LAW OF TURKMENISTAN ON PLEDGE

SECTION I. GENERAL PROVISIONS

Article 1. Definition of Pledge

Pledge is a manner of security for the performance of an
obligation, whereby the pledgee acquires a priority right in
relation to other creditors to receive satisfaction on the
account of the pledged property in the event of failure by the
debtor to perform the obligation, subject to exceptions provided
by the effective legislation of Turkmenistan.

Article 2. Legislation of Turkmenistan on Pledge
The pledge relationships shall be regulated by this Law and by
other legislative acts of Turkmenistan.
Should an international treaty with the participation of
Turkmenistan set forth provisions on pledge that are different
from the ones set forth in the legislative acts of Turkmenistan,
then the provisions of the international treaty will apply.

Article 3. Collateral
1. The collateral may be any property not excluded from
civil circulation (lands, enterprises, buildings, constructions,
equipment, other production funds, securities, money), which can
be foreclosed upon in accordance with the legislation of
Turkmenistan, as well as property rights, objects of intellectual
property.
2. Claims bearing a personal character may not serve as
collateral.
3. The Cabinet of Ministers of Turkmenistan will set
forth the list of objects, which due to the historic, cultural or
any other value thereof, or due to the reasons of state security,
may not serve as collateral.
4. The rights of the pledgee arise from his creditor
interests in the obligation secured by pledge, and the existence
thereof is dependent upon the destiny of the obligation secured
by pledge.

Article 4. Pledgor and Pledgee
1. Pledgor and pledgee (parties to the pledge
agreement) may be natural persons, legal entities and the state.
2. Pledgor may be the debtor himself, as well as a
third party (real surety). Pledgor may be the person, who
exercises a property interest in the collateral, or who holds a
right of economic administration or operative management therein.
The enterprise holding the right of full economic
administration in the property may exercise the pledge of the
enterprise in its entirety, of the structural units and
subdivisions thereof as property complexes, as well as of
separate buildings and constructions with the consent of the
owner of such property.
The institution (organization) holding the right of
operative management in the property may pledge the property or
the rights acquired on the account of the income earned from the
economic activity permitted to the institution (organization).
3. In the event of pledge of rights, pledgor may be the
person entitled thereto.
The right held jointly by several persons may be
pledged only upon consent in writing of all the holders thereof.
4. The state, legal entities and natural persons may
form specialized organizations (pawnshops), which will be in
charge of issuance of money loans secured by pledges of property.
Non-governmental pawnshops will carry out their
activity in accordance with the permits issued by the local
executive authorities.
The banks licensed to conduct banking operations by
the Central Bank of Turkmenistan may also be referred to
specialized organizations issuing secured loans.

Article 5. Grounds for Creation of Pledge
1. A pledge may be created by virtue of agreement or
law.
2. Should the pledge arise by virtue of operation of
law, then the law should state due to which obligation and
exactly which property will be recognized as encumbered by
pledge.

Article 6. Types of Pledge
The law or agreement may provide for the pledged property
to remain with the pledgor, or to be conveyed into possession of
the pledgee (pawn) or of a third party.
Pledge of commodities may be executed by transmission to
the pledgee of the commodity title document, which is a security.

Article 7. Property as Collateral
1. Any property, which in accordance with the
legislation of Turkmenistan may be alienated by the pledgor, may
serve as collateral.
2. The pledge interest in the property will include the
appurtenances and the inseparable fruits thereof, unless the law
or the agreement will provide otherwise. The pledge interest in
the property may include the separable fruits only in the events,
within the limitations, and in the manner provided by law or
agreement.
3. The agreement or law may provide for encumbrance by
pledge of the property that may be acquired by the pledgor in the
future.

Article 8. Pledge of Property Held in Common Joint Tenancy
1. The property held in common joint tenancy may be
pledged only with the consent of all owners.
2. The pledge by the owner of his share of tenancy in
common will not require the consent of other owners, should the
character of tenancy (its severability) allow that.
3. The owner of an apartment may pledge it with the
consent of all jointly dwelling major members of the family.

