GILS Construction and Infrastructure: Uzbekistan

UZBEKISTAN

1. What types of design and construction work require a licence in your country?

The law of Uzbekistan introduces quite a detailed framework in the area of licensing in the construction sector. There are several general licenses and several specific licenses which apply in respect of a wide range of construction and construction related works.

As a general answer we could identify the following licenses in the area of design works:

• Design of hazardous industrial facilities;
• Design of civil construction facilities. This category consists of multiple licenses which include not only design works but also various types of other works used in construction, for example:  technical inspection of buildings, preparation of calculations and estimations as part of design documentation, drafting tender documentation, structuring anti-corrosion protection and others;
• Design of specific facilities, such as telecommunication networks, bridges, tunnels, automobiles, gas and oil pipelines and others.

As a general answer to licensing the construction activities practically similar licenses are required:

• Construction of hazardous industrial facilities and objects;
• Construction of certain categories of civil construction facilities, for example, facilities with X-ray and other ionising radiation sources;
• License for construction works by using industrial alpinism;
• Construction, maintenance and repair works of specific facilities, such as telecommunication networks, bridges, tunnels, automobiles, gas and oil pipelines and others.

2. Can legal entities registered in foreign countries obtain a licence for design or construction?

Yes, they can.

Licensing law of Uzbekistan does not restrict foreign companies to apply for and receive any license in the area of design and construction works.

It is noted that receipt of any license in Uzbekistan by a non-resident shall immediately trigger emergence of this entity’s permanent establishment under tax laws of Uzbekistan. This non-resident shall be expected to file for registration of its permanent establishment no later than within 180 days from the date any license is issued.

3. Which foreign licences and permits in the field of construction and design can be recognized in your country?

In accordance with President’s Decree No. UP-5577 as of 14 November 2018 the Government of Uzbekistan has allowed to recognise certificates and licenses for conducting design and construction works within Uzbekistan if foreign licenses are issued in one of the countries of Organisation for Economic Cooperation and Development (https://www.oecd.org/).

In order to be able to recognise a foreign license or certificate in Uzbekistan a non-resident has to file a recognition application to the corresponding local licensing authority and submit documents evidencing the issuance of license in one of OECD countries, as well as evidence of design and construction experience. The practice suggests that it usually takes up to 2-3 months to get a foreign license recognised and allowed to be used in Uzbekistan.

4. Is it necessary to register a legal entity in your country to carry out design or construction work?

No, it is not. However, this might become an unavoidable practical necessity.

From one hand, the law does not establish any direct obligation to set up a legal entity in Uzbekistan in order to conduct design and construction activities. Provided that all licenses are received and all other technical regulation requirements are complied with, non-residents are allowed to provide design and construction services within Uzbekistan without establishing a local entity. A permanent establishment shall emerge instead which will have to be registered in Uzbekistan as soon as a license is received or a corresponding contract is signed.

Major practical concern is the timing for receipt of a license. Any license to be applied for in design and construction area requires quite a significant amount of inputs to be declared by an applicant. In practice, it usually takes at least from 3-4 to 5-6 calendar months to receive a license for design or construction works. 

From practical point of view it might also be inevitable to use local companies to comply with technical regulations, such as necessity to have local ranking in order to be able to register as a construction company in the course of receiving permit (filing notice) to commence construction works; hiring local and expat personnel; importing equipment, raw materials, components, spare parts; performance of specific tasks by using specific equipment and devices which need special authorisations; as well as for multiple other tasks arising on daily basis. By all means, in some projects it is possible to structure all these by subcontracting third persons and operating in Uzbekistan through a permanent establishment.

In every case decision should be made by taking into account long-term goals of a non-resident of Uzbekistan and the structure of the project.

5. What requirements are imposed on construction contracts and design and survey contracts, including when one of the parties is a non-resident of your country?

The contract law of Uzbekistan imposes a minimal set of terms and provisions that must be reflected in the contract and thus making a written bilaterally signed agreement a mandatory necessity.

The following terms and conditions must be reflected in each construction contract:

• Indication of place, day and persons signing the contract;
• Precise determination of the subject of the contract;
• Terms and conditions for performance of the obligations;
• Cost of contract and price determination mechanism;
• Rights and obligations of the parties;
• Terms of delivery of specific items (when relevant);
• Dispute resolution rules;
• Amendment and termination procedure.

Foreign currency regulations require that all contracts with non-residents leading to making or receiving payments in foreign currency must be registered with special governmental online platform.

6. In what cases should construction contracts and design and survey contracts be concluded following a special procurement procedure?

As a general rule, special procurement procedures apply only when the contract is being signed by a state buyer, i.e. a state body, an entity fully owned by a state or an entity in share capital of which the state owns more than 50%. In this case public procurement procedures as defined by the Law on Public Procurement shall apply. This Law also applies in respect of companies which have a certain degree of indirect state ownership in their shareholding structure. Therefore, it is always recommended to explore the owner of the project and origin of financing to ensure that public procurement procedures do not apply. If they do, special tender or other publicly competitive procedures may apply.

7. What are the features of hiring local and foreign personnel in the implementation of construction and design and survey activities?

Local and foreign personnel can be hired by non-residents without any limitations.

Non-residents operating through local subsidiaries or through permanent establishments shall follow standard employment regulations and sign written employment agreements with all personnel hired for the purposes of the project. 

If design or construction is a one-time project only, employment agreements can be signed on a fixed-term basis.

All foreign citizens employed by local permanent establishment or local subsidiary must receive a work permit from Uzbekistan Agency for Foreign Labour Migration. As a rule, this procedure takes up to two calendar weeks and requires applicants to arrive in Uzbekistan under B-2 visa only (citizens of CIS countries do not require any entry visas).

8. Is it possible to use foreign standard construction contracts?

Yes, it is.

The Civil Code of Uzbekistan establishes the freedom of contract principle.

The parties are free to negotiate and sign a construction contract following any local or international template or standard.

It is noted that FIDIC standard terms and conditions have been becoming quite popular in Uzbekistan in the last decade.

9. Is it possible to use foreign law and foreign courts when concluding construction contracts and design and survey contracts?

Yes, it is.

Although Uzbekistan legislation is quite detailed and liberal in terms of structuring contractual relations, the parties to design and construction contracts are free to choose any foreign law and any foreign court or arbitration tribunal in their contracts. Choice is recommended to be based on some reasonable rationale. Choice of Uzbekistan law is also believed to be an effective solution if local arbitration is chosen.

When choosing foreign dispute resolution venue the parties should also take into consideration that decisions of foreign state courts are recognisable 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. Uzbekistan has signed this kind of treaties with only CIS countries: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Moldova, Ukraine and Russia. Therefore, as for the August 2024 only decisions of state courts from these countries are recognisable and enforceable in Uzbekistan.

If the parties wish to choose 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.

When arbitration is discussed in design and construction contracts lawyers tend to strongly recommend Tashkent International Arbitration Centre (“TIAC”) due to this centre having nearly 100 reputable international lawyers among its arbitrators from top international, USA, UK, EU PRC, Japan, Korea, CIS and other countries, as well leading Uzbekistan arbitrators and legal practitioners. Same arbitrators sit in all major international arbitration tribunals. TIAC is also believed to be favourable in terms of time and cost efficiency.

Author: Nodir Yuldashev (Partner)