This chapter examines Uzbekistan’s legal framework for investment. It assesses barriers to entry and operation of foreign investors and the domestic legal framework for investment protection and dispute settlement, focusing on the ongoing reform of the Law on Investment and Investment Activity (2019). The chapter discusses investor challenges linked to business registration, contract enforcement in domestic courts, alternative dispute resolution mechanisms, anti-corruption, land tenure and administration, and protection for intellectual property. Lastly, the chapter provides an overview of Uzbekistan’s international legal framework on investment.
Roadmap for Sustainable Investment Policy Reforms in Uzbekistan
Abstract
In recent years, Uzbekistan has undertaken extensive efforts to improve the domestic investment climate, including to ease regulatory barriers and enhance attractiveness to foreign investors. In only five years, the country has completely restructured its legal framework on investment, adopting new laws that, directly or indirectly, regulate investment activities. Reforms have resulted in the development of the new Law on Investment and Investment Activity of 2019 (2019 LOI), the Law on Public-Private Partnerships of 2019 (PPP Law), and the Law on Special Economic Zones of 2020 (SEZ Law), among others. While only recently adopted, all these instruments have already been subject to significant revisions, including to comply with the requirements of the World Trade Organization, with the PPP Law having been amended in 2021, and a new draft Law on Investment and Investment Activities (draft 2024 LOI, reviewed in its June 2025 version) and a revised SEZ law under preparation.
Reforms under way are expected to address restrictions affecting foreign investors under Uzbekistan’s legal framework. Currently, statutory restrictions on foreign direct investment (FDI) are largely concentrated in real estate investment, although foreign investors’ limited access to land has broad consequences across all sectors of the economy and can represent a barrier for land-intensive investments, such as renewable energy projects. Foreign investors may not own land but can access land on a leasehold basis for up to 25 years. Foreign investment in real estate assets, excluding land plots, has been partly liberalised since May 2022, but remains subject to important restrictions. Sector-specific regulation in mining, media, banking, and legal services limits foreign equity participation in locally incorporated firms, while other sectors, such as fishing, electricity, transports, telecommunications and other financial services, are more open than in the OECD area.
The modalities under which legal reforms are implemented, and the quick pace in which they are put in place, can give rise to concerns. Legal reforms should further strive to preserve the domestic policy space to regulate in the public interests and to ensure that all investors – domestic and foreign, large and small – are granted equal access to economic opportunities. Certain features of the draft investment law, such as the integration of a Foreign Investor Council seemingly representing only large foreign investors, needs careful implementation to ensure that concerns of small- and medium-sized enterprises (SMEs) and investors are not overlooked.
Legal reform processes should also avoid creating additional uncertainties for investors. Duplications and overlaps of legislation in Uzbekistan raise doubts as to whether a new legal instrument is necessary, or if the same objectives could be achieved through other means, for example by strengthening implementation of existing laws and regulations. At the same time, even when legislative amendments are necessary, concerns remain as to possible overlaps and contradictions within the existing legal framework. This concern is even more pressing when considering the heavy reliance that Uzbekistan places on secondary legislation for the regulation of substantive investment matters. The excessive recourse to “by-laws” (e.g., Presidential and Cabinet Decrees) for the regulation of substantive investment issues, including the definition of incentives and benefits, increases fragmentation in the legal framework and creates uncertainty for investors.
A more coherent investment legal framework could also contribute to reducing margins of discretion in the negotiation of investment contracts, particularly on the possibility of granting to certain large investors additional benefits and incentives not envisaged under primary legislation. Eliminating discretion in contract negotiation allows establishing a level playing field among different types of investors and limiting the risk that large strategic investors be able to use their bargaining power to benefit from a preferential treatment, in breach of the principle of non-discrimination under domestic law. The draft 2024 LOI already introduces provisions aimed at clarifying the specific types of incentives and benefits that foreign investors can access. Ensuring transparency of investment contracts, for example through their publication and parliamentary review, could also contribute to further reducing discretionary outcomes in negotiation processes.
Overall, Uzbekistan’s commitment to improving the domestic investment climate has resulted in the adoption of measures in several areas. Notably, Uzbekistan has invested in digitalisation to simplify regulatory burdens, increasing the efficiency of the applicable licensing regime, facilitating administrative processes to start and operate a business, and enhancing access to land tenure information. At the same time, inefficiencies continue to negatively affect the land administration regime, mostly due to difficulties in navigating the different legal instruments governing the allocation of responsibilities between central and local authorities. Steps were also taken to strengthen access to justice, including for foreign investors, and to enhance quality and efficiency of the judicial process. But concerns remain as to the ability of the judiciary to adjudicate disputes on technical matters, such as intellectual property disputes and issues of recognition and enforcement of arbitral awards, as well as to the effective implementation of the legal principle of judicial independence, despite recent legal reforms undertaken in this area. Lastly, challenges continue to persist with respect to the comparatively large presence of SOEs in the economy of Uzbekistan, and the ensuing risks of distortive effects for private competitors.
The domestic legal framework on investment also interacts with international investment agreements (IIAs) to which Uzbekistan is a party. Most of Uzbekistan’s IIAs were negotiated between the 1990s and the early 2000s, and therefore provide little consideration to issues such as the need to preserve the state’s right to regulate in the public interest and potential interactions between investment and sustainable development. This circumstance leads to an increased risk of exposure to investor-state dispute settlement (ISDS), raising the need to undertake a thorough review of the existing IIA stock.
Restrictions to foreign direct investment
Clarify and consolidate foreign investment measures in real estate to ensure a transparent and standardised framework. While recent reforms have eased some restrictions, nationality-based conditions and investment thresholds remain. Establishing uniform rules for all foreign investors would enhance legal certainty and support a more predictable investment environment.
Implement a negative list approach, consolidating regulatory restrictions to FDI, in the context of the reform process of the 2019 LOI. Sector-specific foreign equity limits and other restrictions to foreign investment are scattered across different laws and decrees. Defining and maintaining an up-to-date, publicly available negative list of FDI restrictions under the proposed draft 2024 LOI, including through relevant implementing regulations, would add transparency and increase certainty around the regulatory framework. Furthermore, to ensure its adoption immediately after the enactment of the draft 2024 LOI, any implementing regulation including the negative list should be developed in parallel with the draft law, in consultation with all relevant stakeholders and in a manner consistent with, and reflective of, already existing FDI restrictions enacted under Uzbek law.
Take advantage of the on-going process of approval of the draft 2024 LOI to clarify the legal situation regarding foreign investors’ access to agricultural land. The draft 2024 LOI extends the maximum lease term for foreign investors from 25 to 49 years but remains unclear as to whether foreign investors may lease agricultural land. Ensure that implementing regulations provide clear guidance on land access, in particular for agricultural investments, so as to strengthen legal certainty and contribute to a more predictable investment environment.
Re-evaluate the necessity of foreign equity restrictions in service sectors such as banking and legal services and consider lifting current restrictions on branches of foreign banks and insurance companies. In the case of banking, the authorities have indicated it will be lifted ten years after WTO accession. Earlier reform could accelerate this transition or provide a clear timeline consistent with accession commitments to ensure predictability for investors.
Reassess the necessity of discriminatory minimum capital requirements and ensure a level playing field for investors. Harmonising minimum capital requirements across all legal forms, regardless of ownership, would enhance Uzbekistan’s investment climate and facilitate market access for foreign investors.
Domestic legal framework for investment and investor protection
Ensure that ongoing legal reform processes are effectively co-ordinated, to reduce risks of overlaps and contradictions with existing laws and regulations. Recourse to tools like Regulatory Impacts Assessment may help determine whether new laws or amendments to existing laws are needed, or whether the same objectives can be achieved by strengthening implementation of existing rules.
Limit recourse to secondary legislation (“by-laws”) and Presidential and Cabinet Decrees only to implement provisions in primary legislation. Relying on secondary legislation to regulate substantive investment issues increases fragmentation in the legal framework and creates uncertainty for investors. For example, it is preferable to consolidate substantive issues relating to the definition of incentives and benefits in primary tax legislation, rather than regulated through decrees.
Adopt measures to ensure effective co-ordination between the Foreign Investor Council envisaged under the draft 2024 LOI and existing participatory mechanisms involving small- and medium-sized investors and enterprises, to ensure that existing investment climate challenges can be addressed in an effective and comprehensive manner. To this end, consider adopting measures to ensure the effective involvement of SMEs in the activities of the Foreign Investors Council.
Consider adopting measures to reduce margins of discretion in the negotiation of investment contracts (i.e., “investment agreements” under Uzbek law), in particular on the possibility to grant certain large strategic investors additional benefits and incentives not envisaged under primary legislation. Such measures could include, for example, publishing investment contracts with large strategic investors, submitting such contracts to parliamentary review and ensuring that the granting of incentives with financial implications be attributed to a single authority.
Continue making efforts to promote competition. The comparatively extensive state presence in the economy, combined with advantages to SOEs, distorts the level playing field with private firms and limits opportunities for foreign investors to enter and operate in the market.
Investor challenges and improvements to the domestic business environment
Make sure to provide sufficient time for public consultations for draft legislation beyond the minimum 15-day term envisaged under applicable laws. Have recourse to direct methods (e.g., stakeholder platforms and dialogues) to engage with interested stakeholders, including foreign investors. If relying on the online consultation platform, ensure that English translations of proposed laws are available. Remove bureaucratic barriers and improve data sharing among agencies to facilitate access to information and improve the quality of the RIA.
Continue implementing measures to enhance the quality and efficiency of domestic judicial proceedings, including by providing training and capacity building to the judiciary on specialised matters relating to FDI (e.g., recognition and enforcement of foreign arbitral awards, intellectual property). Strengthen the current regulatory framework on mediation, by making mediation a pre-condition to the submission of a judicial claim or the initiation of an arbitral proceeding and facilitating enforcement of settlement agreements, including by joining the Singapore Convention on Mediation. Co-operate with the relevant institutions and the private sector to raise awareness of the benefits of alternative dispute resolution mechanisms for the resolution of commercial disputes and building the capacity of domestic arbitrators and mediators to settle disputes involving foreign investors.
Clarify the allocation of responsibilities on land administration between national and sub-national authorities, including through the systematisation of existing regulatory instruments. Define clear criteria for revocation or withdrawal of land permits, taking advantage of the approval process of the draft 2024 LOI to extend guarantees against indirect expropriation of investor’s land plots and other properties.
Renew efforts to strengthen enforcement of intellectual property (IP) rights and continue ongoing reforms to reduce administrative burdens in connection with the registration of IP, including by investing in digitalisation and extending the procedure for accelerated review of IP applications beyond trademarks.
International investment agreements
Adopt more specific language in investment protection provisions in IIAs, to ensure increased predictability for both investors and the government and strike a balance between investor protection and governments’ right to regulate. As Uzbekistan is working to adopt a model bilateral investment treaty (BIT) in line with modern practices and language, the Government may wish to use this opportunity to undertake a review of existing agreements to ensure that they reflect sound practices emerging in recent treaty policy, as well as ensure coherence with draft 2024 LOI.
Participate and follow closely international investment treaty reform initiatives, including the OECD’s “Future of investment treaties” initiative, dedicated to substantive treaty clauses, and UNCITRAL Working Group III on ISDS reform.
The regulatory environment in Uzbekistan remains relatively restrictive for foreign investors (Figure 4.1 and Figure 4.2), according to the OECD FDI Regulatory Restrictiveness Index (FDIRRI), which measures statutory restrictions on FDI (Box 4.1). The degree of FDI regulatory restrictiveness in Uzbekistan is broadly in line with the non-OECD average but higher than the regional Central Asian average comprised of Kazakhstan, the Kyrgyz Republic and Tajikistan. Foreign investors also face more significant restrictions in Uzbekistan than in some of the non-OECD benchmark economies, namely Armenia, Romania and Morocco. As in most benchmark economies, the observed FDI restrictiveness in Uzbekistan is largely due to equity restrictions limiting the degree of foreign ownership allowed in locally incorporated firms.
As evidenced by the FDIRRI, discriminatory policies against foreign investors are applied around the globe, although the extent of discrimination varies from one country to another. While FDI restrictions can serve important public policy objectives, such as promoting domestic employment or the competitiveness of domestic industry, discriminatory policies come with a cost. Even partial restrictions on FDI, such as foreign equity limits, have been linked to lower levels of foreign investment (Mistura and Roulet, 2019[1]; Fournier, 2015[2]; Nicoletti et al., 2003[3]). Consequently, restrictions can slow down the achievement of development objectives due to missed opportunities for foreign firms to contribute to e.g., the clean energy transition, quality employment opportunities, productivity growth, global value chain integration and innovation in the host economy.
OECD FDI Regulatory Restrictiveness Index by policy category in Uzbekistan and benchmark economies, 2023
Note: The indices take values between 0 (fully open) and 1 (fully closed). Data reflect regulation in force as of end-December 2023. The regional average for Central Asia covers Kazakhstan, the Kyrgyz Republic and Tajikistan. Among the benchmark economies used in this report, Bolivia, Paraguay and Turkmenistan are omitted due to lack of data.
Source: OECD FDI Regulatory Restrictiveness Index database, 2023.
Uzbekistan has reformed the regulatory framework for foreign investment in recent years. Notably, the Law on Investment and Investment Activity (No. LRU-598 of 25 December 2019) (2019 LOI) has addressed some of the drawbacks identified in previous OECD analysis by providing a more modern and transparent legal framework for foreign investment (OECD, 2023[4]; 2021[5]). Uzbekistan has also successfully taken steps to streamline procedures and broader business regulation affecting both domestic and foreign firms (ibid). In addition, Decree No. PF-101 of 8 April 2022 partially opened real estate investment to non-residents, subject to minimum investment thresholds. The Law on Currency Regulation (No. O’RQ-573 of 22 October 2019) guarantees the free repatriation of capital and profits related to foreign direct investment, contributing to a more enabling investment climate. Ensuring the free transfer of investment-related funds is recognised as a key aspect of an open and predictable investment framework (World Bank, 2010[6]). This reform builds on the liberalisation of foreign exchange operations introduced in 2017 by Decree No. PF-5177, which enhanced legal predictability for foreign investors. Nonetheless, repatriation requirements continue to apply to export proceeds as part of Uzbekistan’s foreign trade regime.
There is also scope to further reduce statutory restrictions on FDI in Uzbekistan. In particular, limitations on foreign investors’ access to land apply across all sectors and may directly constrain investment in land-intensive activities, such as renewable energy. Reforms liberalising foreign investment restrictions by as little as 10%, as measured by the FDIRRI, can be expected to be associated with a 2.1% increase in FDI stocks on average (Mistura and Roulet, 2019[1]). The following sections describe the statutory restrictions that foreign investors currently face in Uzbekistan and that could be re-considered to further open the economy for FDI.
The OECD FDI Regulatory Restrictiveness Index (hereafter, FDIRRI) measures statutory restrictions targeting foreign direct investment across 100+ countries and 22 economic sectors, including all primary sectors, manufacturing, electricity and main services sectors. The restrictions recorded in the FDIRRI are based on information retrieved from official legal sources.
The FDIRRI captures FDI restrictions across four policy categories: i) foreign equity limits; ii) screening and approval of foreign investment; iii) restrictions on key foreign personnel; and iv) other operational restrictions, such as restrictions on the acquisition of land and real estate for business purposes by foreigners and preferential treatment offered to locally owned firms in public procurement.
The discriminatory nature of a policy (i.e., it applies only to foreign investors) is the central criterion for scoring it as restrictive under the FDIRRI. Certain non-discriminatory measures are also covered when they are considered more burdensome for foreign investors, such as rules regarding the nationality of board of directors. Any non-statutory discrimination that may occur during implementation and enforcement of FDI policies is not taken into account. Preferential treatment accorded to some investors over others as a result of more favourable treatment under international agreements or location and activity-based policies, as well as the presence of state-owned enterprises and monopolies, are equally disregarded.
Individual measures are evaluated on a 0 (fully open to FDI) to 1 (fully closed) scale based on the degree of restrictiveness. The sectoral scores reflect the sum of scores across all four policy categories, capped at 1. The economy wide FDIRRI of a given country is simply a weighted average of all 22 sectoral scores.
Note: For further information about the current FDIRRI methodology, the full list of measures covered and the scores, please refer to: (OECD, 2024[7]), the FDIRRI – Regulatory Database and the FDIRRI – Scores database.
Uzbekistan is taking steps to streamline and clarify statutory restrictions to FDI. The draft 2024 LOI, currently under discussion, is expected to introduce a “negative list” approach to FDI restrictions, listing sectors that are not accessible to foreign investors. Based on information gathered during consultations held in Tashkent in June 2024, it appears that the “negative list” will be included in a decision of the President of the Republic. The introduction of a negative list is a positive development, as it provides greater transparency and security for investors.