Article 9. Property Rights as Collateral
1. May serve as collateral the rights to land plots
(including the right of use, the right of possession and use),
the right to other natural objects (including the parcels of
entrails of the earth, forestry, waters), and other non-property
rights, except for the rights related to the personality of the
creditor, as well as for other rights assignment whereof will be
inconsistent with the law or agreement.
2. The pledge agreement may be entered into with
respect to the rights that may be acquired by the pledgor in the
future.
3. The right limited by a certain period may serve as
collateral only until expiration of such period.

Article 10. Substitution of Collateral
The substitution of collateral is permitted only with the
consent of the pledgee. The manner of substitution of collateral
in the event of pledge of commodities in circulation will be
regulated by Article 52 of this Law.

Article 11. Pledge and Insurance
1. The obligation to insure the collateral conveyed
into possession of the pledgee will be incurred by the pledgee,
unless the pledge agreement will provide otherwise.
2. The pledgee - legal entity - may be bound by
agreement to provide insurance for the event of undertaking by
governmental authorities of actions and adoption of acts ceasing
its economic activity or impeding it, or negatively influencing
it (confiscation, requisition of property), as well as
liquidation or recognition as bankrupt.
3. The pawnshop will insure the property accepted as
collateral in its entirety at the expense of the pledgor pursuant
to the appraisal effectuated by agreement between the parties
upon acceptance of the property as a pledge.
4. Upon occurrence of insured against events the
pledgee will be entitled to priority satisfaction of his claims
from the amount of insurance compensation.

Article 12. Provisions of Pledge Agreement
The pledge agreement must provide for the name, location
(place of residence) of the parties, the type of pledge, the
essence of the claim secured by the pledge, the amount and terms
of execution thereof, the inventory, value and location of
collateral, as well as other conditions that must be agreed upon
due to the request of either party.

Article 13. Form of Pledge Agreement
1. The pledge agreement must be executed in writing and
must be subject to notarial authentication and registration,
unless the legislation of Turkmenistan provides otherwise.
2. The notarial authentication of the pledge for a loan
issued to citizens will be effected by means of an authentication
record made on the notice of issuance of loan received from the
bank or other creditor.
3. The pledge agreement securing the obligations
arising from the principal agreement must also be authenticated
with the body authenticating the principal agreement.
4. The condition of pledge may be included in the
agreement whereby arises the obligation secured by pledge. Such
agreement must be executed in the form established for the pledge
agreement.
5. The form of pledge agreement will be determined by
the law of the place of formation thereof.
The pledge agreement entered into outside
Turkmenistan may not be held invalid on the grounds of failure to
comply with the form thereof, should the requirements set forth
by the legislation of Turkmenistan be respected.
The form of agreement on pledge of buildings,
constructions, enterprises, land plots and other objects located
on the territory of Turkmenistan, as well as of the railway
rolling stock, civilian air, sea and river vessels, registered in
Turkmenistan, regardless of the place of formation of such
agreement, will be determined by the legislation of Turkmenistan.
6. The rights and obligations of the parties to the
pledge agreement will be determined by the law of the state where
the party acting as pledgor was formed, is residing or is having
the principal place of business, unless the agreement between the
parties provides otherwise.

Article 14. Risk of Fortuitous Loss of Collateral
The risk of fortuitous loss of collateral will be incurred
by the owner (subject of full economic administration or
operative management) of the pledged property, unless the
agreement or the legislative acts of Turkmenistan provide
otherwise.

Article 15. State Registration of Pledge
1. The pledge of immovable property and of the
interests therein, the pledge of commodities in circulation, are
subject to state registration. The Cabinet of Ministers of
Turkmenistan may include in the list other property, the pledge
whereof is subject to state registration.
The state registration of pledges on property is
performed by the body authorized by the Cabinet of Ministers.
2. The parties may agree upon registration of pledges
in cases when such registration is not required by law
(facultative registration of pledge agreement).
3. The mandatory and facultative registrations will
cause equal legal consequences and will be effected in the manner
provided by this Law.
4. The pledge agreement subject to state registration
will be deemed as formed from the moment of registration of the
pledge.
5. Upon transfer of right to the pledged property
subject to registration to a different pledgee, necessary changes
must be recorded in the register maintained by the authority in
charge of registration.

