Nasimbek Azizov, Academy of the General Prosecutor’s Office of Uzbekistan
My secondment at Lund University
I am Nasimbek Azizov and I conducted research on the settlement of economic disputes in business and their impact on the business environment in Uzbekistan during my secondment as a guest researcher at Lund University. The research was conducted within the European Commission funded project “Central Asian Law: Legal Cultures and Business Environment”, and coordinated by Sociology of Law Department. I was very pleased to meet the Head of the Department Isabel Schoultz and to discuss all issues related to my research topic with Rustamjon Urinboyev (project coordinator) and they created all the conditions for us to conduct research.
My secondment at Lund University started from November 9 and completed on December 31, 2021. Using this blog post as an opportunity, let me share my secondment experiences and research activity, where I was hosted as a researcher by Sociology of Law Department. My secondment at Lund University provided me opportunities to read foreign publications regarding my research and to learn research methods in the context of sociology of law.As part of my study, I have used electronic resources database and library resources of Lund University. I have also attended a course on “Law, society and corruption” designed by the Department of Sociology of Law of Lund University. Within the frame of my research, I took part in a webinar on “The importance of legal consciousness and legal culture of citizens in maintaining rule of law”, organized by Uzbek Embassy in Germany with the partnership of Sociology of Law Department of the Lund University, and Academy of the General Prosecutor’s Office, and World Association of Youth of Uzbekistan (on December 18th). During my presentation, I gave a brief overview of my secondment at Lund University and introduced the content of my research topic. Also, based on my research work, I prepared a paper for publishing in Project team annual handbook.
In my opinion, today it is important to study the essence, content and interrelation of law and sociology in the field of legal education and science in Uzbekistan. Because in legal practice, it is very important to study the views of members of society, to take into account the interests of society in the preparation of each legal norm.
When I conducted the research, I became convinced that it is important not only to analyze legal norms, but also to conduct sociological research on how it works in society and get real information about ways to resolve disputes between entrepreneurs and their impact on the business environment. This requires a study of economic court decisions, the views of legal practitioners and business representatives.
At present, the successful development of all businesses depends on their legal protection. At the same time, the emergence of disputes between entrepreneurs and their resolution is closely linked to the legal culture. The state of the legal environment and the level of the formed legal culture and other aspects directly affect and determine the degree of protection of the business and its interests.
We guess that, more than million different economic contracts are signed in our country every year. These are only approximate data. Undoubtedly, with such a development of economic activity, it is very important that business disputes are resolved as soon as possible.
Today, we can observe that most of the economic disputes between entrepreneurs arise from contracts concluded between them. The basis of entrepreneurship is contractual relations. Failure to fulfill the obligations set forth in the contract will lead to a conflict situation.
In this regard, it is necessary to develop in every possible way the methods widely recommended in the world: pre-trial (claim) settlement procedure and judicial settlement of disputes through negotiations (mediation) and amicable (settlement) agreements, as well as alternative ways of resolving conflicts through arbitration.
My research topic is also related to the activities of the organization I am currently working on. The main task of the prosecutor’s office in Uzbekistan is to ensure the rule of law in the country, strengthen the rule of law, protect the rights and freedoms of citizens, the legally protected interests of society and the state, crime prevention. In carrying out this work, special attention is paid to ensuring the protection and support of business entities. In particular, cases of unjustified interference in business activities and illegal inspections of business activities are being eliminated. Violation of contract discipline and payment discipline is also considered a type of offense. According to the law of the Republic of Uzbekistan “On contracting and legal basis of activity of business entities” supervision of compliance with legislation related to the conclusion, execution, amendment and termination of business contracts is carried out by the prosecution authorities in accordance with the legislative acts. These bodies also take the necessary measures to having the perpetrators brought to justice in the order established by law, and ensure compensation of the damage caused to the business entity. The Academy of the General Prosecutor’s Office of the Republic of Uzbekistan is an educational and research institution. The main goal of the Academy is to organize an effective system of training, retraining and advanced training of employees of the prosecutor’s office and other personnel, as well as to conduct fundamental and applied scientific research. And I am an associate professor of the Academy of the General Prosecutor’s Office of the Republic of Uzbekistan and I have been developing the knowledge and skills of prosecutors on prosecutorial control over the implementation of laws in the economic sphere, in particular in the field of entrepreneurship.
At this point, it is necessary to find answers to the following questions for research:
- How much are entrepreneurs aware of the ways to resolve a dispute before a court or through an economic court or through an arbitration court, which is not a state court?
- Do entrepreneurs specify the procedure for pre-trial settlement of a dispute under a contract as a mandatory clause in the contract?
- Do entrepreneurs know what methods of pre-trial settlement of contract disputes arise and what are the mechanisms for applying these methods in practice?
