LAW

of the

REPUBLIC OF UZBEKISTAN

December 24, 1998 No. 719-I

On investment activity

Amendments were introduced according to

Section XXIV of the Law of RUz dtd.12.12.2003 No. 568-II,

Article 22 of the Law of the RUz No. ZRU-59 dtd 10.10.2006

Article 27 of the Law of the RUz No. ZRU-197 dtd 31.12.2008

Article 1. Legislation on investment activity

The legislation on investment activity encompasses the present

Law and other legislative acts.

Relations arisen when implement investment activity in the

Republic of Karakalpakstan are also regulated by the legislation of the

Republic of Karakalpakstan.

Peculiarities of relations connected with the implementation

of foreign investment are also regulated by the legislation on foreign

investment, guarantees and measures of protection of foreign investors’

rights, as well as by international agreements concluded by the

Republic of Uzbekistan.

If a certain international agreement signed by the Republic of

Uzbekistan lays down rules and regulations other than those provided

by the present legislation of the Republic of Uzbekistan on investment

activity, the former is applicable.

Article 2. Basic notions

The following basic notions are included into the present Law:

investment – are material and non-material values and

rights for them invested into the objects of economic and other

activityies;

investment activity – is totality of actions of subjects of

investment activity connected with investment implementation;

an investor is a subject of investment activity who implements

investing of own, loan and attracted funds, material values and rights

for them as well as rights for intellectual property into the objects

of investment activity;

a participant of investment activity – is a subject of

investment activity who provides investment activity as an

executive of investor’s orders;

reinvestment is investment of profit (income) derived as a

result of an investor’s activity.

Article 3. Types of investment

There are the following types of investment: capital,

innovation and social investments.

Capital investment are those used for creation and

reproduction of capital assets as well as to develop other forms of

material production.

Innovation investment – are those used to elaborate and

master new technique and technologies.

Social investments are those used to develop human potential,

skills and production experience as well as other forms of non-material

values.

Article 4. Forms of investment implementation

Investors can implement investment in the way of:

– creation of legal entities or a share participation in

their authorized funds (capital) including purchasing of assets and

shares;

– purchasing of securities including promissory notes

issued by residents of the Republic of Uzbekistan;

– acquisition of concessions including those either for

exploration, mining or for use of natural resources;

– ecquisition of right of ownership in keeping with the

legislation, including rights of ownership for trade and service

objects, dwellings with land where they are located as well as

rights of possession and use of land (including that on lease basis)

and other natural resources.

Investors can also implement other forms of investment that

are not in variance with the current legislation.

Changing of forms of investment implementated first or

second time, is not a reason to change their qualification as

investment.

Article 5. Investment resources

Investment resources include the following:

monetary and other financial resources including credits,

shares and other securities;

personal and real estate (buildings, constructions, equipment

and other material values) and rights for them;

objects of intellectual property including technical,

technological, commercial and other knowledges in the form of technical

documentation, as well as skills and factory-floor experience required

to organize some or other production process, know-how;

the right of possession and use of land and other natural

resources, buildings, structures, equipment as well as corporeal rights

proceeding from the right of ownership;

other values in keeping with the legislation.

Article 6. Objects of investment activity

Object of investment activity are those produced material

and non-material values.

Investment into objects whose creation and use do not

correspond with sanitary, hygiene, radioactive, environmental,

architectural, city planning and other demands established by the

legislation and violate rights and interests of legal and natural

entities protected by Law, are banned.

Article 7. Subjects of investment activity

Subjects of investment activity (investors and participants)

can be:

citizens (natural entities (persons), legal entities –

residents of the Republic of Uzbekistan;

local agencies of State power and agencies of State

administration;

foreign states, international organizations and foreign legal

entities and citizens as well as persons without citizenship and

citizens of the Republic of Uzbekistan residing abroad permanently;

legal and natural entities as well as states and international

organizations implemented joint investment activity.

