Legislation and jurisdiction

Relevant legislation and regulators

What is the relevant legislation and who enforces it?

The merger control regime is regulated by the Law of the Republic of Uzbekistan No. ZRU-319 on Competition (the Competition Law), which entered into force on 6 December 2012, replacing the Law on competition and restriction of monopolistic behaviour in the commodities markets. The Competition Law now also governs merger control in financial markets, whereas the previous Law applied only to commodity markets.

Other legislation includes Regulation No. 230 on the order of reviewing and obtaining preliminary consent for concluding shares acquisition agreements in legal entities, approved by the Decree of the Cabinet of Ministers of Uzbekistan on 20 August 2013 (Regulation No. 230), and Regulation No. 344 on the order of issuing a preliminary consent for establishing associations of legal entities, merger and consolidation of legal entities, approved by the Decree of the Cabinet of Ministers of Uzbekistan on 27 December 2013 (Regulation No. 344). These regulations establish detailed procedures for obtaining the antimonopoly pre-approval in the commodities markets and financial markets.

Uzbek merger control provisions are enforced by the Antimonopoly Committee of the Republic of Uzbekistan (the Antimonopoly Committee) and its 14 regional departments across the country.

Scope of legislation

What kinds of mergers are caught?

The following transactions will require an antimonopoly clearance, provided that the respective thresholds are met (with respect to the thresholds, see question 5):

  • establishment of association of legal entities;
  • merger and consolidation of legal entities; and
  • acquisition transactions.

It seems that basic principles of the merger control regime that existed until 2012 were retained in the Competition Law; however, the relevant pre-closing notification was significantly revised. One major improvement was that in respect of acquisitions the merger control requirements only apply in cases where the acquisition of a new or increase of an existing stake cross certain thresholds (35, 50 and 75 per cent in the case of joint-stock companies and 50 and 66 per cent in the case of limited liability companies). In other words, notification is no longer required for each and every increase of an existing stake (previously acquisition of even a single share above the 35 per cent threshold required notification).

Filing would not, however, be required by limited liability companies or joint-stock companies where the foreign purchaser has an Uzbek subsidiary, but the target has no subsidiary or local presence in Uzbekistan.

The filing is not required for an entity, even if the above criteria are met, if there is a specific presidential decree or a decree of the Cabinet of Ministers on the merger, consolidation or acquisition of shares of such entity.

Unlike the previous regulations, now the same test for clearance is set on the financial markets for banks, insurance companies, leasing companies, non-banking credit organisations and professionals in securities markets. The test and procedures for clearance for such financial markets’ members differ by the amount of threshold as described in question 5.

What types of joint ventures are caught?

Uzbekistan merger control does not set out specific rules applicable to the establishment of joint ventures. Joint ventures are reviewed within the general legal framework. In other words, the creation of a joint venture is treated as an acquisition of shares or rights by the joint venture company from its founders and third parties. When a joint venture is established from scratch, notification requirements are not applied.

In addition to new merger control requirements, the Competition Law introduced a revised clearance procedure for agreements restricting competition. Joint venture agreements, shareholders’ agreements and certain other agreements relating to the creation of joint ventures that could potentially restrict competition in Uzbekistan may be challenged by the Antimonopoly Committee.

Is there a definition of ‘control’ and are minority and other interests less than control caught?

The Competition Law does not provide for a definition of control. However, through the definition of ‘group of persons’, the Competition Law determines that control includes the following main situations:

  • two or more legal entities where one legal entity, directly or indirectly, holds or represents more than 50 per cent of the voting shares in a company;
  • the holding or representing by individuals together with their close relatives of more than 50 per cent of voting shares in two or more companies;
  • the holding or representing by a legal entity of more than 50 per cent of voting shares in each of two or more companies;
  • two or more legal entities where executive management positions are held by the same individuals or by their close relatives;
  • two or more legal entities where more than 50 per cent of seats in the collegial executive management body or supervisory board are held by the same individuals or by their close relatives;
  • two or more legal entities, where one company, by virtue of law, constitutive documents or agreements is entitled to give mandatory instructions to another; and
  • two or more legal entities, where one individual or legal entity, by virtue of law, constitutive documents or agreements is entitled to give mandatory instructions to another.
Thresholds, triggers and approvals

What are the jurisdictional thresholds for notification and are there circumstances in which transactions falling below these thresholds may be investigated?

