An official website of the United States Government Here's how you know

Official websites use .gov

A .gov website belongs to an official government organization in the United States.

Secure .gov websites use HTTPS

A lock ( ) or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.


3. Legal Regime

Transparency of the Regulatory System

The government does not use transparent policies to foster competition and foreign investment. Laws have frequent references to bylaws that are not publicly available.  Most bylaws are passed in the form of presidential decrees.  Such decrees are not categorized by subject, which makes it difficult to find relevant cross references.  Personal relations with government officials can play a decisive role in determining how and when government regulations are applied.  Conversely, running a successful foreign business can lead to problems with local authorities.  Some local officials may enforce certain verbal directives as if they were official laws or regulations, without providing any proof of the existence of such laws or regulations.  Some successful businesspeople left the country fearing possible targeting by the authorities.  In some cases, authorities have jailed the legal owners of a local enterprise using security-related laws as a legal pretext and reopened the business under new ownership.  There is no information available on whether the government conducts any market study or quantitative analysis of the impact of regulations. Regulations often appear to follow the government’s try-and-see approach to addressing pressing issues.  (See “Expropriation and Compensation” below for specific examples of expropriation.)

Some U.S. firms, including General Electric and John Deere, have established themselves as key suppliers in certain sectors, but their business operations are largely limited to sales of industrial equipment to the Turkmen government.  Some companies require upfront payment prior to delivery of goods.  Government delays in payment to foreign companies and restrictions on converting earnings into hard currency are major contributors to the country’s challenging investment climate.  Moreover, arbitrary audits and investigations by several government bodies are common in relation to both foreign and local companies.  Belarusian firm Belgorkhimprom is in litigation with Turkmenistan over contractual and non-payment issues.

Many businesses report that bureaucratic procedures are confusing and cumbersome.  The government does not generally provide information support to investors, and officials use this lack of information to their personal benefit.  As a result, foreign companies may spend months conducting due diligence in Turkmenistan.  A serious impediment to foreign investment is the lack of knowledge of internationally recognized business practices, as well as the fact that there are few fluent English speakers in Turkmenistan.  English-language material on legislation is scarce, and there are very few business consultants to assist investors.  Proposed laws and regulations are not generally published in draft form for public comment.  The general public is typically not invited to make contributions during parliamentary deliberations on the proposed bills or amendments to legislation and finds out about such laws only when published in the official newspaper.

There are no standards-setting consortia or organizations besides the Main State Standards Service.  There is no independent body for filing complaints.  Financial disclosure requirements are neither transparent nor consistent with international norms.  Government enterprises are not required to publicize financial statements, even to foreign partners.  Financial audits are often conducted by local auditors, not internationally recognized firms.

The legal framework contained in the Law on Petroleum (2008) was a partial step toward creating a more transparent policy in the energy sector.  Turkmenistan’s banks completed transitioning to International Financial Reporting Standards (IFRS).  State-owned agencies began the transition to the IFRS in 2012 and fully transitioned to National Financing Reporting Standards (NFRS) in January 2014, which is reportedly in accordance with IFRS.  While the IFRS may improve accounting standards by bringing them into compliance with international standards, it has no discernible impact on Turkmenistan’s fiscal transparency since fiscal data remains inaccessible to the public.  There is no publicly available information regarding the budget’s conformity with IFRS.  There is no public consultation process on draft bills and there are no informal regulatory processes managed by nongovernmental organizations or private sector associations.  Public finances and debt obligations are not transparent at all.

International Regulatory Considerations

Turkmenistan pursues a policy of neutrality (acknowledged by the United Nations in 1995) and generally does not join regional blocs.  Turkmenistan is, however, a member of the Economic Cooperation Organization (ECO), a ten-member intergovernmental organization created in 1985 to promote trade and economic cooperation among its members.  In drafting laws and regulations, the government usually includes a clause that states international agreements and laws will prevail in the case of a conflict between local and international legislation.  Turkmenistan is not a member of the Eurasian Economic Union or the WTO, though it may soon pursue WTO observer status.

