If a party to an investment agreement fails to transfer the property stipulated by the agreement, breaches the deadline for connecting infrastructure, or refuses to perform an obligation it has undertaken, the investor may demand performance, compensation for losses and, where sufficient grounds exist, amendment or termination of the agreement. However, the nature of the claim depends on who signed the agreement, what exactly was undertaken, and whether the breach is contractual or relates to the exercise of public authority. Under Articles 236 and 237 of the Civil Code, obligations must be performed properly; unilateral refusal to perform an obligation and unilateral amendment of its terms are permitted only in cases provided for by law or by the agreement. Accordingly, a claim should be based on a specific provision of the agreement: the obligated party, the required action, the deadline, the conditions of performance, and the breach committed. For example, an obligation to transfer an asset under a handover and acceptance certificate by a specified date makes it possible to establish delay. By contrast, wording such as “to facilitate the implementation of the project” does not, by itself, create an unconditional obligation to allocate a land plot, issue a permit, or pay connection costs. The scope of such an obligation must be determined on the basis of the agreement and the applicable legal provisions. A separate legal regime applies to an investment agreement between a foreign investor and the Government. Articles 40–42 of Law No. ZRU-598 of 25 December 2019 “On Investments and Investment Activities” define the parties to and content of such an agreement, including investment obligations, state support, liability, and dispute resolution procedures. An agreement with a private company or a khokimiyat cannot automatically be treated as such an investment agreement. Under Article 45 of this Law, the State is liable for obligations it has assumed under an agreement signed by an authorized person. The State is liable for the obligations of a resident attracting foreign investment only where a state guarantee has been provided. Therefore, before asserting claims against the State, it is necessary to verify the authority of the signatory and the legal basis for each promised measure of state support. It is necessary to determine whether the investor’s performance depended on prior performance by the other party. Article 256 of the Civil Code allows a party to suspend counter-performance or refuse performance and claim damages where the performance required from the other party under the agreement has not been provided. In the event of partial non-performance, the suspension must correspond to the unperformed part. This rule applies unless otherwise provided by law or by the agreement. For example, if the agreement provides that construction is to begin after the site has been transferred and access has been provided, defending a claim concerning delay will require the relevant provisions of the agreement, documents demonstrating the investor’s readiness to commence work, and notices concerning the impediment. If the agreement does not establish a connection between the respective obligations, reliance on Article 256 requires additional justification. A delay in obtaining a permit or an infrastructure connection does not automatically constitute force majeure. The conditions for exemption from liability must be assessed under Article 333 of the Civil Code and the agreement. In entrepreneurial obligations, lack of funds or a breach by a counterparty does not, by itself, constitute force majeure. Article 14 of the Civil Code allows recovery of actual losses and lost profits. In contractual claims, the basis for liability is established by Article 324 of the Civil Code. The calculation must distinguish expenses caused by the breach from ordinary project costs. • Additional equipment storage costs should be substantiated by a storage agreement, invoices, payment documents, and evidence demonstrating that installation was impossible due to the defendant’s breach. • Increased financing costs should be supported by the loan agreement, repayment schedule, bank calculations, and evidence demonstrating that the additional interest arose as a result of the specific delay. • Lost profits should be substantiated by executed contracts, evidence of preparations for production, orders, and a calculation of income taking into account the necessary expenses. A business plan alone does not prove that all projected profits would actually have been earned. The amount invested does not automatically equal the amount of recoverable losses. If purchased equipment remains with the investor and can still be used, including its entire value in the claimed losses requires separate justification. The same expense cannot be counted twice under different descriptions. Reasonable measures should also be taken to mitigate losses, including timely notification of contractors, revision of delivery arrangements, and measures to prevent damage to property. Under Article 335 of the Civil Code, contributing to an increase in losses or failing to take measures to mitigate them may result in a reduction of compensation or refusal to award compensation. Article 19 of Law No. ZRU-598 provides for the application of the previous legislation for ten years from the date of investment where investment conditions deteriorate. However, this guarantee applies in the circumstances specifically listed in the Article, including additional restrictions on the repatriation of income, requirements concerning the amount of investment, restrictions on foreign participation, more burdensome visa procedures, and other requirements relating to foreign investment specified by law. The commencement date of the guarantee depends on the form of investment. For example, when an enterprise is established, the period begins from the date of its state registration; where an investment