To further enhance the transparency of potential restrictions and barriers to FDI, it is further recommended that the negative list be developed in parallel with the draft investment law, in consultation with all relevant stakeholders, to ensure its adoption immediately after the enactment of the draft investment law. Furthermore, the negative list should be developed in a manner consistent with, and reflective of, already existing FDI restrictions enacted under Uzbek law. The government may also wish to consider existing good practices for the development of negative lists, to further maximise clarity and efficiency (Box 4.2).
The negative list approach to the identification of FDI restrictions is particularly efficient and predictable, since all activities are deemed open without conditions, except for those identified and listed in relevant regulatory instrument. At the same time, there are several measures that governments may consider in the definition of negative lists, especially concerning drafting modalities, underlying institutional setting and periodic review:
Drafting practices
The negative list of FDI restrictions should be complete, without providing for carve-outs or exceptions, and list all activities closed to private investment (whether foreign or domestic), activities closed only to foreign investors, and activities where foreign investment is permitted under discriminatory conditions.
The list should be drafted in clear and concise terms, describing imposed conditions with clarity and referencing, where appropriate, specific provisions in existing national laws and regulations.
The list should include explicit reference to international standard industry classification (ISIC) for accurate identification of closed or restricted activities.
Institutional setting and periodic review
The negative list should be placed in an executive-level order (e.g., decree, regulation) to facilitate amendments over time.
The list should be immediately updated whenever any underlying legislation is introduced or modified, to make sure new or modified restrictions are enforceable only when appropriately reflected in the negative list.
The list should be revised on a regular basis, including by engaging in meaningful stakeholder consultations, relying on assessments by independent qualitied institutions, and publicising documents supporting deliberations.
The review process should ensure broader involvement of interested stakeholders, be implemented in a transparent manner, and take into account technical inputs to help broaden the information-base supporting discussions and deliberations and contribute to improved policymaking.
Source: OECD adapted from (OECD, 2020[8])
4.2.1. A strict regime for land access restricts FDI across different sectors of the economy, but particularly in real estate investment
The sectoral distribution of FDI restrictions in Uzbekistan is very uneven. A high degree of restrictiveness is observed in real estate investment and to a lesser degree in agriculture, while sectors such as fishing, electricity, transport, telecommunications and other financial services, are more liberalised than the OECD average due to the lack of restrictions in sector-specific regulation (Figure 4.2).
Foreign investment in real estate remains significantly more restricted in Uzbekistan than in the average Central Asian economy, and far more so than in OECD countries. While some liberalisation has occurred, foreign ownership of land remains prohibited, and nationality-based restrictions continue to apply to real estate acquisitions. Since May 2022, foreign nationals meeting minimum investment thresholds have been permitted to acquire real estate under construction (excluding land plots) without requiring residency. However, this access is limited to investors from a predefined list of countries, while those from non-authorised countries remain ineligible. As a result of these restrictions, both treated as foreign equity restrictions under the FDIRRI methodology, Uzbekistan’s real estate investment sector is nearly fully closed to FDI.
OECD FDI Regulatory Restrictiveness Index by sector, 2023, unweighted scores
Note: The indices take values between 0 (fully open) and 1 (fully closed). Results presented here do not account for sector weights used to compute total economy scores. Data reflect regulation in force as of end-December 2023. The regional average for Central Asia covers Kazakhstan, the Kyrgyz Republic and Tajikistan. Turkmenistan is omitted from the regional average due to lack of data.
Source: OECD FDI Regulatory Restrictiveness Index database, 2023.
Foreign investors may access land only on leasehold basis
Foreign legal entities and foreign-owned companies established in Uzbekistan may not own land but may hold lease titles to non-agricultural land for a period of up to 25 years (up to 49 according to the new edition of the draft 2024 LOI) under the Land Code (of 1 July 1998, as amended; Articles 17 and 24) and the 2019 LOI (as amended; Article 54). In this regard, the regulatory regime in Uzbekistan is particularly stringent: whereas other countries that restrict land ownership by foreigners typically allow resident investors to purchase land, in Uzbekistan the prohibition extends to locally incorporated companies that are foreign owned. Furthermore, foreign investors are subject to different rules than domestic ones regarding the need for state authorisation to lease land.
In 2021, the maximum lease term applicable to foreign investors was reduced from 50 years to 25 years, further limiting access to land conditions for foreign invested companies and increasing uncertainty for investors (Law No. ZRU-708 of 16 August 2021 and Law No. ORQ-775 of 6 June 2022). Other investors are entitled to lease non-agricultural lands for up to one hundred years. The draft 2024 LOI currently under discussion proposes to revert to the previous regime and allow foreign investors to lease land for a period of up to 49 years. While this provision is now enshrined in the draft 2024 LOI, the Land Code still limits such leases to 25 years, creating potential legal uncertainty pending harmonisation between the two instruments.
Agricultural and forestry land is subject to specific rules under Articles 24 and 46 of the Land Code, whereby it can only be granted on leasehold use basis to agricultural co-operatives, enterprises, institutions, organisations, as well as other legal entities for commercial agricultural production. As the code does not explicitly address the case of “enterprises with foreign investment”, in contrast with the current 2019 LOI, which provides explicitly for the right of “enterprises with foreign investment” to lease non-agricultural land, but not agricultural land, there could be a degree of uncertainty regarding whether legal entities with foreign investment are entitled to lease agricultural land and under which conditions. The authorities consulted for this review have confirmed that such entities may lease agricultural land. In the absence of discrimination against foreign investors with regards to leasing agricultural land, the only remaining difference in treatment is the lease term, which is shorter for foreign-invested enterprises (25 years instead of 30 years as for other legal entities).
Until early 2024, the Cabinet of Ministers could decide on allocating agricultural land to agro-industrial clusters and to individual and legal entities undertaking major investment projects. According to the consulted authorities, this procedure for direct transfer of land plots under lease to agro-industrial clusters by the Cabinet of Ministers has been cancelled pursuant to the Presidential Decree No. UP-15 dated 18 January 2024. Agro-industrial clusters may, nonetheless, continue to lease land plots through electronic online auctions for the implementation of major investment projects.
Foreign investment in already built real estate remains prohibited
Since 1 May 2022, subject to certain minimum investment thresholds, foreign nationals (from certain countries) are allowed to acquire real estate under construction (excluding land plots) without being residents of Uzbekistan (Decree No. PF-101 of 8 April 2022).1 Nonetheless, foreign citizens and non-residents of Uzbekistan have to pay higher fees for notarising deals on purchase of residential property in new buildings than citizens of Uzbekistan. Prior to 2022, real estate investment (beyond business and own residential purposes) by foreign persons was fully prohibited.
It is proposed under the draft 2024 LOI that investors may acquire real estate (excluding land plots) on the basis of ownership. While this language appears broader and no longer distinguishes by real estate type (i.e. under construction) or investor nationality, it does not explicitly repeal the restrictions set out in Decree No. PF-101. As such, the continued applicability of those restrictions, particularly regarding eligibility by country of origin and acquisition of completed properties, remains unclear and will depend on the harmonisation of the broader legal framework.
Limited access to land and real estate can have broad consequences for FDI
Uzbekistan could benefit from relaxing the current restrictions on foreign investors’ access to land and real estate. Increased foreign investment in real estate can benefit the economy by increasing access to capital that could be used to expand and modernise the real estate park. Increased FDI in real estate could also stimulate growth in e.g., the construction sector due to urban development projects and indirectly support productive activities through the development of more sophisticated financial markets as a result of the influx of foreign capital. Although FDI in real estate is not without certain risks, such risks can be efficiently managed, such as through macro-financial prudential measures.
The general prohibition of land ownership by foreign investors, along with the relatively short maximum lease terms, might also affect investment activity in primary sectors, manufacturing activities and services sectors that are not subject to any other FDI restriction. This is because foreign investors in these activities are also prohibited from owning land for business purposes. Limited access to land and strict regulation of lease terms can therefore contribute to undermine investor confidence across the board.
Limited land access can pose a significant barrier for investment in land-intensive projects, such as renewable energy projects. Securing land use rights is vital for large-scale utility projects in renewable energies, a number of which are currently in development and planning in Uzbekistan. As most renewable energy plants demand more surface per megawatt installed than their fossil fuel counterparts, hurdles to accessing land can increase the transaction costs associated with such clean energy projects. Furthermore, the prohibition for foreign investors to purchase land may limit their access to financing, as freehold land titles can generally be more easily used as collateral than leasehold titles. In infrastructure projects, this can also be important in determining lender's step-in rights. Likewise, restrictions to access to agricultural land could disincentivise foreign investment in agriculture, another critical sector for green growth and accounting for 23.5% of Uzbekistan’s gross domestic product in 2022 compared to only 1.4% on average in the OECD (see Chapter 8 for a further discussion).
4.2.2. Discriminatory minimum capital requirements impose additional barriers to FDI
Enterprises with Foreign Investment (EFIs), defined as companies with at least 15% foreign ownership, must have an initial charter capital of at least UZS 400 million at the time of registration, as mandated by Presidential Decree UP-5495 of 1 August 2018. In Karakalpakstan and the Khorezm region, a lower threshold of UZS 200 million applies under Annex 11 of Cabinet Resolution No. 66 of 9 February 2017. This requirement does not apply to domestically owned limited liability companies and other non-joint stock companies, creating an additional barrier for foreign investors. Aligning capital requirements across all investors, regardless of ownership structure, would enhance Uzbekistan’s investment climate and support broader economic growth.
In this context, the draft implementing regulation under the draft 2024 LOI would introduce a uniform minimum capital requirement of UZS 200 million for all EFIs, regardless of legal form, thereby eliminating current disparities and improving the transparency of entry conditions. In parallel, the draft 2024 LOI lowers the threshold to qualify as an “enterprise with foreign investment” from 15% to 10% foreign ownership, slightly expanding the scope of covered entities.
4.2.3. Sector-specific restrictions affect foreign investors in mining, media, banking, insurance and legal services
Uzbekistan’s mining, media, banking, insurance and legal services sectors remain partly off-limits to foreign investment mainly due to sector-specific regulation that restricts foreign shareholding in companies operating in these sectors. The extent of FDI restrictiveness observed in these sectors in Uzbekistan is higher than in non-OECD countries on average (Figure 4.2).
Since 2018, foreign equity restrictions apply to artisanal mining. Permits for the right to use subsoil plots for carrying out artisanal mining of precious metals can only be applied for by residents, in particular, individual entrepreneurs who are citizens of Uzbekistan and legal entities in which 70% or more of the authorised capital is held by citizens (Presidential Resolution No. PP-4030 of 26 November 2018, Section 2). As the restriction affects only artisanal mining activity relying on non-industrial/commercial mining techniques, the restriction falls out of the scope of the FDIRRI and hence is not recorded as a restriction.
Foreign investment in Uzbekistan’s mass media outlets has historically been capped at 30% of their authorised capital (Law No. ZRU-78 of 15 January 2007, Article 8). This restriction applies to radio and TV broadcasting, websites, printed media and other forms of periodic dissemination of mass information. Authorities have indicated that a new draft media code is under development, which is expected to remove this limitation.
The scope of the foreign equity restriction applicable to banks is somewhat reduced, affecting only non-financial foreign investors. Foreign investors, except foreign banks and other international financial institutions, cannot hold more than 50% of the voting capital of a bank established in Uzbekistan (Law No. ZRU-580 of 5 November 2019, Article 17). Moreover, foreign banks and insurance companies are not allowed to establish branches in Uzbekistan, therefore ruling out a traditionally important entry mode for foreign investors in the sector (Law No. ZRU-580 of 5 November 2019, Article 30; and Law No. LRU-730 of 23 November 2021, Articles 4 and 39). However, authorities have indicated that branch establishment restrictions towards foreign banks will be lifted upon the expiration of the 10-year period starting from the date of Uzbekistan’s accession to the WTO, after which commercial presence will also be allowed through the establishment of direct branches.
Finally, within professional services, the sub-sector of legal services is fully closed to foreign investment due to rules that reserve equity participation in law firms to licensed lawyers and set Uzbek nationality as a precondition for obtaining such a licence (Law No. 349-I of 27 December 1996, Articles 3 and 4).
Due to the key role of services as intermediate inputs, reducing restrictions in services sectors could have important positive effects for Uzbekistan’s economy in terms of impact on downstream industries and consumers. A higher decree of FDI regulatory restrictiveness in services has been linked to lower overall labour productivity (OECD, 2023[9]) and barriers to establishment in services sectors can be associated with higher profit margins of existing firms (Rouzet and Spinelli, 2016[10]). An in-depth evaluation of whether the existing restrictions in services are effective in meeting their stated public policy objectives and whether the benefits of such policies outweigh their negative effects on FDI can help guide reform efforts in this area.
4.3.1. Overview of Uzbekistan’s investment law framework
Uzbekistan is introducing changes to its legal framework on investment in line with international standards, but regulatory coherence and co-ordination could be improved
Investment activities are extensively regulated under Uzbekistan’s legal framework. At the highest level, the Constitution protects the freedom of economic activity and sets out the state’s obligation to ensure a favourable investment and business climate. Currently, the main instrument for investment governance is the 2019 LOI, which regulates investment relations and investment activities carried out by both foreign and domestic investors. A new draft investment law is currently under development, with a view to creating a more favourable investment environment and enhance protection for the rights and legitimate interests of investors (for a summary of best practices in the drafting of investment laws, see Box 4.3). The new draft 2024 LOI, developed under the initiative of the Ministry of Investment, Industry and Trade (MIIT), is expected to introduce significant changes in the legal framework (for a comparison between the 2019 LOI and the draft 2024 LOI, see Section 4.3.2). Based on information received from the MIIT, the draft 2024 LOI was approved by the Senate in January 2025 and it is awaiting presidential ratification for entry into force. Implementing regulations (“by-laws”) to the draft 2024 LOI are also under development and expected to be finalised before the end of 2025.
In addition to the 2019 LOI, other legal instruments contribute to regulating investment activities in Uzbekistan:
The Law on Special Economic Zones (No. LRU-604 of 17 February 2020) (the SEZ Law) governs the functioning and development of special economic zones (SEZ), the criteria for the selection of investment projects, and the rights and obligations of the investors. While adopted only in 2020, the SEZ Law is already being revised. A new draft law on special free zones is currently under development to address the original shortcomings of the SEZ Law and ensure alignment with international practices.
The Law on Competition (No. LRU-850 of 4 October 2023) reforms the legal framework on competition in Uzbekistan, by defining new criteria to identify dominant market position, introducing the concept of “superior bargaining powers”, setting out antimonopoly compliance requirements for certain business activities, and defining the applicable sanctioning regime. The adoption of the Law on Competition is the last step in the implementation of a broad reform agenda undertaken by the government, which started in 2019 with the establishment of the Competition Promotion and Consumer Protection Committee, an independent authority tasked with overseeing the implementation of competition policies, including consumer protection, advertising and anti-competitive practices.
The development of a national investment law is a delicate process, that is heavily influenced by the specific country context. While there is no “one-size-fits-all” approach to the development of national investment laws, over time several international organisations have developed guidelines and instruments designed to assist policymakers in the performance of this delicate tasks. Importantly, such tools are increasingly concerned in enhancing the alignment between investment and sustainable development objectives, recognising that it is not only the quantity of FDI, but also its quality that really matters.
Below are some questions that policymakers are encouraged to consider in designing national investment laws.
What are the policy objectives that the investment law wants to achieve? One of the most common objectives of national investment laws is to promote and protect foreign investment, contributing to liberalise investment regimes. More recently, however, governments have been placing increased attention in promoting inclusive growth and sustainable development, stressing the importance of pursuing “responsible” and “quality” investment.
How is the relevant investment law pursuing the desired objectives? For example, states have different options available to regulate admission of foreign investment. Certain investment laws adopt a “positive list” approach, whereby FDI is permitted only in listed sectors. Others might instead opt for a “negative list” approach, whereby FDI is allowed in all sectors except those listed.
Is an investment law the best policy tool to achieve the desired objectives? Not all countries have adopted a standalone investment law. In fact, the existence of a specific investment law is neither a guarantee nor a prerequisite for a sound investment policy framework. Investment policy can be embedded in other legislation (e.g., Constitution, sector-specific legislation). While an investment law may add transparency to the applicable investment regime, it can also create uncertainty if inconsistent with other laws.
Are there any unintended risks that the national investment law could entail? The inclusion of certain investment protection standards, such as fair and equitable treatment or stabilisation clauses, or specific dispute settlement approaches, such as advanced consent to international arbitration, raise significant risks for governments, as they might prevent the law from changing over time. The regulation of tax incentives equally entails significant risks, due to the pressure they could create on public funds and are therefore better addressed through general tax law.