Legal System and Judicial Independence

Turkmenistan is a civil law country in terms of the nature of the legal system and many laws have been codified in an effort to transition from Soviet laws.  The Mejlis, the country’s parliament, adopts nearly 50 laws per year without involving the public.  Most contracts negotiated with the government have an arbitration clause.  The Embassy strongly advises U.S. companies to include an arbitration clause identifying a dispute resolution venue outside Turkmenistan.  There have been several commercial disputes involving U.S. and other foreign investors or contractors in Turkmenistan, though not all disputes were filed with arbitration courts.  Investment and commercial disputes involving Turkmenistan have three common themes: nonpayment of debts, non-delivery of goods or services, and contract renegotiations.  The government may claim the provider did not meet the terms of a contract as justification for nonpayment.  Several disputes have centered on the government’s unwillingness to pay in freely convertible currency as contractually required.  In cases where government entities have not delivered goods or services, the government has often ignored demands for delivery.  Finally, a change in leadership in the government agency that signed the original contract routinely triggers the government’s desire to re-evaluate the entire contract, including profit distribution, management responsibilities, and payment schedules.  The judicial branch is independent of the executive on paper only and is largely influenced by the executive branch.

On February 28, 2015, President Berdimuhamedov signed an updated law entitled “On the Chamber of Commerce and Industry of Turkmenistan” (first adopted in 1993).  The new law redefined the legal and economic framework for the activities of the Chamber, defined the state support measures, and created a new body for international commercial arbitration under the Chamber’s purview.  This body can consider disputes arising from contractual and other civil-legal relations in foreign trade and other forms of international economic relations, if at least one of the parties to the dispute is located outside of Turkmenistan.  The enforcement of the decisions of commercial arbitration outside of Turkmenistan may be denied in Turkmenistan under certain conditions listed under Article 47 of the Law of Turkmenistan, “On Commercial Arbitration”, adopted in 2014 and in force as of 2016.  International commercial arbitration is governed by the Law of Turkmenistan “On International Commercial Arbitration” clause and other domestic laws.  According to the commercial arbitration law, the parties in dispute can appeal the arbitration decision only to the Supreme Court of Turkmenistan and nowhere abroad.  The government of Turkmenistan recognizes foreign court judgements on a case-by-case basis.

  • According to the 2008 Law on Foreign Investment, all foreign and domestic companies and foreign investments must be registered at the Ministry of Finance and Economy.
  • The Petroleum Law of 2008 (last amended in 2012) regulates offshore and onshore petroleum operations in Turkmenistan, including petroleum licensing, taxation, accounting, and other rights and obligations of state agencies and foreign partners. The Petroleum Law supersedes all other legislation pertaining to petroleum activities, including the Tax Code.
  • According to the Land Code (last amended February 2017), foreign companies or individuals are permitted to lease land for non-agricultural purposes, but only the cabinet of ministers has the authority to grant the lease. Foreign companies may own structures and buildings.
  • Turkmenistan adopted a Bankruptcy Law in 1993. Other laws affecting foreign investors include the Law on Investments (last amended in 1993), the Law on Joint Stock Societies (1999), the Law on Enterprises (2000), the Law on Business Activities (last amended in 1993), the Civil Code enforced since 2000, and the 1993 Law on Property.

Turkmenistan requires that import/export transactions and investment projects be registered at the State Commodity and Raw Materials Exchange (SCRME) and at the Ministry of Finance and Economy.  The procedure applies not only to the contracts and agreements signed at SCRME, but also to contracts signed between third parties.  SCRME is state-owned and is the only exchange in the country.  The contract registration procedure includes an assessment of “price justification”, and while SCRME does not directly dictate pricing, it does generally set a ceiling for imports and a minimum price for exports.  Import transactions must be registered before goods are delivered to Turkmenistan.  The government generally favors long-term investment projects that do not require regular hard currency purchases of raw materials from foreign markets.

