Types of Pledge in Uzbekistan

A pledge is one of the oldest and most effective forms of securing the performance of obligations. In a market economy, it acquires particular importance as it guarantees creditors the return of the funds provided or the fulfillment of other obligations. The Law of the Republic of Uzbekistan “On Pledge” (as amended on May 1, 1998) regulates the procedure for establishing, types, and legal consequences of a pledge.

According to Article 1 of the Law, a pledge is the transfer of property or property rights by one person to another to secure obligations. In case the debtor fails to perform the obligation, the creditor has the right to satisfy his claims at the expense of the pledged property in a preferential order.

A pledge may arise based on a contract or by operation of law, as provided in Article 3. The Law defines both general provisions on pledges and their specific types.

The legislation of Uzbekistan provides for several types of pledges, each with its own characteristics.

1. Pawn (Zaklad)

A pawn is a type of pledge in which property is transferred into the possession of the creditor (pledgee). The distinctive feature is that the creditor physically controls the pledged item, minimizing the risk of its loss or alienation.

Example: Pawnshop operations, where items are transferred as security for short-term loans.

Features: The pledgee is responsible for the safekeeping of the property and may use it only within the limits of the agreement.

2. Mortgage (Ipoteka)

A mortgage is a pledge of immovable property that remains in the possession of the pledgor. It is used to secure major obligations (bank loans, investment projects).

Subject: Buildings, structures, apartments, land plots (within the limits allowed by law).

Difference: The property is not transferred to the creditor but must be registered with the state.

3. Pledge of Rights and Property Claims

A pledge may be established not only on things but also on property rights.

Subject: Lease rights, claims against debtors, exclusive rights.

Feature: In case of default, the creditor may acquire these rights and use them to satisfy his claims.

4. Pledge of Securities

A separate type of pledge is the pledge of securities, as provided in Article 45 of the Law.

Subject: Shares, bonds, and other securities.

Features: Securities may be transferred to the creditor or deposited with a notary office. Unless otherwise agreed, income from the securities belongs to the pledgor.

5. Pledge of Goods in Circulation

The law also provides for a specific type – the pledge of goods in circulation.

Subject: Raw materials, materials, goods in stock, and trade turnover.

Feature: The composition and volume of the pledged items may change, but their total value must not fall below the amount specified in the contract.

 

Legal Significance of the Classification of Pledges

The classification of pledges has important practical significance:

• Protection of the creditor – different types of pledges provide varying levels of stability for obligations.
• Flexibility for the debtor – the ability to use both movable property and property rights.
• Consideration of property specifics – for example, the turnover of goods requires different regulation compared to immovable property.

Thus, the legislation of Uzbekistan provides for several main types of pledges: pawn, mortgage, pledge of property rights, pledge of securities, and pledge of goods in circulation. Each has its own specifics related to the subject of the pledge, the manner of its transfer, and the enforcement process. This system ensures a balance of interests between creditors and debtors and the stability of civil transactions.

Comparative Table of Types of Pledge

Type of Pledge	Subject of Pledge	Formalization Procedure	Features	Advantages	Disadvantages
Pawn	Movable property (items, valuables) transferred to the creditor	Written agreement, physical transfer to the creditor; in pawnshops – issuance of a pawn ticket	The pledged item is in the creditor’s possession, who must store and insure it	Minimal risk of loss by debtor; high creditor protection	Limits debtor’s use of property; risk of damage while in creditor’s possession
Mortgage	Immovable property: buildings, structures, apartments, vehicles, land (within the law)	Written, notarized agreement with mandatory state registration	Property remains with the debtor; creditor has right of enforcement upon default	Debtor continues to use property; creditor protection via registry	Complicated registration procedure; risk of property value decline
Pledge of Property Rights	Lease rights, claims, other property rights	Written agreement; sometimes notarized	The subject is not a thing but a right; creditor may obtain the claim	Flexibility: allows pledging intangible assets	Difficult valuation and enforcement; potential third-party disputes
Pledge of Securities	Shares, bonds, etc.	Written agreement; securities transferred to creditor or notary deposit	Income from securities usually belongs to debtor	High liquidity; easy sale via stock exchange	Market value fluctuations; limited availability of securities
Pledge of Goods in Circulation	Raw materials, materials, finished goods, inventories	Written agreement; property remains with debtor	Composition may change, but total value must remain stable	Convenient for entrepreneurs; maintains business turnover	Hard to control inventory; risk of debtor’s bad faith actions

 

Procedure for Formalizing a Pledge

Type of Pledge	Form of Agreement	Additional Requirements	Actions of the Parties
Pawn	Written agreement; sometimes notarized	Physical transfer of property to the creditor	Creditor accepts, insures, and stores property; debtor loses possession
Mortgage (Real Estate)	Written and notarized agreement	State registration with the real estate registry	Property remains with debtor but is encumbered; without registration, mortgage is invalid
Pledge of Property Rights	Written agreement; sometimes notarized	Notification of the debtor (third party) whose obligation is pledged	Upon default, creditor acquires or enforces the claim through court
Pledge of Securities	Written agreement; sometimes notarized	Transfer to creditor or notary; entry in shareholder/depository register (for registered securities)	Securities held by creditor or notary; income usually belongs to debtor
Pledge of Goods in Circulation	Written agreement	Must state total value and maintain it at contractual level	Goods’ composition may vary, but total value must remain unchanged