For legal entities in commodities markets: notification and pre-approval are required if the aggregate balance sheet value of the assets of both parties to the transaction or the aggregate amount of sales of goods for the last calendar year of both parties exceeds 100,000 times the minimum monthly wage (MMW), which is currently 202,730 soums.

For legal entities in financial markets: notification and pre-approval are required if the aggregate balance sheet value of the assets of both parties to the transaction exceeds:

  • US$450 million with respect to banks;
  • US$25 million with respect to insurance companies;
  • US$3 million with respect to leasing companies; and
  • US$400,000 with respect to non-banking credit organisations and professionals in the securities market.

Notification and prior approval is also required if one of the parties to the transaction holds a dominant position in the market.

For the purpose of determining whether the thresholds apply, the purchaser and target are taken into account (the seller is not taken into account). Asset values or market shares and volume of sales are assessed at the level of individual entities (eg, the target or local subsidiaries) and at the group of companies level.

The thresholds can be satisfied by one party only and it does not matter which party. Consequently, if the target owns a legal entity that is registered in Uzbekistan, the first two thresholds set out above will in practice almost always be met.

Is the filing mandatory or voluntary? If mandatory, do any exceptions exist?

Filing is mandatory in all cases where the transaction meets the thresholds set by the legislation. However, if there is a special resolution issued by the government in respect of certain deals (where the government approves the purchase by an investor of certain shares in the local entity or consolidation of legal entities), then it is regarded as if formal approval has been received.

Intra-group transactions are also subject to mandatory Antimonopoly Committee control.

Do foreign-to-foreign mergers have to be notified and is there a local effects or nexus test?

Based on the provisions of the Competition Law, which state that the Law applies to transactions carried out outside Uzbekistan if the transaction may have an adverse impact on competition in Uzbekistan, from current practice we can surmise that a foreign-to-foreign transaction falls within the Uzbekistan merger control regime where the target entity directly or indirectly controls any Uzbek entities, owns assets located in Uzbekistan or has substantial turnover from operations in Uzbekistan.

Usually, foreign-to-foreign mergers are not subject to merger clearance or notification if the target does not have any local presence in Uzbekistan in the form of a subsidiary or branch or shareholding in any of the existing corporate forms (limited liability company, joint-stock company, etc). In addition, Uzbek merger control only applies to transactions outside the territory of Uzbekistan, if such transactions (acquiring indirect control, etc) may have an impact on the relevant market of Uzbekistan. In practice, however, applicability of filing is reviewed on a case-by-case basis and decided at the discretion of the Antimonopoly Committee.

Are there also rules on foreign investment, special sectors or other relevant approvals?

Yes, there are special rules with respect to foreign investments in the mass media sector such as TV, radio, newspapers, web sources, etc. In particular, there is a prohibition on the acquisition by a foreign investor of 30 per cent or more shares in mass media.

Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

There are no legal deadlines for a pre-completion filing. Merger control clearance must be obtained before completion and the filing must be made well in advance of the envisaged completion date of the transaction.

The purchaser is liable for a penalty. However, there is no procedure for holding a foreign entity liable in the case of foreign-to-foreign transactions. In case of a breach of the Competition Law in mergers, consolidations and acquisitions, the following fines and penalties can be imposed:

  • administrative: a fine in the amount of one to three times MMW applies where an individual is involved (and three to five times MMW, if committed repetitively within one year of the date of the application of a fine for the similar actions), and of three to five times MMW applies where a legal entity is involved (and five to ten times MMW, if committed repetitively within one year of the date of the application of a fine for the similar actions); and
  • criminal (applicable after imposing administrative fine): a fine in the amount of 25 to 50 times MMW, or deprivation of a right to hold certain positions for the period from three to five years, or up to 360 hours of mandatory public works, or up to three years of corrective labour. There is no notion of corporate criminal liability in Uzbekistan, therefore criminal liability is imposed on the official or any other authorised person from the company of the purchaser and only if such violation is repeated twice during one year.

