April 24, 2025

Legislative Amendments to the Regulation of Pledge Relations in the Republic of Uzbekistan

Legislative Amendments to the Regulation of Pledge Relations in the Republic of Uzbekistan.

  1. Definition of an “Extremely Insignificant” Breach of Obligations Secured by Pledge.

A breach of an obligation secured by a pledge is now considered extremely insignificant — and thus not grounds for enforcement of the pledge — if the following two conditions are met simultaneously:

  • The outstanding obligation of the debtor amounts to less than 15% of the appraised value of the pledged property; and
  • The delay in fulfilling the secured obligation does not exceed three consecutive months.
  1. Creditor’s Priority Right in Case of Seizure of Pledged Property.

If the pledged property is seized from the pledger by state authorities under a lawful procedure — for example, due to its involvement in a criminal or administrative offense — the pledgee retains the priority right to satisfy its claims from the value of the seized property.

  1. Amended Judicial Procedure for Loan Recovery (Amendments to Article 746¹ of the Civil Code).

If a creditor seeks early repayment of a loan through court proceedings — and no alternative procedure is agreed upon in the loan contract — the following two-step procedure now applies:

  1. Initial claim: the creditor must first apply to the court for the recovery of the overdue part of the debt that has not been repaid within the contractual term.
  2. Subsequent claim (if a debt remains unpaid): If, after this step, the borrower still fails to repay the overdue debt in full, the creditor may then apply to the court for early recovery of the entire remaining loan amount.

The table below summarizes the amendments made to the Law on Pledge.

Before amendments

 After amendments in accordance with the Law No.1060 dated 22/04/2025  

Commentary

Art.26 part 4 of the Law “On pledge” – such norm is absent.

 Art.26 part 4 of the Law “On Pledge”:

violation of the obligation secured by pledge is considered extremely insignificant if the following conditions present cumulatively:

  • if the amount of the debtor’s outstanding obligation secured by pledge is less than fifteen percent of the value of the pledge;
  • if the delay in fulfillment of the obligation secured by pledge does not exceed more than three consecutive months.

Now, the court may deny claims for recovery of pledged property if the court finds the breach of obligation to be extremely insignificant under the rules of Article 26.

 

Art.27 part 4(1) of the Law on “On pledge”:

The subject of pledge may be foreclosed only by court decision in cases where:

the law establishes a requirement for the consent or authorization of another person or body;

 Art.27 part 4(1) of the Law “On Pledge”:

The subject of a pledge may be foreclosed only by court decision in cases where:

if the law establishes the need to obtain the consent or authorization of another person or body to conclude a pledge agreement, except where the necessary consent or authorization was obtained when the property in question was pledged.

 

Now, foreclosure of pledged property is allowed only through the court if:

  • In accordance with law, it was necessary to obtain someone else’s consent or authorization (e.g., spouse, governing body, government agency, etc.) to conclude a pledge agreement,
  • However, the consent was not obtained.

Exception: if such consent was nevertheless obtained at the conclusion of the pledge, then recovery can be carried out out of court (e.g., by notary’s writ of execution) if it is provided for in the contract.

Disposal of pledged property.

Art.28 part 2 of the Law on “On pledge”:

At the request of the pledger, the court may, in a decision on foreclosure of pledged property, postpone its sale at public auction for a period of up to one year. The postponement shall not affect the rights and obligations of the parties under the obligation secured by the pledge of this property and shall not relieve the debtor from reimbursement of the creditor’s losses and penalties increased during the period of postponement.

This norm is excluded.

  

Art.26 part 4 of the Law “On pledge” – such norm is absent.

 Art.28 part 4 of the Law “On Pledge”:

The initial auction price of the pledged property is determined based on an agreement between the pledger and the pledgee.

 

In case of disagreement between the pledger and the pledgee regarding the price of the property, in case of disagreement between the pledger and the pledgee, an independent appraisal organization is engaged and the initial value of the pledged property is determined based on market prices. In this case, all expenses related to the appraisal shall be borne by the party that engaged the independent appraisal organization.

This provision regulates the procedure for setting the initial price of pledged property when it is sold through auction – and was introduced to increase the transparency and fairness of the procedure, especially if disputes arise between the parties. Transparency and fairness is ensured through evaluation by a valuation organization.

 

Art.29 part 2 of the Law “On pledge”

If the repeated auction is declared unsuccessful, the pledgee shall have the right to leave the pledged item with an appraisal of not more than ten percent (10%) below the initial sale price of the unrealized pledged item at the repeated auction. In this case, the pledgee is obliged to pay the positive difference between the accepted value of the abandoned property and the amount of the discharged obligation (if any).

Art.29 part 2 of the Law “On Pledge”:

If the repeated auction is declared unsuccessful, the pledgee shall have the right to retain the pledged item with a valuation of not more than twenty-five percent (25%) below the initial sale price of the unrealized pledged item at the repeated auction. In this case, the pledgee is obliged to pay the positive difference between the accepted value of the abandoned property and the amount of the discharged obligation (if any).

 

  

Art.47 part 3 of the Law “On pledge”

In the event that the property, which is the subject of pledge, is seized from the pledger in accordance with the procedure established by law because in reality the owner of this property is another person, or for the commission of a crime or other offense, the pledge in respect of this property shall be terminated.

Art.47 part 3 of the Law “On Pledge”: the phrase “or for committing a crime or other offense” is excluded.

In case when the property being the subject of pledge is seized from the pledger in accordance with the procedure established by law because in reality the owner of this property is another person, or for committing a crime or other offense, the pledge in respect of this property shall be terminated.

  

Art.47 part 4 of the Law “On pledge” – such norm is absent.

 Art.47 part 4 of the Law “On Pledge”:

If the property that is the subject of pledge is seized from the pledger in accordance with the procedure established by law for committing a crime or other offense, the pledgee retains the right to preferential satisfaction of its claims at the expense of this property.

 

If the property that was pledged (e.g. a car, warehouse, equipment) is seized by the state from the pledger:

  • by court sentence (for a crime),
  • or as part of administrative proceedings (for an offense), then the pledgee (creditor) does not lose its right to satisfaction of claims from the value of that property.