November 26, 2024

Public policy of Uzbekistan

1. Legal acts

The Civil Code of the Republic of Uzbekistan (“Civil Code of the Republic of Uzbekistan”);
The Economic Procedural Code of the Republic of Uzbekistan (“EPC RUz”);
The Civil Procedure Code of the Republic of Uzbekistan (“CPC RUz”);
Law of the Republic of Uzbekistan dated 02/16/2021 No. ZRU-674 “On International Commercial Arbitration” (“Law on International Commercial Arbitration”);
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, New York City (the “New York Convention”);
The Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters of January 22, 1993, Minsk, and the Protocol to the Convention of March 28, 1997, Moscow (the “Minsk Convention”);
Convention on Legal Assistance and Legal Relations in Civil, Family and Criminal Matters of October 7, 2002, Chisinau (“Chisinau Convention”).

2. The concept of public order

The legislation of the Republic of Uzbekistan permits, in general, the application of foreign law to legal relations of legal entities or individuals. However, in certain cases, the application of foreign law is limited. One such case is the application of foreign law, which violates the foundations of the rule of law of the Republic of Uzbekistan. To prevent such violations, the legislation of the Republic of Uzbekistan contains a reservation on public order and refusal to apply foreign law. In particular, according to Article 1164 of the Civil Code of the Republic of Uzbekistan, foreign law is not subject to application in cases where its application would contradict the fundamentals of law and order (public order) of the Republic of Uzbekistan. Accordingly, instead of foreign law, the law of the Republic of Uzbekistan applies to legal relations.

However, the legislation of the Republic of Uzbekistan does not provide a formal definition of public order and/or its elements. The second part of Article 1164 of the Civil Code of the Republic of Uzbekistan only states that the difference between the legal, political, or economic system of the relevant foreign state and the legal, political, or economic system of the Republic of Uzbekistan cannot serve as a basis for refusing to apply foreign law.

Also, the procedural legislation of the Republic of Uzbekistan contains a reservation on public order but does not disclose the concept of public order. In particular, according to Article 2328 of the EPC of the Republic of Uzbekistan, an arbitration award may be annulled if it contradicts the public policy of the Republic of Uzbekistan. According to Article 256 of the EPC of the Republic of Uzbekistan, recognition and enforcement of a foreign arbitration award may be refused if recognition and enforcement of this decision contradict or threaten the public order of the Republic of Uzbekistan. Similarly, according to Article 370 of the CPC of the Republic of Uzbekistan, if the enforcement of a decision of a foreign court or a foreign arbitral tribunal (arbitration) damages sovereignty, security or contradicts the basic principles of the legislation of the Republic of Uzbekistan, the court of the Republic of Uzbekistan has the right to refuse recognition and execution of such a decision.

In addition, similar norms are enshrined in international treaties to which Uzbekistan is a party. For example, Article 5 (2b) of the New York Convention, article 19 of the Minsk Convention, and Article 59 (h) of the Chisinau Convention provide that recognition and enforcement of decisions may be refused if they contradict the public policy of the country where recognition and enforcement of the decision is sought.

Due to the lack of a legislative interpretation of public policy, it is necessary to refer to the judicial practice of the Republic of Uzbekistan and foreign law enforcement practice.

3. Application of the public policy in the court practice of the Republic of Uzbekistan

Based on the above, it can be concluded that the interpretation and application of public policy are at the sole discretion of the courts of the Republic of Uzbekistan. The generalization of court practice clarifies some points concerning public policy. In particular, the Resolution of the Plenum of the Supreme Economic Court of the Republic of Uzbekistan “On some issues of application by economic courts of the norms of civil legislation on the invalidity of transactions” No. 269 dated 11/28/2014. (“Resolution of the Plenum No. 269”) (paragraph 12), interpreting the invalidity of the transaction on the grounds specified in Article 116 of the Civil Code of the Republic of Uzbekistan, clarifies that “when recognizing a transaction made for knowingly contrary to the foundations of law and order and morality, invalid due to its insignificance, the courts should determine whether the transaction violates the requirements of legal norms that ensure the foundations of law and order, that is, aimed at protecting the foundations of the constitutional order, human and civil rights and freedoms, defense, security and the economic system of the state (illegal export of weapons, tax evasion, etc.), or whether it contradicts the foundations of public morality, that is, violates the prevailing ideas of good and bad, vice and virtue, etc.”

The following cases can be provided as examples from the judicial practice of Uzbekistan on the application of the public policy clause:

The absence of registration of the contract in the Unified Electronic Information System of Foreign Trade Operations (“UEISVO”) does not contradict the fundamentals of law and order and legislation of the Republic of Uzbekistan, and is not a basis for recognizing a violation of public order, since this requirement is provided for monitoring mutual settlements between business entities (Supreme Court Decision dated January 25, 2022, in case No. 4-10-2111/382);
The difference in the procedure for collecting penalties and fines in the legislation of the Russian Federation and the legislation of the Republic of Uzbekistan is not a reason for refusing recognition and enforcement of an arbitration award due to a violation of public order of the Republic of Uzbekistan.