Particularly sensitive are the interactions between the 2019 LOI and the Law on Public-Private Partnerships (Law No. LRU-537 of 10 May 2019, as subsequently amended by Law No. 669 of 22 January 2021) (the PPP Law), developed with the support of international donors such as the IFC, the EBRD and the ADB. Before its adoption in 2019, partnerships between private and public partners were regulated under the investment legal framework, despite their clear PPP structure. While the 2019 LOI clarified that the PPP Law applies to all legal relations in the field of public private partnerships, in practice agreements relating to PPP-structured investment projects continued to be signed under the 2019 LOI (World Bank, 2023[15]). In its June 2025 formulation, the draft 2024 LOI provides that “special and or procedural conditions” applicable to PPPs are to be regulated under separate laws. International practices call for the implementation of PPP projects exclusively under a dedicated PPP law. The reference to “special and/or procedural conditions” in the draft 2024 LOI seems to imply that the implementation of PPPs will indeed be governed under a dedicated, separate instrument. At the same time, consultations held in the preparation of this chapter have highlighted how the wording used in the draft appears to leave the door open to the adoption of presidential decrees or other special regulation for individual PPP projects, creating uncertainty as to the source of regulation of PPPs. Adding in the draft 2024 LOI a clear reference to the PPP Law might add additional certainty to the fact that PPP projects will be exclusively implemented in accordance with the same.
In addition to primary laws, investment relations in Uzbekistan are frequently regulated through secondary legislation (“by-laws”, in the terminology adopted under Uzbek law). The proliferation of regulations and decrees in the field of investment is particularly concerning, as it increases uncertainties and fragmentation in the legal framework. Decrees issued by the President of the Republic or by the Cabinet of Ministers are often used to address sensitive issues such as the provision of tax benefits or additional investment protections and guarantees (e.g., Presidential Decree No. PD-3594 of 11 April 2005, as subsequently amended, on “Additional Measures to Stimulate Attraction of FDI”; Presidential Decree No. PD-5495 of 2 August 2018 on “Measures for the Cardinal Improvement of the Investment Climate in Uzbekistan”). Consultations held during the OECD fact-finding mission of June 2024 have highlighted how it is common for the President of the Republic to issue decrees in connection with the implementation of specific investment projects, restating and reaffirming terms and conditions already set out under general legislation. Presidential or ministerial decrees are, however, also used to introduce additional guarantees and benefits for large strategic investors, sometimes derogating from primary laws. The proliferation of secondary legislation contributes to an increased fragmentation of the Uzbek legal framework on investment, creating uncertainty for investors and heightening the risk of overlaps and contradiction among existing legal instruments (for more information on how to increase coherence and predictability in the legal framework, see Section 4.4.1 below).
4.3.2. Standards of protection under Uzbekistan’s investment law
Compared to the 2019 LOI, the draft 2024 LOI strengthens investment protection standards for foreign investors, including on indirect expropriation and non-discrimination
The 2019 LOI sets out several investment protections standards. These include guarantees of non-discrimination and non-interference in investment activities (Article 15), guarantees of publicity of normative legal acts and access to information (Article 20) and guarantees of use and free transfer of funds (Articles 16 and 17). The 2019 LOI also includes protections against nationalisation and expropriation, the latter of which is possible only based on a decision of the Cabinet of Ministers and in case of “natural disaster, accidents, epidemics, epizootics and other circumstances of extraordinary nature” (Article 21). Furthermore, the investment law also provides that expropriation must be: (i) strictly limited to the amount of investment or assets that are necessary to pursue the desired public policy objectives; (ii) carried out in a non-discriminatory manner; and (iii) subject to the payment of adequate compensation. The 2019 LOI also grants to the investor the right to appeal the Cabinet’s decision on expropriation.
The draft 2024 LOI is expected to maintain the investment protection standards of the 2019 LOI, while at the same time introducing additional amendments. The draft 2024 LOI first expands the non-discrimination standard by introducing specific guarantees on national treatment, stating that the treatment granted to foreign investors “shall not be less favourable, under the same circumstances […] than the treatment provided to domestic investors” (Article 14). This language recalls the national treatment standard usually included in investment treaties, where it can give rise to interpretative issues as to the extent of the scope and treatment provided to investors. The guarantee of non-discrimination originally provided under the 2019 LOI was already sufficient to protect foreign investors from discrimination, without giving rise to additional interpretative uncertainties. The government may wish to consider reverting to the original language on non-discrimination found in the 2019 LOI. The draft 2024 LOI also removes the guarantee of non-interference in investment activities, replacing it with the more well-defined protection from unjustified inspection, the conditions for the application of which are defined in the same draft (Article 12). Guarantees of openness and transparency of the legal framework are expanded to provide that draft laws and regulations on foreign investments are submitted to public discussion before their adoption (Article 16). The 2024 draft LOI also strengthens the regime on expropriation, by clarifying the criteria guiding compensation. In particular, the draft now clarifies that the owner must be fully compensated for the market value of the expropriated property, as well as for any damage caused in connection with the expropriation (Article 17).
The 2024 draft LOI further expands on the content of the 2019 LOI to expressly provide for protections against indirect expropriation, defined as a “actions by state bodies to restrict [an investor] from the full use of his property without alienation of the right of ownership or direct seizure”. Protections against indirect expropriation are typically found in international investment agreements (IIAs), where the identification of its boundaries is often a source of contention left to the determination of arbitral tribunals. In the investment arbitration context, indirect expropriation requires that regulatory action by the state renders the investment entirely without value. The draft 2024 LOI, however, opts for the more favourable “full use” requirement, potentially enabling investors to bring a claim any time that a state action in any way restricts the full enjoyment of the investment. It should be noted that this definition of indirect expropriation is less strict than the one currently envisaged in the new model bilateral investment treaty adopted by Uzbekistan, leaving more room to investors to argue that an indirect expropriation has occurred (Box 4.8). At the same time, the draft clarifies the difference between indirect expropriation and legitimate regulatory measures, stating that the adoption of measures affecting the investment but aimed at protecting public health and the environment, or aimed at ensuring defence capabilities and economic security shall not give rise to indirect expropriation.
The draft 2024 LOI introduces a guarantee of Fair and Equitable Treatment, making it necessary to manage potential negative impacts on the domestic policy space
The draft 2024 LOI introduces additional investment protection standards not originally envisaged in the 2019 LOI. The draft first reinstates the general principle of freedom of investment (Article 13) already set out also under the Constitution. It then introduces guarantees on freedom of business management (Article 15), access to freely convertible currency (Article 18), and to hire local and foreign personnel (Article 22). In connection with this latter right, however, the draft clarifies that the government retains the power to impose minimum requirements on the number and qualifications of foreign workers, in addition to those already imposed under immigration law. The draft 2024 LOI also includes express guarantees on access to land and real estate purchase (for more information, see Section 4.2.1 above).
The most important innovation concerns the introduction of guarantees of full protection and security (FPS) and fair and equal/equitable (both terms are used interchangeably in the law) treatment. Both FPS and fair and equitable treatment (FET) are typically found in IIAs and, save for very limited exceptions (e.g. Bangladesh, Burkina Faso, Côte d’Ivoire, and Myanmar), do not commonly appear in national investment laws. This is because other parts of a state’s domestic legal framework will generally address issues of physical protection, procedural fairness and government accountability that are covered under the FET and FPS standards. Even in the IIA context, the interpretation of what the FET standard entails is one of the most common grounds of dispute between investors and host states. Arbitral tribunals have often interpreted the standard extensively, to also protect the investor’s legitimate expectations as to the stability of the regulatory framework. Frequent legislative changes, regulations by Presidential or Cabinet decrees, and regulatory inconsistencies and overlaps – all concerns that are often cited by investors as negatively impacting Uzbekistan’s investment climate (see Section 4.4.1 below) – could heighten the risk of a finding of “arbitrary” or “discriminatory” measures in breach of the FET standard.
The inclusion of a provision on Fair and Equitable Treatment (FET) in a national investment law might produce unintended negative consequences on the domestic right to regulate and should therefore be avoided. Since Uzbekistan wishes to maintain such a provision in the draft 2024 LOI, it has also introduced more restrictive FET language to minimise potential risks. The draft limits the scope of FET by providing that the standard only entail compliance with due process of law in the consideration of investors’ applications before government bodies, therefore clearly delineating the substantive scope of the standard.
This drafting option reflects discussions on how to further restrict the FET standard currently ongoing in the investment treaty context, as discussed under Section 4.5.3. Other countries are also relying on new concepts that replace the FET standard while seeking to achieve its same goal. For example, the Investment Protocol to the African Continental Free Trade Agreement introduces the concept of “Administrative and Judicial Treatment”, which is breached when the investor suffers “a fundamental denial of justice in criminal, civil and administrative adjudicative proceedings, an evident denial of due process, a manifest arbitrariness, a discrimination based on gender, race or religious beliefs, or an abusive treatment in administrative and judicial proceedings”.
The draft 2024 LOI removes the legislative stabilisation clause under the 2019 LOI, but the consequences of this change need to be thoroughly assessed
The 2019 LOI includes a stabilisation clause providing that, in the event of legislative changes in selected areas that negatively affect the investment, the investor shall have the right to apply the more favourable legal regime for a period of 10 years after the establishment of the investment (Article 19). The clause does not cover areas that are often the subject of stabilisation (e.g., taxation, land access and labour legislation), but rather specific issues relating to repatriation of income, quantitative restrictions on investment, visa requirements for foreign investors, and restriction on foreign capital.
Stabilisation clauses are a common feature of long-term investment contracts between foreign investors and host states. While they may be found also in the investment laws of certain developing countries – often without limitations as to the areas of the legal framework subject to stabilisation – their inclusion in investment-related legislation is uncommon. Stabilisation clauses also raise concern from an investment treaty perspective, as legislative changes potentially falling under their scope may give rise to the host state’s liability under applicable IIAs, potentially as a breach of the FET standard (Wong and Ali, 2022[16]). As such, stabilisation clauses are often deemed to have a chilling effect on the adoption and implementation of meaningful regulatory changes introduced for legitimate policy purposes, such as raising social or environmental standards (Crockett, 2011[17]).
While draft 2024 LOI removes the legislative stabilisation clause from Uzbekistan’s investment law, in line with international standards, the amendment should be assessed against the new standards of protection introduced under the draft law. The inclusion of a FET standard under the draft 2024 LOI and the lack of a precise definition of the notion “discriminatory” and “arbitrary measures” could lead to an interpretation whereby investors’ legitimate expectations as to the stability of the regulatory framework would be protected tout court, beyond the specific areas stabilised under the 2019 LOI. The government may wish to clarify in the dedicated implementing regulation narrowing the scope of application of the FET standard that this will not be used to shield investors from general regulatory changes occurring during the implementation of the investment.
The Foreign Investor Council under the draft 2024 LOI can support investment climate improvements, but co-ordination mechanisms are needed to ensure the involvement of small scale and domestic investors.
Among the innovations of the draft 2024 LOI is the recognition of the Foreign Investor Council (FIC) as an advisory body designed to help resolve disputes and push for further legislative improvements from a business climate perspective. The FIC was first established with Presidential Resolution No. PP-4519 of 13 November 2019, which included among its objectives the performance of policy, advocacy, and research activities concerning the establishment of a favourable investment climate in Uzbekistan, the exchange of experience and peer-learning on investment-related matters, the development of proposals aimed at removing obstacles constraining investment processes, and the establishment of effective co-ordination among businesses, foreign companies, banks, and international financial institutions.
The draft 2024 does not make any reference to Presidential Decree No. 4519, but rather simply adds additional tasks to the FIC’s mandate. These include the consideration of grievances from its own members on issues arising during the implementation of their investment activities in Uzbekistan, the possibility to submit written proposals to the MIIT on how to address such issues, and, more broadly, the power to submit to the President of the Republic proposals concerning the improvement of investment legislation and the investment climate in Uzbekistan (Article 9). The draft 2024 LOI also recognises the possibility to submit drafts regulatory acts relating to foreign investment to the FIC for consideration, before their formal adoption (Article 16, drafts regulatory acts “may be” submitted to the FIC). An express reference to Presidential Resolution No. PP-4519 in the draft 2024 LOI would be beneficial to ensure co-ordination among the two instruments, reduce risk of contradictions and increase transparency for investors interested in understanding the mandate of the FIC.
The draft 2024 LOI does not provide many details on the membership of the FIC, simply stating that it acts as a “forum for direct communication between the Cabinet of Ministers of the Republic of Uzbekistan and investors”. Information on membership can, instead, be found in Presidential Resolution No. PP-4519, which clarifies that the Council includes representatives of large foreign investors already operating in Uzbekistan, banks and other commercial institutions, international financial institutions and foreign government financial institutions. Membership also extends to “other participants”, without specific indications as to what these could be. During consultations held by the OECD in the context of a fact-finding mission to Tashkent in June 2024, concerns emerged as to whether small- and medium-sized foreign investors and domestic investors and enterprises would be included in the FIC.
Restricting FIC membership to large foreign investors only would be particularly problematic. The effective participation of small- and medium-sized foreign investors and domestic investors in economic activities is essential to unlock benefits arising from FDI and establish key linkages with the domestic economy, while at the same time promoting sustainable economic development. SMEs investors should be provided with an equal opportunity to participate in initiatives leading to the improvement of the domestic investment climate. Granting preferential access to high-level government entities only to large-scale strategic foreign investors would also appear to be in direct contrast with Article 4 of the draft 2024 LOI, which provides that state action in the relationship with investors and investment activities shall be guided by the principle of “fairness for and equality of investors” and the principle of non-discrimination. In this respect, the government has confirmed that it is actively working with small and medium-sized enterprises operating in the country to ensure their participation in broader efforts to improve the domestic investment climate. To this end, the MIIT has set up a dedicated working group and is collaborating with entrepreneurs in all 207 regions in Uzbekistan to solve existing investment climate-related problems. To ensure that existing investment climate challenges are solved in an effective manner, the government should ensure consistent co-ordination and dialogue between the FIC and working groups involving domestic small- and medium-sized companies.
Mechanisms such as the FIC have been successfully established in other CIS members (e.g., Kyrgyz Republic, Tajikistan, Kazakhstan), often with the support of international financial institutions (EBRD, 2021[18]). Rather than being formally recognised into national investment laws, they appear to operate in a manner akin to multi-stakeholder platforms, providing opportunities for companies and policymakers to discuss investment climate-related challenges in an informal setting. The government is invited to reflect on whether the inclusion of the FIC in the draft 2024 LOI is necessary, especially since the Council is already specifically regulated under a dedicated legal instrument. Should the government wish to retain the FIC in the draft 2024 LOI, additional provisions should be included to provide transparency and clarity as to its membership, functioning and mandate, including through an express reference to Presidential Resolution No. PP-4519. In addition, the government should take all necessary steps and measures to ensure the effective involvement of SMEs in the activities of the FIC.
4.3.3. Contractual regime for investment in Uzbekistan
Under the current regime, large strategic investors receive a more favourable and dedicated treatment during the negotiation of the investment contract, but the new draft 2024 LOI is taking steps to limit discretionary treatment
The process for the negotiation of investment agreements – that is, written arrangements concerning the implementation of an investment project between the investor and the government – is entrusted to different entities within the government, depending on the type of foreign investor concerned. In case of investment projects under USD 100 million, the negotiation is entrusted to the relevant line ministry, which retains full discretion on how to conduct the process. The MIIT will be involved only to ensure the final contract’s compliance with the provisions of Uzbek law. In case of large strategic investors, implementing investment projects over USD 100 million, the negotiation of the relevant investment contract falls under the direct competence of the MIIT, which is responsible for both ensuring compliance of the contractual terms with Uzbek law and for providing in-depth facilitation services to the large strategic investor. In this case, the negotiation process lasts an average of three months. After having agreed on a text with the foreign investor, the MIIT submits the contract to the Cabinet of Ministers for review and approval before signature. The investment contract becomes fully effective only upon issuance of a special Presidential or Cabinet decree, confirming, among other things, the types of benefits and incentives that the foreign investor will receive. While decrees confirming the effectiveness of the investment contract are usually published online in the national database of Uzbekistan legislation, it does not appear that contracts regulating strategic investment projects as a whole are similarly publicised, nor subject to parliamentary review.