Investors can act as customers (depositors), creditors, buyers as

well as perform functions of a participant of investment activity in

keeping with the current legislation.

Participants of investment activity can act as an executive of

an investor’s order under an agreement concluded with an investor.

Article 8. Investor’s rights

Investors, irrespective of forms of ownership and type of

activity have equal rights to implement investment activity.

Investment into any objects, with the exception of those whose

implementation is banned or restricted either by Law currently in

force or other legislative acts, is an investor’s exclusive right; it

is protected by Law.

An investor, at his own discretion, defines a purpose, a course,

a type and a volume of investment; to implement such investment, an

investor attracts legal and natural entities as participants of

investment activity on agreed basis and, as a rule, by holding of

competitive (tender) bids.

In accordance with the legislation, an investor has the right

of possession, use, disposal of objects and results of investment as

well as reinvestment.

Investment into objects that does not entail acquisition of the

right of ownership established by the legislation, presumes the right

of further investor’s participation in possession, operative

management (administration) or in profit (income) derved from

operation of such objects.

According to an investor’s decision, the right of possession,

use and disposal of objects and results of investment can be

transferred to the other legal and natural entities in keeping with the

procedure established by the legislation. Relations of Parties under

assignment of rights are adjusted on basis of contracts concluded by

them.

Unless otherwise established by the legislation, an investor

has the right to purchase necessary equipment from legal and natural

entities at prices and on terms defined by an agreement of Parties

without restriction of volume and nomenclature.

An investor can also have other rights stipulated in the

legislation.

Article 9. Investor’s duties

An investor must:

get conclusion of examination of investment projects regarding

observation of sanitary, hygiene, radioactive, environmental,

architectural, city planning and other requirements;

observe the demands of antimonopoly legislation;

pay taxes and other compulsory payments; (In edition of Article

27 of the Law of the RUz dtd 31.12.2008 No. ZRU-197)

compensate for losses caused to a participant of investment

activity by a failure to perform an agreement or its unadequate

performance;

execute claims of local agencies of State power and agencies

of State administration made within the limit of their competence;

An investor can also incur other obligations provided by the

legislation.

Article 10. Rights of a participant of investment activity

A participant of investment activity has the following rights:

to be a participant of competitive (tender) bids;

to conclude agreements with investors for performance of their

orders;

to attract other persons to perform his obligation to an

investor, unless otherwise stipulated in the legislation or an

agreement;

to dispose funds received as a result of decrease in actual

value of an object of investment activity indipendently unless

otherwise stipulated in an agreement.

A participant of investment activity can also have other rights

provided by the legislation.

Article 11. Duties of a participant of investment activity

A participant of investment activity must:

observe norms, rules and standards established by the

legislation;

perform agreements properly and in good time;

compensate for losses caused to an investor by a failure to

perform an agreement or its unadequate performance;

execute claims of local agencies of State power and agencies

of State administration made within the limit of their competence;

To execute activity liable to licensing, a participant of

investment activity must get a license in accordance with the procedure

established by the Cabinet of Ministers of the Republic of Uzbekistan.

A participant of investment activity can also incur other

obligations provided by the legislation.

Article 12. Mutual relations of subjects of investment activity

Conclusion of an agreement, choice of partners and guarantors,

determination of obligations, as well as other terms of mutual

relations of subjects of investment activity are adjusted by the

legislation.

Article 13. Price formation in investment activity

Value of production (work, services) in the course of

investment activity is defined, as a rule, according to results of

competitive (tender) bids at contract prices.

If a subject of investment activity has monopoly position at

the market, prices are adjusted by an authorized state agency in

keeping with the legislative acts.

Article 14. Governmental regulation of investment activity

Governmental regulation of investment activity is implemented

in the way of:

improvement of legislative base of investment activity;

application of levy machinery differentiating tax payers

and objects of taxation, tax rates and privileges;

implementation of accelerated depreciation of capital

assets;

laying down of norms, regulations and standards;

taking of antimonopoy measures;

carrying out of credit and price formation policy;

determination of terms of possession and use of land and

other natural resources;

definition of examination mechanism of investment projects;

monitoring of implementation of investment projects

included into Investment Program of the Republic of Uzbekistan.

