Uzbekistan : International Arbitration Reform for Better Investment Climate

Project Name

International Arbitration Reform for Better Investment Climate

Project Number

53296-001

Country / Economy

• Uzbekistan

Project Status

Closed

Project Type / Modality of Assistance

• Technical Assistance

Source of Funding / Amount

TA 9771-UZB: International Arbitration Reform for Better Investment Climate

Source	Amount
Technical Assistance Special Fund	US$ 225,000.00

TA 9771-UZB: International Arbitration Reform for Better Investment Climate

Source	Amount
Technical Assistance Special Fund	US$ 150,000.00

Strategic Agendas

• Inclusive economic growth

Drivers of Change

• Private sector development

Sector / Subsector

• Public sector management / Law and judiciary

Gender

No gender elements

Description

The objective of this S-KSTA is to establish an effective cross-border commercial dispute resolution regime in Uzbekistan through international arbitration reform to create a better investment climate to facilitate more cross-border trade and investments. Arbitration has become the preferred method of resolving disputes within the international business community for numerous reasons, however, the lack of an international arbitration legal framework impedes the economic potential of Uzbekistan.

Project Rationale and Linkage to Country/Regional Strategy

Since early 2017, Uzbekistan has embarked on significant reforms which aim to enable business development and facilitate opening up to its neighbors. To support these reforms, ADB adopted a Country Partnership Strategy (CPS) for Uzbekistan, 20192023. The CPS identified several factors constraining private sector activities, including, in particular, in governance and rule of law. Despite some progress, Uzbekistan still records low governance ratings compared with its peers. In the 2019 World Justice Project's Rule of Law Index, Uzbekistan is ranked overall 94th out of 126 countries, with a score of 0.46.

Constraints prevail in the areas of doing business, including the lack of a credible commercial dispute resolution and enforcement system trusted by foreign investors, and trading across borders. All these factors hamper business activity because they act as a brake on private sector growth and FDI inflows. Uzbekistan needs substantial donor assistance in tackling these constraints and improving its business climate and rule of law. ADB's Strategy 2030 likewise prioritizes good governance and strong institutions for country development.

International arbitration is preferred over litigation in national courts because it offers certainty for commercial parties and allows for better management of cross-border transactions' risks. In particular, international arbitration has major advantages such as: (i) flexibility and ability to choose neutral forum, impartial arbitrators with subject matter expertise, procedure and governing law; (ii) confidentiality and privacy; (iii) cost-effectiveness; and (iv) finality and ability to enforce a foreign arbitral award in 159 countries pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), known as the New York Convention.

When making investment decisions, international investors often consider whether a country is supportive of international arbitration, including, in particular, whether the country has signed on to the New York Convention and has the legal framework to give effect to it. In addition, there is another well-established legal infrastructure in place for international arbitration, namely, the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (UNCITRAL Model Law). By adopting these two instruments, countries can establish a framework for resolving international commercial disputes by arbitration, or reform any existing frameworks to put them in line with accepted international practices, and start receiving economic benefits. An effective dispute resolution system through the international arbitration reform should improve investment climate and facilitate cross-border activities. Furthermore, the experience of international arbitration reform in Uzbekistan will be valuable for potential expansion of similar support to other CWRD countries.

Impact

Effective international commercial dispute resolution and enforcement regime established in Uzbekistan, leading to increased foreign investor confidence

Project Outcome

Description of Outcome

The laws on international commercial arbitration in line with modern international practices submitted for final approval

Progress Toward Outcome

Since project approval in July 2019, multi-stakeholder consultations have been conducted and the TA provided several rounds of comments and recommendations on the draft law on international commercial arbitration. 2 missions were field in 2019 and 2020 to discuss progress.

Implementation Progress

Description of Project Outputs

Final draft of law on international commercial arbitration to implement the New York Convention and reflect modern international commercial arbitration standards

Final draft of ancillary law and/or relevant amendments to procedural codes on recognition and enforcement of foreign arbitral awards and related international arbitration proceedings

Strengthened capacity for international commercial arbitration reform

Status of Implementation Progress (Outputs, Activities, and Issues)

1. Consultants engaged: (a) international arbitration expert is on board; and (b) national legal expert and project coordinator contract negotiations ongoing. 2. Desk review by project team of draft law on international commercial arbitration conducted. 3. TA review mission was conducted on 25-27 September 2019. The key objectives of the mission were: a. clarified with MOJ the status of the preparations on the main and ancillary laws on international commercial arbitration; b. discussed proposed changes to the draft laws by parliament and shared international experiences and practices; c. met with relevant members of Uzbekistan Parliament; d. met with key donor partners; e. understood capacity development needs for international arbitration; and f. discussed TA implementation plan4. A TA review mission was conducted in Aug 2020.

Geographical Location

Nation-wide

Summary of Environmental and Social Aspects

Environmental Aspects

Involuntary Resettlement

Indigenous Peoples

Stakeholder Communication, Participation, and Consultation

During Project Design

The Government of Uzbekistan requested ADB to provide technical assistance in developing its international arbitration law. ADB's reconnaissance mission was fielded to Tashkent in May 2019 and met with government officials and relevant stakeholders. The Ministry of Investment and Foreign Trade and Ministry of Justice (MoJ) confirmed the urgent need for technical assistance for developing the main law on international commercial arbitration, as well as the related ancillary law. The Government also requested ADB's assistance to engage eminent international arbitration experts to assist the consultations with the Parliament and other government stakeholders, judiciary, legal practitioners, and business community. In developing this S-KSTA, ADB's mission consulted with Tashkent International Arbitration Center (TIAC) and development partners, including the United States Agency for International Development (USAID) which is involved in Uzbekistan's judicial reform.

During Project Implementation

During the recently concluded TA Review Mission, UZB Ministry of Justice was apprised on TA implementation and consulted on the draft laws, issues on international arbitration, capacity development needs and coordination with donor partners. Project team also consulted with the Parliament, Chamber of Commerce and Tashkent International Arbitration Center, State Committee for Investments and relevant donor partners in Tashkent.

Business Opportunities

Consulting Services

ADB engaged one highly qualified international arbitration expert for 3 person-months on an intermittent basis, who will be supported by one or more peer reviewers engaged as resource persons. These international arbitration experts will work together to support drafting the international commercial arbitration law and be available to provide advice at various stages of the legal reform. A national legal consultant is engaged for 2.5 person-months on an intermittent basis, to provide local law advice especially in drafting the ancillary law/procedures and assist with consultations and delivery of workshops, as required. Furthermore, resources persons, including eminent international arbitration experts, will be engaged to participate in consultations with the Parliament and other Government stakeholders, judiciary, legal practitioners and private sector, as needed. The consultants' terms of reference are in Appendix 3. ADB will engage individual consultants following the ADB Procurement Policy (2017, as amended from time to time) and its associated staff instructions.

Contact

Responsible ADB Officer

Nurkuzieva, Nilufar

Responsible ADB Department

Central and West Asia Department

Responsible ADB Division

Uzbekistan Resident Mission (URM)

Executing Agencies

Asian Development Bank

Timetable

Concept Clearance

-

Fact Finding

-

MRM

-

Approval

22 Jul 2019

Last Review Mission

-

Last PDS Update

29 Oct 2020

Funding

TA 9771-UZB