Transparency of the Regulatory System
Tajikistan’s regulatory system lacks transparency. Executive documents – presidential decrees, laws, government orders, instructions, ministerial memos, and regulations – are often inaccessible to the public. Businesspeople and investors must purchase access to Adliya, a commercial legal database, to obtain updated legal and regulatory information. Each ministry has its own set of unpublished regulations and these may contradict the laws and/or regulations of other ministries.
The Tajik government rarely publishes proposed laws and regulations in draft form for public comment. Although the Tajik government solicited public comment on the 2013 Tax Code, it did not modify the draft law based on the input received. The World Bank is assisting the government with ongoing tax reform, and the government will provide for a period of public comment before the finalization of a draft tax code.
TajikStandard, the government agency responsible for certifying goods and services, calibrating and accrediting testing laboratories, and supervising compliance with state standards, lacks experts and appropriate equipment. TajikStandard does not publish its fees for licenses and certificates, or its regulatory requirements.
The World Bank funded Public Financial Management Modernization Project helps the Ministry of Finance adopt International Public Sector Accounting Standards (IPSAS). National energy utility company Barqi-Tojik, Dushanbe municipality water and sewage, utility Dushanbevodokanal, and the national rural water utility Khojagii Manziliyu Kommunali received World Bank assistance to fully adopt and apply International Financial Reporting Standards (IFRS). The 2011 Accounting Law requires all Public Interest Entities, including major State-Owned Enterprises, to apply International Financial Reporting Standards (IFRS), but the transition period continues.
The Tajik central government is the highest rule-making and regulatory authority. On a case-by-case basis, the central government will delegate some regulatory functions to regional or district levels.
The Office of General Prosecutor, Anti-Corruption Agency, the Tax Committee, and the State National Security Committee oversee government and administrative procedures.
The Tajik government did not announce any regulatory system and enforcement reforms in 2019. Government agencies submit proposed draft regulations to government commissions. Once cleared, draft regulations receive final review by the relevant ministries and the Executive Office of President.
Legally, the public has the right to review and monitor the enforcement process. In practice, however, Tajikistan does not regularly enforce regulations. The Tajik government does not review regulations based on scientific or data-driven assessments. Tajikistan archives its laws, regulations, and policies at www.mmk.tj .
Although the government has taken steps to improve its fiscal transparency, publicly-available budget documents fall short of internationally-accepted standards. International assessments recommend that Tajikistan breakdown data by ministry and include information about debt held by State-Owned Enterprises.
International Regulatory Considerations
Tajikistan is a member of the CIS (Commonwealth of Independent States). Government officials claim they are still studying the prospect of membership in the Eurasian Economic Union.
The regulatory system that governs Tajikistan’s cotton sector incorporate CIS and U.S. technical norms. Tajikistan is a WTO member and must notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
Tajikistan has a civil legal system. The parties to a contract can seek enforcement by submitting their claims to Tajikistan’s Economic Court. Tajikistan has written laws on commercial activities and contracts. Tajikistan’s economic courts review economic/commercial disputes.
Legally, the judicial system is independent. In practice, the executive branch interferes in judiciary matters. The current judicial process is neither fair nor reliable. Outcomes tend to favor the government’s executive branch.
Legally, regulation and enforcement actions are appealable, and the national court system adjudicates appeals. In practice, national courts typically carry out executive preferences, leaving business and commercial interests vulnerable to government interference.
Laws and Regulations on Foreign Direct Investment
Several government websites provide information on laws/regulations:
The Tajik government regulates investments through a number of laws, inter alia, the Law on Investment Agreement, Law on Concessions, Law on Resources, Law on Legal Status of Foreigners, Law on Free Economic Zones, Law on Investments, Concept of State Policy on Investments and Protection of Investments, Law on Natural Resources Tenders, and Law on Privatization of Housing. The government also established the New Coordination Council of Inspection Agencies. According to the proposed draft decree, an initial risk assessment will now guide all inspections. Historically, inspections lack justification and are a means to extract fines and revenue from the private sector.
The government’s Action Plan for the Improvement of Investment Climate of the Industrial Sector, Support of Production Entrepreneurship, and Development of National Production for 2016-2018 was approved July 27, 2016 and extended to 2020.
The Tajik government does not offer a “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors.
Competition and Anti-Trust Laws
The Antimonopoly Service (http://www.ams.tj ) is responsible for regulating prices for products of monopolistic enterprises, preventing and eliminating monopolistic activity, and monitoring potential monopolistic abuse and unfair competition.
