Foreign counsel encountering Uzbekistan for the first time frequently apply standard distribution and agency frameworks to subsoil-sector mandates without adjusting for the structural constraints that Uzbek law imposes on arrangements connected with subsoil use licences. The result is a contract that functions adequately under general commercial law but fails at the regulatory interface — when the distributor or agent needs to interact with a subsoil licence holder, act on its behalf before a state authority, or receive remuneration structured around licence-linked transactions. Three points recur in practice.
Uzbekistan's Law on Subsoil establishes a licensing regime for the exploration and extraction of underground resources, including hydrocarbons and solid minerals. Subsoil use rights are non-transferable in the ordinary sense: a licence holder cannot delegate the exercise of its subsoil rights to a distributor or commercial agent under a standard principal–agent arrangement as though the underlying licence were a commercial asset subject to ordinary transfer.
This matters for foreign companies in two contexts. First, where a foreign supplier appoints a local distribution entity to sell equipment, technology, or services exclusively to subsoil licence holders, the distribution agreement itself is not directly regulated by the Law on Subsoil — but the distributor's activities may trigger registration obligations or require that the distributor hold its own regulatory standing before the relevant state body. Second, where a foreign company appoints an agent to act on behalf of the foreign company in dealings with a subsoil licence holder — for example, to negotiate supply terms, sign off on acceptance certificates, or represent the foreign company in technical discussions — the scope of that agent's authority must be drafted with care. Uzbek courts and administrative bodies have shown reluctance to accept broad authority clauses where the underlying transaction touches on licensed subsoil operations, particularly where the agent's actions could be characterised as participating in the management or operation of a subsoil project.
The operative practical point: authority in a commercial agency agreement connected with the subsoil sector should be expressed in specific transactional terms rather than general commercial terms. A clause conferring authority "to conclude and execute all contracts in connection with the principal's commercial activities in Uzbekistan" is adequate for general market entry but inadequate — and potentially void as against a state body — where those activities are subsoil-linked.
Uzbekistan has introduced local content requirements in certain subsoil-sector procurement categories. The applicable regulatory framework — which has developed through a series of presidential and governmental decrees rather than the Law on Subsoil itself — establishes thresholds for the proportion of goods and services that subsoil licence holders must source from Uzbek-registered entities. A foreign company distributing goods into the subsoil sector through a locally registered distribution subsidiary will generally satisfy the form of the local content requirement; a foreign company selling directly or through an offshore intermediary may not.
For foreign counsel, the structuring implication is straightforward: where the end-customer base is predominantly subsoil sector, a distribution structure through a locally incorporated entity is materially preferable to a cross-border agency arrangement. The agency model — where the foreign company retains the seller role and the Uzbek agent merely facilitates — may expose the foreign company's sales to local content exclusion, limiting the agent's ability to close transactions with certain subsoil operators.
Note: local content thresholds and the categories of goods and services subject to Uzbek-entity requirements have been revised periodically. Counsel should verify the current thresholds with Uzbek-qualified practitioners before advising on structure. Reliance on thresholds confirmed more than twelve months before the transaction date carries material risk of error.
Standard practice in Uzbekistan-related commercial agreements is to provide for Uzbek law as the governing law — or, for transactions with sufficient international character, for a neutral governing law combined with international arbitration. The Law on Subsoil introduces a complication: disputes arising from or in connection with a subsoil use licence — including certain ancillary contracts — may be subject to mandatory jurisdiction provisions that override a freely chosen governing law or arbitration clause.
In practice, this constraint most commonly arises in production-sharing agreements and infrastructure contracts directly linked to a licence. Distribution and agency agreements that are purely commercial in nature — supply of equipment, provision of services, payment of commission — are not generally treated as licence-related contracts and do not ordinarily fall under the mandatory jurisdiction provisions. However, where the agency agreement is drafted broadly enough to encompass acts that could be characterised as performance of the subsoil use contract itself, the risk of mandatory jurisdiction arguments increases.
The practical guidance for foreign counsel is to maintain a clear contractual distinction between the commercial relationship (supply of goods or services, agency commission, term and termination) and any operational interface with the subsoil licence. Where the agent's role involves any element of operational coordination — site access, regulatory interaction, acceptance of works under a licence-governed contract — that role should be documented separately, with Uzbek law as governing law and a specified Uzbek dispute forum, to reduce the risk of a mandatory jurisdiction challenge contaminating the broader commercial agreement.
[CTA: If you are advising a client on market entry or distribution structures in Uzbekistan and need to coordinate with Uzbek-qualified counsel, contact the team at info@vetrovpartners.com or via WhatsApp/Telegram at +7 (983) 510-38-76.]
Vetrov & Partners is a Russian boutique law firm established in 2009, recognised by Pravo-300 for eight consecutive years. The firm advises foreign companies and foreign counsel on cross-border matters involving Russia and the CIS region, including coordination with trusted local counsel in Uzbekistan and other Central Asian jurisdictions.
We are a Russian-qualified law firm. For matters governed by Uzbek law or requiring local admission in Uzbekistan, we collaborate with trusted counsel in the relevant jurisdiction. Enquiries: info@vetrovpartners.com | WhatsApp / Telegram: +7 (983) 510-38-76 | t.me/vitvetcom
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.
— Nodura Yusupova Contributing Regional Analyst — Uzbekistan, Vetrov & Partners vetrovpartners.com/contributions/