Uzbekistan: Arbitration In Uzbekistan: Key Things To Know

Last Updated: 12 August 2016
Article by Tatyana Lee

The judicial system of Uzbekistan consists of the Constitutional Court, courts of general jurisdiction for civil and criminal cases, economic courts, and military courts. The main act regulating and establishing the procedure for organization and activity of courts is the Law on Courts (new edition) dated December 14, 2000.

A. Constitutional Court

The Constitutional Court has a special status in the judicial system due to the specifics of its function, that is to say a function of the constitution supervision. The Constitutional Court carries out legal examination of acts issued by the legislative and executive branches in respect of their compliance with the Constitution of Uzbekistan.

Only the Oliy Majlis (Parliament), President of Uzbekistan, Chairpersons of the Supreme Court and Higher Economic Court, Attorney General, and other officials indicated in the law are entitled to apply to this Court.1

B. Courts of General Jurisdiction

Courts of general jurisdiction hear civil and criminal cases. The upper level court is the Supreme Court that acts both as a court of first instance (a trial court) and as an appellate court for civil and criminal cases. It also oversees work of the lower level courts and analyzes court practice.

The lower level courts are divided into regional, city, and district/inter-district courts for civil cases, and regional, city, and district courts for criminal cases.2

Courts for civil cases consider disputes where at least one party is an individual (i.e. neither a sole proprietor nor a corporation). For example, an employment dispute between a company and its employer (former or current) is to be considered by these courts.

C. Military Courts

Military courts are included in the system of courts of general jurisdiction and they hear the following cases:

  • criminal cases where a defendant is a military;
  • civil cases involving claims of military against their command;
  • cases concerning State secrets; and
  • all civil and criminal cases in the areas where, due to certain circumstances, courts of general jurisdiction are not available.

D. Economic Courts

Economic courts hear solely commercial disputes arising between businesses, i.e. legal entities (local and foreign) and sole proprietors (local and foreign).

The upper level court is the Higher Economic Court that has the same functions as the Supreme Court with an accent on commercial issues only.

The lower level courts are divided into regional and city courts.

Disputes arising out of activities attributed to foreign investment or other related activities may be settled through various dispute resolution mechanisms discussed below.

II. Dispute Resolution by Economic Courts

If the parties in their agreement have agreed upon a pre-trial procedure for dispute resolution (e.g. through negotiations), they should follow that procedure before going to court. If negotiations have failed, only then the parties may go to court. Otherwise, the court will dismiss the case.3

Foreign entities have the same procedural rights and duties as their Uzbek counterparts.

Generally, the parties are free to determine the court competent to hear their dispute(s). If such jurisdiction is not determined, a claim should be filed with the court where the defendant is located. If there are several defendants, the claim may be filed where one of the defendants is located.

Any court decision may be appealed to the appellate court (before the decision becomes effective) and to the cassation court (after the decision becomes effective).

Court fees may vary depending on the amount in dispute4:

For Claims of Monetary Value

Up to UZS 1 mln.: 3% of the amount in dispute

More than UZS 1 mln. and up to UZS 10 mln.: 2% of the amount in dispute

More than UZS 10 mln.: 1% of the amount in dispute

For Non-Monetary Claims: 10 minimal monthly wages

Applications to initiate bankruptcy proceedings: 20 minimal monthly wages

Disputes regarding conclusion, amendment, and termination of commercial agreements: 10 minimal monthly wages

For Appeals and Cassation Petitions: 50% of the rate that is to be paid while filing a claim with a court of first instance

For copies of decisions, rulings, and other orders of the economic court and copies of other documents of the case that are given by the economic court at the request of the parties or others participating in the case: 10% of the minimal monthly wage per each page

For application on issuance of enforcement order regarding enforcement of a decision held by an arbitration court as well as applications on reversal of an arbitration court's decision: 2 minimal monthly wages

The winning party may ask the court to rule that the losing party is to pay all the above legal expenses.

III. Alternative Dispute Resolution

Along with the State judicial bodies, there are also alternative dispute resolution mechanisms, such as arbitration courts (also referred to as "third-party courts"), the Arbitration Commission of the Republican Universal Agro-Industrial House, etc.

Arbitration courts hear disputes where the parties are individuals as well as where they are business entities. The courts cannot consider cases involving administrative, family, and labor/employment disputes.

The distinctive features of arbitration courts in Uzbekistan are as follows5:

  • the dispute may be considered by the arbitration court only if there is an arbitration agreement, which can be in the form of the dispute resolution clause in a contract or in the form of a separate agreement;
  • an arbitrator shall be a citizen of the Republic of Uzbekistan who has a law degree;
  • upon rendering its decision, such a decision is not subject to an appeal; upon request of any of the parties, the decision can only be canceled by a competent State court in case of violation of procedural rules of the arbitration; and
  • for enforcement purposes, the party shall apply to a competent State court for obtaining a writ of execution.

Such arbitration may be less time-consuming and less expensive than economic courts of Uzbekistan. However, arbitration courts are still in little demand, mostly because it is a relatively new institute of dispute resolution and people are uncertain about its efficiency.