The negotiation of benefits, protections and incentives through the investment contract represents a particularly delicate matter, due to concerns linked to the need for the government to be accountable to its own citizens (Box 4.4). In general, the 2019 LOI expressly sets out the possibility for the investment contract with any type of investors to provide for the issuance of government guarantees, assistance in the financing of investment projects, the creation of a special tax and payment regime, and state monitoring of the implementation of investment projects. Through special resolution, the government can also grant additional “guarantees and support measures (benefits and preferences)” to large strategic investors operating in priority sectors that provide: (i) sustainable economic growth; (ii) progressive technological changes in the country’s economy; or (iii) strengthening and expanding exports (Resolution of the Cabinet of Ministers No. 264 of 30 April 2020 amending the Resolution of the Cabinet of Ministers No. 180 of 2 August 2005 on “Measures to implement the Decree 11 April 2005 on Additional Measures to Stimulate Attraction of FDI”). The resolution first recalls the guarantees and benefits already provided under the 2019 LOI. However, it clarifies that the list that it includes is not exclusive and that the contract can set out additional guarantees, for example concerning the stability of legislation.
The negotiation of investment contracts between investors and states raises particular concerns, due to the peculiar features of one of the parties involved. Indeed, rather than two commercial entities, one of the parties to the contract is a government, which is accountable to its citizens and has duties, obligations and interests going beyond the maximisation of profits.
Below is a short summary of main issues that emerge when negotiating investment contracts:
Contract transparency: most investment contracts (especially in the extractive sector) are negotiated confidentially. While there might be commercial reasons supporting the lack of disclosure of investment contracts, lack of transparency is concerning as investor-State contracts are a tool for public policy with significant negative impacts on public interest concerns, including with respect to the use and allocation of public resources. Governments should therefore promote the disclosure of contractual terms, with exceptions to disclosure being allowed for compelling justifications (e.g., need to protect proprietary information).
Relationship with broader legal framework: contractual stabilisation clauses seek to mitigate the risks that investors may face when dealing with changes in the law. They can be framed in broad terms, as applying to the entire legal framework applicable to the investment, or narrowly, concerning only specific areas of the law (e.g., taxation). Depending on the way the stabilisation clause is drafted, it might unduly restrict the policy space that a state needs to update its regulatory framework to meet public interest objectives, such as upholding labour rights or protecting the environment.
Community interests: effective and ongoing community engagement is essential to ensure the successful implementation of the investment project, contributing to building shared expectations and reducing the risks of social conflict. Meaningfully engaging with affected communities throughout the project’s life cycle is unanimously considered as a best practice by several international organisations and financial institutions.
Source: (OHCHR, 2015[19])
Overall, the outcome of the negotiation process is highly discretionary. Consultations held during the fact-finding mission in Tashkent of June 2024 have highlighted how large strategic investors are often able to secure additional benefits and incentives not explicitly provided under the investment law or the tax code. While the government has confirmed that, in most cases, it will seek to minimise deviations from the tax code and applicable presidential decrees on incentives, in practice this might not happen in all cases. The specific benefits and incentives granted through the investment contract will often depend on the specific situation and the strategic investor itself. From a governance perspective, this practice is especially problematic, for several reasons. First, the high amount of discretion enhances the risk that powerful strategic foreign investors will be able to obtain better contractual terms compared to their contribution to Uzbekistan’s economy, thus fostering rent-seeking behaviours. Second, the discretion risks discriminating among investors, in direct breach of the principles grounding the investment legal framework as set out under the 2019 LOI and the draft 2024 LOI. Discretion in negotiations also increases the risks of corruption and bribery, due to the lack of transparency often associated with such processes. Lastly, discretion might contribute to creating legal uncertainty. Indeed, it is entirely possible for governments to use the possibility of granting and benefits to create competition among investors and force them to accept additional regulatory requirements not envisaged under the law, while increasing the risk that investors be allowed to avoid the application certain regulations.
Going forward, reducing the margins of discretion in the negotiation of investment contracts and minimising the preferential treatment granted to large strategic investors will be essential to further build investor confidence, especially for SMEs investors. The draft 2024 LOI takes important steps in this direction, setting out the list of incentives that investors in “priority sectors” are entitled to receive (e.g., state aid, land plots, infrastructure facilities). The draft 2024 LOI also provides that investors carrying out activities contributing to sustainability goals, such as gender equality, decarbonisation, and innovation, can be provided with “additional incentives”. Both “priority sectors” and “additional incentives”, including fiscal, non-fiscal and performance-based incentives, will be identified in implementing regulations to be adopted within three months from the entry into force of the draft 2024 LOI. Based on information provided by the government, it appears that the implementing regulation will also clarify that investors will not be provided with investment incentives other than those envisaged under primary legislation. In the meantime, the government has also adopted additional steps to ensure increased transparency and certainty in the granting of privileges and benefits, by tasking the MIIT with the establishment of a Unified Register outlining all types, terms, procedures and entities responsible for their issuance (Cabinet Decision No. 77 of 13 February 2024).
In addition to the innovations to be introduced through the draft 2024 LOI, the government could also consider adopting additional measures to further reduce discretion in the negotiation process. These include, for example, ensuring the transparency of investment contracts, especially with large strategic investors. The government might consider, for example, publishing such contracts in the online national database of the legislation of Uzbekistan. It could also consider adherence to international standards encouraging contract transparency, in particular in certain sensitive sectors such as the extractive industries. In this context, Uzbekistan could consider adhering to the Extractive Industries Transparency Initiative (EITI) and their standards on extractive contracts transparency. In line with best practices, the government should also ensure that the granting of incentives with financial implications be entrusted to a single entity, preferably the Ministry of Economy and Finance.
4.4.1. Transparency, coherence, and predictability of the Uzbek legal framework
A transparent, coherent, and predictable legal framework for investment is a critical determinant of investment decisions. This is especially true for foreign investors who may have to operate within regulatory systems, cultures, and administrative frameworks very different from their own. Measures that contribute to create a transparent, coherent, and predictable investment climate include, among other things, the systematic publication of laws and regulations, including through dedicated portals and mechanisms that allow investors to easily access legislation; the undertaking of consultations and other participatory processes that allow investors to take part in lawmaking initiatives; and the existence of specific legal provisions that allow determining with certainty the outcome of the application of relevant legal instruments.
The legal framework in Uzbekistan is generally transparent, but its coherence and predictability could be improved.
Uzbekistan has taken measures to ensure the transparency of its legal framework. Laws and regulations in force are available online on the national database of legislation of Uzbekistan (https://lex.uz). The database is regularly updated and accessible free of charge and provides English translations of relevant documents. Draft legislative proposals are published online for consultation through a dedicated website (https://regulation.gov.uz), as well as on the website of the Oliy Majlis (https://parliament.gov.uz/ru/events/category/yangi-qonun-loyihalari). In both cases, the website and associated draft legislation are accessible only in Russian and Uzbek, which might impair accessibility for foreign investors.
While the Uzbek legal framework is generally accessible, it remains difficult to navigate, especially for foreign investors. Lawmaking in Uzbekistan often relies on secondary legislation, and especially on “by-laws” as defined under the Law on Normative Legal Acts (No. LRU-682 of 20 April 2021). This category includes, notably, decrees and resolutions of the President of the Republic, resolutions of the Cabinet of ministers, orders and resolutions of ministries, state committees and departments, as well as decisions of local government bodies. While the Law on Normative Legal Acts clarifies that “by-laws” cannot be used to regulate matters that should be governed through legislative acts, stakeholders have noted how, sometimes, this may happen in practice. Presidential and Cabinet decrees are sometimes used to derogate from general legislation and to clarify conditions applicable to specific investment projects.
The significant proliferation of secondary legislation negatively affects the coherence and predictability of the Uzbek legal system. Regulation through secondary legislation has been deemed to have reached “important volumes”, leading to the adoption of multiple and often redundant pieces of regulation and often resulting in overlapping and contradictory outcomes (OSCE Office for Democratic Institutions and Human Rights, 2023[20]). Stakeholders consulted in the preparation of this report have noted how laws and “by-laws” often duplicate one another. This consideration also applies to decrees and resolutions of the President of the Republic, whose material scope of regulation is still unclear under applicable law. Stakeholders have also noted how primary and secondary legislation are often not streamlined, with different instruments often providing for contradictory definitions of the same legal terms. While the Ministry of Justice (MoJ) periodically undertakes a review (“inventory”) of existing legislation to address the lack of co-ordination and try to reduce potential overlaps, this measure is not sufficient, by itself, to ensure the full coherence of the legal framework. To further achieve this objective, the MoJ is conducting a comprehensive systematisation of regulatory acts by industry, in order to identify and eliminate duplications, contradictions, and legal gaps, and consolidating separate but related legal instruments into systematic and comprehensive acts, thus facilitating the simplification of law enforcement practice and reducing bureaucratic barriers. As part of this work, it is also actively developing roadmaps for legislative systematisation and providing methodological support to state bodies to enhance the effectiveness of the legislative process.
The root cause of legislative overproduction lies in the circumstance that the successful performance of governmental entities is often measured based on the number of laws and regulations adopted, rather than on their effective implementation. Overall, institutional actors are often placed under pressure to develop new laws at a very quick pace and in a reactive manner. Furthermore, multiple institutions are entrusted with law-making powers, which they exercise independently in accordance with their own legislative plans. Such fragmentation at the institutional level leads to co-ordination issues, making it difficult to align policy options and regulatory developments in a coherent manner (OECD, 2024[21]). At the same time, stakeholders have noted how implementation of laws and regulations is lacking. Further contributing to the overinflation are significant lawmaking powers of the executive (OSCE Office for Democratic Institutions and Human Rights, 2023[20]). To increase coherence and co-ordination, the government could consider adopting measures to streamline legislative plans across government institutions (e.g., by promoting a plan of prioritisation), prioritising and combining ministerial efforts to achieve common policy objectives. The adoption of an evidence-based and rational approach to law-making can improve regulatory quality and reduce duplication of legislative efforts. The recently adopted OECD Public Governance Review of Uzbekistan can provide additional indications as to how such objectives may be achieved (OECD, 2024[21]).
Additional measures could be adopted to strengthen participatory and impact assessment processes for the adoption of laws and regulations.
The Law on Normative Acts (No. LRU-682 of 20 April 2021) recognises the importance of implementing public consultations prior to the adoption of legislative acts. The law provides for the publication of draft laws on a dedicated online portal (https://regulation.gov.uz/ru) for a minimum term of 15 days (which can be extended depending on the complexity of the project and the importance of involving a broader audience), with a view to implementing public discussions with affected stakeholders. The law also introduces the obligation for the proponent to consider the comments received and provide a justification in case they are rejected. Despite the existence of rules on public consultations, their practical implementation suffers from significant shortcomings. Businesses are sometimes not properly consulted, and the outcome of the consultation process is highly variable depending on the type of act under discussion. Such high variability also depends on the circumstance that the Law on Normative Acts does not clarify at what stage of the law-making process the consultations should be implemented. To ensure the effectiveness of the consultation process, the government should consider increasing the timeframe for the public consultation beyond the current minimum 15-day term, to allow for meaningful stakeholder engagement. Additional measures that could support effective consultations include avoid relying exclusively on online portals, opting instead for more direct methods to engage with interested stakeholders, including foreign investors, and ensuring that all relevant documents for consultation are made available to the public, including by providing relevant English translations where necessary.
The Law on Normative Legal Acts also addresses Regulatory Impact Assessment (RIA), whose implementation is specifically regulated under a dedicated Presidential Resolution (No. 5025 of 15 March 2021). The Resolution clarifies when the performance of a RIA is required, distinguishing between ex ante and ex post RIA. Ex ante RIA may be requested by the President and by the Cabinet or implemented based on the initiative of the proponent of the draft law. Ex post RIA is, instead, required for all acts that were subject to ex ante RIA, as well as acts that affect “entrepreneurial activity, rights, freedoms, and legitimate interests of citizens, as well as the environment”. Government representatives consulted in the preparation of this report have clarified that the RIA process also applies to acts affecting the rights and interests of investors, when they result in the setting of new obligations, prohibitions and restrictions and the imposition of new costs. The Resolution sets out the content of the RIA report, which must identify “the subjects whose interests are affected by the proposed draft” and the “consequences (negative, positive or neutral) of a draft’s impact”.
In 2021, the MoJ intervened to further strengthen the implementation of RIA process, by establishing a unified methodology for conducting ex ante and ex post RIA. In 2024, the government also introduced a simplified and expanded procedure to assess the regulatory impacts of drafts of certain legal acts and instruments. The simplified procedure applies to regulatory acts relating to, among other things, the introduction, expansion or reduction of benefits, preferences or other types of state support to business entities, as well as the determination of obligations, requirements, prohibitions or other restrictions, for individuals and legal entities, of measures of influence. The expanded procedure, instead, applies to regulatory acts adopted in relation to projects which, based on the simplified assessment, are recognised as having a high level of economic and social impact, as well as impacts on the environment.
The Presidential Resolution on RIA also makes it mandatory to implement public consultations on all draft regulatory acts as part of the implementation process. Notably, consultations are held with stakeholders to assess the feasibility and necessity of analysing problems, collecting data and evidence, identifying alternative methods and implementing regulatory instruments. The RIA projects and report are discussed directly with the participation of business entities and their associations. To this end, the MoJ has developed recommendations for the introduction of informal methods of public discussions, aimed at expanding opportunities for open dialogue with citizens and stakeholders. Uzbekistan could also rely on examples and practices from peer countries to further strengthen its public consultation regime (Box 4.5).
Colombia
The Colombian Ministry of Environment publishes responses to stakeholder comments online. It indicates whether a comment is accepted or rejected after explaining its decision. If the comment is accepted, it also explains how it is taken into account in the proposed regulation.
Iceland
Icelandic policymakers publish the results of consultations on the government’s consultation portal. A report highlights the main points raised by stakeholders, as well as suggestions for improvement and areas of concern.
Slovak Republic
When a comment on a draft regulation open for public consultation receives 500 reactions from other stakeholders, the regulator is required to respond to the comment and engage with these stakeholders. In addition, policy makers indicate for each comment whether it is major or minor and whether it has been accepted, rejected or has been partially accepted, and provide the corresponding motivation for the decision.
Source: (OECD, 2021[22])
The requirement for ex ante RIA under the Resolution does not appear to be mandatory, with the initiation of the process being subject to the proponent’s own discretion. An ex ante RIA was carried out, for example, in the preparation of the draft 2024 LOI. The MIIT, as proponent of the law, developed an RIA report, which was then submitted to the MoJ for review. Despite this positive example, stakeholders have noted how ex ante RIAs are not regularly implemented in practice (OSCE Office for Democratic Institutions and Human Rights, 2023[20]). When implemented, ex ante RIAs are only conducted after a regulation has been outlined in the government’s planning, contrary to the best practice that requires RIAs to take place as early as possible in the lawmaking process (OECD, 2024[21]). Similar shortcomings affect ex post regulatory review. Government stakeholders consulted in the development of this report have confirmed that the draft 2024 LOI will be also subject to an ex post RIA following its adoption, as well as to a subsequent examination after 5 years to determine its effectiveness and whether the expected results have been achieved. However, such a process does not appear to be standard practice, and regulatory reviews seem to occur mostly on an ad hoc basis (OECD, 2024[21]).
Furthermore, the implementation of both ex ante and ex post RIA is subject to significant challenges and shortcomings. A primary issue concerns the poor quality of RIA reports, as many government officials lack the skills to prepare them. Recent OECD’s analysis of RIA practices in Uzbekistan has shown that cost-benefit analysis under ex ante RIA processes was often insufficient or incomplete, also due to the absence of clear guidelines for impact assessment (OECD, 2024[21]). As such, RIAs often fail to capture the full impacts of the proposed regulation. Providing capacity building of government officials to meaningfully implement RIAs is, therefore, of utmost importance. In this context, to strengthen the implementation and update of RIA processes in Uzbekistan, the government has implemented a wide range of activities, including training and seminars for technical specialists in government agencies, the development of methodological materials and teaching aids and manuals. Trainings were aimed at sensitising government officials on international practices in conducting RIAs, strengthening their ability to implement different methodologies for conducting a RIA process (e.g., cost benefit analysis) and building knowledge on practical tools for RIA implementation. A second challenge relates to the scarcity of research-based and statistical information. Effective RIAs rely on robust data, but institutions often lack up-to-date and reliable information. Removing bureaucratic barriers and improving data sharing among agencies can, therefore, facilitate access to information and improve the quality of the RIA-making process.
4.4.2. Regulatory processes for starting a business
Foreign investors can freely choose among different legal forms to operate in Uzbekistan. The most common types of arrangements include Joint Stock Companies (JSCs), Limited Liability Companies (LLCs), and unitary state enterprises, as well as branches and representative offices. Each entity is expressly governed under specific legal instruments, setting out the relevant corporate governance framework (e.g., Law on Joint Stock Companies and protection of shareholders’ rights, No. LRU-370 of 7 May 2014; Law on Limited and Additional Liability Companies, No. LRU-310 of 1 March 2002; Law on Private Enterprises, No. LRU-558 of 23 January 2004). Procedures for setting up a business in Uzbekistan are expedient and efficient, with minimal bureaucracy and straightforward regulatory procedures, thanks also to the availability of an online registration system (for more information, see Chapter 3).
