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TURKMENISTAN LAWS

Law of Turkmenistan on Foreign Concessions
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The present law shall define organisational, economic and
legal conditions of establishment and activities of foreign
concessions in Turkmenistan.

SECTION I. GENERAL PROVISIONS

Article 1. The concept of a foreign concession

A concession is the permission of the state to carry out a
specific type of business activity on the territory of
Turkmenistan granted to foreign legal entities and physical
persons.

A concession shall provide for the right given by the state
to a foreign legal entity or a physical person - a
concessionaire - to use plots of land, natural resources,
enterprises and other assets on the basis of an agreement
for a specified period of time and in return for a payment.

Article 2. The legal regulation of foreign concessions

1. Legal relations resulting from Concession agreements
shall be regulated by the present Law and other legislative
acts of Turkmenistan.

2. The legislation of Turkmenistan determines territories,
objects of the state property, types of enterprises and
other assets the concession of which is limited or
prohibited.

3. If the international agreements signed by Turkmenistan
set forth another provisions than those contained in this
Law, the provisions of international agreements shall be
applicable.

Article 3. The basic principles of concession activity
Concession activity in Turkmenistan is carried out by the
following principles:

- contribution to solving economic objectives of
Turkmenistan, attraction of foreign investments, structural
economic reforms and introduction of advanced

technologies;
- rational use of natural resources, provision of
ecological, sanitary and hygienic safety;

- provision of the production of goods meeting the
requirements of industrial standards established in
Turkmenistan;

- involvement in the social development of the territories
where concession activity is carried out;

- assistance by the authorities and governmental agencies of
Turkmenistan to concessionaires in achieving the objectives
set out in concession agreements.

Article 4. Terms of granting a concession

1. A Concession shall be granted on a tender basis. The
terms and procedure for the competition shall be determined
by the Cabinet of Ministers of Turkmenistan. When granting
objects for concession the publicity shall be provided.

2. A concession shall be terminable, repayable and
contractual.

3. Concession projects and programs as well as feasibility
studies shall be subject to the state expert examination
including their environmental. sanitary and hygienic
qualifications.

Participants of a Concession agreement shall have the right
to arrange for an additional expert examination on their
own.

Article 5. Objects of concession activity

1. The right for exploration, development, production or
operation of natural resources as well as for carrying out
any other type of business activity shall be guaranteed to a
concessionaire in all spheres and types of activity not
prohibited by the legislation of Turkmenistan.

The objects of concession activity shall be:

- plots of land and territories with their natural
resources;

- water surfaces with their natural resources;

- individual deposits of natural resources;

- industrial objects intended for the exploration,
development, production or exploitation of natural
resources;

- other objects.

2. Concession activity causing damage to the legally
protected rights and interests of the citizens and the state
and not meeting the requirements of ecological, sanitary and
hygienic norms, radiological, fire and explosion safely
standards, shall be prohibited.

Article 6. Subjects of concession activity

1. The subjects of a concession agreement (contract) shall
be the state of Turkmenistan duly represented by the
authorised bodies, and foreign legal entities and physical
persons as well as foreign states (concessionaires).

2. A concessionaire - the general contractor - is granted
the right to engage subcontractors for implementation of
works in accordance with a concession agreement. Agreements
signed with subcontractors must not contradict the
provisions of a concession contract.


SECTION II. THE ESTABLISHMENT AND ACTIVITY OF CONCESSION
ENTERPRISES

Article 7. The Procedure for granting a Concession

1. The Cabinet of Ministers of Turkmenistan shall approve
priority sectors for concession activities by branches of
industry, territories and objects.

2. An application for granting a concession enclosed by the
documents verifying the applicant's professional
qualifications and technological potentials of an applicant
and his guarantors confirmed by a bank as well as the
feasibility study along with the results of an expert
examination and the request from an executive body of the
velayat where the concession object is located, shall be
submitted to a state property administration agency.

3. After checking the submitted documents and selecting
applications on a competitive basis the state property
administration agency shall sign a concession agreement.

4. The Cabinet of Ministers of Turkmenistan shall specify
the objects, concession agreements on which shall be subject
to mandatory approval by this highest executive body.

5. Concession agreements shall be registered within ten days
after being signed and approved by an executive body in the
location of a concession object. Within ten days the
registration agency that has completed a registration shall
notify of the fact of registration the tax inspectorate and
forward the formation to an authorised agency for inclusion
in the State register.

6. A concession agreement shall be come into force from the
day of receipt of the state registration certificate issued
by the holder of the General state registrar of enterprises
and organisations.

Article 8. The contents of a concession agreement

A concession agreement shall contain the information on:

- the subjects of the agreement;

- concession object and objectives;

- borders of the territory within the frameworks of which a
concession shall be granted;

- the list of the assets conceded and their value;

- the rights and responsibilities of the parties;

- terms of payment;

- procedure for selling ready made products on the domestic
and foreign markets;

- procedure for import of raw materials, component parts;

- the customs terms;

- procedure of insurance;

- validity period of a contract, procedure of its
amendments, extension and termination;

- requirements for environmental protection and restoration,
safeguarding historical and cultural monuments, natural
landscapes, flora and fauna;

- concessionaireís obligations to submit new information
obtained as a result of concession activity, including
geological exploration data, to the grantor f the
concession;

- terms of hiring labour force;

- procedure for settling disputes, each party's
responsibility for violation of the agreement;

- minimum requirement of the capital invested into the
business;

- level of prices for concession products for the domestic
and foreign markets;

- terms and procedure for the return of concession objects
upon expiration of the agreement term, or for any other
reason;

- each party's financial guarantees, legal addresses and
bank requisites;

- legal, economic and organisational consequences in cases
of emergency and contingency;

- procedure and terms of inspection, control for
implementation of a concession agreement;

- other items of importance the contracting parties.

