law introducing amendments and additions to the legislation on land leases and easements.

1. MEASURES TO ACCELERATE INDUSTRIAL DEVELOPMENT

The President has signed a Decree on accelerating the development of the country’s industry, which among other things, envisages the following:

the Ministry of Economy and Finance will perform principal functions for the development of industry, including the elaboration of a unified industrial policy and new regulatory mechanisms for stimulating industrial growth; the development and reform of basic industries (oil and gas, power energy, chemicals, mining, and machine building) through, among other things, the preparation of relevant strategic programs; and the monitoring of the production and consumption of strategic resources (power energy, metals, etc.);
the establishment of the Project Office for Implementing Industrial Policy and Developing Basic Industries under the Ministry of Economy and Finance for doing relevant research and analytical work. The Project Office is allowed to enter into direct contracts with international consulting companies (i.e. without conducting competitive public procurement procedures);
the transfer of the Center for the Comprehensive Expertise of Projects and Import Contracts from the Ministry of Investments, Industry, and Trade to the Ministry of Economy and Finance;
within 2 months from the date of the Decree, a state-owned holding company in the chemical industry and its de-facto regulator JSC “Uzkimyosanoat” shall transfer shares in 5 chemical enterprises (including JSC "Dekhkanabad Potash Plant" and LLC "Kungrad Soda Plant") to the State Assets Management Agency. The Agency shall develop further proposals on transferring shares of chemical enterprises from JSC “Uzkimyosanoat” to the Agency;
the exclusion of a number of goods (caustic soda, building glass, technical kerosene, etc.) from the list of highly liquid goods that shall be sold by enterprises-monopolists and enterprises directly or indirectly owned by the state only through public trades. Further, the Committee for Developing Competition and Protecting Consumer Rights is provided with the right to amend the list.

Presidential Decree No. UP-169 of 12 October 2023

2. REFORMS IN RAILWAY SECTOR

The President has signed a Resolution on reforming the railway transportation sector to attract investment, improve the quality of rail services, and enhance competition. It, among other things, provides for the following:

(A) till 1 January 2024, state-owned JSC “Uzbekistan Railways”, a monopolist in the sector, and its enterprises will be reorganized with the following separate entities being established as subsidiaries of JSC “Uzbekistan Railways”:

JSC “Temiryulinfratuzilma” - responsible for the functioning and developing railway facilities; power supply, signaling, and communication facilities; locomotive facilities; a single dispatch centre; and freight stations;
JSC “Temiryulkargo” - providing cargo transportation services, operating freight wagons and containers, organising multimodal door-to-door transportation, developing logistic centres and terminals;
JSC "Temiryulexpress" - providing passenger transportation services, operating and developing the use of high-speed electric trains;
JSC “Temir Yul Volzallari” - operating railway stations;
JSC “Shahar Atrofida Yulovchi Tashish” - providing sub-urban passenger transportation services;
JSC "Temir Yul Ijtimoiy Hizmatlar" - operating related non-core assets, including, cultural, educational, healthcare, and sports facilities.

(B) till 1 January 2026, (i) JSC "Uzbekistan Railways" and its subsidiaries are allowed to sell, lease, purchase, and supply goods and provide services to each other based on direct contracts (i.e. without conducting competitive public procurement procedures); (ii) JSC "Uzbekistan Railways" is allowed to purchase goods and services, equipment, components and spare parts necessary for the production and repair of rolling stock and the repair and construction of railways based on direct contracts with manufacturers and/or its official dealers (i.e. also without conducting competitive public procurement procedures);

(C) starting from 1 January 2024, the cancellation of all provided discounts on tariffs for local, import, and export freight transportation with the provision of discounts being only allowed based on decisions of the Cabinet of Ministers. Till 1 December 2023, the Cabinet of Ministers shall develop a list of available discounts;

(D) starting from 1 January 2024, the abolishment of state regulation of tariffs for the provision of freight cars and containers and high-speed and high-speed passenger transportation services and the transition to market-determined tariffs;

(E) within 2 months from the date of the Resolution, the Ministry of Transport, JSC “Uzbekistan Railways”, and a number of other entities shall consider and develop proposals on (i) the electrification of the Navoi-Uchkuduk railway section; (ii) the construction of a second electrified railway line on the Angren-Tashkent railway section as well as the creation of a terminal and a logistics center in the Akhangaran district of the Tashkent region; (iii) the development of railway stations in the cities of Tashkent, Samarkand, and Kokand based on public-private partnership;

(F) the approval of, among other things, (i) the Roadmap for the Reform of the Railway Transportation Sector in 2023-2026 (Annex 1 to the Resolution); (ii) a list of JSC "Uzbekistan Railways” enterprises whose shares are intended to be sold at public auction (Annex 5); and (iii) a list of real estate objects of JSC "Uzbekistan Railways" and its enterprises intended to be sold at public auction (Annex 6).

