Restrictions on Pledged Property and Rights

Publication date: 03.05.2025

Pledge, as a method of securing the performance of obligations, plays an important role in civil turnover. However, considering social, cultural, and economic aspects, the legislator introduces a number of restrictions regarding the subject of the pledge and the rights of the parties. These restrictions are aimed at protecting public interests, ensuring the stability of credit relations, and preventing abuse.

1. General Restrictions on the Subject of Pledge

According to the law, any property, including tangible items and property rights, may be the subject of a pledge. However, there are important exceptions:

Property withdrawn from civil circulation cannot be pledged;
Claims inseparably connected with the creditor’s personality, such as the right to alimony or compensation for harm to health, cannot be pledged;
Property withdrawn from circulation for reasons of national security, culture, or history — the list of such objects is determined by the Cabinet of Ministers of the Republic of Uzbekistan.

Thus, the restriction is both legal and social in nature, excluding from commercial circulation values of special significance.

2. Restrictions on Subjects and Rights

The circle of participants in pledge relations is also limited:

State property may be pledged only by a decision of the Cabinet of Ministers, and property not subject to privatization may not be pledged;
Institutions may pledge only property acquired through their own income and not fixed to them under the right of operational management;
To pledge lease rights, the consent of the lessor is required unless otherwise stipulated by the agreement.

These restrictions prevent arbitrary disposal of property assigned to entities under special property rights.

3. Restrictions Protecting Creditors

The law provides mechanisms to prevent infringement of creditors’ rights:

A subsequent pledge is allowed only in the absence of a direct prohibition in the first agreement and after making an appropriate entry in the register;
The pledgor must notify all subsequent pledgees of existing encumbrances, otherwise, he bears liability for the damage caused.

Thus, the legislator creates conditions for transparency and good faith in property turnover.

4. Restrictions upon Transfer of Rights

When ownership of the pledged property passes to another person, the right of pledge remains. Exceptions include cases when the pledged items are goods in circulation or when the pledgee has consented to the transfer without preserving the encumbrance.

This restriction aims to ensure the stability of pledge relations and protect the rights of the creditor.

5. Restrictions on the Sale of Pledged Property

The sale of pledged property is allowed only in accordance with the law:

As a rule, through electronic auction;
For cultural values, historical objects, and property requiring special permission for disposal — enforcement is permitted only through the court.

This prevents illegal circulation of objects of special significance and ensures judicial control over disputed cases.

6. Restrictions Regarding Property Rights and Securities

Property rights may also be pledged, but:

Rights inseparably linked to the creditor’s personality cannot be pledged;
Term-limited rights (e.g., lease) may be pledged only within their validity period;
Securities subject to pledge must be transferred to a notary or the pledgee for safekeeping, preventing the risk of double circulation.

System of Restrictions on Pledged Property and Rights

The system of restrictions in Uzbek legislation has a comprehensive character. It aims to balance the interests of the parties, protect public interests, and prevent abuse. Restrictions appear at the levels of the pledge object, participants, creditor notification mechanisms, and procedures for realization and transfer of rights.
These provisions ensure the stability of pledge relations and increase confidence in the institution of pledge as a key instrument of lending and securing obligations.

Restrictions on Pledged Property and Rights

Category of Restriction	Content	Legal Basis / Comment
By Object (Subject of Pledge)	- Property withdrawn from circulation cannot be pledged; - Personal claims (alimony, compensation for harm to life and health, etc.) cannot be pledged; - Cultural and historical objects and other values specified by the Cabinet of Ministers cannot be pledged.	Art. 5 of the Law on Pledge
By Subject	- State property — only by decision of the Cabinet of Ministers; - Institutions may pledge only property acquired from business income; - Lessees may pledge rights only with the lessor’s consent (unless otherwise provided by the agreement); - Foreign individuals and legal entities participate on equal terms unless exceptions are established by law.	Art. 8 of the Law
By Form and Registration	- Pledge agreement must be in writing; - For mortgages and certain movable assets — mandatory notarization and registration; - Non-compliance with the form entails invalidity of the agreement.	Art. 11 of the Law
By Multiple Pledges	- A subsequent pledge is allowed only in the absence of a direct prohibition in the first contract; - Registration in the pledge register is required; - The pledgor must notify new pledgees of existing encumbrances.	Art. 15 of the Law
By Transfer of Rights	- When ownership of the pledged property changes, the pledge remains; - Exceptions: goods in circulation or consent of the pledgee to transfer without encumbrance.	Art. 16 of the Law
By Realization of Property	- Usually via electronic auction; - For cultural or historical objects — only through court; - Starting price determined by agreement or independent appraisal.	Arts. 27–28 of the Law
By Property Rights and Securities	- Rights inseparably connected to the creditor’s personality cannot be pledged; - Duration of property rights limits the pledge term; - Securities must be transferred to a notary or pledgee for safekeeping.	Arts. 43–45 of the Law

Consequences of Violating Restrictions on Pledged Property and Rights

1. Invalidity of the Pledge Agreement

If the pledged property is of a type that cannot be pledged (e.g., withdrawn from circulation, alimony claims, historical values, etc.), the agreement:

Is considered null and void as contradicting the law (Civil Code of the Republic of Uzbekistan, Art. 117, and Art. 11 of the Law on Pledge);
The pledgee loses the right of priority satisfaction from the pledged property;
The parties must return what was received under the transaction (restitution).

Example: Attempting to pledge an architectural monument without state permission — the agreement will be declared invalid and the property returned to its owner.

2. Refusal to Register the Pledge Agreement

For certain objects (real estate, vehicles, securities), notarization and registration are required. Violation entails:

Invalidity of the agreement;
Inability to claim pledge rights against third parties;
Risks for the creditor (he becomes an ordinary creditor without priority).

3. Liability of the Pledgor to the Creditor

If the pledgor violates restrictions (e.g., conceals existing pledges or pledges jointly owned property without consent):

He bears property liability for the creditor’s losses;
The creditor may demand early fulfillment or foreclosure on the property.

Example: The pledgor concealed that the property was already pledged to another bank — the new pledgee’s claim will be denied, and losses are recovered from the pledgor.

4. Termination of Pledge

If consent requirements are violated (e.g., the lessee pledges rights without the lessor’s consent), the pledge may be declared invalid and terminated from the date of transaction.

5. Criminal Consequences

In cases of deliberate violations causing harm to creditors or the state, criminal liability may arise for:

Fraud, abuse of power, or unlawful disposition of property (depending on the offense under the Criminal Code of the Republic of Uzbekistan);
Initiation of criminal proceedings for illegal alienation or pledge of state property.

6. Limitation of Pledgee’s Rights

If violations are revealed after conclusion of the contract:

The pledgee loses priority over other creditors;
His claims are satisfied in the general order without advantages;
He may lose the pledged property if it is withdrawn from circulation or returned to the state.

Conclusion

Violation of restrictions on pledged property and rights leads to serious consequences:

Civil-law (nullity of transaction, termination of pledge, damages);
Procedural (refusal of registration, inability to foreclose);
Criminal-law (intentional violation causing harm).

These measures aim to protect the interests of creditors, the state, and society, and ensure legal certainty in property relations.