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GUARANTEES OF FOREIGN INVESTORS' RIGHTS IN THE REPUBLIC
OF UZBEKISTAN
Mallakhanov Samandar Qahramon ugli
Third-stage student at Tashkent State University of Law
mallaxonovsamandar50@gmail.com
"Our main goal is to make Uzbekistan a reliable and long-term partner for foreign
investors."
— Sh.M. Mirziyoyev
Anotatsiya:
Ushbu maqolada mamlakatimizda so’nggi yillarda investorlarning huquqlarini
kafolatlarini ta’minlashga qaratilgan chora-tadbirlar, milliy qonunchiligimizdagi investorlar
uchun yaratilgan kafolatlar hamda ularning ahamiyati to’g’risidagi ma’lumotlar yuzasidan fikr
boradi.
Kalit so’zlar:
investitsiya, investor huquqlari, kafolatlar, soliq imtiyozlari, afzallik va
preferensiyalar.
Абстракт:
В данной статье рассматриваются меры, направленные на обеспечение прав
инвесторов в нашей стране за последние годы, гарантии, созданные для инвесторов в
нашем национальном законодательстве, и информация об их значении.
Ключевые слова:
инвестиции, права инвестора, гарантии, налоговые льготы,
преимущества и преференции.
Abstract:
This article discusses measures aimed at guaranteeing the rights of investors in our
country in recent years, guarantees created for investors in our national legislation, and
information about their importance.
Key words:
investment, investor rights, guarantees, tax benefits, advantages and preferences.
Emphasis should be placed on the fact that in recent years, extensive measures have been
implemented to enhance the economic potential of our country, elevate its international
relations to a new level, create the most favorable investment climate and corresponding legal
landscape to attract investments, limit interference in the activities of any form of
entrepreneurial entities, further simplify the licensing and permitting system necessary for their
operations, and establish the required conditions for carrying out investment activities in the
regions.
Considering the interests of investors, several amendments have been introduced to our
country's Tax Code. These include reducing the tax burden, further simplifying the taxation
system, and creating a fair tax and customs system in a healthy competitive environment.
Reforms are also being carried out to amend and supplement existing legislative documents.
Reflecting on the experience accumulated over the past years, it becomes evident that there
have been certain issues in protecting investors' rights, safeguarding these rights, and ensuring
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ISSN: 2692-5206, Impact Factor: 12,23
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Journal:
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page 1192
their guarantees. These issues have long hindered the economic development of our country, as
highlighted by our national leadership. To decisively address these problems, the President of
the Republic of Uzbekistan issued Decree No. PF-5495 on August 1, 2018. This decree
established a new framework aimed at ensuring investors' rights, effective from August 1, 2018.
Specifically:
If an investor acting in good faith uses property, enters into agreements, or benefits from
privileges and advantages based on an administrative document issued by a state div, and
such document is later annulled or deemed invalid, the investor shall be fully compensated for
all incurred losses.
If the annulment or amendment of an administrative document by a state div (or official)
could affect the investor's interests, the matter of annulment or amendment shall be reviewed in
court.
If losses are incurred by an investor due to decisions, actions (or inactions) of state bodies, their
officials, or employees that are found to be unlawful, such losses shall be fully compensated
from targeted fund resources based on a court decision.
The measures to ensure investors' rights did not stop with Decree No. PF-5495. As a result of
consistent efforts, the Law of the Republic of Uzbekistan "On Investments and Investment
Activity" was adopted on December 25, 2019. This law established a robust system of legal
guarantees for investors in our country. The law includes the following guarantees:
Guarantees against unlawful interference and harm in investment activities
— The
essence of this guarantee is that state bodies and their officials are not entitled to interfere in the
lawful activities of investment entities. If state bodies or their officials identify violations of
legislation in the activities of investment entities, they may only take measures within their
authority that are directly related to addressing such violations. If violations are detected, state
bodies and their officials may not interfere in or restrict other lawful activities unrelated to
investment activities. State bodies can cause harm to investment entities in two ways: first,
through actions contrary to existing laws by state bodies or officials; and second, through
failure by state bodies or their officials to adequately fulfill their obligations toward foreign
investors. Here, "harm" refers to monetary losses incurred by investors or enterprises due to
unlawful actions by state bodies or officials, as defined in Article 14 of the Civil Code of the
Republic of Uzbekistan.
Guarantees against discrimination
— The state guarantees that investors will not face
discrimination based on citizenship, place of residence, location of economic activity, or the
origin of the investors or investments. This guarantee ensures that our country treats investors
from all nations equally and provides them with the same privileges or advantages under its
legislation.
