On September 14, 2021, the President of Uzbekistan signed the Decree No. УП-6313 "[o]n fundamental improvements in contractual relations" (the "Decree"). According to the Decree:
- Starting from 1 December 2021, certain matters will be
released from regulatory control allowing parties freedom of
contract, as the Decree abolished:
- the previous ban imposed on commercial banks restricting processing of payments for delivered goods, works, and services rendered to third parties (i.e. parties that are not suppliers of goods, works and/or services);
- mandatory advance payments in contracts for the supply of goods, works, and services entered into by companies with a state ownership of more than 50%; and
- mandatory advance payment in contracts entered into with producers of agricultural and livestock products and stockpile organizations.
- Private individuals are allowed to provide each other loans and repay such loans in foreign currency, provided the relevant loan agreements have been notarized.
- Furthermore, starting from 1 January
2022:
- The concept of duty of good faith will be further expanded: a party to a contract that has accepted full or partial performance of contractual obligations from the other contracting party or otherwise affirmed the contract, will lose its right to demand invalidation of the contract in the future, if such demand conflicts with the principle of good faith;
- Contracts for public procurement would be required to include an anti-corruption clause, the breach of which by a contracting party (or parties controlled by such contracting party) would entitle the other party to unilaterally terminate the contract and demand recovery of damages;
- In case legal entities and/or individual entrepreneurs (the "Debtors") do not pay off their indebtedness on tax or customs duties, the State Customs Committee and State Tax Committee may send an instruction to a servicing bank on freezing of proceeds belonging to such Debtors in the amount equal to the outstanding indebtedness, and such amount may be recovered within thirty days, with a notification to be sent to such Debtors. If the Debtor timely challenges in court such instruction to its servicing bank on recovery of proceeds, then such recovery may only be undertaken based on a court's decision;
- Public contracts in the fields of utilities, energy supplies, communication services, passenger and freight transportation, and similar fields, having substantial social implications and developed by natural monopoly entities, will be subject to approval by the antimonopoly authority of Uzbekistan before they can be entered into with consumers.
- The Decree provides for the plan setting forth
different tasks to the ministries on future steps to improve the
legal regime on contracting processes, including:
- Introduction of an "escrow" system in the process of sale and purchase of goods via online trading platforms and transactions in other areas;
- Development of a draft law on abolishing administrative liability for overdue accounts payable and receivable;
- Development of suggestions on the repeal of the law "[o]n contracting and legal basis of activity of business entities" and, if required, reflection of its provisions in the Civil Code;
- Introduction of changes to the laws of Uzbekistan "[o]n joint stock companies and protection of shareholders' rights" and "[o]n limited and additional liability companies" providing that if the company's executive body breaches the procedures for entering into a significant transaction or a transaction with affiliated parties (i) as a result of which the company sustains a loss and (ii) the fault of a director, board member, or a custodian, is proven, then the director, board member, or custodian may, along with the company, bear subsidiary (secondary) liability in respect of the losses incurred by creditors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
