Uzbekistan’s legal framework regarding PPPs is outdated and requires a substantial upgrade. It comprises
• the Law on Production Sharing Agreement (the “Law“)
• and to a lesser extent, the Decree of the President of the Republic of Uzbekistan (No. 2598) on Measures to Attract Direct Foreign Investment in the Exploration and Production of Oil and Gas (the “Decree”).
The Law only regulates PPPs in the area of exploration and mining of minerals and the exploration and production of oil and gas.
The Decree regulates non-concession and concession PPPs in the field of the exploration and production of oil and gas. Projects in areas other than the exploration and mining of minerals and the exploration and production of oil and gas are currently implemented under general business and investment laws with no specific rules on PPPs and concessions. There is no variety of BOT schemes available and no non-concessions/PFIs. To a great extent, the project models regulated by the current legal framework do not fall within the PPP definition of this 2017/2018 PPP assessment.
A new PPP Law has been in the pipeline for a long time and is expected to be introduced in 2018.
The legal framework constituted by the Law and the Decree shows strength in areas such as the security over concessionaire’s rights and the possibility of creating security interests over the immovable assets and the project proceeds.
There is no requirement to perform an economic evaluation/pre-feasibility study before a project is selected.
Private Party Selection
In general, the Law requires a competitive process for the selection of a private party, but within certain statutory limitations. Only a foreign investor can be the party to a project agreement. The stability of a project agreement is guaranteed by the Civil Code with a view to only allowing for amendments if there is a significant change in the circumstances. The grounds for termination of the project agreement are flexible and there is a balance in the contractual relationship regarding the possibility of an early termination and the grounds for termination. The Law allows for the use of international arbitration and side agreements can be governed by a foreign law. Uzbekistan is a signatory to the New York Convention on the recognition of enforcement of foreign arbitral awards (1958) and has ratified 20 or more international conventions for the avoidance of double taxation.
Concessions are regulated by the Law on Concessions (the “Law on Concessions“) from 1995 and the Decree.
The scope of application needs improvement as it contains a vague definition of “concession“ without a clear definition of the sectors covered.
Unlike non-concession PPPs, concession PPPs can be awarded only after an economic evaluation/ pre-feasibility study has been performed. The Law provides for the stability of a concession contract.
Points for Improvement
Some areas raise concerns, including the lack of variety/flexibility of schemes and the fact there is no precise provision requiring a competitive selection, but merely a reference to such an obligation. Concessions share quite a few similarities with the non-concession PPP framework. In particular, there is no provision expressly providing for compensation to the private party for losses incurred as a result of termination on the grounds of public interest or as a result of public authority acts.
The same applies to compensation in cases of early termination after the assets provided by the private party have depreciated. In this case, the general provisions of the Civil Code on compensation for damages as a result of agreement termination shall apply. Terms and conditions of compensation to the private party for losses incurred as a result of termination may be determined in the project agreement.
As with PPPs, no special provisions exist regarding adjustment of public tariffs for cost increases. One stop shop permitting procedures are not specified by the law. The Law is silent on the possibility of a direct agreement, step-in rights and unsolicited proposals, as is the case with PPPs.
The policy framework lacks a national policy framework regarding PPPs and only one policy document in this regard has been identified, namely in the public utility services sector (“Resolution on approval of the process of deepening the economic reforms in the public utility services“ of 1998).
There is no inter-ministerial specific committee or a separate commission to deal with PPPs/concessions only. There is no specialised institution that serves as a central unit assisting in the development of projects.
A tool kit on PPPs as well as a set of model documents would be welcome.
In the period from 2012 to 2016, Uzbekistan only had 3 projects, none of which were ever implemented. These projects were, in 2012, Uzbekistan Health PPP – Improving Access to Medical Diagnostic Centres for the Poor, in the social and health sector and the PPP for construction of four medical diagnostic centres in four regions of Uzbekistan, in the sector of healthcare. They had a value of approx. € 76 million. There was a PPP in 2013 for the collection and processing of hard wastes in Tashkent region. It was in the sector of infrastructure and had an approx. value under € 9.5 million.