By: Alexander Korobeinikov1Alexander Korobeinikov is a senior associate in Baker & McKenzie’s Almaty office and a member of Baker & McKenzie’s International Arbitration practice group.
A. Legislation, Trends and Tendencies
A.1 Legislation
Arbitration proceedings involving at least one Uzbek party are regulated in Uzbekistan by the Law On Arbitration Courts (the “Law”), which was adopted in 2006. In addition to the Law, arbitration is regulated by the relevant provisions of the Civil Procedural Code and the Commercial Procedural Code. In 2015, there were no significant legislative amendments to these laws.
A.2 Trends and Tendencies
There is no specific legislation that sets forth rules for international arbitration proceedings in Uzbekistan. Therefore, Uzbek authorities are currently considering adopting a specific law regulating international arbitration and the enforcement of foreign awards.
B. Cases
B.1 Investment Arbitration Cases
On 21 December 2015, the Arbitral Tribunal announced the decision in the investment arbitration case of Oxus Gold PLC v. Republic of Uzbekistan. This case concerns a claim by UK company Oxus Gold PLC under the UNCITRAL Rules of Arbitration for compensation for loss of its investment in: (i) the Amantaytau Goldfields project in the Kyzylkum desert; and (ii) the Khandiza base metals project in the Surkhandarya region. As a result of the review of this case, claims with regard to Oxus Gold’s investments in Amantaytau Goldfields have been dismissed. However, arbitrators found a breach of the “fair and equitable treatment” (FET) standard under the UK-Uzbekistan Bilateral Investment Treaty as regards Uzbekistan’s modifications in 2006 and 2009 of the taxation regime applicable to Amantaytau Goldfields and awarded Oxus Gold in excess of US$10 million plus interest. Four other investment arbitration cases against Uzbekistan are currently pending before ICSID.
B.2 Uzbek Court Practice Relating to Arbitration
Since the legal basis for arbitration in Uzbekistan was formed relatively recently, Uzbek courts do not have significant experience applying these laws, meaning that their practice is disputable and inconsistent. In addition, Uzbek court decisions are not usually publicly disclosed in Uzbekistan.
In 2015, we are aware of only one decision of the Supreme Economic Court that is significant for the development of court practice relating to international arbitration. In this case, the Cassation Panel of the Supreme Economic Court completed the review of the claim of an Uzbek company against its debtor and a guarantor who secured the debt.
The court of first instance rejected the claim based on the fact that contracts between the claimant and the debtor provided for the settlement of disputes in arbitration. However, the Cassation Panel of the Supreme Economic Court overruled this decision. Among other arguments, the decision of the Supreme Economic Court is based on the fact that under Uzbek law, if a creditor commences legal action against the guarantor, the latter must involve the debtor in the court proceedings. Therefore, the Cassation Panel concluded that, since the guarantor is not a party to the arbitration agreement between the creditor and the debtor, this agreement does not affect the creditor’s right to collect the debt via local courts. This decision of the Supreme Economic Court is disputable and evidences the inconsistent practice of the local courts on international arbitration issues.
C. Costs in International Arbitration
C.1 Allocation of Costs
Under the mandatory provisions of the Law (Article 22), costs relating to the arbitration proceedings must be allocated between parties in proportion to claims granted or declined by the tribunal.
C.2 Security of Costs
The Law does not set forth any rules relating to security for costs.
C.3 Recovery of Costs
Article 20 of the Law sets forth the list of parties’ costs that can be recovered. Among other costs, this list includes representative costs, as well as costs of witnesses, experts and translators.
The Law does not set forth any limits on costs of witnesses, experts and translators. However, local arbitrators usually use limits provided for the court proceedings in the Law On Procedure and Limits of Compensation of Applied Costs to Witnesses, Injured Persons, Experts, Specialists and Translators, dated 3 July 1992.
The Law also does not provide limits on the recovery of representative costs. However, local arbitrators are usually guided by rates of local advocates, which are much lower than fees charged by international law firms.