NEWS AND EVENTS
January 13, 2010
Fair decision in favour of the Republic of Uzbekistan at International Arbitration Court
Favourable investment climate has been created in Uzbekistan. The legal framework of investment activity and protection of foreign investors\' rights and their investments has been formed. To a number of acts composing the legal base of the investments and their protection shall refer the laws of the Republic of Uzbekistan, \"On foreign investments\", \"On guarantees and measures of protection of the rights of foreign investors\".
Moreover, Republic of Uzbekistan participates in a number of international conventions, providing legal instruments for protection of investments, and also Uzbekistan has bilateral agreements with many countries on protection and promotion of investments.
Republic of Uzbekistan guarantees effective protection to foreign investments and in good faith fulfils its obligations under international agreements including investment protection agreements.
Besides, there are cases when the foreign companies put their efforts to involve Republic of Uzbekistan into disputes related to their commercial activity. As such an example, the claim of \"ROMAK S.A.\" to the International Arbitration Court vs Republic of Uzbekistan can be mentioned.
On November 26, 2009, the International Arbitration Court, acting according to UNCITRAL Arbitration rules under the administrative support of Permanent Court of Arbitration, (the Hauge, the Netherlands) rendered an award in favour of Republic of Uzbekistan and once again acknowledged the adherence of the Republic of Uzbekistan to the principals of the International Law, principles of justice.
Dispute against Republic of Uzbekistan was initiated by Swiss Company \"Romak S.A.\", specializing in sale of grain and cereal products. Paris was the place of arbitration.
\"Romak S.A.\", having entered into contractual relations with Uzbek and Kazakh Companies, supplied grain to the Uzbek enterprises. In view of dispute arisen with Uzbek companies, \"Romak S.A.\" have applied to GAFTA to settle the dispute through arbitration. The Arbitration Court GAFTA has rendered an award in favour of \"Romak S.A.\" and ordered Uzbek Company \"Uzdon\" to pay the price of the contract on behalf of \"ODIL\" Company.
Swiss Company applied to the corresponding court of the Republic of Uzbekistan in 2000 aiming at enforcement of the GAFTA Arbitration Court award under the New York Convention on recognition and enforcement of foreign arbitral awards. The Economic Court of Tashkent rejected the\"Romak S.A.\" application, due to the non-correspondence of the submitted application to the New York Convention.
Instead of re-applying in correspondence with the New York Convention requirements, \"Romak .S.A.\" brought an unjustified claim to the International Arbitration Court against the Republic of Uzbekistan stating that the Republic of Uzbekistan breached the Agreement between the Republic of Uzbekistan and Swiss Confederation on promotion and reciprocal protection of investments, dated 16.04.1993 (Investment Protection Agreement). Mentioned Agreement aim at protection and promotion of investments of the Parties and stipulates for initiation of Arbitration in compliance with UNCITRAL rules.
At the Arbitration Court \"Romak S.A.\" declared itself as investor and its rights under the grain purchase-and-sale contract and according to the GAFTA award to be the investments made in accordance with the Investment Protection Agreement.
Due to the fact that the grain supply contract concluded with \"Romak S.A.\" is a one-off commercial transaction and is not the investment contribution to the development of the economy of the Republic of Uzbekistan, such contract shall not be subject to the jurisdiction of the Arbitration Court, provided by the aforesaid Investment Protection Agreement. The Investment Protection Agreement was concluded between the Republic of Uzbekistan and Swiss Confederation on April 16, 1993 aiming at the promotion of the economic prosperity of both Countries by means of creation of favourable conditions for the investments. In other words, the Investment Protection Agreement protects only the rights of the investors and their investments on the territory of the parties to the Agreement.
In its decision, the Arbitration Court agreed with the Republic of Uzbekistan arguments, dismissing the claim for lack of jurisdiction in the present matter, since \"Romak S.A.\" had never made investments in Uzbekistan, which could be protected according to Investment Protection Agreement, and grain supply contract, GAFTA arbitration award as well as any rights of \"Romak S.A.\" arisen from it can not be considered as investments.
The International Arbitration Court cleared out the definition of \"investment\" and defined investments as a \"contribution\" that extends over a certain period of time and involves some risk.
Thus, the Arbitration Court in its decision indicated that \"Romak S.A.\" did not have any investments complying with the Article 1 of the Investment Protection Agreement. The rights of \"Romak S.A.\" arise from the purchase-and-sale contract, i.e. one-off commercial deal, according to which \"Romak S.A.\" had an obligation to supply grain to the Uzbek companies for certain payment. Since any investments in the dispute found to be missing, the Republic of Uzbekistan does not fall under arbitration proceeding and the arbitration court does not have any jurisdiction on this matter.
It is necessary to mention that the decision of the arbitration court, fairly adopted in favour of the Republic of Uzbekistan, showed insufficiency of the claim and unconscientiousness of the \"Romak S.A.\" Company towards Republic of Uzbekistan.
In the opinion of well-known foreign practicing lawyers, the abovementioned award should be viewed as a \"great contribution to investment treaty arbitration\", as it adds very pertinent criteria, which helps define the term \"investment\" in bilateral investment treaties.
The award of the international arbitration court is available at Permanent Arbitration court web-site (www.pca-cpa.org).