Governmental regulation of investment activity can also have

other forms of implementation provied by the legislation.

Article 15. Centralized investment

Centralized investment are those implemented within the

framework of state investment activity in the way of:

direct financing at the expense of funds of national budget as

well as off-budget funds;

attraction of foreign investments and credits against security

of Government of the Republic of Uzbekistan.

The control over centralized investment includes the

determination of objects for the purpose of implementation of state

investment, terms of investment and solving of other associated tasks.

The control over centralized investment is executed by local

agencies of State power and agencies of State administration within

their competence.

Article 16. Decision-making regarding centralized investment

implementation

Decisions on centralized investment implementation are made by

state agencies on basis of forecasts of social and economic

development, purpose-oriented scientific, technical and comprehensive

state programs and technical and economic substantiations defining

expedience of such investment.

Drafts purpose-oriented comprehensive state programs are

being worked out and approved in keeping with the procedure defined by

the Cabinet of Ministers of the Republic of Uzbekistan.

The Oliy Majlis of the Republic of Uzbekistan approves volumes

of investment financed from the state budget.

Article 17. Placement of centralized investment

The placement of centralized investment is executed, as a

rule, on basis of state contract.

State contract is concluded on basis of competitive

(tender) selection of an executive – a participant of investment

activity. At the same time, specified privileges and benefits can be

established by the legislation for above mentioned executive.

Article 18. Investment Program of the Republic of Uzbekistan

Investment projects designed for priority fields of social

and economic development are included into Investment Program of the

Republic of Uzbekistan that should be approved by the Republic’s

Cabinet of Ministers.

Participants who implement investment projects included into

Investment Program of the Republic of Uzbekistan are granted tax and

other privileges. List of privileges granted to every investment

project or Investment Program of the Republic of Uzbekistan as a

whole, is defined in keeping with the procedure established by the

legislation.

Article 19. Examination of investment projects

Investment projects financed at the expense of budget and

off-budget funds as well as with attraction of foreign investors

against security of the Government of the Republic of Uzbekistan, are

liable to obligatory examination. The examination procedure is

established by the Cabinet of Ministers of the Republic of Uzbekistan.

Investment projects financed at the expense of other sources are liable

to state examination regarding observation of sanitary, hygiene,

radioactive, environmental, architectural, city planning and other

requirements in accordance with the procedure established by the

legislation;

Small investment projects financed at the

expense of banks’ credit resources are liable to examination by the

commercial bank to define expedience of the given investment project

implementation. (Amended according to Section XXIV of the Law of RUz

dtd. 12.12.2003 No. 568-II)

Investment projects implemented within the framework of

international agreements signed by the Republic of Uzbekistan are

liable to examination in keeping with the procedure provided by such

agreements.

Article 20. Investment funds

The relevant investment funds can be formed for the purpose of

implementation of investment activity.

Article 21. Guarantees of rights of subjects of investment

activity

The state guarantees rights of subjects of investment activity.

State agencies and their officials have no right to interfere in

activity of subjects of investment activity implemented in accordance

with the legislation.

If state agencies and their officials reveal violation of

legislation by subjects of investment activity when they implement

their activity, they have the right to take those measures for which

they are authorized and which are directly associated with the

elimination of the given violation. The state agencies and their

officials can not use the fact of violation as the ground to interrupt

or restrict any legal activity of subjects of economic activity.

The rules of the present article are not applicable either to

adoption or abolishment of legislative acts that are directly connected

with assurance of national security of the Republic of Uzbekistan

defined in keeping with the common principles of international law.

Article 22. Investment protection

The state guarantees protection of investment.

Investment and other investors’ assets in the Republic of

Uzbekistan are not subject to nationalization.

