Regulatory update: subsoil and mining licensing in Uzbekistan under the Law on Special Economic Zones (2020)

Uzbekistan's Law on Special Economic Zones (2020) did not merely adjust the administrative framework for free economic zones — it introduced a distinct licensing pathway for subsoil use and mineral extraction activities conducted within those zones, altering the relationship between the general subsoil legislation and the lex specialis regime that SEZ operators now navigate. For foreign companies considering mineral-sector investment in Uzbekistan, the practical consequence is a bifurcated licensing environment: the standard subsoil use right procedure continues to apply outside designated zones, while activities within an SEZ are subject to a separate set of conditions, approvals, and investor protections that were not available under the pre-2020 framework.

Before the Law on Special Economic Zones entered into force, foreign investors seeking subsoil use rights in Uzbekistan were required to navigate a unified licensing procedure administered through the state geological and mineral resources authority. Licences were granted on the basis of competitive tender or direct negotiation with the relevant ministry, and the terms were governed exclusively by the Subsoil Code and implementing regulations. No zone-specific derogation existed: an investor located within what was then a free industrial zone received no differentiated treatment for subsoil activities.

The 2020 Law introduced a materially different structure. Within designated SEZs — including free economic zones established under the same legislative framework — operators engaged in subsoil use or mineral extraction may now access a parallel approval pathway. Rather than initiating a standalone subsoil licence application through the general procedure, an SEZ resident company may obtain subsoil use authorisation as part of the integrated investment agreement concluded with the SEZ administration. The SEZ administration coordinates with the state geological authority, but the investor's primary legal counterparty for licensing purposes shifts from the ministry to the zone management body.

The substantive conditions attached to subsoil use rights granted through this pathway differ from those available outside the zone. SEZ-resident status confers access to a streamlined documentation requirement, a defined approval timeline, and — critically — a stability clause that locks in the regulatory and fiscal terms applicable at the date the investment agreement is signed. That stability guarantee does not exist, in equivalent form, under the general subsoil licensing procedure.

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The distinction between the general subsoil licensing procedure and the SEZ pathway is not purely technical. It has direct consequences for the legal form an investor must adopt, the timeline to first licence grant, the ongoing compliance obligations, and the stability of the terms over the life of the project.

Foreign investors most directly affected by the 2020 change fall into three categories. First, companies already holding subsoil licences granted under the pre-2020 procedure and operating within territory that has subsequently been designated as an SEZ need to determine whether their existing licence remains valid on its original terms or whether they may — or must — migrate to the SEZ licensing framework. As a general rule, previously granted licences are not automatically converted, but zone designation may trigger a review process.

Second, foreign investors entering Uzbekistan's mineral sector for the first time after 2020 face a structural choice at the outset: apply for a standard subsoil licence through the general procedure, or establish an SEZ-resident entity and pursue the integrated investment agreement pathway. The two approaches carry different timelines, capital requirements, and ongoing reporting obligations.

Third, investors using a Russian or CIS holding company to channel investment into Uzbekistan — a common structure given the CIS membership of both states and the prevalence of cross-border Uzbekistan–Russia investment flows — need to assess whether the holding structure meets the residency and beneficial ownership requirements for SEZ-resident status. The 2020 Law introduced investor qualification criteria that are applied at the level of the SEZ administration rather than the general licensing authority, and interpretive practice on cross-border ownership chains has not yet fully stabilised.

For in-house counsel managing a portfolio that includes or is considering Uzbekistan mineral assets, the regulatory timeline introduces a practical constraint: stability clauses are locked in at the point the investment agreement is signed, not at the point of first extraction. Delay in legal structuring therefore erodes the value of the protection.

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Three practical steps follow from the 2020 legislative change for foreign companies with Uzbekistan mineral-sector interests.

The first step is a zone designation check. Not all subsoil-bearing territory in Uzbekistan falls within an SEZ. The list of designated zones and their geographic boundaries has been updated since 2020, and the boundaries of some zones have been adjusted by subsequent implementing decisions. Before any licensing strategy is finalised, counsel should confirm the current SEZ map and identify whether the target deposit or exploration area falls within a zone boundary.

The second step is a structural assessment. For investors who are outside SEZ boundaries, the question is whether repositioning the legal structure — establishing an SEZ-resident entity or using a joint venture with an existing SEZ resident — is feasible and commercially justified by the stability clause benefit. For investors already within a zone, the question is whether the existing corporate structure qualifies for SEZ-resident treatment under the investor qualification rules.

The third step is an investment agreement review or preparation. For investors already holding SEZ-resident status, the terms of the investment agreement should be reviewed to confirm that subsoil use activities are expressly within the scope of the agreement's stability clause. For investors entering negotiations, the drafting of the subsoil use provisions in the investment agreement is the critical point of risk — the stability clause will only bind the state to the extent it is clearly drafted to cover future regulatory changes affecting the licensed activity.