Presidential Resolution No. PP-329 of 10 October 2023

3. IMPROVEMENT OF THE DRINKING WATER SUPPLY AND SEWAGE SYSTEM

The President has signed a Resolution on measures to improve the drinking water supply and sewage systems across the country. It, among other things, envisages the following:

(A) till 1 April 2024, state-owned water supply organisation JSC "Uzsuvtaminot" and its enterprises will be reorganised and the following separate companies - subsidiaries of JSC ”Uzsuvtaminot” will be established:

regional water transmission organisations, responsible for the production of drinking water; its transmission through the main water transmission networks; and the development and maintenance of water bodies related to the water production and the main water transmission networks;
regional drinking water supply organisations, responsible for the provision of drinking water to consumers through drinking water supply networks; wastewater disposal; and the development and maintenance of the relevant networks and sewerage systems;

(B) starting from 1 January 2024:

tariffs for drinking water supply and wastewater disposal services will be formed based on the actual costs of production, current expenses, expenses for the development and modernization of relevant facilities, financial costs, payable taxes and duties, and expenses for the maintenance of JSC “Uzsuvtaminot”;
when designing new water supply and sewage facilities and systems, it is necessary to ensure full coverage of relevant territories.

(C) a wider use of mechanisms of public-private partnership (PPP) in the sector. Starting from 1 July 2024, on an experimental basis, the drinking water supply and wastewater disposal systems in the cities of Kagan, Shirin, Yangier, Bekabad, and Yangiyul will be transferred to private investors based on PPP;

(D) for a period till 1 January 2027, special machinery, equipment, and vehicles purchased (imported) for projects in drinking water supply and wastewater disposal at the expense of international financial institutions and foreign government financial organizations are exempt from the disposal charge;

(E) the approval of, among other things, (i) the Roadmap for Improving the Drinking Water Supply and Sewerage Systems (Annex 1 to the Resolution); (ii) the list of projects implemented by JSC “Uzsuvtaminot” and international financial intuitions in 2024-2026 within the framework of the Program for Providing the Population with Drinking Water Supply and Sewerage Services (Annex 7).

Presidential Resolution No. PP-343 of 24 October 2023

4. FINANCIAL LIABILITIES OF THE STATE IN PPP PROJECTS

The Cabinet of Ministers has adopted a Resolution on the management of fiscal liabilities of the state in public-private partnership (PPP) projects. The following is, among other things, established by the Resolution:

public partners shall identify and calculate financial liabilities of the state (direct and contingent ones) that arise under corresponding PPP projects and pre-approve them with the Ministry of Economy and Finance (the Ministry) as well as, if project cost exceeds USD 10 mln, the Cabinet of Ministers. The pre-approval is needed at the stage of approval of a relevant project concept and, also, at the stage prior to the signing of a relevant PPP agreement;
public partners shall regularly submit to the Ministry reports on financial liabilities under ongoing PPP projects as per the form provided in Annex 5 to the Resolution;
for PPP projects that were approved, tendered, or started to be implemented prior to the date of the Resolution, public partners shall submit to the Ministry all documents and information necessary for calculating liabilities of the state within 30 calendar days from the date of the Resolution.

For a more detailed overview of the Resolution, please refer to our dedicated Legal Alert.

Resolution of the Cabinet of Ministers No. 558 of 23 October 2023

5. LAND LEASE AND EASEMENT

On 23 October 2023, a Law introducing amendments to the land legislation regarding lease and easements was adopted. It entered into force on 25 October and, among other things, provided for the following changes:

(A) with respect to land lease:

rights and obligations related to leased land may be transferred to other persons/entities with the consent of a lessor (“re-lease”);
where real estate located on a leased land plot is transferred, relevant lease rights pass to a transferee without the consent of a lessor being required;
the rules for prolonging the term of land lease have been clarified. Hence, among other things, if, within 1 month from the receipt of the lessee’s request to extend a land lease agreement for a new term, a lessor does not provide a lessee with a justified refusal, the agreement is considered extended for a new term on the same terms;
it is now explicitly provided that the overall term of land lease, including an initially agreed term of lease and all prolongations, may not exceed the maximum term set forth by law (e.g. 25 years for foreign individuals and legal entities and “enterprises with foreign investments”);

(B) with respect to an easement:

requirements for the form and the content of easement agreements have been set. Hence, easement agreements shall be concluded in writing and shall, among other things, include the following: (i) information that allows to identify a relevant land plot; (ii) a description of conditions of the land plot; (iii) a purpose of the easement; (iv) a procedure for paying and the amount of an easement fee;
regional municipalities may now grant easements for all categories of lands where land is required for specific public needs (among other things, laying and operating electrical networks, communication lines, pipelines, internal irrigation networks);
an easement is preserved where rights to relevant land are transferred to another person/entity. An easement cannot be a separate subject of sale, gift, pledge, or lease and it is also prohibited to transfer it to persons who are not right holders to land encumbered by an easement;
cases when an easement may be terminated are set forth.

Law No. ZRU-871 of 23 October 2023

To ensure that we are addressing the topics that are most important to you, we would This email address is being protected from spambots. You need JavaScript enabled to view it. your feedback and suggestions.

Have a good day!

Sincerely,
Kosta Legal Law Firm