Guarantees for the use and free transfer of funds
— Foreign investors may reinvest or
otherwise use profits and income earned during their activities after paying taxes and other
mandatory payments under the laws of the Republic of Uzbekistan. Notably, the ability to
freely bring in and transfer funds without bureaucratic barriers strengthens a country's appeal to
foreign investors. They gain confidence that their profits and income will not be appropriated
by state bodies or officials but will instead be protected. However, allowing foreign investors to
freely withdraw funds from developing or transitioning market economies could lead to capital
flight and disrupt the balance of payments. Therefore, while guaranteeing the free transfer of
funds, national interests must also be considered.
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Guarantees for the repatriation of foreign investments in case of termination of
investment activity
— Under the aforementioned law, any investor in the Republic of
Uzbekistan has the right to terminate their investment activity. After termination, foreign
investors may freely repatriate their assets in cash or in kind, provided this does not harm
creditors or obligations to the Republic of Uzbekistan (Article 18).
Guarantees against unfavorable changes in legislation for investors
— Article 19 of the law
stipulates that if subsequent legislative acts of the Republic of Uzbekistan worsen the
conditions for investment, the laws in effect at the time of investment shall apply to the investor
for the next ten years. Additionally, the investor has the right to opt for new laws that improve
their investment conditions. This means that if new laws or amendments worsen the investor's
legal standing, they may adhere to the previous laws for ten years. For example, if tax rates are
increased under a new law, the investor may continue paying taxes at the previous rates for ten
years.
The guarantees for applying the laws in effect at the time of investment for ten years are
applicable in the following cases: When additional requirements complicate repatriation
procedures or reduce the amount of income (profits) transferred abroad, except where
repatriation is suspended due to the insolvency of an enterprise with foreign investment,
violation of creditors' rights, criminal or administrative offenses by a foreign investor, or other
necessary grounds under court or arbitration decisions. When quantitative restrictions or
additional requirements, such as increasing the minimum share of foreign investments in
enterprises, are introduced. When restrictions on foreign investors' participation in the charter
funds of Uzbek enterprises are imposed. When additional procedures for visa issuance or
extension, or other requirements for foreign investments, are introduced. The guarantees against
unfavorable changes take effect in the following cases: For enterprises — from the date of state
registration. For acquiring property, shares, securities issued by Uzbek residents, or rights to
trade and service facilities, residential properties, land plots, or other natural resources — from
the date the document confirming ownership or other property rights takes effect.
For intellectual property rights, including copyrights, patents, trademarks, utility models,
industrial designs, trade names, know-how, or goodwill — from the date the document
confirming such rights takes effect. For concessions, including exploration, development,
extraction, or use of natural resources — from the date the concession agreement is registered.
For other forms of investment not prohibited by Uzbek law — from the date the document
confirming the investment activity takes effect.
Another unique aspect of investor rights guarantees is the protection against nationalization.
According to the Civil Code, nationalization is the transfer of property owned by individuals or
legal entities to state ownership with compensation. Typically, nationalization is justified for
the following purposes:
— Preserving enterprises and other facilities of strategic importance for national security or
social development.
— Ensuring environmental safety.
— Protecting consumers from potential abuses by private monopolies.
— Restructuring the economic framework.
— Halting illegal capital flight.
— Establishing control over financial resources held by banks and other institutions.
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— Achieving nationally defined socio-economic goals.
Even in these cases, the state fully
guarantees the inviolability of investors' property.
To reliably ensure these guarantees and effectively address challenges faced by investors, the
"Tashkent International Investment Forum" has been held annually in Tashkent since 2022.
During the first forum, several issues awaiting solutions to attract large-scale foreign
investments to our country were highlighted. These included frequent changes in Uzbek
legislation, bureaucratic barriers in transferring funds out of Uzbekistan (investors noted that in
the UAE, they could bring in and withdraw investments on the same day, unlike in Uzbekistan),
and the reluctance of foreign entrepreneurs to invest in local businesses or their minimal
investments (they primarily invest in their own ventures). These criticisms were raised by
foreign experts.
By the time of the "Third Tashkent International Investment Forum," many of these
shortcomings had been addressed. The forum attracted over 2,500 delegates from 93 countries
and saw the signing of major investment agreements with companies such as "Data Volt"
(Saudi Arabia), "Acwa Power" (Saudi Arabia), "Amea Power" (UAE), "Nil Shugar" (Egypt),
"Shaynxay Knud Interneshnl" (China), "Vilmar Interneshnl" (Singapore), "Bonafarm Grup"
(Hungary), "Sayar" (USA), "Goldvind," "Sinoma" (China), "Sam Yapi" (Turkey), "Pasha
Development" (Azerbaijan), "Laselsberger" (Austria), and "Petrosat Chexelsoton" (Iran) in
sectors like thermal energy, textiles, and food industries.
