Use of English Law in Uzbek Corporate Transactions

Abstract

Legal practice in the post-soviet union environment in recent years show that a large number of M&A, JV and international financing transactions in Uzbek companies involving foreign entities or foreign investment are governed by laws other than national legislation. Establishment of legal entities are based on contractual agreement of the founders (Memorandum of Association/Shareholders agreement) and Uzbek law provides a relative freedom at the conclusion of the contracts or afterwards through allowing parties to choose the law that will apply to their rights and obligations under the contract. A choice of law upon agreement of the parties is provided by the article 1189, Civil Code of the RUz. However, the foreign law chosen by the parties cannot, in theory, affect the operation of the imperative norms of the legislation, meaning that the minimum requirements set by the legislation should be complied with at all instances.The rigid nature of the national legislation and distrust towards the judicial system of Uzbekistan is the main reason ‘why much legal activity is effectively "offshored" through the use of contracts governed by English law, and disputes being referred to arbitration in London as in every other CIS country. English law, as well as English arbitration courts, often appear in the international transactions, including transactions involving Uzbek entities. English law is widely used around the world because of its clear, well-established character. The British legal system has evolved for over several hundred years and continues to grow and is characterized by flexibility and adaptation to the rapidly changing business environment. This flexible nature is one of the most appealing aspects of English law, which can also confuse those who are not familiar with it. When comparing the English legislation with the European continental system of law or the legal systems of now CIS countries, it is vital to note that English law is not enshrined into a single set of laws.The contractual principles of British law are very clear, concise and flexible to great extent and therefore, permit the parties to agree on whatever terms they may want. Legal provisions, such as warranties, representations, indemnities, put and call options, covenants, drag and tag along options, conditions precedent, good leaver/bad leaver provisions, deadlocks mechanisms and preferential share rights make English law straight-forward, flexible and thus, preferable by foreign investors entering Uzbek market. The ultimate aim of the paper, therefore, will be concentrated on exploration of the peculiar features of English law which make it lucrative to companies in Uzbekistan when carrying out transactions and analysing whether the same or similar concepts can be included in Uzbek contracts. Through examining the existing national legislation and making cross jurisdiction comparison with the English law concepts the paper will make an attempt to put forward recommendations for wider research in the area to make Uzbek law preferable by foreign investors. The subject research work has been divided in five major chapters and further divided into various sub topics. The first chapter provides brief introduction to the concepts of JV and M&A, discusses the differences and highlights their relevance to the current topic. The second chapter of this work attempts to briefly overview some main English contract law concepts. The third chapter deals with foreign investment environment in Uzbekistan, advantages of investing into the country and popular forms of ownership of legal entities. The fourth chapter of this research work is an endeavour to find the link between contractual relationship of the parties and memorandum of association. The final chapter before the conclusion, carefully analyses Uzbek legislation for provisions permitting inclusion of English Contract law provisions in memorandum of association. And, finally, the sixth chapter of this dissertation gives conclusion of the research work.