Expropriation and Compensation
The Tajik government can legally expropriate property under the terms of Tajikistan’s Law on Investments, Law on Privatization, civil code, and criminal code. The laws authorize expropriation if the Tajik government identifies procedural violations in privatizations of state-owned assets or determines a property has been used for anti-government or criminal activities, as defined in the criminal code. Under the Law on Joint Stock Companies, the government may request that a court cancel the private purchase of shares in SOEs if it determines that there was a violation to the procedure within the original sale.
Tajikistan has a history of expropriating land because the properties involved were illegally privatized following Tajikistan’s independence. Following an investigation by government anti-corruption, anti-monopoly, and other law enforcement agencies, the Committee for Investments and State Property Management can issue a finding that the asset was illegally privatized, and request that the Tajik court system order its return to government control. Domestic law requires owners be reimbursed for expropriated property, but the amount of the compensation is usually well below the property’s fair market value.
In several cases, Tajik officials have used government regulatory agencies to pressure businesses and individuals into ceding properties and business assets. The Tajik government has not shown any pattern of discrimination against U.S. persons by way of illegal expropriation. All privately owned operations are vulnerable to expropriation actions.
The Tajik government may threaten to impose inflated and baseless taxation charges on companies, and use this as leverage to negotiate the transfer of some share of a company to the government. In cases of expropriations, claimants and others have generally had no access to due process.
ICSID Convention and New York Convention
Tajikistan is not a member state of the International Centre for the Settlement of Investment Disputes (ICSID) Convention.
Tajikistan became the 147th country to sign and ratify the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Tajikistan acceded to the Convention on August 14, 2012, and it entered into force on November 12, 2012 – 90 days after depositing the signed text at the UN and in accordance with Article XII (2) of the Convention.
Nonetheless, Tajik courts have overturned arbitral awards in favor of connected officials. Tajikistan signed the Convention with a number of reservations regarding types of arbitration agreements and decisions that Tajikistan can recognize and implement.
One of the reservations established that Tajikistan does not apply the provisions of the Convention to disputes with immovable property; Norway had previously established a similar reservation. Another reservation established that Tajikistan apply the Convention only to disagreements and decisions “arising after the entry into force of the Convention and to decisions made in the territories of third countries.”
Investor-State Dispute Settlement
In 2011, Tajikistan joined the Cape Town Convention on International Interests and Mobile Equipment. The Cape Town Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, together usually referred to as the Cape Town Treaty, is an international treaty intended to standardize transactions involving movable property, particularly aircraft and aircraft engines. The treaty creates international standards for registration of ownership, security interests (liens), leases, and conditional sales contracts, and various legal remedies for default in financing agreements, including repossession and the effect of a particular states’ bankruptcy laws.
Disputes involving foreign investors have primarily centered on the implementation of tax incentives. In the last ten years, numerous foreign investors have reported difficulty utilizing promised value-added tax exemptions on imported items to Embassy officials. Tajik procedures require businesses to submit in January of the calendar year a list of goods to be imported, the exemption then expires at the end of December in that same year.
It takes an average of 430 days to obtain a resolution on a commercial dispute/contract enforcement proceeding in Tajikistan: 40 for filing and service, 120 for trial and judgment, and 270 for enforcement of the decision.
International Commercial Arbitration and Foreign Courts
Tajik law recognizes the role of local courts in dispute resolution and arbitration but in reality there is no reputable arbitration institution for resolving disputes domestically among individuals and businesses. In practice, however, these courts are primarily used to resolve disputes over agricultural plot demarcations as part of the land reform process, and do not serve as venues to resolve non-agricultural commercial disputes.
Tajikistan has signed bilateral agreements with several countries on arbitration and investment disputes, but local domestic courts do not always properly enforce or recognize awards.
Under Tajikistan’s Law on Bankruptcy (2003), both creditors and debtors may file for an insolvent firm’s liquidation. The debtor may reject overly burdensome contracts, and choose whether to continue contracts supplying essential goods or services, or avoid preferential or undervalued transactions. The law does not provide for the possibility of the debtor obtaining credit after the commencement of insolvency proceedings. Creditors have the right to demand the debtor return creditors’ property if that property was assigned to the debtor less than four months prior to the institution of bankruptcy proceedings. Tajik law does not criminalize bankruptcy.