The new Law on Foreign Investment clarifies and improves a number of the definitions used in the previous law. For example, Article 3 expands the definition of "foreign investment" to include re-investment of Uzbek source income as foreign investment, and Article 4 broadens the definition of a "foreign investor" to include "administrative or state bodies of foreign states". The new law also eliminates the ambiguity inherent in the prior law concerning which entities can be considered "foreign legal entities" by using the more inclusive phrase "legal entities, any other partnerships, organizations or associations established and acting in accordance with the legislative acts of foreign states."
In addition, Article 5 elaborates on what types of intellectual property rights may be contributed by foreign investors, including "copyrights, patents, trademarks, models, industrial designs, trade names and knowledge, as well as business reputation (goodwill)." Given the current $150,000 charter fund requirement for an entity to qualify as an "enterprise with foreign investment," this broad definition of intellectual property will be welcome to those investors who wish to contribute such items as part of the entity's charter fund.
Some of the more notable substantive provisions of the new law include the relaxation of rules regarding investment insurance. The prior law allowed investments in Uzbekistan to be insured only by either the National Insurance Company of the Republic of Uzbekistan or joint insurance companies with participation of foreign insurance organizations. Article 16 of the new law permits the foreign investments to be insured by "international organizations, foreign state export credit agencies, and other insurance companies".
In addition, for an "enterprise with foreign investment, "the new law has removed the prohibition in the former law against granting a security in the enterprise's right to own and use land and other natural resources. In addition, the new law expressly states that all property and property rights owned by a foreign investor, regardless of location, may be used as a security for obligations.
Article 22 contains a dramatic improvement on the former law by ensuring that in the event of any inconsistency between the Law on Investment and any other legislation or any international agreements to which the Republic of Uzbekistan is a party, the provisions more favorable to the foreign investor shall apply. The former law provided only that in the event of a conflict between the law and any international agreement, the terms of the international agreement would apply.
Although it largely restates the provisions of the former law, the new Law on Guarantees makes a number of substantive improvements as well. As under the previous law, a foreign investor's rights are stabilized for 10 years, but the investor may now, at its own discretion, apply those provisions of any new legislation which may improve the conditions of investment. In addition, the stabilization provisions are extended expressly to protect the foreign investor from the adverse effects of legislation as implemented, not just as written. Article 9 guarantees the foreign investor free access to legislative and departmental regulatory acts affecting it.
The new law also states that any required requisition must be minimized to that amount required to achieve the necessary result, that it must be carried out on a nondiscriminatory basis and that the foreign investor may appeal in court or through arbitration the factors surrounding the requisition (its purpose, amount, valuation and procedures).
Finally, in an effort to clarify the arbitration provisions of the previous law, Article 10 of the Law on Guarantees provides that international arbitration may be chosen by agreement of the parties as the exclusive means of dispute resolution pursuant to the rules and procedures of international agreements to which the Republic of Uzbekistan is a signatory. Uzbekistan has acceded to the ICSID Convention and UNCITRAL. In a notable change from the former law, disputes unrelated to the investment may be consigned to international arbitration upon the agreement of the disputing parties.
The new laws do offer some important protections to the foreign investor and should be seen as a significant step forward. The new Law on Foreign Investment and Law on Guarantees make significant efforts to address the concerns of foreign investors in the Republic of Uzbekistan and go a long way toward clarifying ambiguities contained in the former law.