Investment and other investors’ assets are not liable to

requisition (withdrawal) with the exception of acts of God, accidents,

epidemics, epizootics and other extraordinary circumstances.

Decision regarding requisition (withdrawal) of investment is

taken by the Cabinet of Ministers with the observation of requirements

under which requisition:

is restricted by minimum amount of investment or other assets

required to solve tasks, proceeding from cases mentioned in part three

of the present article;

is implemented not on discriminatory base and in keeping with

the procedure established by the legislation;

is liable to payment of compensation equal to inflicted loss.

The State acts as a guarantor of payment of indicated compensation in

good time.

An investor has the right to contest decisions on investment

requisition (withdrawal) in legal form.

Investment can be insured; and in cases provided by Law, they

must be insured.

Article 23. Guarantees of use of funds

Income (profit) of a subject of investment activity derived as

a result of investment activity can be, after payment of taxes and other

compulsory payments, reinvested or used in any way at his discretion.(In

edition of Article 27 of the Law of the RUz dtd 31.12.2008 No. ZRU-197)

In case of withdrawal (requisition) of shares or securities

purchased by a subject of investment activity, his purpose bank

deposits as well as the value of purchased assets or payment for lease,

they should be compensated in accordance with the legislation.

Restriction to use or compulsory draw of funds from accounts of

subjects of investment activity, can be executed in keeping with the

procedure established by Law.

Article 24. Additional guarantees and measures designed to

protect investment

Additional guarantees and measures designed to protect

investment can include the following: granting of guarantees by the

Government, rendering of assistance in financing of investment

projects, creation of special tax and payment regime, conduction of

state monitoring over the projects realization and other measures in

accordance with the legislation.

Additional guarantees and measures of investment protection are

granted to subjects of investment activity on the grounds of decisions

taken by the Cabinet of Ministers of the Republic of Uzbekistan.

Article 25. Free access to public information

Obligatory legislative acts affecting interests of subjects of

investment activity in any way, should be available to them.

By request of subjects of investment activity, the local

agencies of State power and agencies of State administration should

provide them with interested information in accordance with the

procedure stipulated by the legislation.

Article 26. Restriction, suspension or termination of

investment activity

Restriction, suspension or termination of investment activity

can be executed according to the decision taken by an investor,

authorized state agency or a court.

Part 2 is stated in edition of Article 22 of the Law of the RUz

No. ZRU-59 dtd 10.10.2006.

A decision on restriction, suspension or termination of

investment activity can be taken in the following cases:

the declaration or recognition of an investor as a bankrupt in

accordance with the procedure established by the law;

the rise of extraordinary situations;

the disclosure in the course of investment activity of

circumstances that can be a reason of violation of sanitary, hygiene,

radioactive, environmental, architectural, city planning and other

requirements established by the law, as well as rights and interests of

legal and natural entities protected by the legislation.

Part 3 is supplemented in accordance with Article 22 of the

Law of the RUz No. ZRU-59 dtd 10.10.2006

Restriction, suspention (with the exception of cases of

restriction and suspension of investment activity for a term not

exceeding ten working days in connection with prevention of beginning of

extraordinary situations, epidemic and other real threat to life and

health of the population) or termination of investment activity

entailing suspension or termiantion of activity of the subject of

entrepreneurship is carried out in legal form.

Part 3 is regarded as the Part 4 in accordance with Article 22

of the Law of the RUz No. ZRU-59 dtd 10.10.2006

The procedure for the compensation for damages caused to a

subject of investment activity in cases stipulated in paragraph thee,

part two of the present article, are defined by the legislation.

Article 27. Responsibility for violation of the legislation on

investment activity

Persons culpable in violation of the legislation on investment

activity, are responsible according to the established procedure.

If the legislation on economic activity is violated, a subject

of investment activity has the right for compensation for caused

damages, including lost profit in keeping with the procedure

established by the legislation.

Article 28. Settlement of disputes

Disputes connected with investment (investment disputes) are

settled by a court.

President

of the Republic of Uzbekistan I. Karimov