Article 16. Consequences of Failure to Comply with Form of
Pledge Agreement
Failure to comply with the form set forth for the pledge
agreement will cause recognition of invalidity of such agreement
with the consequences provided by the legislation of
Turkmenistan.

Article 17. Appeal Against Actions Connected with Registration
of Pledge
The interested person may appeal the rejection to register
or the unlawful performance of registration of the pledge with
the court of the location of the body in charge of registration.

Article 18. Information on Pledge Registration
The body in charge of registration of pledge must provide
to the pledgee the certificate of registration, as well as
extracts upon request of the pledgee, pledgor and other
interested persons, having proof of sound interest.

Article 19. State Fee for Pledge Registration
For registration of pledges, issuance of certificates of
registration, as well as provision of extracts from the register,
a state fee will be charged in the amount set forth by the
legislation of Turkmenistan. The applicant will submit to the
body in charge of registration the proof of payment of the state
fee. In absence of such proof, the application for registration
of pledge will not be examined.

Article 20. Liability of Body in Charge of Registration
The body in charge of registration of pledges will be
liable for damages and will compensate the damages produced as a
result of violation by its employees of the registration rules.

Article 21. Registration of Performance of Obligation Secured by
Pledge
1. The pledgee, upon request of the pledgor, must issue
to the latter the documents certifying the performance of the
obligation in whole or in part for the subsequent recording of
the respective data in the register.
2. Upon receipt of documents certifying the performance
in whole or in part of the obligation secured by pledge, the body
in charge of registration must immediately make the respective
record in the register.

Article 22. Duty of Pledgor to Keep a Pledge Record Book
1. The pledgors, registered as entrepreneurs, must:
§ Keep a pledge record book;
§ Not later than ten days after creation of a pledge, make in the
book the record containing data on the type of pledge and
collateral, as well as on the volume of security of the
obligation by the pledge;
§ Provide the book for familiarization to any interested person,
having proof of sound interest.
2. The pledgor will be liable for timely and correct recording
of data on the pledge in the pledge record book. The pledgor
must compensate the victims in full volume for all damages caused
by the delayed recording in the book, by incompleteness or
inaccuracy of the records, as well as by avoidance of the
obligation to provide the pledge record book for familiarization.

Article 23. Right to Dispose of Pledged Property
The pledgor will retain the right to dispose of the pledged
property, unless the law or the pledge agreement provide
otherwise.
Furthermore, the transfer of right to the pledged property
is possible only with the transfer to the new pledgor of the
principal debt secured by the pledge.

Article 24. Subsequent Pledge of Pledged Property (Re-Pledge)
The re-pledge of property is permitted, unless the
legislation of Turkmenistan or the preceding pledge agreement
provide otherwise.

Article 25. Right of Preceding Pledgee
1. If the property already pledged as security for the
performance of a different obligation become collateral, then the
pledge right of the preceding pledgee will preserve its force.
The claims of the succeeding pledgee will be
satisfied from the value of collateral after satisfaction of the
claims of the preceding pledgee.
2. The pledgor must inform every succeeding pledgee
about all the existing pledges encumbering such property, as well
as about the character and amount of the obligations secured by
such pledges. The pledgor must compensate the damages caused to
any of his pledgees due to the violation of this obligation.

Article 26. Claims of Pledgee Subject to Satisfaction at Expense
of Pledged Property
At the expense of the pledged property the pledgee may
satisfy his claims in their full volume, determined at the moment
of factual satisfaction, including interest, damages caused by
delay of performance, while in the events provided by law or
agreement - the penalty interest; will also be subject to
compensation the necessary expenses incurred in connection with
the maintenance of the pledged property, the expenses incurred in
connection with enforcement of the claim secured by pledge.

