Leasing in Uzbekistan

Leasing is one of the most significant forms of investment support for entrepreneurial activity in the Republic of Uzbekistan. Its legal structure enables business entities to use expensive equipment and fixed assets without the need for a one-time capital outlay. The Law of the Republic of Uzbekistan “On Leasing” (1999) constitutes a fundamental regulatory act governing the key elements of leasing legal relations.

Modern economic realities require a detailed scholarly examination of the legal nature of leasing, its functions, and the legal mechanisms that ensure a balance of interests among the participants.

1. Concept of Leasing

The Law defines leasing as a special type of financial lease whereby the lessor acquires property from a seller at the request of the lessee and transfers it to the latter for temporary use for a period exceeding twelve months.

At the same time, the lease agreement must meet at least one of the following key criteria:

• transfer of ownership of the leased asset to the lessee upon expiration of the lease term;
• lease term exceeding 80% of the useful life of the asset;
• the right to purchase the asset at a price below its market value;
• the present value of lease payments exceeding 90% of the value of the asset.

Thus, leasing represents a complex mixed contract combining elements of sale and purchase, lease, and investment activity.

The Law allows both tripartite (seller – lessor – lessee) and bipartite (lessor – lessee) contractual structures. In the latter case, an additional sale and purchase agreement is concluded between the seller and the lessor.

2. Legal Regime of Leasing Objects

2.1. Permissible Objects

Leasing objects may include any non-consumable items used in entrepreneurial activity, such as production complexes, buildings, machinery, equipment, vehicles, and other fixed assets.

2.2. Prohibitions and Restrictions

The Law expressly excludes the possibility of leasing:

• land plots;
• natural resources;
• property withdrawn from or restricted in civil circulation.

Thus, the legislator establishes clear limits on the transferability of leasing objects in order to ensure legal certainty and protection of the parties’ interests.

3. Parties to Leasing Legal Relations

3.1. Lessor

The lessor is the central figure in leasing relations and performs an investment function by acquiring property and transferring it under the terms of the lease agreement.

3.2. Lessee

The lessee is an entrepreneurial entity that uses the leased object in its business activities and bears the risks associated with its preservation.

3.3. Seller

The seller is obliged to duly supply the property, ensuring its completeness, quality, and compliance with delivery deadlines.

The Law establishes an important principle: in the event of defects in the leased property, the lessee has the right to present claims directly to the seller, bypassing the lessor.

4. Leasing Agreement: Content and Legal Structure

4.1. Essential Terms of the Agreement

The mandatory terms of a leasing agreement include:

• a detailed description of the leased object;
• obligations of the parties related to acquisition, transfer, and operation;
• procedures for delivery and commissioning;
• payment schedule;
• repair and maintenance obligations;
• duration of the agreement;
• procedure for selecting the seller.

4.2. Additional Terms

The parties may additionally provide for:

• insurance;
• force majeure;
• amendment and termination procedures;
• performance monitoring;
• additional services.

The leasing agreement is of enhanced legal significance, as it integrates provisions of civil, financial, and investment law.

5. Rights and Obligations of Leasing Participants

5.1. Rights and Obligations of the Lessor

The lessor has the right to control the use of the leased object, accelerate the recovery of payments in case of contractual violations, and select the seller by agreement with the lessee. The lessor is obliged to timely transfer the leased object and fulfill maintenance obligations imposed under the agreement.

5.2. Rights and Obligations of the Lessee

The lessee has the right to:

• select the leasing object and the seller;
• demand elimination of defects;
• terminate the agreement in the event of material breaches;
• demand the return of advance payments.

The lessee’s obligations include timely payment of lease installments, proper use of the object, and its return in the agreed condition.

6. Ownership Rights and Allocation of Risks

6.1. Ownership of the Leasing Object

Until full performance of obligations, the leased object remains the property of the lessor. Transfer of ownership may occur:

• upon expiration of the lease term;
• upon early full payment;
• if a purchase option is stipulated.

6.2. Risks of Accidental Loss or Damage

The risks pass to the lessee from the moment the property is received, except in cases involving improper delivery of the object.

6.3. Insurance of Leasing Property

As a general rule, insurance is provided by the lessee unless otherwise agreed by the parties.

7. Economic and Legal Aspects of Leasing

7.1. Leasing Payments

Lease payments consist of:

• compensation for the value of the property;
• interest income of the lessor.

7.2. Depreciation Policy

The Law allows for the application of accelerated depreciation by agreement of the parties, which increases the investment attractiveness of leasing.

Rights and Obligations of the Parties to a Leasing Agreement

1. Rights and Obligations of the Lessor

Category	Rights of the Lessor	Obligations of the Lessor
Control and supervision	Monitor compliance of the object’s use with its purpose and contractual terms	—
Selection of seller and object	Select the seller and the object with the lessee’s consent	Notify the seller that the property is acquired specifically for leasing
Demand for return	Demand early return of the object in case of material breach by the lessee	Eliminate violations or provide an alternative object
Financial terms	Demand accelerated payment in case of serious breaches	Transfer the object in proper condition and within agreed timelines
Enforcement	Enforce claims against the object under pledge-like procedures	Perform maintenance and repair obligations if stipulated
Assignment	Assign contractual rights to third parties with notice	—
Other rights	Exercise other rights provided by law and contract	Comply with all other statutory and contractual obligations

2. Rights and Obligations of the Lessee

Category	Rights of the Lessee	Obligations of the Lessee
Selection	Independently select the object and seller	Accept and use the object as intended
Protection	Demand elimination of defects and compliance with quality standards	Ensure safekeeping and operational condition
Defective delivery	Suspend payments, refuse the object, or terminate the contract	Perform routine maintenance at own expense
Advance payments	Demand refund of advance payments upon early termination	Make lease payments in full and on time
Protection from enforcement	Terminate and redeem the object if third-party claims arise	Return the object in proper condition
Subleasing	Sublease with the lessor’s written consent	Comply with contract terms
Assignment	Assign rights with the lessor’s consent	—
Other rights	Exercise all rights under law and contract	Fulfill all other obligations

3. Rights and Obligations of the Seller (Supplier)

Category	Rights of the Seller	Obligations of the Seller
Relations with lessor	Receive payment under the sale contract	Deliver the object in proper quality and completeness
Relations with lessee	—	Fulfill obligations to the lessee as beneficiary
Contractual duties	—	Eliminate defects under warranty obligations
Quality liability	—	Bear liability for defects attributable to the seller
Limitations	Not refer to improper use to evade liability	Avoid double liability for the same damage

Conclusion

The legal regulation of leasing in the Republic of Uzbekistan forms a stable and comprehensively developed normative framework for the advancement of investment processes and economic modernization. The Law “On Leasing” thoroughly regulates the rights and obligations of the parties, risk allocation mechanisms, ownership issues, and contractual conditions.

In modern Uzbek law, leasing acts as one of the most flexible instruments for the renewal of fixed assets, stimulates entrepreneurial activity, and contributes to the development of small and medium-sized businesses. Further improvement of leasing regulation should take into account international standards and the needs of the digital economy.