- To what extent is the increase in the number of entrepreneurs’ claims for non-fulfillment of contractual obligations by regions related to the level of legal culture of entrepreneurs, and is this a positive or negative indicator?
- What is the state of certain legal mechanisms in the process of considering entrepreneurs’ appeals to economic courts and their appeals?
- How does the emergence of disputes between entrepreneurs affect the business environment?
- How often do entrepreneurs use legal services (lawyers)?
A draft survey covering these questions was also developed.
Many developed countries use ADR (Alternative Dispute Resolution) methods as a conflict resolution tool. I believe that, now in Uzbekistan on of the main methods of resolving business disputes is the court. Conflicts can arise between business owners due to various misunderstandings. Moreover, it is not always possible to find a solution peacefully. However, the parties have several options for solving the problem. This can be an appeal to the court or to a third party, which, based on all the information, will help the parties to come to an agreement. So-called “resolutions”, “settlements” or “terminations” are frequently not the end of the story of a particular dispute or case, especially in a situation of continuing relationships (Twining W, 1993, 392).
I analyzed the issues related to the ADR process as the dispute settlement mechanism in commercial contracts, focusing on mediation and pre-trial (claim) settlement procedure.
Each business owner, having signed a contract, expects its execution. In connection with the pandemic, the violation of contracts is not always the result of the counterparty’s bad faith, but in fact it can be force majeure. Therefore, it is better for the parties to negotiate in order to maintain relations and business. Therefore, it is extremely important to popularize ADR among entrepreneurs.
The main prerequisites for the use of ADR are:
– the parties to the conflict have a desire to preserve the existing relations between them, resolving the dispute through negotiations;
– the parties wish to resolve the conflict less formally;
– the parties want to quickly resolve the conflict.
Until 2019, the only way to reduce the number of cases considered by the economic court was one of the types of pre-trial settlement of disputes – claims proceedings, which is traditional for Uzbek law (this year amendments were made to the Economic procedural code about mediation).
Legal reforms implemented in Uzbekistan affect different aspects of legal activity and changes also occurred in the organization and working conditions of courts. And these reforms will ensure accelerated implementation of the requirements stipulated in the indicators of the annual “Doing Business” report. It was mentioned that one of the highlights of Uzbekistan’s reforms is making contract enforcement easier by introducing a consolidated law on voluntary mediation, establishing financial incentives for the parties to attempt mediation, and publishing performance measurement reports on local commercial courts (Doing Business 2020: Reforms Propel Uzbekistan to Place Among World’s Top 20 Business Climate Improvers).
An economic dispute is a dispute between legal entities, or between a legal entity and an individual, or between individuals whether domestic or foreign that may arise from the breach of a contract or from a dispute related to production or business operations.
Economic court shall settle disputes:
1) on disagreements arising at the conclusion of a contract, the obligatory conclusion of which is provided for by law;
2) on disagreements arising from the conclusion of a contract, the transfer of which to the court is agreed by the parties to the contract;
3) on amendment or termination of a contract;
4) on declaring a transaction invalid;
5) on non-performance or improper performance of obligations;
6) on declaration of ownership;
7) on reclamation of property from another’s adverse possession by the owner or another lawful possessor.
…
The court shall also settle other disputes attributed to its competence by law.
Pre-trial settlement of economic disputes in Uzbekistan is also carried out through:
negotiations;
pre-trial (claim) settlement procedure;
mediation (it may be during the court litigation).
Most of the contracts concluded by business entities today stipulate that when a dispute arises, the parties must resolve the dispute amicably through negotiations, and if the dispute is not resolved through this method, they must go to the court. In most cases, the settlement of disputes through negotiations (resolving amicably) is specified in the contracts as a separate item. In case of failure to reach an agreement in such negotiations, the disputes shall be settled in court. If the contract provides for the peaceful settlement of disputes between the parties, but does not specify the procedure for resolving the dispute, then the procedure for resolving the dispute by pre-trial (claim) settlement procedure is not mandatory. According to the general theory, the use of ADR methods cannot be an obstacle to bringing a dispute to court. The mandatory provision of the mediation procedure may violate the disputantsʼ right of access to the justice, the mediation procedure should not become a barrier before the litigation (Karaketov M, 2014, 100).
Pre-trial (claim) settlement procedure
The use of the pre-trial (claim) settlement procedure for resolving a dispute by the disputing parties is aimed at prompt resolution of the dispute and serves as an additional guarantee of protection of rights. It is the preeminent mode of dispute resolution in Uzbekistan. The pre-trial (claim) settlement procedure of disputes means the exchange of letters (claim and response to the claim) stating the views and proposals of the parties to resolve the dispute.
The business entity whose rights and legitimate interests are violated, shall have the right to lodge a claim against the business entity that violated these rights and interests.
In case of full or partial recognition of the claim, the claimant has the right, within twenty days upon receipt of the reply, to submit to the bank an order to write off the amount recognized by the debtor incontestably. The debtor’s response shall be attached to the order.