The new Entrepreneurship Code, approved by the Senate in August 2024, further streamlines business operations by comprehensively regulate relationships in the field of entrepreneurship. The Code streamlines and consolidates existing business legislation, providing for the unification of over 100 legislative acts. It also defines the rights and obligations of firms, dividing business entities into small, medium and large (Senate of Uzbekistan, 2024[23]). Lastly, the Code addresses the issue of the social responsibility of entrepreneurs, by defining social entrepreneurship, social enterprise, socially vulnerable groups and the mechanisms for their support.
Both the Chamber of Commerce and Industry and the MoJ provide dedicated services to investors seeking to start a business in Uzbekistan. The latter, in particular, has developed an interactive information portal, “Business Consultation” (https://b-advice.uz/), to provide comprehensive assistance and legal advice in business activities. The website provides information on topics such as starting and operating a business, dispute resolution, tax, and licenses and permits. To date, the website is still in testing mode, and not all relevant information has been yet translated into English, resulting in limited accessibility. The UzIPA also provides business facilitation services to investors, including consulting services, information and analysis, business registration, and other legal assistance (for more information, see Chapter 3).
4.4.3. Privatisation and State-Owned Enterprises
The government is implementing an ambitious programme of privatisation, to liberalise the economy and reduce the number of SOEs operating in the country. Based on information received by UzSAMA, the Uzbekistan State Asset Management Agency, there are currently 1775 SOEs operating in Uzbekistan, of which 376 state unitary enterprises, 1242 LLCs and 165 JSCs operating in various sectors of the economy, including energy, mining, transport, telecommunications, and manufacturing (UzSAMA, 2023[24]).
The competition-distortive effects of public ownership continue to represent a barrier to entry and expansion
A first step in the privatisation process was the adoption of the Strategy for the Management and Reform of SOE (2021-2025), approved with Cabinet Resolution No. 166 of 29 March 2021. Among others, the Strategy sets out measures to increase efficiency in SOE management and to improve the regulatory framework for SOEs. It also sets out the criteria to determine when an enterprise should be kept in state ownership, identifying three specific cases: (i) the enterprise carries out activities that are compatible with natural monopolies; (ii) the implementation of activities by private enterprises is unprofitable and concerns essential services for the population; and (iii) the enterprise operates in strategic sectors of the economy (e.g., mining, defence, infrastructure). In the implementation of the strategy, a series of executive measures adopted in 2022 initiated the process of privatisation of large SOEs in the energy, transport, mining, manufacturing, and ICT sector.
From a legislative perspective, Uzbekistan adopted two key instruments contributing to the privatisation process. The Law on Privatisation of Non-Agricultural Land Plots (No. LRU-728 of 16 November 2021) sets out the process for the privatisation of land plots attributed to legal entities for entrepreneurial activities or attributed to citizens for housing and performance of entrepreneurial activities, and land plots on which state-owned real estate facilities subject to privatisation are located. Foreign citizens and foreign legal entities, however, cannot participate in the privatisation process. The Law on the Privatisation of State Property (No. LRU-907 of 14 February 2024), instead, sets out the regime for the privatisation of state-owned real estate, government shares, and state unitary enterprises, including through the determination of the methods of privatisation and the starting price for the sale. As part of the privatisation process, in 2024, the government also established the National Investment Fund of the Republic of Uzbekistan (“UzNIF”), which owns strategic stakes ranging from 20% to 40% in key SOEs, with the objective of driving long-term sustainable economic growth and development. Based on information received from UzSAMA, between 2021 and 2024 a total of 3,371 real estate properties – covering 3.4 million square meters of buildings and structures and 2.2 thousand hectares of land – together with 503 state-owned enterprises were privatized.
Despite recent reform efforts, previous OECD analysis indicates that the role of the state in Uzbekistan’s economy continues to be extensive (OECD, 2023[4]; 2021[5]). Competition distortions induced by public ownership represent a particularly high barrier to entry and expansion for firms in Uzbekistan. SOEs are active in sectors where natural monopolies typically arise, such as electricity, gas, telecommunications and transport (such as railways), but also have a broad presence in other sectors, such as accommodation, food and beverage service activities; motion picture distribution and projection; financial services; and all manufacturing sectors. SOEs also have regulatory and policy influence in certain sectors and they are accorded various types of preferential treatment compared to private firms (OECD, 2023[4]; 2021[5]). For instance, SOEs are granted preferential treatment in terms of access to land, financing and investment incentives that distorts market entry for private firms (ibid). In addition to privatisation efforts, eliminating the above-mentioned competition-distortive policies is also needed to level the playing field and foster competition.
4.4.4. Contract enforcement: judicial processes and alternative dispute resolution mechanisms
Access to a sound court system for the prompt enforcement of contracts and resolution of disputes is another key concern for both foreign and domestic investors. Investors will be more likely to invest in a country when they have confidence that their contractual rights will be upheld. The existence of an effective, independent, and impartial justice system grounded in the rule of law and access to alternative dispute resolution (ADR) mechanisms, including arbitration and mediation, are critical elements of a stable investment climate.
Uzbekistan is provided with a sound judicial system and effective ADR mechanisms, although concerns have been raised as to the effective implementation of the principle of judicial independence. Additional efforts are also required to improve the quality of the judicial process, especially for what concerns the resolution of highly technical cases, concerning for example intellectual property disputes.
Uzbekistan has taken steps to strengthen foreign investors’ access to its judicial system.
Uzbekistan’s judicial system has been subject to major reform efforts in recent years. The Constitution (2023) regulates, respectively, the Constitutional Court, as the authority tasked with assessing compliance of legislative and executive acts with constitutional principles, and the Supreme Court, the supreme judicial body of the country for civil, criminal, economic and administrative cases. The recent Law on Courts (No. LRU-793 of 28 July 2021), instead, sets out the new structure of ordinary courts. In the first instance, inter-district, district, and city courts established in the 12 administrative regions of Uzbekistan, the Independent Republic of Karakalpakastan, and the City of Tashkent are provided with general jurisdiction over civil, economic and criminal cases. In the second instance, the Court of Karakalpakstan, the 12 Regional Courts and the Tashkent City Court consider appeals over civil, economic, and criminal law cases.
The Economic Procedure Code (EPC) regulates economic and commercial jurisdiction. The Code sets out special rules on jurisdiction for disputes involving foreign investors, whether natural foreign residents or local companies with foreign participation. To improve foreign parties’ access to justice, the EPC grants first instance jurisdiction to the Court of Karakalpakstan, the Regional Courts and the Tashkent City Court. In addition to cases involving foreign investors, such courts can also decide disputes concerning the recognition and enforcement of foreign judgments and arbitral awards.
Recent reforms introduced additional measures to facilitate foreign investors’ access to the Uzbek judicial system. First, local companies with foreign participations are exempt from the payment of state fees when filing a claim with local courts. Such fees will only be due if, at the conclusion of the judicial proceeding, the foreign party loses the case. Second, to further enhance access to justice for strategic foreign investors, Presidential Decree No. DP-6034 of 24 July 2020 established a new special mechanism within the Supreme Court of Uzbekistan, that is the Judicial Division for the Settlement of Investment Disputes. The Division has jurisdiction to settle investment disputes between state bodies and foreign natural or legal persons that have made investments of no less than USD 20 million. To date, foreign investors have yet to file petitions to the Division concerning the resolution of investment disputes.
Judicial independence is a grounding principle of the judicial system, but concerns remain as to its full implementation
The principle of judicial independence finds express recognition in Uzbekistan’s legal system. The Constitution clearly provides that the judiciary functions “independently from the legislative and executive authorities, political parties, and other institutions of civil society” (Article 130). It further stresses that “judges shall be independent and subject solely to the Constitution and the law” and that any interference with their office shall be inadmissible and punishable (Article 136). Additional safeguards are envisaged in ordinary legislation, including in administrative and criminal laws sanctioning interference with judicial proceedings.
Despite the recognition of the principle in the legal framework, judicial independence in Uzbekistan continues to raise international observers’ concerns (International Commission of Jurists, 2021[25]). It has been noted that, while Uzbekistan’s Constitution and ordinary laws are drafted in line with international standards concerning judicial independence, in practice, “a number of interferences continue to undermine both the independence of the judiciary from other branches of Government (institutional independence) and the independence of individual judges to adjudicate cases before them impartially and autonomously (personal independence)” (UN Human Rights Council, 2020[26]). Undue executive influence over the judiciary is an often-cited concern (Bertelsmann Stiftung, 2024[27]). In the World Justice Project’s Rule of Law Index for 2023, for example, Uzbekistan achieved a low score under the indicator “no improper government influence” in both civil (0.27/1) and criminal (0.22/1) proceedings (World Justice Project, 2023[28]).
Over time, Uzbekistan has implemented several reforms to provide full effectiveness to judicial independence and to address concerns that the current organisation did not provide “sufficient guarantees to insulate the judiciary and the judicial career processes from external political pressure, mainly from the executive branch” (UN Human Rights Council, 2020[26]). The principle of judicial independence has been recently reinstated in the new Law on Courts, adopted in 2021, which provides that the judiciary acts independently of the legislative and executive authorities, political parties and other public associations (Article 66). Furthermore, the new Constitution has recognised the Supreme Judicial Council of the Republic of Uzbekistan, as institutional body supporting the compliance with the constitutional principle of independence of the judiciary (Article 135). The Council is responsible for a wide range of activities, including the selection of candidates for the judicial office, the evaluation and promotion of judges, and the handling of disciplinary processes. The President retains extensive powers to determine the composition of the Council, including by proposing the Chairman of the Council for Senate’s appointment, directly appointing the Deputy Chairman, and approving the 11 judge-members of the Council and the seven members representing civil society and legal professionals.
The recent Law on Courts has also intervened to further insulate the judicial system from executive influence, especially for what concerns the administration of justice (e.g., establishment of judicial bodies, organisation and functioning of courts). While such matters were often regulated by Presidential Decree, the reform now grants the President only the power to recommend members of the Supreme Court and propose the names of the members of the Constitutional Court. He also retains the power to approve the court structure and the number of staff. The Law on Courts has also intervened to address concerns regarding the security of tenure. Judges are now appointed for an initial 5-year term, followed by a 10-year term, and subsequently by a lifetime appointment. It has been noted, however, that the system of temporary appointments before achieving lifelong tenure “continues to expose judges to the risks of undue pressure and interferences during the first 15 years in office” (UN Human Rights Council, 2020[26]).
During consultations held with non-governmental stakeholders during the fact-finding mission to Tashkent in June 2024, concerns surrounding judicial independence appeared to be somewhat lessened. Some stakeholders have noted how issues of independence, including personal independence, continue to affect the judicial system. Others, instead, did not identify such issue among those affecting access to justice for foreign investors. In any event, the existence of perceptions surrounding the lack of judicial independence may raise concerns for foreign investors. The government is invited, therefore, to continue implementing measures to ensure the full effectiveness to the principle of judicial independence.
Uzbekistan has taken steps to ensure the efficiency and quality of judicial proceedings for commercial and economic disputes.
Commercial and economic disputes in Uzbekistan are resolved in an effective manner, thanks to the availability of specialised economic courts and favourable legal provisions facilitating access to justice. In the last World Bank’s Ease of Doing Business Report (2020), Uzbekistan received a score of 71.9 under the “Enforcing Contracts” indicator, higher than the regional average for Europe and Central Asia (World Bank, 2020[29]). More recently, Uzbekistan ranked 74th out of 142 jurisdictions for the quality of its civil justice system in the World Justice Project’s Rule of Law Index for 2023 (World Justice Project, 2023[28]).In 2020, the average time for enforcing contracts in Uzbekistan was equal to 225 days, almost half the average time for commercial contracts enforcement in Europe and Central Asia (496.4 days) and in OECD high-income countries (589.6 days) (World Bank, 2020[29]).
The efficiency of judicial proceedings is ensured, among other things, by relying on digitalisation. The Presidential Resolution “on measures to digitalise the activities of the judiciary” (No. PR-4818 of 3 September 2020) introduced a first set of measures to digitalise court proceedings, including remote access to courts, participation in court hearings using video conferencing, automatic distribution of cases among judges, publication of court decisions on a dedicated platform (https://public.sud.uz/#!/sign/view), and sending enforcement documents in electronic format. Furthermore, the “Programme for the digitalisation of the justice system for the period 2020-2023” provided for the implementation of additional digitalisation measures, including: (i) notification of all participants of the time and place of courts sessions via SMS, free of charge; (ii) submission of court decisions to the parties online; (iii) submission and acceptance of court cases to the state archive in electronic form. The Programme was successfully implemented, with a new short-term strategy and programme of action adopted for 2023-2026. Measures that will be enacted in the future include the introduction of AI technologies to provide legal assistance to citizens, automatically preparing draft judicial acts, and facilitate the analysis of judicial practice.
Despite these positive improvements, international observers have highlighted certain persisting challenges affecting the quality of the judicial process. From a procedural perspective, the e-filing service is already available through a dedicated platform, “Adolat” (https://my.sud.uz/#/#online_service). While its use appeared to be originally quite limited, as parties were used to take advantage of their right to re-submit documents in hard copy (EBRD/Dentons, 2023[30]), the Supreme Court reports an increase in cases involving entirely remote participation and electronic submissions. In general, ensuring the effective implementation of measures and legal provisions on e-filing at all court levels is key to ensure the quality of the judicial proceeding. From a substantive perspective, instead, commentators have noted a high variability in outcomes for judicial decisions addressing identical cases (International Commission of Jurists, 2021[25]). This is especially the case when the decision concerns highly sophisticated and technical matters, such as the recognition and enforcement of foreign arbitral awards or the resolution of intellectual property disputes (Sharipov, 2019[31]). Additional efforts to build judicial capacity on these highly technical cases may contribute to further enhance the effectiveness of domestic judicial proceedings. In this context, the Supreme Court, in co-operation with the Asian Development Bank, is working on the publication of a judicial handbook on international commercial arbitration, which contains examples of applications for recognition and enforcement of foreign arbitral awards. The Supreme Court has also taken steps to ensure uniform application of laws in the field of intellectual property, to further protect the legitimate interests of authors and other right holders.
Uzbekistan is generally seen as an ADR-friendly jurisdiction
Arbitration in Uzbekistan is governed under three different sources of law. The Law on Arbitration Courts (No. LRU-64 of 16 October 2006) regulates domestic arbitration for civil law disputes, including economic disputes, while the Law on International Commercial Arbitration (No. LRU-674 of 16 February 2021) governs international arbitration for commercial disputes of contractual and non-contractual nature, and is in line with the UNCITRAL Model Law (Snider, 2021[32]). Provisions on both domestic and international arbitration are also included in the ECP, which provides that the recognition and enforcement of arbitral awards is possible only if allowed under treaties to which Uzbekistan is a party or under Uzbek law.
From an international perspective, Uzbekistan is a party to the New York Convention on the Recognition and Enforcement of Arbitral Awards, which it joined in 1995. Uzbekistan is also a party to several investment and juridical co-operation treaties with foreign countries, including the Convention on the Settlement of Investment Disputes between States and National of Other States (ICSID Convention), also ratified in 1995.
In general, practitioners have noted the relative novelty of arbitration in Uzbekistan. Courts do not have significant experience in dealing with arbitration (Korobeinikov, 2023[33]), which might lead to inconsistent outcomes in the resolution of cases (Sharipov, 2019[31]). Despite these challenges, Uzbekistan remains a generally arbitration-friendly jurisdiction, with arbitral awards being generally enforced. According to information shared by stakeholders in Uzbekistan, in 2024 only one out of seven applications for the enforcement of foreign arbitral awards was rejected.
There are currently around 25 arbitral institutions in Uzbekistan, including those established under the Chamber of Commerce and Industry. It is the case, for example, of the Domestic Arbitration Court (DAC) and the International Commercial Arbitration Court, both of which deal with commercial disputes between local and foreign companies, except for those that non-arbitrable under Uzbek law. In 2018, a decision of the President of Uzbekistan established the Tashkent International Arbitration Center (TIAC) under the Chamber of Commerce and Industry to settle international disputes between local and foreign companies, including foreign investors. Since its establishment, the TIAC has received nearly 60 requests for arbitration. Requests were filed by foreign investors from Italy, the Netherlands, Türkiye, China, Kazakhstan, Russia, Bulgaria, and Singapore, among others. In 2024 alone, TIAC administered over 40 disputes involving a foreign element, of which 25% featuring non-Uzbek parties on both the claimant and respondent side. The TIAC conducts its proceedings in both Russian and English, ensuring accessibility to foreign investors.
