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17ISSUES OF USING ENGLISH LAW IN FREE ECONOMIC ZONES IN
UZBEKISTAN
Sayyora Zohkidjon kizi Makhmudova
Master student of Tashkent State University of Law sayyoramahmudova253@gmail .com
ABSTRACT
The article draws main attention to application of Common law in free trade zones in which companies are taxed very lightly or not at all in order to develop economic climate in the country intending to attract both local and foreign investment, as an example of Uzbekistan. Moreover, benefits and drawbacks of implementing English law into Uzbek legislation are compared and by analyzing foreign countries' experiences, final view is provided. Apart from that effectiveness of adaptation of English law in narrower scope namely in free economic zones is analysed and applicable recommendations for the prospect of implementing English law in free trade zones are summarized.
Keywords: Free economic zones (FEZ), special economic zones (SEZ), foreign investment, tax, custom, English law, the Law of the Republic of Uzbekistan on Special economic zones.
INTRODUCTION
In the second half of the twentieth century on the planet monetary practice became broad utilize the tool of state guideline of the economy as an association in the region of the nation extraordinary and "free" zones of private value with institutional content. For the effective use of these tools it is represented a complex challenge. It is a universally accepted business stereotype that every investor ought to know the legal system of a country where investment activities are going to be settled in order to gain confidence of legally protected investment environment there. However, foreign investors do not always understand national legislation of a host country well and concern about risks like physical damages, expropriation or loss of property. As a result, need for a common law (hereinafter English law) recognized by most nations to regulate investment activities emerges to be introduced to address these issues. In this way, the investor is guaranteed the opportunity to apply to him on the basis of English law in the cases required by him. To attract foreign investment, it is necessary to focus on the development of regulations aimed at fully demonstrating the country's investment potential to the global business community, setting out an integrated approach to the formation of investment projects by region and industry for investors seeking investment. Since it is offered to adhere to an unknown law when dispute arises,
investors especially foreign ones are not highly encouraged to set their business in a host country.
MAIN PART
It is undeniable fact that English law is universally being preferred in commercial activities in international sphere. Thus, in turn a question arises - "Why do foreign investors require to use English law in their commercial activities?" Through comparing common law to civil law, several differences are faced. First, unlike civil law, common law describes laws made by judges rather than a parliament. Common law provides specific instruction on the law examining specific facts for a certain case and interpreting relevant legislation. Second, as common law is largely based on court precedents, when a contest arises between two opposing parties even without legal training ordinary people can decide on the facts of the case and furthermore, responses to real-life situations can be examined and developed. Second, it allows for flexible law-making process since precedents can be set aside, challenged and replaced by new precedent. And, in turn a contesting party benefits from common law reforms carried out by the courts. Third, due to the fact that judges make legislative decisions relying on precedents maintained over time not legal codes provided by a legislative body, impartiality and independence of the presiding judge ensure confidence for disputing parties' to bring the case to the domestic courts. Fourth, common law is faster and often reacts more quickly to changing social values, community expectation.
Considering abovementioned advantages, many investors seek a place where common law is used. There exist another matter is that 'what if Uzbekistan implements English common law in commerce?' It is believed that application of English law is nothing more benefit. Namely, the large number of foreign investments will flow into a state resulting in development of trade relations, stabilization of price and product availability in local markets and unemployment rate.
Despite the fact that such inevitable benefits are expected, there are reasonable causes that our country is still unwilling to apply English law in commercial relations. It is crystal clear that Uzbekistan lacks qualified experts on English law when required by an investor. Therefore, issue of cadres in this situation is utmost important to draw attention, requiring qualified judges and lawyers who are familiar with English law. Before dealing with this issue, commencement of any measure allowing the implementation of English law will be an unwise conduct. Moreover, there exists ubiquitous influence of lack of professionals in not only dispute settlement process but also on daily relations like making contract, laying taxes. To analyse the consequences of implementing English law into national legislation, it is highly recommended to learn foreign experiences.
For example, one of the neighbouring country, Kazakhstan today is unable to fully enforce the legal structures of English law because of a lack of applicable legal norms and the judicial system's inability to apply legal frameworks that are not forbidden by Kazakh law but are unfamiliar to Kazakh courts. Furthermore, the impermissibility of some Kazakh legal codes limits the parties' ability to formalize their agreements, including the ability to apply English law to certain forms of contracts. Due to these factors, foreign investors are forced to structure their ownership of Kazakh companies into foreign jurisdictions, where the majority of mergers and acquisitions occur and English law can be applied1.