A party may file a court claim and an application for a court ruling to be issued to the economic court in case of refusal (partial refusal) or failure to receive a response to the claim within the prescribed period from the other party.
But by the Economic procedural code if the law establishes a pre-trial (claim) settlement procedure for a certain category of disputes or it is provided for by a contract, the case may be initiated in court only after the parties have taken measures to voluntarily settle their relationship. But in the law “On contracting and legal basis of activity of business entities” it is written as a right.
Why don’t some of the business entities use this mechanism and how informed they are about it? Most of the people do not have sufficient information regarding this procedure. According to the law of the Republic of Uzbekistan “On contracting and legal basis of activity of business entities” business contracts shall be checked for compliance with the law by the legal service of business entities or by involved lawyers in the process of preparation. The conclusion of contracts without their approval is not allowed.
What does an increase of the number of economic disputes mean? Is it a negative or positive indicator? We should assess the increase in disputes between business entities as a negative indicator. Calculating an indicator of conflicts related to the fulfillment of obligations and others, crimes and administrative offences related to business activities help us to know about the business environment of the any region. For example, determination of the average size of the number of conflicts (in the economic, civil, administrative courts) between business entities, between business entities and persons or administrative bodies, in addition crimes and administrative offenses related to business activities (in the criminal courts), considered with the participation of business entities in the respective region, per 1000 business entities operating in this region, is calculated using the following formula:
Indicator size №1 = (Conflicts/ Business entities ) × 1000
Indicator size №2 = (Crimes and administrative offenses related to business activities / Business entities ) × 1000
The third indicator is the determination of the average size of the number of court orders (in economic courts the court order is an independent type of ruling of the court of first instance, which is not related to the non-dispute claim proceedings in the court, is issued according to the requirements, the list of which is specified in Economic Procedure Code of the Republic of Uzbekistan and has the force of an executive document) issued in relation to business entities in economic courts in the respective region, per 1000 business entities operating in this area, is calculated using the following formula:
Indicator size №3 = (Number of court orders / the number of business entities) × 1000
Mediation
ADR is a less formal procedure in comparison with the procedure for considering cases in court, allowing to significantly relieve the burden on the judicial system while resolving the conflict that has arisen (Rustambekov, 2020).
Mediation differs from other alternative methods of dispute resolution (arbitration, pre-trial (claim) settlement procedure) in its informal nature. Mediation can be applied out of court, in the process of consideration of the dispute in court, before the court is removed to a separate (advisory) room for the adoption of a judicial act, as well as in the process of execution of judicial acts and acts of other bodies.
The economic court is obliged to suspend the proceedings due to conclusion of an agreement on the mediation procedure until the end of the mediation procedure, but no more than sixty days.
If the mediation agreement is not fulfilled, the parties are entitled to apply to the court for the protection of their rights. It means that the plaintiff shall have the right to submit again to the court. It seems to me that this mechanism will not work.
My hypothesis is that it would work effectively if a mediation agreement approved by the court and which has not been executed voluntarily within the time limits specified by the agreement, shall be subject to enforcement on the basis of a writ of execution issued by the court at the petition of the person who entered into the mediation agreement. In Russian Federation and Belarus mediation agreement was equated as an amicable agreement and enforcement procedure of the mediation agreement is the same with the amicable agreement.
Mediation has many advantages over litigation. For example, you save time and money. During mediation, there are no winners or losers, since it provides for the consolidation of agreements between the parties. The mediation process consists of several stages (the choice of a mediator, conclusion of an agreement on the use of mediation, mediation and conclusion a mediation agreement, execution of the mediation agreement).
When a dispute is resolved by a mediation agreement in the manner of mediation, the paid state fee shall be returned, with the exception of cases of concluding a mediation agreement in the process of execution of judicial acts and acts of other bodies (Article 17 of the Law of the Republic of Uzbekistan “On Mediation” dated July 3, 2018, No. LRU-482.). And the state should provide some privileges for the parties who settle the dispute through amicable (settlement) agreements.
The Civil and the Economic Courts can promote its widespread use by informing the parties about the existence of mediation and its advantages (Masadikov, 2020). The state need to actively promote mediation among the business entities and organize meetings between mediators and judges. Ministry of justice of Uzbekistan maintains a register of professional mediators.