Other ADR mechanisms are generally available in Uzbekistan. Mediation is governed under the Law on Mediation (No. LRU-482 of 03 July 2018), which makes it an entire voluntary process. Not only the parties are free to decide whether to engage in the process, but compliance with the settlement agreement is also entirely voluntary. In case of lack of execution, the parties will need to seek judicial remedies to enforce the settlement agreement (EBRD/Dentons, 2023[30]). The exclusively voluntary nature of mediation significantly impairs its effectiveness as an ADR mechanism. The government may wish to consider strengthening the current regulatory framework on mediation, for example by making mediation compulsory and simplifying enforcement of the settlement agreement. In this context, the government is exploring the possibility of acceding to the Singapore Convention on Mediation to further align its practices with international standards.
Mediation procedures are available at all stages of judicial and arbitral proceedings, with the courts and TIAC actively encouraging the amicable settlement of the dispute. Yet, while available and accessible, the recourse to mediation in Uzbekistan remains rare. Other non-adversarial ADR mechanisms, such as conciliation, are also rarely used, with parties preferring arbitration or adjudication through courts. In recent years, the government has undertaken additional reforms to advance mediation practices. Amicable settlement is fostered through mechanisms such as the reimbursement of filing fees for both judicial and arbitral proceedings in the event of successful mediation. In 2020, the government established the Tashkent Mediation Center, which plays a significant role in the training of mediators and providing support for their professional activities. Since then, the number of certified professional mediators has steadily increased, reaching 1 841 as of 31 December 2024. The government is also implementing extensive capacity building activities to strengthen recourse to ADR methods, and in particular mediation, for the resolution of commercial disputes (ADB, 2024[34]). Moreover, a draft law is currently under consideration by the Oliy Majlis to broaden the range of areas where mediation can be utilised, introduce mandatory mediation in specific sectors, and establish mechanisms to ensure the enforceability of mediated agreements.
The draft 2024 LOI seeks to further promote the amicable resolution of investment dispute by encouraging recourse to consultations and negotiations, under the facilitation of the MIIT. Only if the dispute is not solved within 180 days from the date notification of the existence of an investment dispute, the investor will be entitled to refer the dispute to arbitration, on the basis of either an existing investment treaty to which Uzbekistan is a party, the investment contract, or a specific arbitration agreement entered into with the government. Regardless of this possibility, the investor also retains the rights to seek legal protection through domestic courts or to have recourse to mediation, in accordance with the laws of Uzbekistan. In addition to intervening through regulatory means, closer co-operation between the government and institutions such as the TIAC, the Chamber of Commerce and Industry and the private sector can support the implementation of key initiatives aimed at raising awareness of the benefits of ADR for the resolution of commercial disputes and building the capacity of domestic arbitrators and mediators to settle disputes involving foreign investors.
In addition to traditional ADR mechanisms, Uzbekistan is taking steps to ensure access to justice for foreign investors through other means. At the recent 2024 Tashkent International Investment Forum, the President of the Republic announced plans for the establishment of the Tashkent International Commercial Court (TICC), as a new platform for investors to solve their litigation cases with the government (Box 4.6). The Commissioner for the Protection of Rights and Legitimate Interests of Entrepreneurs (the Business Ombudsman) also performs an important access to justice function. Its mandate includes both protecting the legitimate rights and interests of companies from the violations of administrative bodies and promoting the improvement of the business environment in Uzbekistan. In relation to the first function, the Commissioner is entitled to receive and review complaints by private sector entities, including foreign investors, concerning the violation of their rights and to participate in the judicial process by filing claims with local courts on behalf of domestic and foreign companies (OECD, 2024[35]). As to the second function, the Commissioner has the power to submit legislative proposals for new laws and regulations that can improve the investment climate for businesses. Regulations are being developed for the purpose of determining how such powers can be exercised.
In May 2024, President Shavkat Mirziyoyev announced the establishment of a new Tashkent International Commercial Court (TICC) by means of special law (Alasgarli, 2024[36]). To date, information on the functioning and structure of the TICC are still limited. According to preliminary information, the TICC was supposed to be part of Uzbekistan’s court system, but with its own independent regulation and proceedings and serve as a trusted and neutral platform for investors to solve their litigation cases with the government. The TICC was also supposed to be composed of international judges (OECD, 2023[4]).
Based on consultations held by the OECD in the context of a fact-finding mission to Tashkent in June 2024, it appears that most aspects concerning the features and functioning of the TICC are still being defined. A working group has been set up to determine the TICC’s design and functioning, the type of cases it should adjudicate on, and its relationship with existing courts. Stakeholders in Tashkent have shared that the TICC should not be part of the domestic court system, but will rather be established under the special regime applicable to IT parks.
4.4.5. Anticorruption
Corruption remains a major concern for foreign investors, but Uzbekistan is taking steps to address it
Corruption continues to raise significant issues of perception among investors, which considers it among one of the main obstacles to FDI in Uzbekistan (US Department of State, 2023[37]). Corruption is considered pervasive especially among low- and mid-level officials (Freedom House, 2023[38]), causing significant negative impact for state budgets (Bertelsmann Stiftung, 2024[27]). Faced with this situation, in the past 10 years, Uzbekistan has taken decisive action to curb corruption. In 2023, Uzbekistan was listed as a significant improver on Transparency International’s Corruption Perception Index, achieving a score of 33/100 and gaining 15 positions compared to 2014 (Transparency International, 2023[39]). Key measures adopted included creating an anti-corruption agency, strengthening legislation on anti-corruption and taking steps to liberalise the economy. The government also introduced stronger internal control and audit tools in various ministries and local government offices, such as anti-bribery management systems.
From a regulatory perspective, the legal framework on anti-corruption is grounded in the Law on Anti-Corruption (No. LRU-419 of 3 January 2017). This instrument provides for a definition of acts of corruption and conflict of interests and sets out the good governance principles guiding public action (e.g. transparency, accountability, competition stimulation etc). The law also introduces a duty for all public officials to notify their supervisors or law enforcement agencies of all cases of proposed corruption from businesses or individuals, as well as any similar offenses committed by other public service employees. Additional safeguards have been introduced with the Law on Public Civil Service (No. LRU-788 of 8 August 2022). Among other things, the law introduces a prohibition for “civil servants” – a category which does not include President, members of Parliament, judges, law enforcement or military personnel – to accept gifts, engage in business activities, open a foreign bank account, or purchase real estate property abroad. Overall, Uzbekistan’s legal framework on anti-corruption is deemed to be in line with international standards, although challenges persist in connection with its effective implementation (Uzbek Forum for Human Rights & Transparency International Russia, 2022[40]).
From an institutional perspective, in 2020 the President established the Anti-Corruption Agency of the Republic of Uzbekistan (ACA). Its mandate includes the implementation of an internal anti-corruption control system within the governmental bodies and legal entities, as well as the analysis of the effectiveness of the anti-corruption control system in the field of public procurement. To this end, ACA is empowered to request and analyse documentation related to the expenditure of budget funds, sales of state assets, public procurement, implementation of investment projects and implementation of state programmes, considering citizen appeals on corruption issues and conduct administrative investigations into corruption offences. ACA also plays an important policy and advocacy role in the field of anti-corruption. The Agency is empowered to provide recommendations to other ministries with a view to minimising risks of corruption. Furthermore, it is also tasked with reviewing and assessing all drafts of proposed legal and normative acts for potential corruption risks, providing recommendations for improvement when necessary.
4.4.6. Land tenure, titling, and administration system
Secure and well-defined land rights encourage new investments and sustainable land management. Investors need to be confident that their land rights are properly recognised and that they are protected against expropriation without compensation. An accessible, reliable, and transparent land administration system is also key to ensure the security of land tenure rights.
The Constitution of Uzbekistan recognises the inviolability of private property, stating that expropriation can occur only in accordance with the procedure defined under the law and based on judicial decisions (Article 65). It further states that land can be privately owned on the terms and in the manner prescribed by law (Article 68). Issues concerning the extent to which foreign nationals and companies can access land have already been discussed under Section 4.2.1. Other issues influencing the security of land rights relate to the features of the land administration system, the ease of land registration processes, and the process applicable in case of expropriation of land titles.
The allocation of functions between state authorities concerning land administration is sometimes unclear.
The land administration system in Uzbekistan is mostly regulated under the Land Code. This instrument entrusts land administration to different state authorities at the national and sub-national level, including the Cabinet of Ministers, regional and district authorities, and city government bodies (Table 4.1). A wide range of regulatory instruments, including presidential decrees and resolutions, further contribute to the allocation of responsibilities with respect to land management. As a consequence of the existing regulatory proliferation, however, the allocation of functions among relevant activities is often unclear, resulting in total or partial overlaps across different levels of government. All state authorities involved in land administration share functions relating to the organisation of land acquisition, land monitoring, and management of state land cadastre. At the sub-national level, district and city authorities often share competences concerning the development and implementation of measures to ensure the reasonable and effective use of land, the exercise of control over the rational use of land, and the conclusion of land plot leases.
Stakeholders have also noted how the mandate and responsibilities of national and sub-national authorities concerning the administration of land are not clearly allocated. Inefficiencies in land management might heighten uncertainties for foreign and domestic investors. Unclear allocation of responsibilities might also create risks of corruption and weaken implementation and enforcement of laws and regulations. The government may wish to reflect on the current allocation of responsibility concerning land administration and adopt measures to ensure that the spheres of competence between national and sub-national authorities are clearly defined, including the systematisation of existing primary and secondary instruments on land management and administration.
Uzbekistan’s legal framework sets out specific rules concerning the registration of land rights. The registration of ownership and other proprietary rights over land and real estate, as well as any changes pertaining to those rights (e.g., transfer, termination, restrictions) are generally regulated under the Civil Code of Uzbekistan. This provides for the state registration of the right of ownership and other proprietary rights, as well as any transactions affecting the enjoyment of those rights (e.g., sale, mortgage, long-term lease).
The procedure for registering real estate transactions is then regulated under ordinary laws, and in particular under the recent Law on the State Registry of Real Estate Rights (No. LRU-803 of 28 November 2022). The law applies to the registration of rights over land, including ownership, permanent use, and lease rights – as the legal title upon which foreigners are entitled to access non-agricultural land. The law also regulates the State Register, an electronic database including systematic information about real estate rights and rightsholders (https://gov.uz/en/pages/kochmas_mulklarga_bolgan_huquqlar_reyestri/). The main responsibility for the management of the State Registry falls on the Chamber of State Cadastres of the Cadastre Agency, established under the Ministry of Economy and Finance, which carries out the state registration of real estate rights. The Cadastre Agency is also responsible for maintaining the state land cadastre. Land cadastral information is publicly accessible for individuals and legal entities against the payment of a fee.
Expropriation and withdrawal of land permits
The legal framework in Uzbekistan sets out clear guarantees against expropriation of property. At the highest level, the Constitution of Uzbekistan provides for the inviolability of private property, except in cases specifically governed under the law (Article 65). Similar guarantees are further reinstated in the Civil Code (Article 166) and in ordinary laws. The Law on the Protection of Private Property and Guarantee of Owner’s Rights (No. LRU-336 of 24 September 2012) sets out the regime applicable in case of expropriation, clarifying that the expropriation of property, including privately-owned land plots, can be carried out only in special cases determined under Uzbek law and against payment of full compensation, at the property’s market value and including all losses suffered by the owner.
In 2022, a special regime was introduced for the expropriation of land plots in case of public need. The Law on Procedures for the Withdrawal of Land Plots for Public Needs with Compensation (No. LRU-781 of 29 June 2022) clarifies that land plots held on a basis of a legal title different than ownership (i.e., permanent or temporary use, permanent possession, or leasehold) can be expropriated only for public necessity and against the payment of compensation. The law clarifies both when a “public need” is deemed to exist (e.g., defence, creation of protected areas, creation of SEZ, construction of critical infrastructure, exploitation of mineral deposits) and the criteria for the payment of compensation, which covers the market value of the land, moving costs, loss of profits and any other cost or loss suffered by the right holder.
The definition of “public need” under Uzbek law is particularly extensive, as it is applicable also in case of public development of projects where the involvement of foreign investors could be likely envisaged (e.g., construction of transport, ICT or energy infrastructure, development of mining projects). Furthermore, the law is drafted in a way to apply only to the explicit deprivation of the land title by the right holder, without extending to other forms of encroachment over the relevant title, including the withdrawal or termination of associated land permits. Several stakeholders have noted how the difficulties in securing and retaining land permits are one of the most pressing obstacles to investment. In particular, the unilateral revocation of land permits by local authorities is a common occurrence, which might not necessarily find remedy under the regime set out in the Law on Procedures for the Withdrawal of Land Plots for Public Needs with Compensation. While the 2019 LOI does not address indirect expropriation, in the future, foreign investors might be able to find protections under the draft 2024 LOI, which would introduce guarantees against indirect expropriation.
4.4.7. Protection and enforcement of intellectual property rights
A well-functioning and balanced system for the protection of intellectual property (IP) is key to promoting innovation and creativity, which are the main drivers of economic development of knowledge-based economies.
Uzbekistan’s institutional, legal and policy frameworks on intellectual property are in line with international standards.
Uzbekistan has taken significant step to ensure the alignment of its legislative framework on IP with international standards. Uzbekistan protects IP rights through the Constitution, the Civil Code, and a wide range of primary laws and regulations, contributing to the establishment of a vast legal framework for the protection of IP rights (Table 4.2).
At the international level, Uzbekistan is a member of the World Intellectual Property Organization (WIPO) and a party to several key IP treaties, including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the WIPO Performances and Phonograms Treaty, and the WIPO Copyright Treaty. In 2024, Uzbekistan also acceded to the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs and the Singapore Treaty on the Law of Trademarks. Membership in such treaties underscores Uzbekistan’s commitment to international IP standards. Uzbekistan is in the process of acceding to other significant international treaties, including the Singapore Treaty on the Law of Trademarks and the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (US International Trade Administration, 2023[41]). Uzbekistan is also a signatory to eight regional treaties under the CIS, and actively participates in the Intellectual Property Working Group established under the United States-Central Asia Trade and Investment Framework Agreement, demonstrating its ongoing efforts to enhance its IP regime and international co-operation.
From an institutional perspective, the MoJ plays a crucial role in the protection of IP rights. Its responsibilities encompass developing strategic directions for IP development, protecting IP-rights, providing public services such as methodological assistance, and considering appeals related to IP protection. In 2022, the MoJ also incorporated the Intellectual Property Agency, originally responsible for state registration and legal enforcement of IP rights. Currently, the new “Intellectual Property Centre” under the MoJ is tasked with carrying out examinations of applications for registration, co-ordinating the storage of copyright objects, developing regional initiatives, protecting IP created in educational and research institutions, and participating in research and other IP-related activities. Additional state agencies responsible for the protection and enforcement of IP rights in specific fields include the Agency for Technical Regulation, the Agency for Pharmaceutical Industry Development, State Inspectorate for Control in the Field of Information and Telecommunications, the Information and Mass Communications Agency, and the Competition Promotion and Consumer Protection Committee.
Overall, Uzbekistan has demonstrated a political will to improve its IP regime, as evidenced by the adoption of the National Strategy for the Development of Intellectual Property for 2022-2026. The strategy aims to address gaps such as low involvement of IP in production, insufficient public and business knowledge, and lack of interest from businesses in utilising intellectual activity results. It stresses the need for progress in the area of legal protection and enforcement, through streamlining the application processes, bolstering inter-agency co-operation, training and education of state employees and strengthening enforcement mechanisms based on international practices (Government of Uzbekistan, 2022[42]).
Uzbekistan has adopted measures to improve processes for the registration and the protection of IP rights.
The protection of patents, trademarks, and design rights in Uzbekistan rests on registration, which can be completed electronically. Registration is crucial, as protection is granted to the first entity to file an application, rather than to the first person to use the relevant IP. According to WIPO’s Global Innovation Index 2023, Uzbekistan ranked 82nd out of 132, outlining significant progress in IP applications (WIPO, 2023[43]). In 2022, the country saw an 11% increase in patent applications and 13.4% increase in trademark filings. Despite recent improvements, international filings continue to remain limited, especially for what concerns patents (rank: 120/132), trademarks (rank: 100/132) and industrial designs (rank: 127/132).
Against this background, Uzbekistan has introduced measures to facilitate the process for the registration of IP rights. In 2021, a Presidential Resolution introduced a procedure for accelerated examination of trademarks, which significantly reduces the timeframe for state registration. Under the new system, the MoJ will examine an application and issue a decision within approximately a month of the payment of the relevant registration fee. An accelerated examination procedure was introduced also to facilitate the state examination of inventions, utility models, industrial designs and other objects. Furthermore, in 2023, the government established the “Industrial Property Protection" database, which provides information on all stages of state registration of industrial property objects. As a consequence, the processes related to the registration of intellectual property objects were completely transferred to electronic format, reducing the time for correspondence between the expert and the applicant and providing the opportunity to submit applications remotely and at any time.