Article 27. Arising of Right to Foreclose on Collateral
1. The pledgee will acquire the right to foreclose on
collateral, if at the moment of occurrence of maturity of the
obligation secured by pledge such obligation was not performed,
except when the law or agreement provides for arising of such
right at a later time, or when by virtue of operation of law the
foreclosure may be effected at an earlier time.
2. Upon termination (liquidation) of the legal entity -
pledgor, the pledgee will acquire the right to foreclose on the
pledged property, regardless of the occurrence of maturity of
performance of the obligation secured by pledge.

Article 28. Collateral Upon Performance in Part of Obligation
In the event when the debtor performs in part the
obligation secured by pledge, the pledge will remain in the
initial volume until performance in whole of the obligation
secured thereby.

Article 29. Satisfaction of Claim of Pledgee from Collateral
Consisting of Several Objects (Rights)
In the event when several objects or rights serve as
collateral, the pledgee, at his choice, may foreclose on the
account of all such objects or rights, or on the account of one
such object (right), preserving the possibility to receive
further satisfaction on the account of the other objects (rights)
forming the collateral.

Article 30. Consequences of Satisfaction of Claim of Pledgee by
Third Party
1. In the event of full satisfaction of the claim of
the pledgee by a third party, along with the claim the pledge
right securing such claim will pass to the latter in the manner
provided by the legislation of Turkmenistan governing assignment
of claims.
2. If the pledge agreement was registered, then the new
pledgee will acquire the pledge right from the moment of
recording of respective changes in the register.

Article 31. Manner of Foreclosure on Pledged Property
1. The pledged property may be foreclosed upon pursuant
to a judgement of the court having jurisdiction thereon, unless
the law provides otherwise.
In cases provided by the legislation of
Turkmenistan, foreclosure on pledged property may be effected out
of court on the grounds of a writ of execution issued by a
notary.
2. The sale of pledged property subject to foreclosure
will be carried out in accordance with the legislation of
Turkmenistan governing the civil procedure, unless the agreement
provides otherwise.

Article 32. Independent Sale of Pledged Property by Creditor
The pledge agreement may allow the pledgee to independently
sell the property pledged to him without a court judgement (at a
sale, auction, commission shop or by other means) in the event of
delay in performance of an obligation. In such event the
agreement must provide for the minimum price, or must set forth
the manner of appraisal or sale.

Article 33. Satisfaction of Claims of Pledgee in Case of
Deficiency of Proceeds from Sale of Collateral
In the event when the proceeds from the sale of collateral
are insufficient to provide a full satisfaction of the claim of
the pledgee, he will be entitled, unless the law or agreement
will provide otherwise, to the deficient amount on the account of
other property of the debtor that may be subject to foreclosure
in accordance with the legislation of Turkmenistan, in which case
he will not be entitled to priority as conferred by the pledge
right.

Article 34. Return to Pledgor of Amount Earned Upon Sale of
Collateral
Should the amount earned from the sale of collateral exceed
the amount of claims of the pledgee secured by such pledge, the
difference will be returned to the pledgor.

Article 35. Termination of Foreclosure of Pledged Property by
Means of Performance of Obligation
1. The pledgor may terminate the foreclosure on the
pledged property at any time prior to the sale of collateral by
means of performance of obligation secured by pledge.
2. Should the obligation secured by pledge provide for
the portioned performance thereof, the pledgor may terminate the
foreclosure on collateral by means of performance of the delayed
portion of the obligation.

Article 36. Continuation of Pledge Upon Transfer of Collateral
to a Third Party
1. The pledge will remain in force, should the right of
ownership or full economic administration in the pledged
property, or the right serving as collateral, pass to a third
party, unless the law provides otherwise.
2. The consequences indicated in paragraph 1 of this
Article will also arise in the event of transfer of rights
serving as collateral.