It is possible to exist such problems when implementation of similar measures is conducted in Uzbekistan as well. Therefore, the legal law system must be simultaneously developed. Yet it has not formally and practically approved, Uzbekistan has taken first steps towards implementation of English law in narrower scope namely in free economic zones. It can be cited that at the initiative of the Ministry of Justice, on October 17-18, 2019, the international conference "English Law Day in Tashkent" in which an active exchange of views between lawyers of the UK and Uzbekistan took place, was held in the capital city. At the forum several issues were mentioned which Uzbekistan must take into account while applying English law. Uzbekistan needs enough resources, time and, most importantly, personnel potential as it is mentioned above.
According to Ruslan Davletov, the Ministry of Justice has been instructed by the Presidential Decree to study the prospects of the application of English law to free economic zones namely in 'Navoi' FEZ. The legal aspects of corporative and contract law in English law are very well structured. Most importantly, the laws there are stable, the practice is vertical. The law is applied in the same manner everywhere and everyone knows in advance what his actions will lead to in the future.
Despite the privileges such as exemption from various taxes, customs payments, granted to participants for their activities in special economic zones which are stated in the Decree of the President of the Republic of Uzbekistan of 26.10.2016. No.DP-4853, foreign investors are not willing to invest in Uzbekistan owing to the fact that little trust for the current legislation system has been gained.
Taking the example of another newly adopted Law on Special economic zones (SEZ) 17.02.2020. No.LRU-604, the same privileges can be seen in the Article 39. Article 42 states that the participants of the special economic zone are guaranteed the protection of rights and interests, which is ensured by this Law and other legislative acts, as well as international treaties of the Republic of Uzbekistan. 5th part of this Article defines that losses, as well as lost profits and non-pecuniary damage caused to
1 Kazakhstan - Choice Of Law In Contracts: English Law Benefits. Legal News & Analysis - Asia Pacific - Kazakhstan -FDI 30 August, 2019
SCIENTIFIC PROGRESS VOLUME 2 I ISSUE 2 I 2021
ISSN: 2181-1601
legal entities and individuals as a result of unjustified interference in their activities by state and other bodies or officials, are subject to recover or compensation in court. On the one hand, these guarantees seems to be set a perfect legislative regime to regulate special economic zones. However, on the other hand, this may hint at high potential of the possibility of such law-breaches which may increase feelings of insecurity towards not only legislation but application of them.
CONCLUSION
To sum up, by analyzing and observing foreign strategies in implementation of English law into economic sector, it can be deemed that Uzbek legislation needs to include several necessary elements and principles of English law in order to gain large amount of investment flow. Where needs do not match with offers, there is no progress. Thus, advantages of adaptation of English law in Uzbekistan overweigh its drawbacks. Specifically, economic advance, improvement of international trade, creation of new workplaces, lower prices in local markets are most valued benefits which can be earned through application of English law in free economic zones in Uzbekistan. However, in turn available problematic issues need be addressed. When it comes to disadvantageous aspects, lack of Uzbek professional specialists in English law, enough financial resources and time for amendments to national legislation matter and must be taken into account. Hence, it is opined that application of English law to commercial sector is considered as an innovative method to attract foreign investment if it is carried out by necessary fulfillments.
REFERENCES
1. English Law Day in Tashkent
2. https://qalampir.uz/uz/news/%D2%B3atto-k-ozogistonda-%D2%B3am-mavzhud-bulgan-ingliz-%D2%B3uk-uk-i-nega-uzbekistonda-yuk-suz-davletovga-11839
3. Kazakhstan - Choice Of Law In Contracts: English Law Benefits. Legal News & Analysis - Asia Pacific - Kazakhstan - FDI 30 August, 2019 https://www.conventuslaw.com/report/kazakhstan-choice-of-law-in-contracts-english-law/# :~:text=English%20law%20is%20based%20on,a%20more%20prescriptive%20civ il%20code.&text=IP/o20Kazakh%20law%20is%20selected,agreement%20regulated%2 0by%20English%20law.
4. https://demo.minbar.uz/uz/post/navoiy-eizda-ingliz-huquqi-ioriy-etilishi-mumkin
5. The Decree of the President of the Republic of Uzbekistan of 26.10.2016. No.DP-4853
6. Law on Special economic zones (SEZ) 17.02.2020. No.LRU-604
