Public-Private Partnership in the Republic of Uzbekistan: What changed?

 The Government involvement into relations that are subject to the civil legislation on an equality with other participants is stipulated by the Article 79 of the Civil Code of the Republic of Uzbekistan. At the same time, it is stipulated that the regulatory and administrative authorities and other bodies specially authorized by such shall participate in the relations that are subject to the civil legislation on behalf of the Government.
The Public-Private Partnership (PPP) shall represent one of the forms of such interaction between the Government and the private sector.  The Law of the Republic of Uzbekistan "On Public-Private Partnership" has been adopted on May 10, 2019. A special body - the PPP Development Agency that is defining the uniform PPP Policy in the Republic, considering projects, approving the tender documents and PPP agreements has been created even earlier by the Decree of the President of the Republic of Uzbekistan dated as of October 20, 2018.
Prior to development and adoption of the special Law on PPP, the mechanisms of such partnership had already been applied in Uzbekistan in the area of the preschool education, road construction, construction and reconstruction of the social facilities, and etc.
Upon publication of the Law on PPP, new projects have become to be regulated by the new Law application of which has risen many issues that requiring clear regulation, as well as bringing the norms of the current legislation in line with the Law on PPP.
The Law of the Republic of Uzbekistan "On Amendments and Supplements, as well as Invalidation of Certain Legislative Acts of the Republic of Uzbekistan in Connection with Improvement of the Law on the Public-Private Partnership” has been adopted on January 22, 2021.
Thus, the Law on PPP also becomes to regulate the relations in the area of concessions, while the law for public-private partnership projects shall prescribe the manner for implementation of the concession projects, as well as signing of the concession agreements. At the same time pursuant to the innovations the concession shall represent the form of the public-private partnership.  The Law of the Republic of Uzbekistan dated as of August 30, 1995 No. 110-I "On Concessions" has been  declared invalid.
The alterations have affected the basic concepts as applied in the PPP Law: the land plots are included in the PPP facilities, the concepts of "private partner", "concept of the public-private partnership project" have been clarified, the definitions "special project company", "applicant" have been introduced.
The functions of the PPP Development Agency under the Ministry of Finance of the Republic of Uzbekistan have been supplemented by including negotiating with the international financial institutions, international and local consulting and project companies on rendering the consulting and audit services within the framework of implementation of the public-private partnership projects as well as signing of the contracts. The Agency is also entrusted with signing of the agreement on levying of the one-time payment from the successful tenderer or a participant in direct negotiations for the successful execution of the agreement on the public-private partnership in the amount as stipulated by the Cabinet of Ministers of the Republic of Uzbekistan.
The law has introduced a new article that is defining  participation and the powers of the local government authorities in the area of PPP including allocation of the land plots without an auction for a period as specified in the public-private partnership agreement aiming to implement the public-private partnership projects.
According to the legal developments the private partner shall not be entitled to assign the right to use the land plot as granted to such under the terms and conditions of the public-private partnership to other legal entities and individuals, with exception of the cases as provided for in the Article 35 of the Law, which is currently allowing the private partner providing its creditors with any types or forms of security including the right to use the land plot.
The legal developments have clarified that alterations and (or) supplements may be introduced to the concept of the public-private partnership project.
Also, the list of information on the public-private partnership projects that are posted on the official websites of the public partner and the authorized government body has been made more specific , a clause on the cases related to the state secrets has been included.
The procedure for conducting of the tender bidding for the right to sign the PPP agreement has been revised, the tender documentation and a draft of the PPP agreement shall be agreed with the authorized state body. The public partner shall  reduce the deadline for submitting of the tenders to the fifteen calendar days instead of the thirty days in case the cost of the PPP project exceeds US Dollars One Million.
The list of grounds for signing of the PPP agreement without the tender bidding based on the direct negotiations has been supplemented by the cases as defined by the resolutions of the Cabinet of Ministers of the Republic of Uzbekistan.