In the meantime, the judicial board of the Supreme Court, considering the case in cassation, concluded that the decision of the appellate instance to refuse to collect penalties based on the arbitral award “for each day of delay in delivery of goods from March 12, 2021, to the actual fulfillment of the obligation” justified due to the uncertainty of the amount of the penalty and possible difficulties at the stage of execution of the arbitral award. But the court of appeal and cassation did not provide legal grounds for changing and partially recognizing and enforcing the arbitration award (Supreme Court Ruling of October 11, 2022, in case No. 4-14-2203/2);

Recognition and enforcement of the arbitration award for the transfer of funds to the servicing bank (Gazprombank) of the counterparty against whom US sanctions were imposed, does not contradict the public policy of the Republic of Uzbekistan (Supreme Court Decision of October 11, 2022, in case No. 4-14-2225/540);
An indication of the permanent or temporary nature of the arbitration court is not an essential condition of the arbitration agreement. The absence of such an indication does not violate public order and does not contradict the legislation of the Republic of Uzbekistan (Decision of the Court of Cassation of November 18, 202,0 in case No. 4-10-2011/261).

4. Application of the public policy in the court practice of the Russian Federation

The civil legislation of the Russian Federation outlines public policy in Article 1193 of the Civil Code of the Russian Federation that states “the norm of foreign law to be applied in accordance with the rules of this section [Section VI “Private International Law” of the Civil Code of the Russian Federation], in exceptional cases, does not apply when the consequences of its application would contradict the foundations of law and order (public order) of the Russian Federation, taking into account the nature of relations complicated by a foreign element. In this case, if necessary, the relevant norm of Russian law is applied.

Russian legislation, unlike the legislation of the Republic of Uzbekistan, clarifies two important points in the application of the public policy clause and the norms of Russian law:

the application of the public policy clause is allowed only in exceptional cases;
refusal to apply foreign law does not lead to the application of Russian law by default, and the norms of Russian law are applied only if necessary.

A review of the judicial practice of the Russian Federation until 2022 shows that the courts of the Russian Federation applied public policy in exceptional cases. The Presidium of the Supreme Arbitration Court of the Russian Federation reviewed the practice of applying public policy and developed recommendations on the application. In particular:

the enforcement of an arbitration award providing for the recovery of a contract concluded as a result of commercial bribery of an authorized person of the defendant is contrary to the public policy of the Russian Federation;
the court of the Russian Federation has the power to establish that the recognition and enforcement of an arbitration award contradicts the public policy of the Russian Federation, and the power is independent, regardless of the statement of the relevant arguments by the parties to the case;
the court’s assessment of the consequences of the execution of the arbitral award for violation of public order should not lead to a review of the decision on the merits;
a party claiming a contradiction between the recognition and enforcement of a foreign judicial or arbitral award to the public policy of the Russian Federation must justify the existence of such a contradiction;
the arbitration court applies the public procedure clause as a basis for refusing recognition and enforcement of foreign judicial or arbitral awards in exceptional cases, without replacing the special grounds for refusal of such recognition and enforcement provided for by international treaties of the Russian Federation or the norms of the Arbitration Procedural Code of the Russian Federation;
recognition and enforcement of a foreign judicial or arbitral award cannot violate the public policy of the Russian Federation on the sole ground that there are no norms in Russian law similar to the norms of applied foreign law;
the court of the Russian Federation recognizes the enforcement of a foreign judicial or arbitral award as not contrary to the public policy of the Russian Federation if the evidence provided by the debtor does not indicate that the pre-agreed damages or penalties collected on the basis of a civil law contract are punitive;
failure by a foreign legal entity to comply with the procedure for approving large transactions provided for by its personal law does not indicate a contradiction to the public order of the Russian Federation of recognition and enforcement of a foreign judicial or arbitral award issued on demand based on the counterparty’s failure to execute such a transaction;
the presence of a typo in a foreign arbitral award, which does not affect its essence and meaning, cannot be considered an obstacle to its recognition or enforcement.

However, the court practice of the Russian Federation after 2022 shows that the courts of the Russian Federation refuse to recognize and enforce foreign judicial decisions and arbitral awards, in particular, due to the current geopolitical situation. For example, the Judicial Board for Economic Disputes of the Supreme Court of the Russian Federation, in a Ruling dated July 26, 2024, in case No. A45-19015/2023, refused to recognize and enforce the FOSFA arbitration award due to violations of public policy of the Russian Federation, in particular objectivity, impartiality, and proportionality of civil liability, and sent the case for a new hearing. Also, in the decision of the Arbitration Court of the Moscow District dated July 24, 202,3 in case No. A40-242631/2022, the decision of the US court was not executed, in particular, because in the USA, based on the principles of politeness and reciprocity, decisions of Russian courts in similar cases are not enforced.

Public policy of Uzbekistan

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