IV. Enforcement of Foreign Arbitral Awards

In general, any legal act is valid only in the territory of the State where it has been issued. However, the validity of such an act can be extended to the territory of another country on the basis of reciprocity in accordance with international agreements.

For an act (issued by a foreign country) to be effective in Uzbekistan, it should pass through two separate stages: (i) recognition of the act and (ii) its enforcement. The two stages depend directly on bi- or multilateral agreements between Uzbekistan and foreign countries. For this purpose, Uzbekistan has signed and ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("NY Convention") and the 1992 CIS Agreement on Procedure for Settling Disputes Arising Out of Business Activity ("CIS Agreement), and other bi-lateral agreements regarding legal assistance (for example, with China, Turkey, Latvia, Lithuania, the Czech Republic, the Republic of Korea, Bulgaria, etc.)

A recent review of the judicial practice regarding recognition and enforcement of decision rendered by foreign (arbitration) courts shows that the Uzbek economic courts does not have a unified methodology for considering such cases.

Thus, for example, certain economic courts send foreign court decisions, without their recognition, directly to court executors for enforcement of the decisions. Such practice contradicts to the international conventions, agreements, and treaties where it is specifically provided that before its enforcement, a foreign arbitral award shall be, first, recognized.

Another example of irregularities in cases involving enforcement of foreign court decisions is that the economic courts oftentimes do not follow the pre-enforcement requirements. Thus, under Article 4 of the NY Convention, for a foreign arbitral award to be recognized and subsequently enforced, an applicant shall submit the following document along with the application:

  • the duly authenticated original award or a duly certified copy thereof; and
  • the original agreement between the parties to the dispute that contains an arbitral clause.

If the said award or agreement is not made in Uzbek (an official language of Uzbekistan), the party applying for recognition and enforcement of the award shall produce an Uzbek translation of the documents. Such a translation shall also be notarized by a notary public.

Article 6 of the CIS Agreement provides a broader list of documents that are to be submitted together with the application for recognition and enforcement of the award:

  • a duly certified copy of the court decision;
  • an official document confirming that the decision has come into force, if the decision itself is vague regarding its effective date;
  • proof that the other party has been duly notified of the process; and
  • a writ of execution.

However, economic courts in Uzbekistan oftentimes neglect the aforesaid requirements and begin the enforcement procedure immediately. In 1997, the Economic Court of Samarqand Region, in a dispute between Russian and Uzbek companies,6 skipped the recognition stage in violation of Article 6 of the CIS Agreement. The court did not take into consideration the fact that in the set of the submitted documents, there was no proof that the other party (debtor) had been notified of the date of the court hearing. In that case, the court should have dismissed the application and left the case without consideration until all deficiencies were cured.

Such violations have been revealed in other economic courts as well (in Navoiy, Bukhara, Fergana Regions).

If the recognition stage is quite a clear-cut procedure, the enforcement stage, on the other hand, can be very complicated. Due to a strict currency control policy, one of the yet to be resolved issues arising out during the enforcement stage is the issue when the debt is to be paid off in foreign currency (which is the case in the majority of such disputes). Another related issue arises when it appears that there are no enough funds on debtor's bank account(s). For this purpose, debtor's property shall be sold in national currency (not foreign currency) and since there may be certain convertibility matters involved, the enforcement stage may be extended considerably.7

* * *

In order to avoid certain unexpected outcomes, it is highly recommended first to counsel with a local law firm which majors in litigation matters and knows all the peculiarities of the local legal system and which can advise on more efficient ways to enforce a foreign arbitral award.

Published in Global Arbitration Review: «The European, Middle Eastern and African Arbitration Review 2013»

Footnotes

[1] Art. 19 of the Law on the Constitutional Court of the Republic of Uzbekistan dated Aug. 30, 1995, as amended.

[2] Art. 1 of the Law on Courts (new edition) dated Dec. 14, 2000, as amended.

[3] Para. 2 of Article 6 and para. 8 of Article 86 of the Economic Procedure Code of the Republic of Uzbekistan dated January 1, 1998, as amended; para. 6 of Article 15 and Articles 17-19 of the Law on the Contractual Legal Basis for Business Entities' Activities dated August 29, 1998, as amended.

[4] State Fees Rates approved by Decree No. 533 of the Cabinet of Ministers of the Republic of Uzbekistan dated Nov. 3, 1994, as amended.

[5] The Law on Arbitration Courts dated October 16, 2006, as amended.

[6] Case No. 10-147 dated June 6, 1997 (Econ. Ct. of Samarqand Reg.)

[7] See also The Review of Court Practice regarding Enforcement of Foreign Arbitral Awards (approved by the Resolution of the Presidium of the Higher Economic Court of the Republic of Uzbekistan dated March 26, 1998); Newsletter No. 58 of the Higher Economic Court of the Republic of Uzbekistan regarding the Issues on Enforcement of Foreign Court Orders dated November 28, 2002.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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