Article 9. Concession payment and taxes

Procedure and amounts of concession payments and taxes by
foreign legal entities and physical persons are specified by
the current legislation of Turkmenistan.

Article 10. Terms of concession agreements

1. A concession agreement shall be signed for the period
from 5 to 40 years. In exceptional cases an agreement may be
signed for 5 years. Upon expiration of the period specified
in the agreement the latter may be renewed as agreed between
the parties. Terms and conditions of an agreement being
renewed may be altered.

2. Upon expiration of the period of a concession agreement
the concession objects shall be returned to the State body
that has granted the concession.

Article 11. Changes in the terms and cancellation of a
concession agreement

1. Changes in the terms of a concession agreement or pre-
term cancellation may take place by the mutual agreement of
parties or in the legal order.

2. The liquidation of a concession shall be carried out in
accordance with the procedure stipulated by the agreement,
or by mutual agreement between the parties; in case of
discord between the parties or bankruptcy of a concession
enterprise liquidation shall be carried out by a court.

3. The fact of liquidating a concession shall be registered
by the agency that has registered the concession agreement.

4. The concession shall be considered liquidated from the
date of its exclusion from the Unified State Register of
Enterprises and Organisations of all forms of property and
management.

Article 12. Inheritance of concession rights

Inheritance of concession rights shall be carried out in
accordance with the laws of Turkmenistan.

Article 13. Insurance

1. Risks of a concession enterprise shall be insured by
mutual agreement between a concessionaire and the granter of
a concession.

2. The social insurance of the staff of concession
enterprises shall be regulated by the legislation of
Turkmenistan, and for foreign employees - by individual
labour agreements (contracts) by transfer of payments to the
corresponding funds in the countries of their permanent
residence.

Article 14. Accounting and reporting

1. Concession enterprises carry out accounting and
statistical reports of their activity in accordance with the
current laws of Turkmenistan.

2. The translation of foreign currency into the monetary
units used in Turkmenistan for the purpose of accounting and
calculating the book value of assets shall be carried out in
compliance with the rules established by the Central Bank of
Turkmenistan.


SECTION III. REGULATION OF CONCESSION RELATIONS

Article 15. The rights of the state body granting a
concession

The State body of Turkmenistan that granted a concession has
the right to:

- have a share in the concession's profits;

- to purchase the concession's products;

- to control the performance of the concession agreement;

- authorise the concessionaire to use and exploit natural by-
resources. The list of mineral resources not subject to
exploration as natural by-resources shall be determined by
the Cabinet of Ministers of Turkmenistan.

Article 16. The obligations of the state body granting a
concession

The state body that has granted a concession must:

- observe all the terms of the concession agreement;

- give the concessionaire exclusive rights to exploit and to
use a concession object;

- must not publish and render to third persons information
on commercial and production activities, obtained from the
concessionaire, without his consent;

- guarantee that any alteration of terms of the concession
agreement shall not be admitted without concessionaireís
consent;

- compensate for the concessionaireís expenses in case of
pre-term cancellation of the agreement on the grantor's
initiative;

- compensate for the concessionaireís losses resulting from
violating the agreement through someone elseís fault;

- guarantee the right to export a stipulated share of the
output and hard currency profit on conditions provided for
by the concession agreement, or by additional agreements.

Article 17. The concessionaireís rights

A concessionaire shall have the right:

- to carry out business activity as stipulated by the
concession agreement;

- to use on the terms set up for enterprises in Turkmenistan
a plot of land, piped water, energy, communications, to
construct on the concession territory buildings, structures,
approach roads, highways, wire and telephone lines.

- to open representations, branches and offices in
compliance with the legislation of Turkmenistan;

- to hire personnel from among the citizens of Turkmenistan
in accordance with the labour legislation of Turkmenistan as
well as personnel from among the citizens of other
countries;

- to import, for the purpose of providing for the production
process and labour force, instruments, overalls and
foodstuff without the right to resell or use them outside
the concession territory;

- to establish consortia;

- to appeal to the court against illegal actions by state
administrative bodies and their officials.

Article 18. The obligations of a concessionaire

A concessionaire shall be obliged to observe the terms of
the concession agreement and work strictly accordance with
the legislation of Turkmenistan.

Article 19. Procedure for settling disputes

Disputes of a concessionaire with state bodies, enterprises,
public organisations, other legal entities and citizens of
Turkmenistan as well as disputes between concessionaires
with each other related to their activity shall be solved in
the courts of Turkmenistan if otherwise not stipulated by
international agreement.

Article 20. The responsibilities of parties

The parties that signed concession agreements shall be
responsible for its non-observance in the way established by
the legislation of Turkmenistan and provided for by
concession agreements.


SAPARMURAT NIYAZOV
President of Turkmenistan

The City of Ashgabat
October 1, 1993