Investing in digitalisation can significantly facilitate the process for the registration and protection of IP rights. The online portal “Protection of Industrial Property” (https://im.adliya.uz/) provides information to investors and facilitates the registration of IP object. The portal acts as a single window for the protection of IP rights, allowing for information exchange and interdepartmental co-operation between IP authorities. Efforts are ongoing to further upgrade the online portal, including by harnessing the potential benefits arising from artificial intelligence. Differences continue to exist between domestic and foreign persons wishing to apply for IP protection. While domestic persons can file a request for protection directly with the MoJ, foreign citizens must submit their application through a licensed patent attorney, which must also be an Uzbek citizen. As such, foreign citizens cannot apply directly for protection of their own IP rights. To facilitate IP registration by foreign nationals, the online portal “Protection of Industrial Property” includes a unified electronic register of patent attorneys that foreign investors can contact for support.
Despite recent reforms, enforcement of IP rights is not yet fully effective, endangering the IP of foreign investors.
The enforcement of IP rights in Uzbekistan is pursued through a mix of civil, criminal, and administrative remedies (Box 4.7). Civil remedies include the restoration of the situation that existed prior to the violation of the right and suppression of actions that violate the right (e.g., through seizure of the objects causing the infringement, or mandatory publication of the infringement) and compensation for losses. Criminal liability is also provided for the infringement of copyrights and other inventive rights, although not for trademarks. Uzbekistan has also strengthened administrative sanctions for the infringement of IP rights. Through recent amendments to the Code of Administrative Liability, IP owners can now find protection from illegal use of IP (including trademarks), reproduction and distribution of counterfeit copies, and unauthorised manufacture, use, import, or sale of products infringing on protected IP. In all these cases, the Code of Administrative Liability provides for the imposition of fines (e.g., between approximately USD 2 890 and USD 5 780 in case of trademark infringements), the confiscation of products breaching existing IP rights, and the restriction of access to websites and information of the infringer of intellectual property rights. Lastly, a 2024 amendment to the Law on Trademarks introduced the possibility for the owner to demand additional compensation (between USD 540 and USD 28 980) for the breach of its intellectual property rights. Such additional compensation is paid regardless of the actual damage suffered, taking into account the nature of the violation, the degree of guilt of the person illegally using the trademark, and business customs.
Enforcement is also pursued through the involvement of government authorities. In May 2024, Uzbekistan granted its customs authorities the power to independently seize and investigate suspected counterfeit products without needing a formal complaint from the rightsholder. The MoJ has investigative powers, which it exercises through test purchases aimed at identifying violations of intellectual property rights that receive legal protection in Uzbekistan. The MoJ can also take direct action against infringers, based on written requests of rightsholders, and, to this end, issue written warnings, obligatory cease-and-desist notices, and administrative fines and financial sanctions against legal entities. It can also conduct compliance inspections based on a request of the IP-holder. The coordination of inspections by the Business Ombudsman are to verify the compliance of inspecting authorities with legal provisions during the inspection. Furthermore, in 2023, the MIIT amended the rules for product certification by requiring local certification bodies to verify potential infringements of third-party IP rights before issuing product certificates. A draft law on establishing criminal liability for illegal use of trademarks has also been developed and is currently in the process of being submitted to the Oliy Majlis for consideration.
Despite the safeguards and protections embedded in the legal system, challenges persist when it comes to the de facto enforcement of protected IP. According to the Global Organized Crime Index, the trade in counterfeit goods is prevalent in Uzbekistan, particularly affecting food products, household chemicals, cosmetics, and medicines (Global Initiative against International Organised Crime, 2023[44]). Reports highlight how some international brands have faced challenges entering the local market because their trademarks were previously registered by Uzbek entrepreneurs, leading to copies and imitations of their products (US International Trade Administration, 2023[41]). The low fines stipulated in the Code of Administrative Liability, even in case of repeated violations, and the lack of specific punishment for counterfeiting, do not seem to have a sufficient deterrent effect to prevent recurrence (Azizov & Partners, 2024[45]). While Uzbekistan has intervened to raise administrative fines for the infringement of IP rights – now set between EUR 2 200 and EUR 4 400 – enforcement challenges still remain, linked to the need to notify business entities about an upcoming inspection at least 10 days in advance and the exclusion from the application of fines to infringements by individual. Foreign companies may also face obstacles in proving IP violations and receiving compensation for losses. The absence of a dedicated IP court and the low level of understanding by courts and judges in the field of IP persists, complicating the judicial protection of IP rights (Yuldashov, 2023[46]). Strengthening judicial capacity in the IP area is critical to contribute to effective IP enforcement. To this end, the government undertook a wide range of capacity building initiatives for experts in the field of legal protection of trademarks, as well as awareness-raising activities among small and medium-sized businesses. Members of the judiciary also receive regular training on intellectual property issues, including in international fora and in collaboration with the World Intellectual Property Organization. Capacity building and awareness raising initiatives can significantly contribute to strengthen judges and government officials’ ability to effectively enforce IP rights.
Traditionally, the main “demanders” of strong international IP rights were a limited number of developed countries attracting much of the world’s activities of research and development. In recent years, however, an increasing number of companies from emerging markets are now producing innovative products, calling for a further strengthening of IP rights protection. In Brazil and the Philippines, short-term patents have helped domestic companies adapt foreign technologies to local conditions, while in Ghana, Kuwait and Morocco, local software companies are expanding into the international market. In India, the dynamism of the music and film industries is partly due to copyright protection, while in Sri Lanka, laws protecting designs from piracy have enabled manufacturers of quality ceramics to increase their exports.
Moreover, a growing number of developing countries are seeking to attract FDI, particularly in sectors where proprietary technologies are important. Foreign companies are reluctant to transfer their most advanced technologies or invest in production facilities until they are sure that their rights will be protected.
There is also a growing recognition that consumers, including in emerging markets, can suffer from the sale of counterfeit products, as illustrated by examples ranging from misbranded pesticides in Kenya to the sale of poisoned meat in China. Consumers are generally the most affected when laws protecting trademarks and brand names are not rigorously enforced.
The trend is to address intellectual property issues one at a time, which allows for areas of agreement to be identified and common ground to be found on areas of disagreement.
Source: (OECD, 2015[12]; OECD, 2006[47])
Uzbekistan has entered into several international investment agreements (IIAs) to protect foreign investments in its territory. IIAs include bilateral investment treaties (BITs), multilateral investment treaties, investment chapters of deep free trade agreements (FTAs), as well as other treaties with investment-related provisions.
IIAs set out a wide range of substantive and procedural rights to foreign investors in addition to – and independently from – those already existing under domestic law. By virtue of the new Article 15 of the 2023 Constitution, all investment treaties entered into by Uzbekistan, as well as general principles of international law, are “an integral part of the legal system of Uzbekistan”. IIAs typically grant absolute standards of protection – in particular, “fair and equitable treatment” (FET) and protection against direct and indirect expropriation – and relative standards of protection, including National Treatment and Most Favourable Nation (MFN) treatment to covered investors. In case of alleged breaches of relevant treaty protections, investors may directly bring claims against the state under the relevant treaties and seek compensation through investor-state dispute settlement (ISDS).
Like in many other countries, Uzbekistan’s IIAs were mostly concluded in the 1990s and early 2000s and feature designs that are no longer pursued in recent treaties. These older designs provide for vague and unspecified protections to foreign investors that have created significant uncertainty in the context of investor-state disputes. Over time, ISDS tribunals have interpreted IIA standards of protection – in particular on FET and indirect expropriation – in an extensive manner, sometimes considering legitimate regulatory initiatives in breach of investor’s expectations as to the stability and predictability of the regulatory framework. Similarly, Uzbekistan’s IIAs also provide limited considerations to sustainable development concerns, including environmental protection and labour standards. These two factors – i.e., the extensive interpretation of investment protection standards by arbitral tribunals and the lack of consideration to sustainable development – might prejudice the government’s ability to adopt new regulations for the protection of public interest concerns, such as the environment, labour rights, and public health. The inclusion of more specific language in investment protections standards, and the introduction of treaty provisions safeguarding the state’s right to regulate for the protection of sustainable development concerns, could help strike a better balance between investor protection and domestic right to regulate.
4.5.1. Overview of Uzbekistan’s investment treaty policy and current trends
Uzbekistan started concluding IIAs in 1992, after gaining its independence from the USSR in the previous year. Uzbekistan adopted a series of BITs throughout the 1990s and early 2000s, to signal its openness to foreign investment and to provide additional assurances to foreign investors wishing to establish and operate in the country. The conclusion of new treaties, and especially BITs, slowed down starting from 2004. Since then, ten investment treaties have been concluded, the most recent one in 2019.
At the multilateral level, Uzbekistan is a signatory of the Energy Charter Treaty (ECT). Uzbekistan ratified the treaty in 1995, which entered into force in 1998. Uzbekistan also signed the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) in 1994, and ratified it in 1995. Between 1991 and July 2024, Uzbekistan has concluded investment treaty relationships with 49 jurisdictions and has treaty relationships in force with 41 economies (Figure 4.3).
Source: OECD investment treaty database.
Based on publicly available information, it appears that Uzbekistan has not concluded any new BIT since 2019. Based on information gathered during consultations held in June 2024, the government has confirmed the signature of two new BITs, one with the Republic of Korea and one with the Republic of Belarus. Negotiations are also ongoing with several countries, including Qatar, the United Arab Emirates, Saudi Arabia, Italy, and India. The government is also reforming its approach to investment treaty policy to ensure that they align with current policy priorities to mobilise sustainable investment. The MoJ and the MIIT are working in collaboration with the ADB to develop a new model BIT, to update the country’s approach to investment treaty protections and to enhance the consideration of sustainability concerns in investment treaties (Box 4.8). The development of a new model BIT will inform ongoing treaty negotiations, to ensure alignment with sustainable development objectives.
Uzbekistan’s treatymaking activity has brought almost all of its current FDI stock under treaty cover. Since 2014, almost all of Uzbekistan’s inward and outward FDI stock is estimated to be covered by investment treaties in force (Figure 4.4). The proportion of inward FDI stock coverage from investment treaties increased importantly in 1994, with the entry into force of the Uzbekistan-China BIT (1992), and in 2014, when the Uzbekistan-Russian Federation BIT (2013) also came into force. Since 2014, over 95% of Uzbekistan’s total inward FDI stock was reported to originate in jurisdictions with which Uzbekistan had an investment treaty in force. The treaty coverage of Uzbekistan’s outward FDI stock increased significantly starting from 2014, also due to the entry into force of the Uzbekistan-Russian Federation BIT (2013). Since then, investment treaties cover over 90% of its total outward FDI stock.
Note: Inward and outward FDI stock data calculated for the entire period based on positions reported at end 2022 rather than historical values. Percentages are based on matching aggregate immediate bilateral FDI stock data and treaty relationships as of July 2024. For several reasons, reported FDI stock data is not a valid measure for assets that benefit from treaty protections (Pohl, 2018[48]) and available data does not allow to determine ultimate ownership of assets. The proportions of FDI stock data may nonetheless serve as a rough approximation of stocks held by immediate investing countries to illustrate features and outcomes of Uzbekistan’s past investment treaty policies. FDI stock coverage from the ECT is excluded from the calculation, due to its limited sectoral scope.
Source: OECD calculations based on OECD investment treaty database and FDI stock data from the OECD FDI statistics database and the IMF Coordinated Direct Investment Survey (CDIS).
The MoJ and the MIIT, in co-operation with the ADB, have led efforts to develop a new model BIT for Uzbekistan, to promote foreign investments that contribute to the country’s sustainable development while, at the same time, minimising the risk of ISDS that usually arises from investment treaties. To this end, the model BIT introduces significant deviations from Uzbekistan’s treaty practice to date, some of which are listed below:
Definition of “investment” and connection with sustainable development (Article 1.2): the model BIT integrates sustainable development into the definition of investment, providing protection only to investments that “contribute to the sustainable development” of Uzbekistan. It also sets out a non-exhaustive list of indicators that arbitral tribunals can use to measure an investment’s contribution to sustainable development (e.g., increase in production capacity, quality of jobs created, technology transfer, environmental protection, reduction of greenhouse-gas emissions).
Limitation of the FET standard (Article 8): the model BIT restricts the ability of arbitral tribunals to provide a broad interpretation to the FET standard, clarifying that this refers only to a party’s obligation “not to deny justice to any investor in criminal, civil or administrative adjudicatory proceedings”. The model BIT also clarifies that the FET standard does not protect an investor’s legitimate expectations (e.g., on regulatory stability or the granting of permits).
Definition of “indirect expropriation” (Article 9): the model BIT clarifies that, for indirect expropriation to exist, the investor must be “substantially and permanently” deprived of the “fundamental attributes of property” in the investment, thus excluding claims based on reduced profits or simple loss of value. It also clarifies that “non-discriminatory regulatory measures designed and applied to protect legitimate public welfare objectives” (such as the environment) do not constitute indirect expropriation.
Exclusion of MFN standard: to reduce exposure to ISDS and avoid detrimental effects on Uzbekistan’s sustainable development, the new model BIT excludes the MFN standard, which allows investors to “import” more favourable clauses from other treaties to which the host state is a party.
Sustainable development provisions: following current international practices, the model BIT also includes provisions protecting the host state’s right to regulate to ensure that investment activities are consistent with sustainable development objectives (Article 25), setting out the parties’ obligations not to lower environmental and labour standards for the purpose of attracting investments (Articles 15 and 16) and establishing investors’ obligation to conduct environmental and social impact assessments (Article 17).
Source: Uzbekistan Model BIT, as shared by the ADB.
4.5.2. ISDS claims under Uzbekistan’s IIAs
Based on publicly available information, Uzbekistan has to date been a respondent in at least 11 ISDS cases (Table 4.3). Nine cases appear to have been initiated under an investment treaty to which Uzbekistan is a party, four of which under the Turkey-Uzbekistan BIT (1992). Two cases were brought in 2006 on the basis of the Uzbekistan Law on Guarantees and Measures of Protection of Foreign Investors' Rights (1998). Cases were mostly brought in connection with investments in the extractive sectors, including oil & gas and mining. There appears to be only one publicly known ISDS case brought by Uzbek nationals, under the Kyrgyzstan-Uzbekistan BIT (1996) with respect to an investment by an Uzbek national in the Kyrgyz tourism sector. The case was ultimately resolved in 2023 in favour of the investor.
Source: ICSID cases database: https://icsid.worldbank.org/cases/case-database; ITALAW cases database: https://www.italaw.com/browse/respondent-state?field_case_type_tid%5B%5D=1090&field_respondent_state_tid=484
4.5.3. Main features of Uzbekistan’s investment treaties
Most of Uzbekistan’s IIAs feature designs of older generation IIAs which provide for vague and unspecified protections to covered investors that have led to uncertainties in the context of disputes. This section examines how Uzbekistan addresses three main substantive protection standards included in investment treaties, namely the fair and equitable treatment (FET), protection against indirect expropriation, and the most-favoured nation (MFN) treatment standard. The section also discusses the extent to which existing investment treaties in force in Uzbekistan deal with broader sustainable development issues and how they align with ongoing government efforts to mobilise increased sustainable investment.
“Fair” and “equitable” treatment (FET) clauses
Fair and Equitable Treatment (FET) clauses are included in almost all investment treaties since the early 1960s. It represents one of the most common grounds of disputes between investors and host states. As most early-generation FET provisions do not include any guidance on the scope of obligations under the standard, ISDS tribunals have conducted widely different interpretations, leading to legal uncertainty and increased risks of litigation. Treaties concluded since the early 2000s feature newer designs to clarify its content. Such approaches have become unanimous in recent treaty practice (Box 4.9).
Since the early 2000s, three primary approaches have been observed in treaty designs with regards to FET clauses intended to specify and limit the obligations under the clauses:
The limitation of FET to the ‘minimum standard of treatment’ under customary international law. This approach was first featured in the Joint interpretation related to NAFTA that the contracting parties adopted on 31 July 2001 but can be traced back to the 1962 version of the OECD Draft Convention on the Protection of Foreign Property. This approach is the earliest to have emerged and is by far still the most frequently used to clarify the scope of FET obligations in recent treaties.
The specification of the scope of FET through a closed list. The approach was first observed in 2009 in the ASEAN-China Investment Agreement (2009) and emerged in additional treaties beginning in 2016. The lists have different length and the items in the list are framed differently, although they usually include protections against denial of justice.
The non-inclusion of an obligation to accord FET among post-establishment protection standards. The approach saw increased popularity beginning in 2015 in treaties concluded by Brazil that did not contain FET clauses. Some of these recent treaties also explicitly state that the obligation to afford FET is not provided for under the investment treaty.
Source: (OECD, 2023[49]).