Laws and Regulations on Foreign Direct Investment

Under Turkmenistan’s law, all local and foreign entities operating in Turkmenistan are required to register with the Registration Department under the Ministry of Finance and Economy.  Before the registration is granted, however, an inter-ministerial commission that includes the Ministry of Foreign Affairs, the Agency for Protection from Economic Risks, law enforcement agencies, and industry-specific ministries must approve it.  There is no “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors.

Foreign companies without approved government contracts that seek to establish a legal entity in Turkmenistan must go through a lengthy and cumbersome registration process involving the inter-ministerial commission mentioned above.  The commission evaluates foreign companies based on their financial standing, work experience, reputation, and perceived political and legal risks.

In order to participate in a government tender, the companies are not required to be registered in Turkmenistan.  However, a company interested in participating in a tender process must submit all the tender documents to the respective ministry or agency in person.  Many foreign companies with no presence in Turkmenistan provide a limited power of attorney to local representatives who then submit tender documents on their behalf.  A list of required documents for screening is usually provided by the state agency announcing the tender.  Before the contract can be signed, the State Commodity and Raw Materials Exchange, the Central Bank, the Supreme Control Chamber, and the Cabinet of Ministers must approve the agreement.  The approval process is not transparent and is often politically driven.  There is no legal guarantee that the information provided by companies to the government of Turkmenistan will be kept confidential.

Competition and Anti-Trust Laws

There is no publicly available information on which agencies review transactions for competition-related concerns.  The government does not publish information on any competition cases.  While Turkmenistan does not have a specific law that governs competition, Article 17 (Development of Competition and Antimonopoly Activities) of the Law on State Support to Small and Medium Enterprises seeks to promote fair competition in the country.

Expropriation and Compensation

Three cases raise expropriation concerns for foreign businesses investing in Turkmenistan.  In December 2016, the government expropriated the largest (and only foreign-owned) grocery store in Ashgabat, Yimpaş (Yimpash) shopping and business center, without compensation or other legal remedy.  In April 2017, the Turkish Hospital in Ashgabat was expropriated without compensation.  In September 2017, cell phone service provider MTS suspended its operations after the state-owned Turkmen Telecom cut it off from the network over an alleged expired license.  In each case the companies involved had valid licenses or leases.

Turkmenistan’s legislation does not provide for private ownership of land.  The government has a history of arbitrarily expropriating the property of local businesses and individuals.  Under former President Niyazov, the government frequently refused to compensate those affected when the government exercised its right of eminent domain.  However, during a March 2007 Cabinet of Ministers meeting, President Berdimuhamedov stated that residents of affected apartments or houses would be provided alternative housing before their homes were demolished.  Despite these assurances, many families were evicted from their homes when the government demolished their houses in preparation for the 2017 Asian Indoor and Martial Arts Games and were forced to stay with relatives and friends or rent temporary housing.

Dispute Settlement

ICSID Convention and New York Convention

Turkmenistan is a Party to the 1995 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID), but it is not a member of the 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  The commercial law enforcement system includes the Arbitration Court of Turkmenistan which tries 13 categories of disputes, both pre-contractual and post-contractual, including taxation, legal foundations, and bankruptcy issues.  The court does not interfere in an enterprise’s economic relations, but reviews disputes upon the request of either party involved.  Appeals to decisions of the Arbitration Court can be filed at the Arbitration Committee of the Supreme Court of Turkmenistan.

Investor-State Dispute Settlement

Turkmenistan does not have a Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

There are several examples, as recently as 2017, of Western companies being unable to enforce contracts or prevail in formal procedures in investment disputes.  In some instances, the government bluntly refused to pay awards to the companies despite a court decision that required it to do so.  In others, the government disputes the amount owed, which has made any collection efforts by the companies futile.  There are also scattered reports of the government falsifying documents to win arbitration cases.