The legal developments shall stipulate possibility for signing of the PPP agreement with a special project company; the supplemented data (terms and conditions) may be introduced into the PPP agreement pursuant to the procedure stipulated except for those already listed in the Article 27 of the Law. The amended version shall set forth the Article 29, which has previously contained the grounds for alterations, supplements or termination of the PPP agreement so that now the article shall stipulate the procedure for alterations, supplements or termination of the agreement: by the public partner and private partner independently - for the projects costing up to US Dollars One Million through agreement with the PPP Development Agency - for the projects costing above US Dollars One Million through agreement with the Cabinet of Ministers of the Republic of Uzbekistan - for the public-private partnership projects having the total cost above US Dollars Ten Million.
One of the main articles of the Law that is defining the guarantees of the rights of the private partner, has undergone the significant alterations.  Thus, pursuant to the previously valid version the legislation that has been in effect on the date of its signing should be applied to the private partner for ten years from the date of the PPP agreement in case the subsequent legislation of the Republic of Uzbekistan worsens the conditions for investing in the public-private partnership. Moreover, the private partner has had the right, at its own discretion, to apply those provisions of the new legislation of the Republic of Uzbekistan that improving the conditions for its investment in the facilities of the public-private partnership.
Pursuant to the new version and based on the project being implemented the private partner shall have the right to request the compensatory increase in payment for availability of the PPP facility and (or) payment for use as well as request the one-time compensation payment from the public partner and (or) introduction of the appropriate alterations and (or) supplements to the PPP agreement if such is stipulated by the PPP agreement in case the alteration of the legislation of the Republic of Uzbekistan being in force on the date of signing of the PPP agreement directly results in increase in the costs of the private partner or decrease in its income under the PPP project. The procedure, terms and conditions, restrictions and exclusions for application of such guarantees shall be defined  by the PPP agreement.
It is also stipulated that guarantees shall not be applied in case of amendments in the legislation of the Republic of Uzbekistan that is stipulating the alteration in taxes and fees after signing of the PPP agreement excepting the discriminatory changes in relation to a certain project(s) of the public-private partnership.
The Article 38 of the Law that is containing a list of the Government support types for the PPP shall be set forth in the  revised version. Thus, now the Government may provide the additional guarantees by mutual agreement aiming to ensure fulfillment of the obligations by the investors. This article of the Law shall reflect the agreements on the Government support as signed as a matter of actual practice: the agreement on the Government support shall be represented as a written agreement that is signed between the Republic of Uzbekistan and a private partner and stipulating the additional guarantees and support (benefits and preferences) to the private partner and (or) creditors. The agreement on the Government support for implementation of the PPP projects shall be signed by the Ministry of Finance of the Republic of Uzbekistan on behalf of the Republic of Uzbekistan. The agreement on Government support shall come into force from the date of adoption of the Resolution of the President of the Republic of Uzbekistan or the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan on approval of the agreement on the Government support unless otherwise is stipulated by the Resolution of the President of the Republic of Uzbekistan or the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan.
The legal developments shall stipulate that any types of the additional guarantees and (or) support, directly or indirectly affecting the State budget of the Republic of Uzbekistan, should be agreed with the Ministry of Finance of the Republic of Uzbekistan prior to approval of the concept of the PPP project. The tax benefits and preferences shall be stipulated in the manner prescribed by the Tax Code of the Republic of Uzbekistan.
Thus, the amendments introduced to the PPP Law have more clearly regulated the procedure for implementing the projects under the PPP terms and conditions, which, we believe, may play a positive role in negotiating with the financial institutions aiming to attract the funding. Another positive side is that the new Law shall provide the parties of the public-private partnership with more opportunities for consolidating the agreements and terms and conditions of the interaction in the PPP agreement. Application of the updated legal norms of the legislation on the PPP as a matter of actual practice will allow making the arm's length basis conclusions in the future and, possibly, will require the additional revision in regulating of this most demanded area today - the public-private partnership.