Counsel experienced in both Uzbekistan's regulatory framework and the cross-border considerations that arise for foreign investors — including those using CIS or international holding structures — can materially reduce the structuring risk at this stage.

The 2020 Law established the framework, but several questions of practical importance remain subject to ongoing implementation and interpretive development.

The interaction between SEZ-specific subsoil authorisations and the general Subsoil Code has not been fully resolved in all scenarios. Where an SEZ-resident company wishes to expand its licensed area beyond the zone boundary — for example, because a mineral deposit extends across the zone perimeter — it is not yet settled whether the general licensing procedure applies to the extra-zone portion, or whether the investment agreement can be extended to cover it.

The treatment of environmental and social impact assessment requirements within SEZs is a second area of uncertainty. The general subsoil licensing procedure carries defined environmental approval requirements. The extent to which those requirements are modified — or replaced by zone-specific procedures — under the SEZ framework has been addressed in implementing regulations, but the practical interpretation of those regulations by the relevant environmental authority continues to evolve.

Finally, the enforcement of stability clauses against subsequent legislative changes — a common concern for foreign investors in any emerging market — remains an area where Uzbekistan's legal practice is still developing. The 2020 Law includes stability protections, but their scope, the mechanism for invoking them, and the forum for resolving disputes about their application are points that experienced counsel should address explicitly in the investment agreement negotiation.

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Q: What specifically changed for subsoil and mining licensing under Uzbekistan's Law on Special Economic Zones (2020)?

A: The 2020 Law created a parallel licensing pathway for subsoil use activities conducted within designated SEZs. Before its enactment, all mineral-sector investors — regardless of location — were subject to the same general licensing procedure under the Subsoil Code. Under the new framework, an SEZ-resident company may obtain subsoil use authorisation through an integrated investment agreement with the SEZ administration, rather than through a standalone application to the state geological authority. The key substantive change is the availability of a regulatory and fiscal stability clause, which locks in the terms applicable at the date of the investment agreement. That protection was not available in equivalent form under the pre-2020 general procedure.

Q: Which foreign investors and company structures are most affected by the 2020 SEZ licensing change?

A: Three groups are most directly affected. First, foreign investors entering Uzbekistan's mineral sector for the first time after 2020 must choose between the general licensing route and the SEZ pathway — a structural decision with long-term regulatory and fiscal consequences. Second, investors who already held subsoil licences under the pre-2020 procedure and whose licensed territory has since been incorporated into an SEZ need to assess whether their existing licence is affected and whether migration to the SEZ framework is advisable. Third, investors channelling investment through Russian or other CIS holding structures need to confirm that their ownership chain satisfies the investor qualification criteria applied by the SEZ administration under the 2020 framework. Interpretive practice on cross-border ownership structures has not fully stabilised.

Q: What practical steps should an in-house counsel take in light of this regulatory update?

A: Three steps should be prioritised. The first is a zone designation check — confirming whether the target deposit or existing licensed area falls within a current SEZ boundary, given that boundaries have been updated since 2020. The second is a structural assessment — determining whether the existing or proposed entity structure qualifies for SEZ-resident status and whether that status is commercially beneficial relative to the general licensing route. The third is an investment agreement review or preparation — ensuring that the stability clause expressly covers subsoil use activities and is drafted to capture future regulatory changes. Each of these steps benefits from counsel with direct experience of Uzbekistan's regulatory practice and the cross-border structuring considerations that commonly arise for international investors.

Vetrov & Partners is a Russian boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years and listed as a trusted adviser by the German Consulate General in Novosibirsk.

The firm's Regulatory & Licensing practice advises foreign companies entering CIS and post-Soviet markets — including Uzbekistan — on licensing frameworks, regulatory structuring, and investment agreement negotiations. For Uzbekistan-specific matters, the firm works in collaboration with qualified local counsel and contributing regional analysts to provide integrated cross-border advice. With over 1,000 matters handled since inception, the team combines direct partner involvement with deep procedural knowledge of the regulatory environment across the region.

Enquiries: info@vetrovpartners.com | WhatsApp / Telegram: +7 (983) 510-38-76 | t.me/vitvetcom

We are a Russian-qualified law firm. For matters governed by Uzbekistan law or requiring local admission in Uzbekistan, we collaborate with trusted counsel in the relevant jurisdiction.

This publication is provided for informational purposes only and does not constitute legal advice under Russian or any other applicable law. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Vetrov & Partners is a Russian-qualified law firm. For matters governed by foreign law or requiring local admission in another jurisdiction, we collaborate with trusted counsel in the relevant jurisdiction. For advice regarding your particular situation, please contact info@vetrovpartners.com.

— Nodira Yusupova Contributing Regional Analyst — Uzbekistan, Vetrov & Partners vetrovpartners.com/contributions/

Nodira Yusupova is a contributing regional analyst advising on Uzbekistan market entry, foreign investment regulation, and licensing matters. She collaborates with Vetrov & Partners on cross-border mandates involving Russian and CIS investors in the Uzbekistan market.