While we have analyzed the privileges under our national legislation, we now turn to
international practices. Globally, financial, fiscal, and other guarantees for foreign investors are
common, often in the form of incentives. Financial guarantees are created through free
economic zones, offering tax incentives and preferential credit systems. Fiscal guarantees are
typically used by developing countries with limited resources, introducing "tax holidays" or
customs exemptions for investors in specific regions or nationwide. Such measures can strain
national budgets, so they are usually time-limited. The goal is to improve the "investment
landscape" and attract more foreign capital.
For example, countries like Bahrain, Paraguay, Uganda, Vanuatu, Mongolia, the Maldives,
Ukraine, and Tajikistan exempt foreign investors from most taxes, either for a specified period
or indefinitely. Egypt, South Korea, and Trinidad and Tobago exempt foreign investors from
corporate taxes. South Korea and Zambia exempt foreign investors from dividend taxes.
Guyana, Singapore, Thailand, and Mozambique exempt foreign investors from import taxes on
goods deemed essential for these countries.
Preferential taxation may apply to specific sectors or regions, as seen in the laws of Romania,
Armenia, Nigeria, and Morocco
In summary, a legal and effective guarantee system for foreign investors is essential. Investors
thoroughly study the legal guarantees and incentives offered by a country before committing
their funds. They ask questions like, "What privileges are available here?" and "Who ensures
these privileges?" A robust legal framework capable of addressing such questions is crucial for
our rapidly growing economy.
1
Дойников И.В. Хозяйственное (предпринимательское) право: новый курс. – М., 2001. – С. 240
2
O.Oqyulov, N.Imomov, Sh.Ro‘zinazarov, B.Samarxodjayev, I.Rustambekov, Q.Mexmonov, E.Musayev,
U.Saydaxmedov, A.Tojiboyev, A.Ibragimova, A.Jumagulov. Investitsiya huquqi. – Toshkent: Toshkent davlat
yuridik universiteti, 2019. – 300 b.
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ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 06,2025
Journal:
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page 1195
Our efforts are not limited to legislation. Under Presidential Decree No. PQ-4001 of November
5, 2018, the Tashkent International Arbitration Center (TIAC) was established under the
Chamber of Commerce and Industry of Uzbekistan. Pursuant to Presidential Decree No. PF-
6034 of July 24, 2020, a specialized judicial div was created within the Supreme Court of
Uzbekistan, authorized to resolve investment disputes involving investments of at least $20
million, as well as competition-related cases. These measures exemplify our commitment to
safeguarding investors' rights.
Despite these efforts, challenges remain in ensuring and reliably protecting investors' rights.
Unfortunately, these issues often stem from individuals within state authorities, negatively
impacting our country's investment appeal and reputation. For instance, a January 9, 2023,
article in "Kun.uz" reported that Kerry Adler, CEO of Canada's "Skypower Global," accused
certain government officials of obstructing a solar power plant project in Uzbekistan. Although
an agreement was reached to sell solar energy at 6 cents per kWh, the Uzbek side later
attempted to lower the price. Such incidents raise doubts among investors about the rule of law
in the country. Similarly, in Quvasoy, a dispute arose between a Turkish investor and the city
mayor over the latter's attempt to take over the investor's project. Additionally, Aziz
Mirzakarimov, an Andijan native, faced bureaucratic hurdles and unnecessary meetings when
trying to establish a business in Uzbekistan after selling his business in Russia. These cases
highlight the need for stronger and more attentive approaches to this sector, as the harm caused
to investors ultimately affects our people and economy.
REFERENCES:
1.
Textbook "Investment Law," authors' collective.
2.
Law of the Republic of Uzbekistan "On Investments and Investment Activity," No. O'RQ-
598, December 25, 2019.
3.
Presidential Decree of the Republic of Uzbekistan "On Measures to Radically Improve the
Investment Climate," No. PF-5495, August 1, 2018.
4.
Presidential Resolution of the Republic of Uzbekistan "On the Establishment of the Tashkent
International Arbitration Center (TIAC) under the Chamber of Commerce and Industry," No.
PQ-4001, November 5, 2018.
5.
Presidential Decree of the Republic of Uzbekistan "On Additional Measures to Improve
Judicial Activities and Enhance the Efficiency of Fair Justice," No. PF-6034, July 24, 2020.