Article 37. Continuation of Pledge Upon Assignment of Claim and
Transfer of Debt
In the event of the assignment by the pledgee of the claim
secured by pledge to a third party, or of the transfer by the
pledgor of the debt incurred by the obligation secured by pledge
to a different person, in the manner established by law, the
pledge will remain in force.

Article 38. Grounds for and Consequences of Termination of
Pledge
1. The pledge right will be terminated:
§ Upon performance of the obligation secured by pledge;
§ Upon loss of the pledged property, for which the pledgee is
liable;
§ Upon expiration of the term of validity of the right serving as
collateral;
§ Upon passage of rights serving as collateral to the pledgee;
§ Upon impossibility for the creditor to receive satisfaction for
his claims from the pledge as a consequence of expiration of the
limitation period;
§ In other cases provided by law.
2. Should the pledge be terminated as a consequence of
performance of the obligation secured thereby, the collateral
held by the pledgee must be returned to the pledgor.
3. In the event of refusal by the pledgee to accept the
performance of the monetary obligation secured by pledge, the
respective amount will be deposited with the notary office.
Should the amount deposited cover the debt in entirety, the
pledge right will be terminated.


SECTION II. MORTGAGE

Article 39. Definition of Mortgage
Mortgage is a pledge of immovable property, whereby the
collateral rests with the pledgor or a third party.

Article 40. Mortgage Collateral
1. As mortgage collateral may serve land plots, multi-
annual plants, enterprises, buildings, constructions, apartments,
other property complexes and other property, referred to by the
legislation of Turkmenistan as immovable property, including
means of transportation.
2. The results of economic and other use of immovable
property, including products, fruits and other earnings, will
serve as independent collateral, if provided by the mortgage
agreement.
Separable fruits may serve as collateral, provided
that from the moment of separation they do not become encumbered
by rights of third parties.

Article 41. Form of Mortgage Agreement. Registration of
Mortgage
1. The mortgage agreement must be subject to notarial
authentication and registration.
2. The mortgage will be registered in the respective
registers or in the land book of the place of location of the
enterprise, construction, building, establishment or other
property object.
Upon change of obligation secured by mortgage, as
well as upon passage of right of ownership or full economic
administration in the mortgage collateral from the pledgor to
another person, an additional registration must take place at the
same location where the mortgage was registered. Any violation
of this requirement will cause invalidity of the effected
changes.
3. The body in charge of state registration of pledge
of an entire enterprise, must communicate the data on the
registration of pledge to the bodies maintaining the land book,
including at the place of location of the territorially
individual subdivisions of the enterprise.

Article 42. Rights of Mortgagor
Unless the law or agreement provide otherwise, the
mortgagor may:
§ Possess and use the collateral in accordance with the purposes
thereof;
§ Dispose of the collateral by means of alienation thereof with
an assignment to the acquirer of the debt under the obligation
secured by pledge, or by means of lease.

Article 43. Obligations of Mortgagor
The mortgagor, unless the agreement provides otherwise,
must:
§ Insure the collateral at his own expense for the entire value
thereof;
§ Undertake measures necessary to preserve the collateral,
including current capital maintenance;
§ Notify the mortgagee of the lease of collateral;
§ Upon loss of the mortgage collateral, provide a property of
analogous value, or regardless of the occurrence of maturity,
perform the obligation in whole or in part.

Article 44. Consequences of Violation of Obligations by
Mortgagor
1. Upon violation by the mortgagor of obligations on
undertaking of measures necessary to preserve the mortgage
collateral, the mortgagee may demand a premature performance of
the obligation, foreclosing on the mortgage collateral, if
necessary.
2. Upon violation by the mortgagor of obligations on
insurance of the mortgage collateral, the mortgagee may demand a
premature performance on the principal debt, or may insure the
mortgage collateral at the expense of the latter, but in favor of
the mortgagor, reclaiming from him the insurance expenses.
3. The consequences indicated in paragraphs 1 and 2 of
this Article will occur regardless of whether the mortgage
collateral is held by the mortgagor or a third party. The
mortgagor is liable before the mortgagee for the acts of such
third party in the same manner as if he were liable for his own
acts.

