Uzbekistan's New Bilateral Investment Treaty Standpoint: In Case of Uzbekistan-Turkey bit (2018) by F. Muminov and J. Górski About tdm tdm

Uzbekistan’s New Bilateral Investment Treaty Standpoint: In 
Case of Uzbekistan-Turkey BIT (2018) 
Farruhbek Muminov
*
 and 
Jędrzej Górski
**
 
Abstract

Uzbekistan is often seen as an attractive destination for foreign direct investment (FDI), largely 
thanks to its vast supply of natural resources. However, inward FDI in Uzbekistan remains 
below 
expectations due to the lack of transparency and stability of the domestic regulatory 
environment. Uzbekistan has recently undergone lengthy reforms aiming at economic 
liberalization. In particular, a review of investment laws suggests an improvement of the 
investment climate in the country. In the course of these reforms, Uzbekistan concluded a 
b
ilateral investment treaty (BIT) with Turkey in 2018, which in essence follows the Turkish 
Model BIT. By revising its BITs-related policies, Uzbekistan has sent a positive message to 
foreign investors, suggesting a more favorable investment climate than that of the previous 
generation of its BITs. The new Uzbekistan-Turkey BIT also clarifies host states regulatory 
powers, by adding provisions on social and environmental standards as well as public health. 
T
hat the main concern of foreign investors stands as the lack of transparency and predictability 
of 
the host country legislation is widely recognized, rather than high standards of the investors. 
Therefore
, Uzbekistan ultimately aims to create a transparent and predictable investment 
environment, whilst the same time adhering to social responsibilities. 
1. Introduction 
Uzbekistan has made gradual progress in attracting inward FDI since the collapse of the Union 
of Soviet Socialist Republics (USSR). During the early years of its independence, Uzbekistan 
adopted a number of laws aiming at increasing investment inflows. However, their 
effectiveness can be deemed questionable because of their poor stability and transparency. For 
this reason, the volume inward FDI in Uzbekistan has remained under expectations, despite the 
fact that Uzbekistan is otherwise considered an attractive FDI, for its attractive natural 
resources and a dormant potential of its extraction sectors. The later discussed lack of 
transparency and predictability of Uzbekistan’s FDI environment has often repelled investors, 
in the eyes of whom mere deposits of natural resources are not sufficient factor to make an 
investment decision. A decent legal framework of the host country a 
sine qua non and the 
barriers to investment in Uzbekistan will persists unless this framework is significantly 
improved. 
As far as Uzbekistan’s BIT network is concerned; it is a party to more than 31 BITs plus the 
Energy Charter Treaty (ECT). Most of these BITs still contain restrictive provisions, the 
application which highly dependents upon Uzbekistan’s domestic entry-related legislation. 
This approach is known as 
controlled entry model, under which a host country has robust 
powers over FDI at entry-stage of a particular project. Nonetheless, recent developments in 
Uzbekistan’s FDI-related policies manifest that Uzbekistan has entered a new era of investment 
liberalization. The is best illustrated with the recently concluded Uzbekistan–Turkey BIT 
*
PhD candidate, Faculty of International Private Law, Anadolu University, Turkey . 
**
MJur (Warsaw) PhD (CUHK). Research Fellow. Dept Asian & Intl Stud, CityU HK 
. 

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(2018) which is also an improvement in terms of clarity and consistency on the provisions of 
previous Uzbekistan-Turkey BITs (1992). 
Uzbekistan has not yet developed its own, individual BIT model. However, a typical trait of 
Uzbekistan’s BITs have been ample to references to domestic legislation included in BIT’s 
substantial and procedural provisions. Such variable elements in Uzbekistan’s investment 
environment undermined protection of foreign investment, as the fluctuating protection 
standards could unexpectedly become lower than average protection standards found in 
commonplace BIT law. Unlike to-date Uzbekistan’s BITs, the Turkish Model BIT (2009)
1
(the 
‘Model BIT’) encompasses more liberal provisions such as no pre-establishment provisions, 
environmental and public health provisions. Regulating the main aspects of the legal status of 
foreign investment (customary international law or minimum standard of treatment) in the host 
country is an indispensable part of an international investment treaty. In this respect, the 
Turkish Model BIT (2009) provides more predictable and transparent provisions for foreign 
investors than does a typical Uzbekistan BIT. 
There are ten investment cases, including two Turkish investors, in which foreign investors 
have taken legal actions in international arbitration against Uzbekistan as the respondent state.
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 Of those, two cases initiated by Turkish investors in the context of Uzbekistan-Turkey (1992), 
are connected with the expropriation of foreign investment, and none has been concluded yet. 
Undoubtedly, this kind of host state’s record damages host state’s reputation in the eyes of 
international business, and leads to the loss of foreign investors’ confidence in such 
jurisdiction. In such cases, foreign investors are alerted prior to investing in the host state 
concerned, while analyzing investment opportunities abroad, and comparing profits and non-
commercial ‘country risks’ encumbering specific host countries.