Today, I commend the work of the Chamber of Commerce and Industry in dispute resolution and mediation. Because according to the Chamber of Commerce and Industry of Uzbekistan, in the first half of 2019 year, 793 disputes between business entities were resolved in the process of pre-trial dispute resolution (mediation). For example, in the interests of “Shoxidon Metan Gaz” LLC, the Namangan Regional Department of the Chamber of Commerce and Industry filed a lawsuit against the Namangan regional administration for 3,414,000,000 sums, but the lawsuit was dismissed due to a mediation agreement between the parties (case No. 4-16-2105 / 27, dated 12.11.2021). According to the Law “On the Chamber of Commerce and Industry of the Republic of Uzbekistan”, the Chamber has the right to conduct pre-trial settlement of disputes between the parties. In addition, the Chamber examines all primary documents before filing a lawsuit in the interests of its members, and the responsible officer of the Chamber holds a meeting between the parties to resolve the dispute through a pre-trial settlement procedure (mediation).
In Sweden New Entrepreneur’s Business Center (Nyföretagar Centrum Lund) provides also free advice to those who are thinking of starting their own company or already have one. There are two different types of meetings: individual counseling and start-own-course in group. In Uzbekistan, it is advisable to provide information on mediation and pre-trial dispute resolution in the training and education of entrepreneurs.
Currently, economic courts are assisting the parties in resolving disputes by recommending that the parties enter into a mediation agreement, explaining its consequences, and giving them appropriate time to do so. This is a sign that the conflicting parties are realizing that the new institution is effective. This institution is similar in many respects to the procedure for pre-trial settlement of economic disputes (submission of applications) and the procedure for concluding a settlement agreement, but differs from them. The difference is that mediation is carried out with the participation of a mediator, the proceedings are not terminated when the mediation agreement is concluded, but the claim is left without consideration, and then the parties have the right to go to court to protect their rights in case of non-compliance with the terms of the mediation agreement. When a mediation agreement is concluded, the state fee paid to the court is refunded, but not in the settlement agreement.
In conclusion, it is necessary to improve the current national legislation on the pre-trial (claim) settlement procedure of economic disputes and mediation in the following ways:
1. Business contracts should include a mediation clause to allow for alternative / out-of-court dispute resolution, if the parties want this. Because the Law “On contracting and legal basis of activity of business entities” does not require the parties to specify and follow the mediation procedure in the contracts.
2. Disputes should be made available on the website where court decisions are published (www.public.sud.uz), including the name of any business entity with their consent. This allows the parties wishing to sign the contract to receive information about their future partner on previous contractual disputes.
3. The procedure for conducting “negotiations” as a pre-trial settlement of disputes should be established at the legislative level and the consequences of non-compliance should be established in the Code of Economic Procedure.
4. The Code of Economic Procedure of the Republic of Uzbekistan should be amended to allow businesses to apply not only the procedure for filing an application as a pre-trial (claim) procedure, but also the procedure of “negotiation” and “mediation” as other methods of pre-trial settlement.
5. When a dispute is resolved by a mediation agreement, the paid state fee shall be returned. Therefore, the state should provide some privileges for state fee of the parties who settle the dispute through amicable (settlement) agreements too.
6. The entrepreneurs should be informed about the existence and possibilities of pre-trial (claim) settlement procedure of economic disputes and mediation, in addition judges, lawyers, business entities should be involved in the interviews, conferences, round tables devoted to these issues.
References:
Chamber of Commerce and Industry of Uzbekistan. (2019). Retrieved 16 December 2021, from https://chamber.uz/uzk/news/4789
Doing Business 2020: Reforms Propel Uzbekistan to Place Among World’s Top 20 Business Climate Improvers. https://www.worldbank.org/en/news/press-release/2019/10/24/doing-business-2020-reforms-propel-uzbekistan-to-place-among-worlds-top-20-business-climate-improvers
Economic court case No. 4-16-2105 / 27 (12.11.2021) of Namangan regional court. https://public.sud.uz/#!/sign/economy
Karaketov M. (2014). “Creating an appropriate model of court-connected mediation for uzbek judicial system”. Doctoral Thesis in Law. https://nagoya.repo.nii.ac.jp/record/19045/files/k10785_thesis.pdf
Law of the Republic of Uzbekistan “On Mediation” dated July 3, 2018, No. LRU-482. https://lex.uz/docs/4407205
Law of the Republic of Uzbekistan “On the Chamber of Commerce and Industry of the Republic of Uzbekistan” dated July 9, 2018, No. LRU-483. https://lex.uz/docs/3815461
Masadikov, Sherzodbek. 2020. ‘Mediation in Uzbekistan’. Kluwer Mediation Blog. http://mediationblog.kluwerarbitration.com/2020/02/10/mediation-in-uzbekistan/ (December 16, 2021).
Rustambekov I. (2020). Genesis of alternative dispute resolution mechanisms in the republic of uzbekistan. Review of Law Sciences, November Еxclusive issue, 7–20.).
Twining, W. (1993). Alternative to What? Theories of Litigation, Procedure and Dispute Settlement in Anglo-American Jurisprudence: Some Neglected Classics. The Modern Law Review, 56(3), 380–392. https://doi.org/10.1111/j.1468-2230.1993.tb02679.x
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