Article 45. From and Registration of Agreements on Mortgage of
Means of Transportation
1. The agreement on mortgage of civil air, sea and
river vessels, of railway rolling stock, and of other means of
transportation, must be authenticated by a notary.
2. The pledge of means of transportation is subject to
mandatory registration in the registers maintained by state
organizations in charge of registration of civil air, sea and
river vessels, and of other means of transportation.

Article 46. Mortgage of Constructions, Buildings and
Establishments
1. Upon mortgaging of constructions, buildings or
establishments, the collateral, along therewith, will include the
interest in the land plot whereupon such objects are situated.
In such cases upon foreclosure of collateral, the person
acquiring the construction, building, establishment, will
simultaneously earn the interest in the land plot.
2. Unless the law or agreement provide otherwise, the
land plots, as well as the constructions, buildings or
establishments located thereon, serve as collateral
independently.

Article 47. Mortgage of Land Plots
The mortgage of land plots by legal entities and natural
persons having title thereto will be effected in the manner set
forth by the land legislation and other legislation of
Turkmenistan.

Article 48. Mortgage of Enterprise
1. The mortgage of an enterprise will include all the
property thereof, including fixed assets and circulating assets,
as well as other valuables reflected on the independent balance
sheet of the enterprise, unless the law or agreement provide
otherwise.
2. The enterprise-pledgor must provide the pledgee with
the annual balance sheet upon request of the latter.
3. Upon failure to perform on the obligation secured by
mortgage of enterprise, the pledgee may undertake measures of
enhancement of the financial condition of the enterprise,
provided in the mortgage agreement, including appointment of
representatives in the senior executive positions of the
enterprise, limitation of the right to dispose of production and
of other property of the enterprise. Should the mentioned
measures fail to produce proper consequences, the mortgagee may
foreclose on the enterprise.
4. If provided by agreement or law, the enterprise will
pass to the mortgagee. In such event the final appraisal of the
mortgage collateral will be performed at the moment of passage of
enterprise, although by agreement between mortgagor and
mortgagee, while in the event of a dispute over such matter -
pursuant to the judgement of the respective court.
5. Should the agreement or law fail to provide for the
condition indicated in paragraph 4 of this Article, upon
foreclosure of the enterprise encumbered by mortgage, such
enterprise will be sold off at an auction as a single complex in
the manner provided by the legislation of Turkmenistan. In such
event the land plot will pass to the new landowner (land user).

Article 49. Premature Performance on Obligation Secured by
Mortgage
At any time prior to maturity the mortgagor may perform on
the obligation secured by mortgage, if the mortgage agreement
excluded the possibility of subsequent pledge of the same
collateral.


SECTION III. PLEDGE OF COMMODITIES IN CIRCULATION OR UNDER
PROCESSING

Article 50. Definition and Object of Agreement on Pledge of
Commodities in Circulation or Under Processing
1. Pursuant to the agreement on pledge of commodities
in circulation, the pledged property will remain in possession of
the pledgor. He is entitled to sell such property, provided that
he will pay the debt under the obligation secured by pledge, or
that he will replace the outgoing property by other homogeneous
property of equal or greater value.
2. Upon pledging of commodities under processing, the
pledged property remaining in the possession of the pledgor, may
be processed in his production, while the pledge right will also
include the production (semi-finished products, finished output)
resulting from such processing.
3. Raw material, semi-finished products, complementary
supplies and finished output may serve as collateral in case of
pledge of commodities in circulation or under processing.

Article 51. Rights of Pledgor Under Pledge of Commodities in
Circulation or Under Processing
In case of pledging of commodities in circulation or under
processing, the pledgor will retain the right of possession, use
and disposal of collateral.

