16 February 2024
Read MoreAAA Law Offices is advising IFC on its subscription to the first 10 million green bond just issued by Eskhata Bank. It’s a private placement that is in compliance with ICMA green bond principles. Our role includes the conduct of the legal due diligence on the issuer, and advice on Tajik law aspects of the subscription.
09 February 2024
Traditional issues that an English-law governed financing agreement finds in Tajik law. We thought it would be interesting to share here our experience in reviewing hundreds of financing agreements between many financial institutions of various calibers with local banks and businesses.
A usual clause on an Event of Default in a loan agreement attempts to be as broad as the lender sees fit. Thus, any event defined in the loan agreement as such will serve as the basis for a lender to either accelerate the loan repayment or enforce the loan.
Until recently, not all events of default could be used to declare a default under a loan agreement, and, therefore, not all of them might be recognized and enforceable under Tajik law. Thus, it might not be possible to contract out of the statutory definition of the grounds for acceleration or enforcement of the loan. In this case, given the loan agreement is governed by foreign law, there may be issues with enforcing this broad definition adopted in the loan agreement should the lender decide to enforce the claims in Tajik courts.
An example of contractual clauses on event of default in an English law-governed loan agreement would include the following: (1) failure to pay principal, interest or other charges; (2) any representation or warranty (or document provided) by a borrower or other relevant party appears false or misleading; (3) nationalization, seizure, expropriation or forced acquisition of any substantial part of the assets or majority ownership of the borrower or other relevant party; (4) a change of control in the beneficial ownership of a borrower or a guarantor.
Tajik law essentially provides only a few cases constituting an event of default, which may lead to the lender’s right to accelerate the loan and enforce its rights under a Tajik law-governed loan agreement. These include when: (1) the security (if provided) become unavailable or its conditions worsen; (2) the borrower fails to repay on time; (3) the borrower uses the borrowed funds for unintended purposes.
Since mid-2023 the possiblity for broader accomodation of a lender's interests on this particular account became essentially unlimited.
Loan transactions, especially those where the borrower is an International Financial Institution, are typically governed by English law, and such choice of law is acceptable and should be enforceable under Tajik law. These conflict of laws rules are contained in the Civil Code. This concerns contractual obligations. For non-contractual obligations, such transaction documents tend to capture them as well by bringing them under the ambit of English law. This, however, may be problematic from the Tajik law point of view since obligations arising out of damage or other wrongdoing would be exclusively governed by the Tajik law.
An English law-governed loan transaction will usually have an arbitration clause with LCIA (London Court of International Arbitration) as arbitration authority, UNCITRAL Rules of arbitration, and London, as the place of arbitration. The arbitration clause has been recognized and should be enforceable under Tajik law since 2012 when Tajikistan acceded to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The borrower also asked to irrevocably submit to the non-exclusive jurisdiction of the courts of England and appoint an agent to receive service of process and any other legal summons in England for purposes of any legal action brought by the lender. This latter clause may be considered one-sided by a Tajik court for it precludes the borrower itself to bring action against the lender in Tajikistan or elsewhere.
Also, for a court decision of another jurisdiction to be enforceable in Tajikistan, the procedural legislation of Tajikistan requires a bilateral (or multilateral) treaty with such jurisdiction. As of today, such treaties exist with most of the former Soviet states and also with China and Turkey;
Currently, Tajikistan is not a party to any such treaties with the UK or other European countries and the USA. Any foreign court judgment is likely to be unenforceable in Tajikistan. Certain disputes may not be referred to either foreign arbitration or jurisdiction of foreign courts (these include: disputes involving Tajik state assets, immovable assets situated in Tajikistan, certain IP rights that are subject to registration in Tajikistan, entries and records on the public registers in Tajikistan, bankruptcy/insolvency cases, registration and liquidation of legal entities).
A typical tax gross-up provision in the loan agreement would have any taxes arising in the country of the borrower being borne and paid by the borrower. Tax Code of the Republic of Tajikistan generally requires any taxpayer to personally perform the obligation for payment of taxes levied on such taxpayer, which may be interpreted as prohibiting, directly or implicitly, contractual provisions which obligate one party to bear the tax liabilities of another party.
While no official interpretation or court practice is available to provide guidance as to the validity and enforceability of such tax gross-up provisions. Accordingly, there is a risk that the validity of such provisions may be challenged.
Financing transactions are considered “capital transactions” for exchange control purposes and are subject to notification to the National Bank of Tajikistan if their maturity period is longer than one year. Notification is mandatory and will need to be confirmed by the National Bank. Notification for exchange control purposes is typically included as a condition precedent to the disbursement of the loan or a condition subsequent to the disbursement of the first part of the loan to be made by the borrower.
Read More30 March 2023
On 24 December 2022, the new Civil Code was signed into law which will come into force starting from 1 July this year. We have only started to review this piece of legislation and, for now, offer you some of the novelties which it brought.
Understandably, a change of a legislative piece of such magnitude would assume an enormous amount of effort. And such would be the expectation of its outcome: to have something fundamentally better. The new Code provides only a few new concepts meeting, primarily, the requirements of international business. This is a small step towards transplanting Common Law system provisions into Tajik Romano-German Civil Code.
Read More24 April 2022
On the scale of global crypto adoption and regulation Tajikistan is among the last and the least if compared to its closer or immediate neighbors. For instance, by adoption, Pakistan and Ukraine are in the world’s top 5 countries. In some sources, by regulation, Tajikistan scores profile of a ‘hostile’ country. Against this stance, countries like Estonia, Georgia, Kazakhstan, Uzbekistan and Kyrgyzstan have adopted a different approach: from being among ‘global leaders’ to being pragmatic.
But if to take a closer look, currently, crypto is neither legally banned nor legally restricted in Tajikistan. Strictly speaking, it is not legal either, a position which creates a grey area and which most of the counties in the world have accepted as fact.
Read More19 January 2022
On 23 December 2021, new Tax Code of the Republic of Tajikistan was adopted by the Tajikistan Parliament. The Tax Code is in force since 1 January this year. Key changes related to the tax rates tax base/incidents include the following.
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