GILS Commercial contracts: Uzbekistan
GENERAL CONTRACT LAW REGULATIONS
UZBEKISTAN
1. Is it mandatory for a commercial contract to be governed by local law?
The parties to a commercial contract are free to choose any foreign law. However, the choice should be based on some reasonable rationale. If, for example, a local arbitration is chosen, an Uzbek law is believed to be an effective choice.
2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language?
Language requirement exists only in relation to commercial contracts in e-commerce, that is, contract terms shall be formulated in a clear and understandable manner in a state language. However, with regards to other commercial contracts on the territory of Uzbekistan, there are no language requirements and parties may establish the prevailing language.
3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities?
Yes, private entities may use electronic signatures when executing commercial contracts.
4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts?
There are no standard forms of commercial contracts, however, generally, they shall include the following clauses: subject matter of the contract, quantity, quality, variety and price of the goods supplied (works, services), deadlines, calculation procedure, obligations of the parties, liability of the parties for non-fulfillment or improper performance of contractual obligations, dispute resolution, requisites of the parties, and place of conclusion of the contract, as well as other essential terms that are established by the applicable legislation with regards to certain type of contracts or by request of one of the parties.
5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?
Article 361 of the Civil Code provides for the concept of “preliminary agreement”. Under a preliminary agreement, the parties commit to enter into a contract (main agreement) in the future for the transfer of property, performance of work, or provision of services based on the terms specified in the preliminary agreement. The preliminary agreement must contain terms that allow identification of the subject matter of the main agreement as well as other essential terms.
The preliminary agreement should specify the period within which the parties shall enter into the main agreement. If no such period is specified in the preliminary agreement, the main agreement must be concluded within one year from the date the preliminary agreement was made.
6. What currency is allowed to be used for commercial contracts in the Country?
All settlements and payments for goods (works, services) within the territory of Uzbekistan shall be made in national currency of Uzbekistan, except for certain cases, e.g. transactions related to settlements in duty-free shops, as well as settlements when selling goods and providing services to passengers along the route of vehicles during international transport, operations involving settlements and transfers of funds in foreign currency coming from abroad from the sale of freight forwarding services to the account of forwarding companies, on the basis of concluded agreements, etc.
7. Are there options for the limitation of liability of a party under the commercial contract?
Yes, the Civil Code of Uzbekistan provides for the concept of freedom of contract, and, therefore, parties may limit their liability under the contract, unless it is specifically prohibited by any law applicable to that particular sphere. For instance, consumer protection laws establish specific amounts of liability of the seller (performer, manufacturer) for violation of legislation on the protection of consumer rights, and any agreement to limit the liability of the seller (performer, manufacturer) is void.
8. Is the concept of release from liability or indemnity enforceable in the Country?
The commercial contract may establish the following scenarios: recovery of penalties only (not losses); recovery of damages in full in excess of the penalty; or when at the discretion of the creditor, either a penalty or damages can be recovered.
9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability?
Consequential damages can be considered within the concept of “losses”. In accordance with Article 14 of the Civil Code, losses include expenses that a person whose right has been violated has made or will have to make to restore that right, loss or damage to his property, as well as lost income that such person would have received under normal conditions of civil circulation if their right was not violated. Generally, consequential damages can be excluded from liability, unless it is specifically prohibited by any law applicable to that particular sphere.
10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?
Force-majeure events in Uzbekistan are mainly referred to in local legislation as events of unavoidable force.
There is no special statutory law enacted by the Parliament of Uzbekistan regulating the concept of force-majeure, however, this concept is sufficiently defined and regulated by several general references in the Civil Code as well as several sub-laws enacted by the Cabinet of Ministers of Uzbekistan. The concept of force-majeure is also acknowledged and employed by the Presidium of the Supreme Court of Uzbekistan in its observations of judicial practice and recommendation to local state courts in some business, criminal and civil law cases.
Basic definition of force-majeure is approved by Article 333 of the Civil Code of Uzbekistan as extraordinary and unavoidable forces under the established circumstances. The same Article 333 also approves non-force-majeure events such as breach of obligations by the debtor’s contractors, absence of necessary goods in the market, absence of necessary financial funds of the debtor.
A more detailed definition of force-majeure is approved in the Regulations on procedures for confirmation of events of unavoidable force (force-majeure) which has been approved by the Cabinet of Ministers Resolution No. 231 as of 7 June 2023 (hereinafter “Regulations No.231”).
Clause 3 of this Regulations No. 231 defines force-majeure as events of extraordinary, unavoidable and non-foreseeable character under current circumstances caused by natural events (earthquakes, landslides, hurricanes, droughts and others) or social and economic circumstances (act of war, blockade, bans on imports or exports in state interests and others), which are not dependent on the will or actions of the parties, due to which the parties cannot perform underlying obligations.
It is important to note that Uzbekistan laws provide for two ways for confirmation and certification of force-majeure events:
(1) In the case of domestic agreements force-majeure events are confirmed and certified by the Chamber of Commerce and Industry of Uzbekistan. Confirmation and certification is made in accordance with Regulations №231.
(2) In the case of foreign trade agreements force-majeure events are confirmed and certified by the Ministry of Investments, Industry and Trade of Uzbekistan. Confirmation and certification is made in accordance with Administrative procedure approved by Resolution of the Cabinet of Ministers No. 625 as of 28 October 2022 (“Administrative Procedure No. 625”). Application can be filed online and through State service centres.
If the contract has been executed and performance has been started the occurrence of force-majeure events may lead to amendment or termination of such contract under Article 383 of the Civil Code.
The parties to such contract shall be first of all entitled to settle any issues and decide upon the future of the contract in accordance with terms and conditions of the underlying contract.
In any event either of the parties may have sufficient rights to terminate the contract by initiating a judicial proceeding. Article 383 of the Civil Code establishes that significant change of circumstances during which the parties have executed the contract is a ground for termination or amendment of the agreement unless a different provision is contained in the underlying contract. Following the same Article, the change of circumstances is treated as significant only if the circumstances have changed so much that could the parties foresee such a change the contract would not have ever been executed or would have been executed on completely other terms and conditions.
11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?
No, at the regulatory level there are no corresponding provisions. However, as a matter of practice, local banks may freeze certain transactions involving sanctions element, and a number of local banks have officially published the list of sanctioned banks located in various jurisdictions.
12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?
No, there is no mandatory dispute resolution regime in Uzbekistan for commercial contracts. However, when choosing foreign dispute resolution venue, parties should take into consideration that decisions of foreign states are recognizable and enforceable in Uzbekistan only under a condition that the country, where respective state court which has made a decision is located, has signed a bilateral or multilateral international treaty for mutual recognition and enforcement of judicial decisions. For instance, Uzbekistan has signed such treaties with only CIS countries: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Moldova, Ukraine and Russia. Therefore, currently only decisions of state courts from these countries are recognizable and enforceable in Uzbekistan.
13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution?
Yes, parties are free to choose the arbitration as a method of dispute resolution. If the parties wish to choose foreign arbitration, there are no issues with recognition and enforcement due to Uzbekistan’s unconditional membership with the New York Convention 1958 for Recognition and Enforcement of Foreign Arbitral Awards.
Author: Anora Turakhujaeva, Counsel