agreement with the Government establishes investment obligations, it begins from the date the agreement enters into force. The Article also provides an exception for legislation directly related to the protection of national security. This provision cannot be interpreted as guaranteeing that all taxes, tariffs, land regulations, and permitting procedures will remain unchanged for ten years. In a dispute concerning a benefit or incentive, it is necessary to identify the specific legal act, the duration and conditions of the benefit, and the legal provision allowing it to remain applicable after a change in legislation. Under Article 382 of the Civil Code, a court may amend or terminate an agreement in the event of a material breach by the other party or on another ground provided by law or by the agreement. A breach is material where the affected party is substantially deprived of what it was entitled to expect when entering into the agreement. Before bringing such a claim, a proposal to amend or terminate the agreement must be sent to the other party. Court proceedings may be initiated after the proposal has been rejected or no response has been received within the prescribed period. If no period is specified in the proposal, by law, or in the agreement, a 30-day period applies under Article 384 of the Civil Code. This requirement applies specifically to claims seeking amendment or termination of an agreement, rather than to every claim arising from the project. Termination does not, by itself, mean that all investments must be returned. Under Article 385 of the Civil Code, performance rendered before amendment or termination of the agreement is not returned unless otherwise provided by law or by agreement of the parties. The legal grounds for the return of property and payments and for compensation for losses must therefore be formulated separately. A special rule applies to investment agreements with the Government under Article 44 of Law No. ZRU-598. Where a foreign investor breaches its obligations, the authorized body sends written notice requesting documents substantiating the suspension of the project or demonstrating the possibility of continuing it. If such documents are not submitted within three months from receipt of the notice, the authorized body submits a proposal to the Government and, following the Government’s conclusion, notifies the investor of the early termination of the agreement. Accordingly, this procedure does not amount to immediate termination of the agreement upon the first notice. The same Article provides that, upon termination of the agreement, taxes and other payments that were not paid to the budget as a result of additional benefits granted under the agreement must be paid. Termination by mutual agreement of the parties is regulated separately. The financial consequences of withdrawal from the project should therefore be calculated before a notice of termination is issued. Disputes concerning the conclusion, amendment, termination, and performance of an investment agreement, as well as recovery of losses and contractual penalties provided for by such an agreement, constitute investment disputes under Article 30¹ of the Economic Procedural Code. If, however, the investor challenges a decision, action, or omission of an administrative authority made in the exercise of public powers, the rules of administrative proceedings apply. The mere participation of a state authority in an agreement does not, by itself, determine which court has jurisdiction. For disputes related to foreign investment, Article 63 of Law No. ZRU-598 provides for negotiations, followed by mediation and, if no settlement is reached, consideration of the dispute by a court of the Republic of Uzbekistan. International arbitration is available where the conditions established by that Article are satisfied and the State has given valid written consent in an international treaty or in an agreement with the investor. The Law itself does not constitute such consent on behalf of the State. Before selecting a dispute resolution mechanism, the applicable international treaty should be reviewed to determine who qualifies as a protected investor, which investments are covered, whether a negotiation period or preliminary steps are required, and whether there are restrictions concerning the choice of forum. Under Article 2 of Law No. ZRU-598, where an international treaty of the Republic of Uzbekistan establishes rules different from those contained in domestic legislation, the rules of the international treaty apply. A written demand should specify: • the relevant provision of the agreement; If the investor suspends counter-performance, the legal basis and scope of the suspension, as well as the connection between the respective obligations, should be specified. Evidence confirming delivery of the demand should be retained. The general limitation period is three years. For an obligation with a specified performance date, the limitation period begins to run after the deadline for performance has expired, pursuant to Articles 150 and 154 of the Civil Code. A special limitation period may be prescribed by law for particular claims. The expiry date of the applicable limitation period should therefore be determined before entering into lengthy negotiations. Material current as of 19 September 2026.Investor Protection in the Event of a Breach of an Investment Agreement
What obligations may be enforced?
What if claims concerning delays are brought against the investor?
What losses may be recovered?
What does the ten-year stability guarantee mean?
Amendment and termination of the agreement
Which court has jurisdiction, and when is arbitration available?
What should be sent to the other party before a dispute?
• the obligation that has been breached;
• the date on which performance became due;
• evidence of the investor’s own performance;
• the action required from the other party; and
• a substantiated calculation of losses.Sources
