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Investment climate

2.1   Legal Framework for Investment Activities

 

Since investments are a major prerequisite for economic development in the Kyrgyz Republic, investment legislation of the country is quite liberal. 

 

The Constitution is the basic and paramount law to which all other laws must conform, including the laws directly or indirectly regulating investment in the Kyrgyz Republic such as the “Law on Licensing”, the “Law on Joint-Stock Companies”, the “Law on Mining”, the “Law on Free Economic Zones in KR”, the Tax Code, the Land Code, the Customs Code, the Civil Code, the “Law on Public-Private Partnership in KR”. Nonetheless, the principal law governing investment is the “Law on Investment in Kyrgyz Republic”[1]

 

Thus, under the legislation of the Kyrgyz Republic,[2] foreign investors enjoy the national treatment applied to individuals and legal entities of this country. Legislation provides for a broad scope of rights and guarantees to foreign investors, including guarantees of export and repatriation of investment, property, and information out of the Kyrgyz Republic, guarantees of protection against investment expropriation and coverage of losses incurred by investors, guarantees of income use and freedom of monetary transactions, and others. 

 

 

The Kyrgyz Republic has entered into a number of bilateral treaties on mutual support, encouragement and protection of investment (capital expenditure). Such treaties have been signed with a number of countries such as[3]:

 

  • The People’s Republic of China (1995);
  • The Republic of Turkey (1996);
  • The Republic of Ukraine (treaty signed in 1993);
  • The United States of America (1994);
  • The Republic of Armenia (1995);
  • The United Kingdom of Great Britain and Northern Ireland (1998);
  • The Republic of France (1997);
  • The Islamic Republic of Iran (2005);
  • The Republic of Azerbaijan (1997);
  • The Federal Republic of Germany (2006);
  • The Republic of Georgia (1997);
  • The Republic of India (2000 );
  • The Republic of Kazakhstan (2005);
  • The Republic of Belarus (2001);
  • The People’s Republic of Mongolia (treaty signed in 1999)
  • The Swiss Confederation (2003);
  • The Republic of Tajikistan (2001);
  • The Kingdom of Sweden (2003);
  • The Republic of Moldova (2004);
  • The Republic of Finland (2004);
  • The Republic of Korea (2008);
  • The Republic of Latvia (signed in 2008);
  • The Republic of Lithuania (2009);
  • Denmark (signed in 2001);
  • Malaysia (signed in 1995);
  • The Islamic Republic of Pakistan (signed in 1995);
  • The Republic of Indonesia ( 1997);
  • The Republic of Uzbekistan (signed in 1997);
  • The United Arab Emirates (signed in 2014);
  • State of Qatar (signed in 2014);
  • State of Kuwait (signed in 2015).

 

The Government of the Kyrgyz Republic has approved draft agreements on mutual support, encouragement and protection of investment with the Czech Republic,[4]the Kingdom of the Netherlands[5].

 

The Ministry of Economic Development and Trade of the Kyrgyz Republic is the authorized executive body responsible for the development of its national investment policy. It drafts and implements a cohesive national macroeconomic, financial, tax and customs policy, in addition to a policy that covers economic development, foreign trade and economic activities, encouraging investment, technical regulation, support and development of entrepreneurship, and the development of free economic zones.[6] 

 

The primary tasks of the Investment and Export Promotion Agency under the Ministry of Economy are to attract and promote investment into the national economy, to assist existing and potential exporters in  promoting their products in overseas markets and to develop mechanisms for public-private partnership[7].

2.2   State Guarantees to Foreign Investors

 

Subject to its legislation,[8] the Kyrgyz Republic provides the following guarantees to foreign investors:  

  

  • National treatment of business activities, equal investment rights of domestic and foreign investors, no intervention into the business activities of investors, protection and restitution of infringed rights of investors in accordance with the legislation of the Kyrgyz Republic; 

 

  • Export or repatriation of profit gained on investment, proceeds of investment activities in the Kyrgyz Republic, property, and information, out of the Kyrgyz Republic;

 

  • Protection against expropriation (nationalization, requisition, or other equivalent measures, including action or omission on the part of authorized government bodies of the Kyrgyz Republic that has resulted in seizure of investor’s funds or investor’s deprivation of the possibility to use the results of their investment). In exceptional cases involving public interest, investments may be expropriated with concurrent state guarantees of appropriate coverage of damage incurred by the investor; 

 

  • The investor’s right to freely use the income derived from their activities in the Kyrgyz Republic;

 

  • The freedom to invest in any form into objects and activities not prohibited by the legislation of the Kyrgyz Republic, including the activities subject to licensing;