Although Turkmenistan has adopted a number of laws designed to regulate foreign investment, the laws have not been consistently or effectively implemented.  The government does not always distinguish between foreign investment and loans from foreign financial institutions.  The Law on Foreign Investment, as amended in 2008, is the primary legal instrument defining the principles of investment.  The law also provides for the protection of foreign investors.  A foreign investor is defined in the law as an entity owning a minimum of 20 percent of a company’s assets.

No known investment disputes have involved a U.S. person over the course of the past ten years.

International Commercial Arbitration and Foreign Courts

There are no alternative dispute resolution mechanisms in Turkmenistan as a means for settling disputes between two private parties.  The government’s dispute settlement clause in contracts generally does not allow for arbitration in a venue outside the country.  However, the government is sometimes willing to codify the right to international arbitration in contracts with foreign companies.  U.S. companies may wish to include an international arbitration clause in their contracts, as political considerations still influence local courts.  Several foreign companies have pursued international arbitration against the Turkmen government through the World Bank’s International Center for Settlement of Investment Disputes and the Arbitration Institute of the Stockholm Chamber of Commerce.

The commercial law enforcement system includes the Arbitration Court of Turkmenistan, which tries 13 categories of disputes, both pre-contractual and post-contractual, including taxation, legal foundations, and bankruptcy issues.  The court does not interfere in an enterprise’s economic relations, but reviews disputes upon the request of either party involved.  Appeals to decisions of the Arbitration Court can be filed at the Arbitration Committee of the Supreme Court of Turkmenistan.

Bankruptcy Regulations

Turkmenistan adopted a Bankruptcy Law in 1993 (last amended March 2016), which protects certain rights of creditors, such as the satisfaction of creditors’ claims in case of the debtor’s inability or unwillingness to make payments.  The law allows for criminal liability for intentional actions resulting in bankruptcy.  The law does not specify the currency in which the monetary judgments are made.  Turkmenistan’s economy is not ranked by the World Bank’s 2020 Doing Business Report.

10. Political and Security Environment

Turkmenistan’s political system has remained stable since Gurbanguly Berdimuhamedov became president in February 2007 and, with the exception of a reported coup attempt in 2002, there is no history of politically-motivated violence.  There have been no recorded examples of damage to projects or installations.

The government does not permit political opposition and maintains a tight grip on all politically sensitive issues, in part by requiring all organizations to register their activities.  The Ministry of National Security and the Ministry of Internal Affairs actively monitor locals and foreigners.  The country’s parliament passed a Law on Political Parties in January 2012 that defines the legal grounds for the establishment of political parties, including their rights and obligations.  In August 2012, under the directive of President Berdimuhamedov, Turkmenistan created a second political party, the Party of Industrialists and Entrepreneurs.  This pro-government party, created from the membership of the Union of Industrialists and Entrepreneurs, has a platform nearly identical to the President’s Democratic Party.  The same is true for the Agrarian Party, which was created in September 2014 in an effort to move Turkmenistan towards a multi-party system.  Organized crime is rare, and authorities have effectively rooted out organized crime groups and syndicates.  Turkmenistan does not publish crime statistics or information about crime.

The Department of State has reported significant human rights issues in Turkmenistan.  These issues include: reports of torture by police and prison officials; arbitrary detention; harsh and life-threatening prison conditions; political prisoners; arbitrary or unlawful interference with privacy; serious problems with the independence of the judiciary; severe restrictions on free expression, the press, and the internet, including threats of violence and threats of unjustified arrests or prosecutions against journalists; censorship and site blocking; interference with the freedoms of peaceful assembly and freedom of association; severe restrictions of religious freedom; substantial restrictions on freedom of movement; restrictions on political participation; widespread corruption; trafficking in persons; and the existence of laws criminalizing consensual same-sex sexual activity between men.

The Department of State’s 2019 Human Rights Report for Turkmenistan is available at:

Investment Climate Statements
Edit Your Custom Report

01 / Select a Year

02 / Select Sections

03 / Select Countries You can add more than one country or area.

U.S. Department of State

The Lessons of 1989: Freedom and Our Future