The majority of Uzbekistan’s IIAs include unspecified FET provisions, that do not provide any substantive guidance as to the content of the standard itself. While this approach is typical of older generation IIAs, it also comes with significant risks. Only five of Uzbekistan’s IIAs provide limited guidance on the FET standard. The Belgium/Luxembourg-Uzbekistan BIT (1998) links FET to international law, providing that treatment and protection investors receive “shall in no case be less favourable than those recognised under international law”. Similarly, the France-Uzbekistan BIT (1993) includes an express reference to “principles of international law”. In both cases, the reference to “international law” or “principles of international law” does not allow to determine with certainty what is required under the standard.
Two of Uzbekistan’s treaties are notable as they link the FET standard to domestic law. The Finland-Uzbekistan BIT (1992) treaty states that “each Contracting Party shall, subject to its laws and regulations and in conformity with international law, at all times ensure fair and equitable treatment to the investments and returns of investors of the other Contracting Party”. In a similar instance, the Türkiye-Uzbekistan BIT (2017) clarifies that FET shall be provided “in accordance with [each party’s] laws and regulations”. Despite the efforts made by linking the notion of the FET standard to domestic legislation, the approach continues to entail a high degree of uncertainty and discretion in the interpretation of what is “fair” and “equitable” under relevant domestic law.
In the last example, the France-Uzbekistan BIT (1993) not only links the FET standards to applicable principles of international law, but also offers a non-exhaustive list of examples of what constitutes a breach of FET. Relevant cases include restrictions on the purchase and transport of raw materials, auxiliary fuel and energy materials, and means of production and exploitation, restrictions on the sale and transport of products, and other measures producing similar effects. Such treaty design is generally rare and concentrated only in treaties from specific jurisdictions, and especially France (OECD, 2023[49]). Although this design is conceived to outline the content of FET, the indicative nature of the list leaves room for ambiguity about the additional events that are to be considered as potentially breaching fair and equitable treatment.
Given the approach of existing treaties to the definition of FET, the government may wish to consider the adoption of a more specific approach to FET, following the approach of the new model BIT under development. A more precise approach in the definition of what represent “fair” and “equitable” treatment could improve predictability for the government, investors, and arbitrators alike, and also contribute to preserving the government’s right to regulate in the public interest (Gaukrodger, 2017[50]).
Protection against indirect expropriation
Investment treaties typically require that states must provide investors with due, prompt, and adequate compensation to covered investors for losses suffered as a consequence of the direct or indirect expropriation of their investment. While the relevance of direct expropriation has declined over time, indirect expropriation has acquired far-reaching importance. Many regulatory acts, even when non-discriminatory and taken to protect public interests, have been deemed to constitute indirect expropriation and require compensation when analysed by ISDS tribunals.
Determining what constitutes indirect expropriation is essential to preserve the host state’s space to regulate in the public interest. New generation IIAs have increasingly specified at what conditions a regulatory act can be considered as an indirect expropriation that would require compensation. Such clarifications have become standard language in IIAs since 2003 and are now consistently used by a number of jurisdictions (Box 4.10).
All of Uzbekistan’s BITs offer explicit protection against indirect expropriation, with one exception. The Malaysia-Uzbekistan BIT (1997) does not expressly consider indirect expropriation, instead limiting protections against “any measures of expropriation or nationalization”. Despite the lack of an express distinction between direct or indirect expropriation, the provision should still be interpreted as covering also indirect expropriation.
When treaties offer explicit protection against indirect expropriation, they tend to be silent as to the identification of what this might entail, increasing the risk that legitimate regulatory action may be require compensation from the host state. Some recent treaties concluded by Uzbekistan – the Türkiye-Uzbekistan BIT (2017) and the Korea-Uzbekistan BIT (2019) – clarify that non-discriminatory measures that aim to safeguard public interests and protect public welfare objectives, including measures related to health, safety, and environment, do not constitute indirect expropriation.
Efforts to specify the notion of “indirect expropriation” or to guide arbitral tribunals in their findings on whether a specific measure constitutes an “indirect expropriation” can be traced back to the Exchange of Letters on Expropriation to the Singapore-United States FTA (2003), which served as a template for many later treaties. To specify the notion of indirect expropriation, countries have recently used four textual elements in their recent international investment agreements:
They identify the assets that can be subject to an indirect expropriation from among items covered by the definition of investment in the treaty. As such, indirect expropriation provisions are usually confined to tangible or intangible property rights or property interests in an investment, thereby excluding some elements that may be covered by the definitions of investment in treaties (such as goodwill, customer base, market share or licences, permits and other government authorisations).
They establish a positive description of what constitutes an indirect expropriation. Most treaties with specific language in this area have defined it as an “action or series of actions adopted by a Party that has an effect equivalent to direct expropriation without formal transfer of title or outright seizure” or as measures “tantamount to direct expropriation”. Some treaties have also specified the conditions to appreciate the “equivalent effect” of a measure.
They set out criteria to be considered when determining whether a measure constitutes an indirect expropriation. The most common cited criteria concern the economic impact of the measure, the character of the measure, the extent to which the government action interferes with distinct, reasonable investment-backed expectations, the objective or purpose of the measure, or even the context of the measure.
They specify under which conditions a measure does not or typically does not constitute an indirect expropriation. This fourth element is almost universally employed to specify the notion of indirect expropriation. Most treaties that employ this fourth combine two primary criteria to disqualify a measure: (1) the measure must be non-discriminatory; and (2) the measure must serve or intend to serve a specific purpose, most often the pursuit of a legitimate public welfare objective. A third explicit criterion has emerged more recently, related to the measure’s severity or its disproportionate effects.
Source: (OECD, 2021[51]).
Overall, however, Uzbekistan’s BITs provide very limited guidance as to the boundaries of indirect expropriation, as they do not clarify which type of assets can be expropriated, what measures constitute indirect expropriation, or how expropriation should be assessed by tribunals in the context of investment disputes. This creates risks for the government’s own regulatory space, heightening the risk that regulatory measures adopted to pursue public policy objectives be deemed to constitute indirect expropriation by investment tribunals. Clarifying the boundaries of indirect expropriation, including as set out in the context of the new model BIT, may allow Uzbekistan to strengthen its regulatory space to pursue public policy and sustainable development objectives.
“Most Favoured Nation” (MFN) treatment clauses
The Most Favoured Nation (MFN) standard stems from the international law guarantee of non-discrimination, ensuring equality among all foreign investors. Foreign investors have historically invoked the MFN clause to benefit from more favourable conditions in third-party IIAs. Over time, such clauses have been interpreted in a way to allow investors to take advantage of the more beneficial treatment afforded to foreign investors from third countries, incorporating it into the treaty under which their claim is filed (the base treaty). This incorporation of “third treaty” standard concerns not only substantive standards of protection but also procedural provisions as well, in the form of access to specific dispute settlement arrangements not originally envisaged under the base treaty.
Recent treaty practice has reduced the scope of application of the MFN clause, limiting the type of provisions that parties may ‘import’ from one treaty to another. Almost all treaties entered into since the early 2000 seek to bar the possibility of importing dispute settlement arrangements in third-party treaties (Box 4.11).
MFN provisions are present in all of Uzbekistan’s investment agreements. In almost all cases, no distinction is made among procedural and substantive standards, leading to the possibility to “import” both types of provisions from third-party treaties. The only notable exception is the Türkiye-Uzbekistan BIT (2017), which explicitly states that the MFN clause “shall not apply to settlement of disputes.” Accordingly, foreign investors are barred from resorting to this provision to obtain more advantageous dispute settlement arrangements. The exclusion adopted in this treaty provides an example of how express language can be harnessed to create certainty in the interpretation of MFN.
An important share of Uzbekistan’s BITs explicitly allows interaction between the base treaty and domestic regulations of contracting parties. Through the “application of other rules” clause, a “treatment more favourable” found in the laws of any contracting parties or international agreements shall prevail over the base treaty. Such a provision may be found, for example, in the China-Uzbekistan BIT (1992), the Israel-Uzbekistan BIT (1994), the Kazakhstan-Uzbekistan BIT (1997), the Netherlands-Uzbekistan BIT (1996), the Singapore-Uzbekistan BIT (2003), and the Oman-Uzbekistan BIT (2009).
An additional feature in Uzbekistan’s BITs that helps delimiting the scope of MFN clauses is the exclusion of Regional Economic Integration Organization (REIO) clauses from its scope. This provision is a common element in all Uzbekistan’s BITs, but the language broadly varies depending on the level of economic integration. Regardless of the language used, its final effect is that foreign investors cannot invoke more beneficial substantial arrangements granted to third-party investors due to closer economic regional ties nor special conditions negotiated in the context of political, economic, and regional integration.
Despite the limitations introduced through the exclusion of REIO clauses, for the most part MFN provisions in Uzbekistan’s investment treaties do not set out additional boundaries as to the import of additional substantive or procedural standards granted to third-party investors. Moving towards the inclusion of additional directions on whether MFN allows or forbid the “import” of substantive and/or procedural provisions, what are the treatments covered, and how future interactions shall occur, would reduce room for extensive interpretation in the context of potential disputes with investors. Another possible approach, adopted in the context of the new model BIT, is to completely exclude the MFN standard from the scope of the relevant BIT.
Although few treaties throughout the 1990s explicitly provided that dispute settlement arrangements could be imported through MFN clauses, the large majority of treaties concluded until the early 1990s remained silent on the issue. In the absence of clearly delineated MFN clauses, claimants in investment treaty disputes have argued for the import of dispute settlement arrangements of third-party treaties through MFN clauses when such clauses did not initially specify whether and to what extent such arrangements could be included within their scope.
In response to an arbitral decision (Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction, 25 January 2000), some governments began considering an explicit exclusion of dispute settlement arrangements from MFN clauses as early as 2003. Since 2004, the share of new treaties that provide for such an explicit exclusion of dispute settlement arrangements from the scope of MFN has grown steadily. Such a feature has become quasi-universal in treaties concluded since the early 2000s.
The absence of such a clarification creates uncertainty and unpredictability about the legal obligations of treaty parties. It potentially levels differentiated arrangements for dispute settlement arrangements (Pohl, Mashigo and Nohen, 2012[52]) and may effectively be construed as providing access to such dispute settlement arrangements in instances where treaty parties had not intended to make them available.
Source: (OECD, 2022[53])
Sustainable investment provisions in Uzbekistan’s investment treaties
Over time, the inclusion in BITs of treaty language addressing sustainability concerns has become increasingly common. A 2014 OECD survey of over 2100 IIAs and 1000 treaty arbitration cases showed that a growing number of treaties signed between 2008 and 2013 started to include references to sustainable development issues, such as environmental protection, labour rights, human rights, and anti-corruption (Gordon, Pohl and Bouchard, 2014[54]). Provisions addressing sustainable development are common in new generation IIAs, often pursuing a wide variety of objectives. These can be specifically linked, among other things, to the preservation of the host state’s policy space, the limitation of treaty protection to specific categories of investments that are considered as more sustainable, the introduction of standards and obligations on foreign investors, and the creation of a more favourable investment climate in the state parties (Box 4.12). Along these lines, the new model BIT integrates sustainable development into the definition of investment, providing that only investments which contribute to sustainable development will be able to benefit from the treaty’s protections.
Treaty provisions addressing sustainable development are scarce in the stock of Uzbekistan's IIAs. Out of Uzbekistan’s 49 BITs, only four contain references to environmental concerns or broader sustainable development-related issues: the Singapore-Uzbekistan BIT (2003), the Japan-Uzbekistan BIT (2008), the Türkiye-Uzbekistan BIT (2017), and the Korea-Uzbekistan BIT (2019). Except for the Singapore-Uzbekistan BIT (2003), all these treaties include preambular or hortatory language addressing the need for the parties to refrain from lowering their environmental or labour standards for the purpose of attracting of investment. All four treaties also include general exception provisions, which relieve treaty parties from liability for the adoption and enforcement of good faith, non-discriminatory measures seeking to pursue public policy objectives, including environmental protection. Lastly, the Türkiye-Uzbekistan BIT (2017) and the Korea-Uzbekistan BIT (2019) both limit the scope of indirect expropriation to exclude non-discriminatory regulatory actions designed and applied to protect legitimate public welfare objectives, such as public health, safety, the environment.
Sustainable development provisions have become increasingly common and are being incorporated in the investment treaties negotiated by several jurisdiction. While they vary significantly in terms of scope and objectives to be achieved, it is possible to broadly distinguish them into four broad categories:
Provisions preserving the host state’s policy and regulatory space to protect public interests: such provisions include, among other things: (i) right to regulate clauses reaffirming the states’ power to adopt measures for the protection of the environment, human and labour rights; (ii) carve-outs, exceptions, or clarifications to traditional IIAs provisions, such as the definition of indirect expropriation or FET; or (iii) non-lowering of standards provisions, which that discourage or prohibit the lowering of environmental standards for the purpose of investment attraction.
Provisions restricting the scope of application of the IIA itself: such provisions, specifically relevant when discussing IIAs’ role in supporting the low carbon transition, include, among other things: (i) clarifying that, to receive protection, an investment must contribute to the sustainable development of the host state; and (ii) the possibility to of policy carve-outs for fossil fuel investments or mechanisms to reduce fossil fuels benefits.
Provisions addressing the investors’ responsible business conduct (RBC): such provisions include, among other things: (i) treaty references to existing RBC standards, such as the OECD Guidelines for Multinational Enterprises; or (ii) the definition of conduct that the investor is expected to adopt in the implementation of its investment activities.
Provisions seeking to create a more favourable domestic climate for the mobilisation of sustainable investment: such provisions, which require the host state to take active measures aimed at improving the domestic investment climate for the specific purpose of harnessing sustainable investment, include, among other things: (i) the adoption of coherent national policies on investment and sustainable development; (ii) the adoption and implementation of environmental impact assessment and strategic environmental assessment processes for the domestic implementation of investment-related projects and policies; (iii) the implementation of investment promotion and facilitation activities for the mobilisation of sustainable investment, including low-carbon investments; (iv) the definition of transparency requirements for incentives contributing to sustainable investment.
Source: OECD, “Strengthening sustainable investment through international investment agreements” (2024, forthcoming).
The limited consideration that Uzbekistan’s IIAs place on environmental and broader sustainability concern may negatively impact the government’s ability to regulate in the public interest, including for the protection of the environment. Treaty language appearing in Uzbekistan’s IIAs may in some cases be perceived to conflict with environmental and climate objectives and with principles and standards included in multilateral environmental and climate agreements to which Uzbekistan is a party, including the Paris Agreement. Uzbekistan may wish to consider discussions ongoing in international fora on how to align IIAs with the objectives of the Paris Agreement and national priorities on sustainable investment, including in the energy and low-carbon sector.
Temporal validity of Uzbekistan’s investment treaties
Uzbekistan’s investment treaties cover a substantial share of its inward FDI stock. This scenario entails exposure to potential claims, especially given that most of its treaty-protected stock is covered by older treaties that follow outdated design features with unspecific clauses. Many provisions in Uzbekistan’s IIAs lack specific language to indicate government intent as to their scope and meaning.
Uzbekistan might wish to consider reviewing its existing agreements to ensure that they reflect government intent and sound practices emerging in recent treaty policy. The option to terminate treaties is not always available, as investment treaty clauses on temporal validity often place limits on exit. Unlike most international treaties, which can be denounced at relatively short notice, investment treaties typically contain clauses that extend their temporal validity for significant periods of time. While the majority of Uzbekistan’s IIAs currently in force are out of their initial validity periods (55%) and could be denounced in the next two years, the country is bound by at least one treaty until 2034. Following their unilateral denunciation at the earliest possible occasion, Uzbekistan’s IIAs will stop producing their effects only by 2048, as most of its treaties provide for 10 to 15-year “sunset periods” (Figure 4.5). Uzbekistan may thus want to consider whether the current design of its temporal validity provisions serves its interests and consider adjusting its treaty policy in the context of amendments, renegotiation, or joint interpretations of existing treaties or in negotiations of future treaties. Uzbekistan is invited to closely follow and participate in international investment treaty reform initiatives, including the OECD’s “Future of investment treaties” initiative, dedicated to substantive treaty clauses, and UNCITRAL Working Group III on ISDS reform.
Note: Black dots represent the share of treaties in force each year, based on treaties in force as of mid-2024. White dots represent the share of treaties that will continue producing their effects each year based on the hypothetical scenario of unilateral denunciation of all treaties at the earliest possible occasion.
Source: OECD calculations based on the OECD investment treaty database.
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← 1. The list of states from which foreign nationals are authorised to acquire real estate under construction is set in the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated July 13, 2022 No.384 “On Approval of the List of Foreign States Whose Citizens Have the Right to Acquire New Immovable Property Constructed in the Republic of Uzbekistan”.