 

  • Freedom of monetary transactions (free conversion of currency, unbound and unrestricted money transfers; should provisions restricting money transfers in foreign currency be introduced into the legislation of the Kyrgyz Republic, these provisions will not apply to foreign investors, with the exception of cases where investors engage in illegitimate activities (such as money laundering);

 

  • Free access to open-source information;

 

  • The right to: establish legal entities of any organizational and legal form provided by the legislation of the Kyrgyz Republic; open branches and representative offices within the territory of the Kyrgyz Republic; select any organizational and managerial structure for the business entities, unless a different structure is explicitly required by law for the given organizational and legal form of a business entity; acquire property (with the exception of land plots), shares, other securities, including governmental securities; participate in privatization of state property, establish associations and other unions; hire local and foreign employees subject to legislation of the Kyrgyz Republic; and engage in other investment activities not prohibited by legislation in the Kyrgyz Republic  

 

  • Recognition by public authorities and officials of the Kyrgyz Republic of all intellectual property rights of foreign investors;

 

  • In the event of amendments to the Law of the KR on Investments, or the tax legislation of the Kyrgyz Republic or the nontax payments legislation, the investor and the investee who meet the statutory requirements have the right, during 10 years from the date of signing the stabilization agreement, to choose such conditions as may be most favorable to them for paying taxes including value added tax but excluding other indirect taxes, and nontax payments (except fees and charges for public services) in the manner provided by the laws of the Kyrgyz Republic. The procedure and conditions for applying stabilization regime to tax and nontax legal relationships are established by the laws of the Kyrgyz Republic;

 

  • Other guarantees specifically provided in bilateral and multilateral international treaties on the promotion and protection of investment, to which the Kyrgyz Republic is a party.  

 

  1. Investment Agreement with the Government of the Kyrgyz Republic

 

The Government of the Kyrgyz Republic may execute investment agreements for implementing investment projects initiated by the investor in accordance with state development programs in high priority economic and social sectors. Such investment agreements may be executed through direct negotiations between the Government of the Kyrgyz Republic and the investor, provided that the amount of investment made by the investor in the investment project is not less than USD 50 million and the investor has internationally recognized business reputation, unique knowledge and experience in successfully implementing the projects in the similar area of practice.

 

  1. Settlement of Investment Disputes

 

Under the legislation of the Kyrgyz Republic,[9] investment dispute parties may agree on any applicable procedure for settlement of investment disputes. 

 

Failing such an agreement, an investment dispute between the Kyrgyz authorities and an investor shall be settled wherever possible by consultations between the parties. If the parties do not settle amicably within 3 months from the day of the first written request for such consultation, any investment dispute between the investor and the Kyrgyz authorities shall be settled in the Kyrgyz courts, unless either party to the dispute between the foreign investor and the authority requests to consider the dispute in accordance with one of the following procedures by submitting to:

 

  • the International Center for Settlement of Investment Disputes (ICSID) under the Convention on the Settlement of Investment Disputes between States and Citizens of Other States or under the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the ICSID; or
  • arbitration or an international ad hoc arbitral tribunal (commercial court) formed in accordance with the arbitration rules of the United Nations Commission on International Trade Law.

 

Some treaties on mutual support, encouragement and protection of investment (capital expenditure), to which the Kyrgyz Republic is a party, contain provisions entitling foreign investors to submit their investment disputes to international arbitral tribunals.

 

[2] The Law of the Kyrgyz Republic “On Investments in the Kyrgyz Republic” dated March 27, 2003 (with the latest amendments as of  February 13, 2015 ). 

[3] In parentheses are the years on which the respective treaties came into effect in the Kyrgyz Republic, unless stated otherwise. 

[4] Ordinance No. 125-r of the Government of the Kyrgyz Republic dated April 12, 2000. 

[5] Ordinance No. 594-r of the Government of the Kyrgyz Republic dated October 1, 2003.

[6] Regulation on Ministry of Economy of Kyrgyz Republic dated 20 February 2012 (with the latest amendments as of  September 27, 2016)

[7] Regulation on State Investment and Export Promotion Agency under the Ministry of Economy of the Kyrgyz Republic dated October 14, 2016.

[8] Chapter 2 of the Law of the Kyrgyz Republic: “On Investments in the Kyrgyz Republic” dated March 27, 2003 No.66 (with the latest amendments as of  February 13, 2015 No.32). 

[9] Article 18 of the Law of the Kyrgyz Republic: “On Investments in the Kyrgyz Republic” dated March 27, 2003 No.66 (with the latest amendments as of  February 13, 2015 No.32).  ).