RESOLUTION OF THE SUPREME ECONOMIC COURT OF THE REPUBLIC OF UZBEKISTAN

of June 1, 2004 No. 15-03-04/4854

(extraction)

The privileges provided to foreign investors of Art. 3 of the Law "About Guarantees and Measures of Protection of the Rights of Foreign Investors" are applied under condition when the fact in evidence of deterioration in conditions of investment by the changes made to the legislation is investor.

The justice department of the Fergana region made the claim for the benefit of JV 172-TEHASO to the defendant - to Management of the State Customs Committee on the Fergana region about return of 108765447 bags of the paid customs payments.

By the decision of economic court satisfaction of the claim it is refused.

The decision is left by the resolution of appellate instance without change.

The justice department of the Fergana region appealed to the Supreme Economic Court of the Republic of Uzbekistan with the writ of appeal in which it asks to cancel the judgment and to return the amount of the paid VAT.

Judicial board, having studied case papers and arguments of the writ of appeal, considers the writ of appeal not subject to satisfaction, the decision of economic court - to leaving without change on the following bases.

From case papers it is seen that JV 112-TEHASO is formed based on the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan by N455 of December 23, 1996 in Fergana for production of high-quality oils, their packing and packaging. The share of the foreign investor (American) in the amount of 50,1% and share of the Uzbek participant - % 49,9 is provided in authorized fund. Appendix to this resolution provides the rights and privileges provided to newly created joint business. In particular, JV I2-TEHASO is exempted:

- from the customs duties, charges on the equipment, mechanisms, products and property imported by joint business for implementation of the activities and for personal needs of the foreign employees;

- duties for export and any charges connected with export of products of the joint venture from the Republic of Uzbekistan;

- payments of all taxes entering competence of the Cabinet of Ministers for the five-year period from the moment of registration;

- all contributions to Social Insurance Fund concerning his workers who are not citizens of the Republic of Uzbekistan.

Thus, the joint venture is exempted from payment of some types of customs payments. It is provided in Article 103 of the Customs code of the Republic of Uzbekistan that when moving goods and vehicles through customs border the following customs payments are paid: customs duty, VAT, excise tax and other charges. From this it follows that the value added tax is independent type of customs payment, however the Resolution KM RUZ N455 not release of the claimant from payment of the VAT is provided, therefore, the claimant shall make this type of customs payment.

In the writ of appeal the claimant asks to apply regulation of article 3 of the Law RUZ "About Guarantees and Measures of Protection of the Rights of Foreign Investors" of which is determined that if the subsequent legislation worsens investment conditions, then the foreign investor within ten years from the moment of investment has the right at discretion to apply legislation provisions. However, on this case the claimant not fact in evidence of deterioration in conditions of investment as the company within five years really had and applied the privileges established by the legislation.

Under such circumstances, the judicial board considers that the writ of appeal is unreasonable, and the decision of economic court is made legally and there are no bases for its cancellation.

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