In addition, the Antimonopoly Committee may apply to a court to invalidate, in full or in part, agreements and other transactions for which its prior authorisation or subsequent notice was required but has not been obtained or given, or to liquidate a company if it was incorporated without prior approval, provided that the relevant transaction or incorporation results in limitation of competition.

Which parties are responsible for filing and are filing fees required?

The purchaser of the shares or assets is responsible for filing with the Antimonopoly Committee. There are no filing fees.

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

The Antimonopoly Committee is obliged to consider antitrust filings within 10 calendar days of the filing date and take a decision on approving the filing or returning it as incomplete and in this case the review period will start anew as soon as the full set of documents is submitted. However, if the Antimonopoly Committee determines that further disclosure, documents or information is needed or that the transaction may result in limitation of competition, the Antimonopoly Committee may extend the term of review by up to 30 calendar days.

Closing of the transaction must be suspended prior to clearance.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

If a transaction that falls under the scope of the merger control is closed before antimonopoly pre-approval has been obtained, the potential penalties are as set out in question 9.

It should be noted that in practice the parties can only be prevented from closing by a court decision. However, for a direct acquisition of shares in a company registered in Uzbekistan, closing cannot be carried out without preliminary approval of the antitrust authority, as the registration agency may request a preliminary approval of the transaction.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

See question 9. As noted above, clearance must be made before closing. As there is no procedure for holding a foreign entity liable in case of foreign-to-foreign transactions, we are not aware of any such cases.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Hold-separate arrangements are not provided for by the Competition Law.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

There are no special merger control rules and notably no exemption from the prohibition on completing the transaction before clearance.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The Competition Law lists the documents and information that must be collected for the filing. These include the following:

  • an application, which must include the full name of the business entity, information about the transaction, purpose of the agreement to be concluded, list of the executive and supreme management bodies of all parties to the transaction and information on shareholdings in other business entities;
  • copies of constitutive documents (certificate of incorporation, articles of association). A copy of a passport if an individual is involved, including full passport details of an individual;
  • information on types of activities rendered, names of goods and the volume of goods manufactured and sold by an applicant for the last two years prior to the application, or from the date of company’s operation if less than two years;
  • annual financial and statistical reports for the past two calendar years;
  • information on the group of persons indicating certain grounds for forming the group, including other additional information, as may be requested by the Antimonopoly Committee; and
  • a power of attorney.

The documents listed above (except for the power of attorney) are required from all parties to the transaction. Documents issued abroad must carry an apostille (if the country where the document is issued is a party to the 1961 Hague Convention on Apostille) or be legalised. They need to be further translated into Uzbek or Russian by a certified translator and the translation must be notarised in Uzbekistan.

In the event of supplying the Antimonopoly Committee with wrong or misleading information, the following fines and penalties can be imposed:

  • administrative: a fine in the amount of one to three times MMW applies where an individual is involved (and three to five times MMW, if committed repetitively within one year of the date of the application of a fine for the similar actions), and of three to five times MMW applies where a legal entity is involved (and five to 10 times MMW, if committed repetitively within one year of the date of the application of a fine for the similar actions); and
  • criminal (applicable after imposing administrative fine): a fine in the amount of up to 25 times MMW, or deprivation of a right to hold certain positions for the period of up to three years.

However, in practice, we are not aware of any cases of application of fines or penalties for submitting wrong information and the Antimonopoly Committee may simply request clarification of the submitted information or ask the applicant to submit missing information.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

After submission of all necessary information and documents, the Antimonopoly Committee must decide within 10 calendar days of the filing date whether to clear the merger or return it as incomplete and in this case the review period will start anew as soon as the full set of documents is submitted.

If the transaction raises competition concerns, the Antimonopoly Committee is entitled to extend the review for up to 30 calendar days. In practice, the Antimonopoly Committee usually issues its decisions within 30 calendar days. There are no legal means to speed up clearance.

What is the statutory timetable for clearance? Can it be speeded up?

Upon filing, the set of documents and information as filed is forwarded to the Special Committee of the Antimonopoly Committee (the Special Committee) formed by its chairman.

The Special Committee is obliged to consider antitrust filings within 10 calendar days of the filing date and take a decision on approving the filing or returning it as incomplete.

As mentioned above, if the Antimonopoly Committee determines that further disclosure, documents or information are needed or that the transaction may result in limitation of competition, the Antimonopoly Committee may extend the term of review by up to 30 calendar days.

The Antimonopoly Committee is entitled at its own discretion to invite the applicant (or his or her authorised representatives) and other concerned parties to attend meetings of the Special Committee.

A decision of the Antimonopoly Committee approving the transaction must be signed by the chairman and members of the Special Committee in two copies, stamped and sent to the applicant on the same day. This decision is valid for one year and transactions on the establishment of association of legal entities, merger and consolidation of legal entities and acquisition of the shares must be entered not later than one year from the date of the decision.

Substantive assessment

Substantive test

What is the substantive test for clearance?

A merger must be prohibited or made conditional by the Antimonopoly Committee if it leads to the creation or strengthening of a dominant position in the relevant Uzbekistan market sector or otherwise leads to a limitation of competition in the Uzbekistan market.

Dominance is defined in the Competition Law as the position of one or several companies or groups in the market for a specific product or service that allows it or them to carry out their business activities independently from their competitors and seriously influence the terms of trade of such product or service or to impede other companies’ access to this market sector.

A company or group is viewed as dominant if its market share is:

  • 50 per cent or more; or
  • between 35 per cent and 50 per cent, provided a company or group had a stable market share for at least one year and there are possibilities to enter the market for new entrants and competitors.

Is there a special substantive test for joint ventures?

No, there is no special substantive test for joint ventures in Uzbekistan. The general merger control rules will apply.

Theories of harm

What are the ‘theories of harm’ that the authorities will investigate?

The Antimonopoly Committee investigates whether the transaction may lead to limitation of competition in the Uzbekistan market, including through abuse of a dominant position or coordinated actions of two or more business entities. These actions may include:

  • reduction of the quantity of goods on the market with the purpose of creating scarcity on commodities or the financial market, which results in an increase of prices;
  • establishing monopolistic high or low prices for goods;
  • creating barriers on commodities or financial markets for new entrants;
  • an increase or decrease in the prices of commodities or financial markets that is not owing to market forces; and
  • other actions that may lead to limitation of competition on the commodities or financial markets of Uzbekistan.
Non-competition issues

To what extent are non-competition issues relevant in the review process?

Usually, the legal test for clearance is competition-related and other issues, including the ones related to industrial policy or public interest are not covered by the review process. However, in the event the Antimonopoly Committee identifies any non-compliance with industry policy or conflict to public interests it very likely to report its findings to the relevant state authorities.

Economic efficiencies

To what extent does the authority take into account economic efficiencies in the review process?

The Antimonopoly Committee’s role is to find a compromise between protection of competition and economic development in Uzbekistan. The Antimonopoly Committee considers the economic impact of the transaction and may give clearance even if the transaction results in limitation of competition, provided that the parties perform certain actions to mitigate or eliminate the negative effects. Economic efficiencies are not covered by the review process.

Remedies and ancillary restraints

Regulatory powers

What powers do the authorities have to prohibit or otherwise interfere with a transaction?

The Antimonopoly Committee is authorised to either prohibit a transaction that has or may have an adverse effect on competition or to require the parties to fulfil certain conditions before a clearance is issued. In this event, the Antimonopoly Committee issues binding orders aimed at protecting competition. If a transaction that leads or may lead to limitation of competition in the Uzbekistan market is closed without Antimonopoly Committee approval, the Antimonopoly Committee is authorised to challenge the transaction in court.

Remedies and conditions

Is it possible to remedy competition issues, for example by giving divestment undertakings or behavioural remedies?

An approval may be subject to compliance with certain conditions at the decision of the Antimonopoly Committee. The Antimonopoly Committee may condition its approval, inter alia, with divestment undertakings or behavioural remedies.

What are the basic conditions and timing issues applicable to a divestment or other remedy?

Conditions of divestments undertakings or behavioural remedies, as well as timing, are specified by the Antimonopoly Committee in each particular case.

What is the track record of the authority in requiring remedies in foreign-to-foreign mergers?

There is no relevant track record available regarding remedies in foreign-to-foreign mergers.

Ancillary restrictions

In what circumstances will the clearance decision cover related arrangements (ancillary restrictions)?

The Competition Law is silent on this matter. Most likely, the clearance decision will cover only the transaction in question. If there are any doubts on whether an antitrust approval is required for related arrangements, an additional application should be filed.

Involvement of other parties or authorities

Third-party involvement and rights

Are customers and competitors involved in the review process and what rights do complainants have?

Usually, customers and competitors are not involved in the review process. However, the Antimonopoly Committee is entitled at its own discretion to invite the applicant (or his or her authorised representatives) and other concerned parties to attend meetings of the Special Committee.

Publicity and confidentiality

What publicity is given to the process and how do you protect commercial information, including business secrets, from disclosure?

The review process is not public.

Commercial secrets and any other information protected by law cannot be withheld in a filing. The Antimonopoly Committee has the right to demand it from the parties and suspend the review process until it is provided. The Antimonopoly Committee is under an obligation not to disclose commercial secrets or any other information protected by law contained in filings. The Antimonopoly Committee’s officials are criminally liable for unauthorised disclosure and compensation of the material damage done by such disclosure. However, in practice, these types of cases are rare.

Cross-border regulatory cooperation

Do the authorities cooperate with antitrust authorities in other jurisdictions?

Uzbekistan has signed bilateral treaties on legal assistance and legal cooperation with a number of countries, and each treaty provides a mechanism for how requests for information can be submitted to other jurisdictions. In practice, to our knowledge the Antimonopoly Committee’s cooperation with antitrust authorities in other jurisdictions is very limited.

Judicial review

Available avenues

What are the opportunities for appeal or judicial review?

Decisions of the Antimonopoly Committee may be challenged in the Uzbek court or with superior government authority. An appealed decision of the Antimonopoly Committee is put on hold for the duration of the appeal process.

Time frame

What is the usual time frame for appeal or judicial review?

Uzbekistan’s judicial process takes approximately two months at each of the three review levels: the first instance court, the court of appeal (or cassation) and the supervisory court of appeal. In practice, it could take up to six months to overturn a decision of the Antimonopoly Committee. If the case reaches the fourth appeal level, the Highest Economic Court, the review could take six months or longer.

Enforcement practice and future developments

Enforcement record

What is the recent enforcement record and what are the current enforcement concerns of the authorities?

Usually, the Antimonopoly Committee grants clearance without delay if all procedural requirements are met and a merger does not restrict competition.

Recent practice indicates that the Antimonopoly Committee requires filing of a notification even for foreign-to-foreign mergers where one of the entities carries out certain activities in Uzbekistan without having an established presence there (sales, supplies of equipment or commodities, etc). Usually, the Antimonopoly Committee’s reply is provided without delay in the form of clearance or confirmation that the merger does not affect the Uzbek market.

Regardless of the above reviewed thresholds, the most recent practice has been that applicability of filing and pre-approval is reviewed on a case-by-case basis and decided by the Antimonopoly Committee, which is the only state body authorised to make an assessment of whether or not a particular transaction has any impact on the relevant market in Uzbekistan. Thus, obtaining a prior written confirmation of the Antimonopoly Committee that no pre-approval is required for a particular transition is a must even if the envisaged transaction does not exceed the thresholds provided in the Competition Law.

Reform proposals

Are there current proposals to change the legislation?

As described above, Uzbekistan’s antimonopoly regulations have recently been amended, including the introduction of the Law of the Republic of Uzbekistan on Competition dated 6 January 2012, Regulation No. 230 and Regulation No. 344. No other changes are expected at this point.

Update and trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year?

No updates at this time.