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New regulations of Uzbekistan in the field of currency regulation and public-private partnership

5 Mar 2021
Subject Tax Alert
Categories Law
Jurisdictions Uzbekistan

On January 22, 2021, the Law of the Republic of Uzbekistan (“Uzbekistan”) on Amendments and Additions to, as well as the Annulment of, Certain Legislative Acts of the Republic of Uzbekistan in Connection with the Improvement of Legislation on Public-Private Partnership No. ZRU-669 (the “Law”) was adopted. In this regard, the following amendments, which entered into force on January 23, 2021, were made to the Laws of Uzbekistan on Currency Regulation and on Public-Private Partnership:

1. It is now allowed to tie the prices of goods (services, work) sold in Uzbekistan to foreign currencies and conventional units based on the respective decisions of the President of Uzbekistan on projects involving foreign investment within the framework of:

  • Agreements on Public-Private Partnership (“PPP”);
  • Investment agreements with the Government of Uzbekistan.

2. The procedure for the implementation of concession projects, as well as the conclusion of concession agreements, will now be governed by the procedure set for PPP projects.

3. The following bodies are granted certain authorities in the field of PPP:

The Cabinet of Ministers:

  • Determines the state partner in cases of uncertainty with its determination upon the recommendation of the authorized body in the field of PPP – the Agency for PPP Development under the Ministry of Finance of Uzbekistan (the “Agency”);
  • Sets the amount of a one-time payment charged to the winner of the tender or participant in direct negotiations for the successful execution of the PPP agreement.

The Agency:

  • Coordinates the tender documentation of the PPP projects and draft PPP agreements with a total value of more than USD 1 million equivalent;
  • Negotiates and concludes relevant agreements with international financial institutions, and international and local entities, for the provision of consulting and audit services within the framework of PPP projects;
  • Enters into contracts to collect a one-time payment from the winner of the tender or participant in direct negotiations for the successful execution of the PPP agreement.

Local executive bodies:

  • Identify potential facilities within their jurisdiction for PPP projects;
  • Review high-potential projects and land plots that are expected to be implemented/developed on the basis of a PPP agreement;
  • Take measures to eliminate the circumstances that prevent the successful implementation of PPP projects;
  • Allocate land plots without conducting an auction within the framework of PPP projects.

4. Amending, supplementing or terminating the PPP agreement is now carried out on the following basis:

  • For a total value equivalent to up to USD 1 million inclusive – by the public partner and private partner independently;
  • For a total value equivalent to more than USD 1 million up to USD 10 million – upon approval by the Agency;
  • For a total value equivalent to more than USD 10 million – upon approval by the Cabinet of Ministers of Uzbekistan.

5. The following information about PPP projects must be posted on the official websites of the state partner and the Agency, with an exception for information related to state secrets:

  • Names of the project parties;
  • Field of project activities;
  • Location of the project;
  • Duration of the project;
  • Tariffs for goods (work, services) sold to consumers (if available);
  • Total project costs;
  • The volume and types of state support (if any).

6. The guarantees of the rights of the private partner have been changed. In particular, if legislation adopted after the date of conclusion of the PPP agreement directly increases the expenses of the private partner or reduces its income within the framework of the PPP project, the private partner shall have the right to demand:

  • A compensatory increase in the payment for the availability of the PPP subject and (or) its use;
  • A one-time compensation payment from the state partner and (or) appropriate changes and (or) additions to the PPP agreement, if provided for by the agreement.

However, this rule does not apply to changes in legislation with respect to taxes and fees, except for discriminatory payments in relation to a particular PPP project.

7. For PPP projects with the participation of creditors, creditors may enter into direct agreements with public or private partners, which should take into account:

  • The rights and obligations of creditors in connection with the replacement or removal of a private partner (management of the private partner);
  • Any obligation to pay creditors the payments payable by the public partner to the private partner under the PPP agreement in cases of replacement or removal of the private partner;
  • Conditions for reducing the risk of termination of the PPP agreement;
  • Payments in case of early termination of the PPP agreement;
  • The procedure for exchanging information on the implementation of the PPP project, as well as protection of the rights and obligations of the parties.

8. The Law also provides for the provision of additional guarantees within the framework of PPP projects:

  • Through conclusion of an agreement with the government of Uzbekistan on state support;
  • In accordance with the procedure provided for in the PPP agreement.