Article 52. Distinctions of Pledge of Commodities in Circulation
or Under Processing
1. Upon pledging of commodities under processing, the
change of composition and natural form of collateral (various
reserves, raw materials, semi-finished products, finished output
and other) is allowed, provided that the aggregate value thereof
will not become lesser than the one indicated in the pledge
agreement.
2. Upon pledging of commodities in circulation, the
commodities sold by the pledgor cease to serve as collateral from
the moment of transfer thereof to the person buying the
commodity, or to the carrier contracted for delivery to the owner
of the commodity, while the commodities purchased by the pledgor,
provided by the pledge agreement, will become collateral from the
moment of arising of property (full economic administration or
operative management) interest therein.
3. In the event of loss of pledged commodities, the
pledgor must replace them with other commodities of equal or
greater value. The decrease in value of replaced commodities
will be permitted only when carried out proportionately to the
repaid portion of original debt.


SECTION IV. PAWN

Article 53. Definition of Pawn
1. Pawn is a pledge of movable property, whereby the
property - collateral - is transferred by the pledgor into
possession of pledgee.
2. By agreement between the pawnor and pawnee, the pawn
collateral may rest with the pawnor under the lock and seal of
the pawnee (hard pawn).
An individually identifiable object may be left in
the possession of the pawnor with affixation of signs certifying
the pawn.

Article 54. Rights of Pawnee
1. The pawnee may use the pawn collateral in cases
directly provided in the pledge agreement. The income and other
property benefits earned by the pawnee as a result of use of the
pawn collateral will be spent on coverage of expenses incurred in
connection with maintenance of the pawn, as well as will be
accounted as payment of interest payable under the debt, or as
payment of debt itself under the obligation secured by pawn.
2. In the event of emergence of a real threat of loss,
deficiency or damage of the pawn collateral not by the fault of
the pawnee, he is entitled to demand replacement of the pawn
collateral, while in case of refusal of the pawnor to satisfy
such demand - to foreclose on the pawn collateral prior to the
maturity of the obligation secured by pawn.

Article 55. Obligations of Pawnee
1. Upon pawning, unless the agreement provides
otherwise, the pawnee must:
§ Insure the pawn collateral at the expense and in favor of the
pawnor for the entire value thereof;
§ Undertake measures necessary to preserve the pawn collateral;
§ Notify the pawnor immediately upon emergence of a threat of
loss or damage of the pawn collateral;
§ Report regularly to the pawnor on the use of the pawn
collateral;
§ Return immediately the pawn collateral after performance by the
pawnor or a third party of the obligation secured by pawn;
§ Extract the income from the pawn collateral in favor of the
pawnor in cases provided by the agreement;
§ Pay the taxes and levies connected with the possession of the
object, on the account of the pawnor.

Article 56. Liability of Pawnee for Preservation of Pawn
Collateral
1. The pawnee is liable for the loss or deficiency of
the pawn collateral in the amount of the object lost, while in
case of damage to the pawn collateral - in the amount equal to
the lessened value of the pledged property. In cases when the
pawn collateral was appraised upon pawning of the property, the
liability of the pawnee must not exceed the indicated value.
2. When provided by law or agreement, upon loss,
deficiency or damage of the pawn collateral, the pawnee must
compensate the pawnor for all damages caused by such reason in
their entirety.
3. The pawnee will be excused from liability for loss,
deficiency or damage of the pawn collateral, should he prove that
the indicated consequences did not occur due to his fault.
4. Should the pawnee be a pawnshop or other
organization for which issuance of secured loans to citizens
represents an objective of the economic (entrepreneurial)
activity practiced by it, excuse from liability may follow only
provided that the pawnee proves that the loss, deficiency or
damage of the pawn collateral occurred due to the circumstances
of irresistible force, or to the intent or negligence of the
pawnor.

Article 57. Possibility of Premature Performance of Obligation
Secured by Pawn
Should the pawnee store or use the pawn collateral in an
improper manner, the pawnor will be entitled at any time to
demand termination of the pledge, or to prematurely perform the
obligation secured by pawn.

Article 58. