On leasing (756-I-son)

14.04.1999

Law of the Republic of Uzbekistan

Article 1. Legislation on leasing

The legislation on leasing regulates relations arising from the implementation of leasing, and consists of this Law and other legislative acts.

If an international treaty of the Republic of Uzbekistan established other rules than those which are provided for by the legislation of the Republic of Uzbekistan on leasing, then the rules of international treaty shall be applied.

Article 2. The concept of leasing

Leasing — a special form of financial lease, at which one party (the lessor) on behalf of another party (the lessee) acquires from a third party (seller) the property (an object of leasing) indicated by the leasing contract and provides it to the lessee for a fee on certain such contract terms in possession and use for a period exceeding twelve months. In this case, the leasing contract must meet one of the following requirements:

at the end of the term of the contract of leasing the object of leasing passes into the property of the lessee;

the term of the leasing contract exceeds 80 percent of the service life of the leasing object or the residual value of the leasing object at the end of the leasing contract is less than 20 percent of its initial value;

at the end of the term of the leasing contract, the lessee has the right of redemption of the object of leasing at the price lower than the market value of the object of leasing on the date of implementation of this law;

The current discounted value of the leasing payments over the period of the leasing contract exceeds ninety per cent of the current value of the object of leasing at the time of transmission in the lease. The present discounted value is determined in accordance with the legislation on accounting.

Leasing is carried out under a tripartite (seller — lessor — lessee) or bilateral (lessor — lessee) leasing contract.

When concluding a bilateral leasing contract between the lessor and the seller an additional contract is concluded on the sale of the leasing object.

Article 3. Objects of leasing

The objects of the leasing can be any non-consumable items, in that those enterprises, property complexes, buildings, structures, equipment, transport means and other movable and immovable property used for entrepreneurial activity.

The objects of the leasing may not be land plots and other natural objects, as well as other property seized from circulation or limited transferable.

Article 4. Subjects of leasing

The subjects of leasing are the lessor, lessee and seller.

The lessor recognizes the person acquiring the object of leasing in the property in order to its subsequent transfer to the lessee in accordance with the leasing contract.

A lessee is a person who acquires a leasing object in his possession and use under a leasing contract.

The seller is the person from whom the lessor acquires the leasing object.

In relation to the specific object of leasing is not allowed to combine in one person of the lender, lessor and lessee in the case when the object of leasing is acquired for the account of the credit (loan) of the lessee.

Article 5. Forms of leasing

Leasing can be carried out both in a straight line shape, at which are present all three of the subject of leasing, so and in the form of returning, at which the lessee and the seller act in one's face.

Article 6. Sub-Leasing

The lessee has the right to hand over the object of leasing, received on the contract of leasing, in temporary possession and use in subleased to a third party with the written consent of the lessor, staying in charge in front of the lessor of the leasing contract. In this case, the provisions of this Law in the sub-leasing contract shall apply to the sub-lessor, sub-lessee and seller, respectively, as to the lessor, lessee and seller.

The term of action of the contract subleasing not may exceed the term of action of the contract of leasing.

Article 7. Accounting and registration of a leasing object

The leasing object is recorded on the balance sheet of the lessee.

Leasing objects requiring registration in state bodies are registered in the name of the lessor or lessee in the manner prescribed by law.

Article 8. Leasing Activities

Leasing activity — a type of investment activity for the lessor to acquire a leasing object at the expense of its own and (or) borrowed funds and transfer it to the lessee under a leasing agreement.

Article 9. Leasing contract

Leasing contract is formed in written form in accordance with the procedure established by law.

The leasing contract is subject to notarization:

at the request of one of the parties to the contract;

The leasing agreement must be notarized in cases where the property is the subject of the lease and agreements concerning it are required by law to be notarized, with the exception of leasing agreements for the acquisition of real estate and vehicles from the primary market.

The essential terms of the leasing contract are:

a description of the leasing object (quantity, quality, list, contract value of the leasing object and other parameters) and an indication of the total monetary amount of the contract;

obligations of the parties related to the acquisition and transfer of the leasing object;

the procedure for the transfer of the object of leasing, including the procedure for the delivery, installation and administration of the object of leasing in the operation;

conditions, sizes, terms and procedure for making lease payments;

obligations of the parties on the use, storage, maintenance and repair of the leasing object;

term of the contract;

indication of the seller and the party responsible for selecting the object of leasing.

By agreement of the parties, the following conditions may be included in the leasing contract:

the procedure and terms for the repurchase of the leasing object;

changes and termination of the leasing contract;

leasing object insurance;

force majeure circumstances;

providing lessor of additional services, without which it is impossible to use the object of leasing;

the order of the subjects of leasing of control over the observance of the conditions of the leasing contract.

The leasing contract can be included other conditions in accordance with the law.

Article 10. Amendment and termination of the leasing contract

Change and termination of the contract of leasing are possible by agreement of the parties, if otherwise not provided by the legislation or the contract.

Article 11. Rights and obligations of the lessor

The lessor has the right:

to exercise control over the conditions of operation and the target use of the lessee of the object of leasing in accordance with the terms of the leasing contract and the requirements of the legislation;

choose, with the consent of the lessee, the object of leasing and its seller;

to demand the leasing object from the lessee in cases and in the manner prescribed by law or a leasing contract;

In the event of a serious breach of obligations by the lessee, unless otherwise provided for in the lease agreement, the lessor has the right to demand the acceleration of future lease payments, or the cancellation of the agreement with the foreclosure on the leased object in the manner provided for debt collection, and the recovery of damages.

In case, if the object of the lease is not supplied as result of the fault of the lessor or do not correspond to the terms of the leasing contract, the lessor, with the consent of the lessee has the right to fix its improper execution of conditions of the leasing contract or offer the lessee another object of the lease.

The lessor is obliged to:

acquire property under a leasing contract and transfer it to the lessee to own and use;

acquire property for the lessee to notify the seller of the fact that the property is intended for transmission in leasing a particular person;

timely and in full volume to fulfill commitments on himself obligations to the lessee of the content of the object of leasing, its repair and maintenance services, if such conditions are provided by the contract.

The lessor may have other rights and bear other obligations established by law.

Article 12. Rights and obligations of the lessee

The lessee has the right to:

independently determine the object of leasing and choose a seller;

demand from the lessor compensation for losses incurred as a result of non-performance or improper performance of the leasing contract;

present to the seller the requirements arising from the contract of sale of the leasing object, in particular regarding its quality and completeness, timing of the transfer, warranty repairs and etc;

in the case of non-delivery, incomplete delivery, delay in delivery or delivery of the object of leasing inadequate quality to delay payment of the lease payments, to refuse from the supplied leasing object and require the termination of the contract of leasing, unless otherwise not provided for by the contract;

in the case of early termination of the contract of leasing, demand return paid to them earlier in an advance payment for the deduction of the cost of those benefits, which he earned from the use of the object of leasing.

When a third party directs the levy on the object of leasing the lessee is entitled to a lump sum to make the remainder due on the leasing contract lease payments for the deduction of the income of the lessor for the remaining period with a simultaneous termination of the contract of leasing and acquisition of the object of leasing in the property.

The lessee is required to:

accept and use the object of leasing in properly way, contain it in accordance with the terms of the contract;

timely pay leasing payments, unless otherwise provided by leasing agreement, make current repair of an object of leasing at its own expense, and incur other expenses related to its maintenance.

At the termination of the leasing contract, the lessee is obliged to return the object of leasing in the state in which he his received from the lessor, with the view of its normal wear and changes resulting from the agreement of the parties, for the exception of the cases stipulated by part two of this article.

The right and duty of the lessee on repair and maintenance service of the object of leasing can be determined by a separate agreement concluded with the seller.

The lessee may have other rights and bear other obligations established by law.

Article 13. Rights and obligations of the seller

The seller has the rights and bears responsibilities in accordance with the legislation and the contract.

If otherwise not provided for in the contract of leasing, or in the contract of purchase and sale (supply), the rights and obligations of seller on the contract of purchase and sale will be in relation to the lessee such as, how to respect the lessor. At this the lessee is not entitled to terminate or cancel the contract of sale of the object of leasing.

Article 14. Features of the contract of sale of a leasing object

The contract of purchase and sale of the object of leasing is between the lessor and the seller, according to which the lessor on behalf of lessee acquires in his own object leasing for subsequent transfer to the lessee.

At the discretion of the parties, the contract of sale of the leasing object may be concluded before or after the entry into force of the leasing contract.

At the conclusion of the contract of sale of the object lease, the lessor is obliged to previously inform the seller about the purpose of acquisition of the object of leasing, specifying this in the contract of sale.

Article 15. The right of ownership to the object of leasing

The ownership right to the leasing object before its purchase by the lessee belongs to the lessor.

The right of ownership to the object of the lease can go to the lessee before the expiry of the term of action of the contract of leasing with the condition of payment of all lease payments over the net of the income of the lessor for the remaining period until the expiration of the term of the contract of leasing, unless otherwise not provided by the contract of leasing.

In the event of a lessee's bankruptcy, seizure, or confiscation of his property, the leasing object is separated from the lessee's total property and is subject to return to the lessor, who may dispose of it at his discretion. The procedure for damages to the lessor is determined by law.

Article 16. Assignment by the lessor and lessee of their rights to third parties

The lessor may assign to third parties all or part of its rights under the leasing contract with notification to the lessee.

The lessee may assign to third parties all or part of their rights under a leasing contract with the permission of the lessor.

When moving the right of ownership to the object of leasing from the lessor to a third party leasing contract, concluded with the lessee retains the power to a new owner.

Article 17. Application of accelerated depreciation of a leasing object

The lessor and the lessee have the right, by mutual agreement, to apply accelerated depreciation of the leasing object in accordance with the law.

Article 18. Insurance of a leasing object

Insurance object leasing from all kinds of potential damage associated with the risk of destruction, loss, theft, damage and premature wear, is carried out by agreement of the parties. In case of absence of such an agreement responsibility for the insurance object lease, has the lessee.

Article 19. Risks associated with the object of leasing

All risks associated with the object of the lease, in fact including the risks of its accidental loss (destruction) or accidental damage, as well as theft, premature wear, damage, move to the lessee in accordance with the procedure provided for by the contract of leasing. From the moment of transfer of risks to the lessee last responsible for any loss or damage of the object of leasing in for a period of action of the contract of leasing.

If the contract of leasing is not determined during the transition of risk from the lessor to the lessee, the risks pass to the lessee from the moment of receiving them the object of leasing.

If the proposed object of leasing does not correspond to the contract of leasing and it gives the right to the lessee refuse from the object of leasing, the lessor shall bear all risks until such discrepancy is eliminated or the lessee acquires the object of leasing.

The lessee shall bear the risk of the seller's insolvency or incompatibility of the object of leasing for its intended use, except for cases when a lessor chooses a seller or an object of leasing or illegally forces a lessee to choose a particular seller or object of leasing.

Article 20. Provision under a leasing contract

Leasing insurance against any possible damage in the form of risk of loss, theft, damage and premature obsolescence is made upon agreement of the parties. In the absence of such agreement, the lessee is responsible for the insurance of the object of leasing.

Article 21. The use of an object of leasing in as collateral

The lessor does not have the right to use the object of leasing in as collateral without the prior consent of the lessee.

If stipulated in the leasing agreement, the lessee may provide the leased object as collateral for the fulfillment of other obligations, based on the part of the object's value that exceeds the remaining amount of lease payments due to the lessor.

Article 22. Leasing payments

Leasing payments represent the lessee reimbursing the lessor for the cost of the leasing object, as well as the lessor's interest income.

Leasing payments are distributed for the entire duration of the contract and are paid in installments. The size and frequency of lease payments are established by the leasing contract .

Article 23. Collection of monetary amounts and foreclosure on the leased asset

The procedure for the recovery of monetary amounts is determined by law, and the foreclosure on the leased asset is carried out in the manner prescribed for foreclosure on the subject of pledge.

Article 24. Responsibility of leasing entities

The lessor shall be liable to the lessee for non-delivery , short delivery, late delivery and delivery of property of improper quality, if it was the result of his guilty actions (or inaction).

The lessor does not bear responsibility before the lessee on the object of leasing, for the exception of cases, when is proved that the choice of seller and of the object of leasing carried out by the lessor and the lessee has suffered due to this loss.

According to the relation to the seller the lessor and the lessee act in a joint and several creditors of the contract of sale of the object of leasing. The seller is responsible to them for the fulfillment of their obligations arising from the contract of sale of the leasing object (quality, completeness, proper delivery of the leasing object and etc.). If this seller is not can bear the responsibility at the same time in front of the lessor and lessee for one and the same damage associated with the object of leasing.

The lessor is not responsible for the shortcomings of the transferred object of leasing, which were they stipulated at the conclusion of the contract of leasing.

The loss of the object of leasing or loss of the object of leasing its functions by the fault of the lessee does not exempt the lessee from liability to the lessor, unless otherwise not provided for by the contract of leasing.

Article 25. Settlement of disputes

Disputes arising in the course of the lease, are resolved in court order.

President of the Republic of Uzbekistan I. KARIMOV

Tashkent city,

April 14, 1999,

No. 756-I