INTRODUCTION

Franchising is a widespread and dynamically developing form of commercial cooperation in Uzbekistan. It provides unique local market opportunities for entrepreneurs and potential investors. In this article the main aspects of franchising in the context of Uzbek legislation will be considered, and key factors that must be considered before concluding a franchise agreement will be identified.

Regulation of franchising is carried out with consideration to the provisions of the Civil Code of the Republic of Uzbekistan dated December 21, 1995 (hereinafter referred to as the "Civil Code"), including other legislative acts that establish the fundamental rules and conditions for the conclusion and execution of franchise agreements. The following regulations are some of the main ones:

  • Law of the Republic of Uzbekistan "On Competition" No.319 dated January 6, 2012 (hereinafter referred to as the "Law on Competition");
  • Resolution of the Cabinet of Ministers of the Republic of Uzbekistan "On approval of the administrative regulation for the provision of public services for the state registration of franchise agreements (franchising)" No.346 dated June 24, 2022 (hereinafter referred to as the "Regulation on Franchising Agreements Registration");
  • Rules on the Registration of agreements on the transfer of rights to an invention, utility model, industrial design, selection invention, trademark, service mark, and license agreements for their use, agreements on the transfer of rights to an integrated circuit topography, the transfer of all property rights and the transfer of property rights to the program for electronic calculating machines or database No.8-mx dated March 31, 2022 (approved by the Order of the Minister of Justice, registered on March 31, 2022, under No. 3359) (hereinafter referred to as the "Rules on registration of license agreements"); and
  • other legislative acts.

KEY REQUIREMENTS FOR THE FRANCHISE AGREEMENT

Under the Civil Code, a franchise agreement is defined as a Comprehensive Business License Agreement (hereinafter referred to as the "Franchise Agreement"). Under the Franchise Agreement, one of the parties, acting as a complex licensor (hereinafter referred to as the "franchisor"), undertakes to provide the other party, acting as a complex licensee (hereinafter referred to as the "franchisee"), a certain set of exclusive rights, which includes the right to use the company name of the complex licensor, protected commercial information and other objects of exclusive rights, such as trademark, service mark, inventions, and others, as part of the franchisee's business activities, for the established remuneration.

One of the key aspects of the legal regulation of franchising in Uzbekistan is the protection of intellectual property. The franchisor must ensure proper protection of its intellectual property rights, such as brands, trademarks, patents, and other intellectual property. The franchisee, in turn, is obliged to comply with the terms of use of intellectual property and not violate the franchisor's rights.

The requirements and limitations for Franchise Agreements are mainly provided for by Chapter 50 of the Civil Code. It is important to note that, under Article 862 of the Civil Code, only commercial organizations and individual entrepreneurs can be parties to the Franchise Agreement. Moreover, the Franchise Agreement can be concluded by indicating the term or as an open-ended agreement.

Simultaneously, it should be noted that it is necessary to register the Franchise Agreement by the competent authority responsible for registering the legal entity or individual entrepreneur assuming the role of the franchisor. Failure to appropriately register the Franchise Agreement renders it null and void.

Upon conclusion of the Franchise Agreement, the franchisor is obliged to provide technical and commercial documentation and information necessary for the franchisee to exercise its rights under the Franchise Agreement. In addition, the franchisor is obliged to instruct the franchisee and its employees on any aspects of franchise activities.

KEY REQUIREMENTS FOR THE FRANCHISE AGREEMENT

It should be noted that per Article 5 of the Civil Code, if the parties' relations are not directly regulated by law or by the agreement, the rights, and obligations of the parties shall be determined based on the general principles and meaning of civil law and the requirements of good faith, reasonableness, and fairness.

Moreover, under Article 868 of the Civil Code, the Franchise Agreement may include the following restrictive conditions:

  • the franchisor's obligation is not to enter into other similar franchise agreements for use in the territory assigned to the franchisee or to refrain from operating in that territory;
  • the franchisee's obligation is not to compete with the franchisor in the territory where the Franchise Agreement is applied;
  • the refusal of the franchisee to conclude other Franchise Agreements with the franchisor's competitors (or potential competitors);
  • coordination with the franchisor of the location of commercial premises used to exercise the exclusive rights granted under the agreement, including their external and internal design.

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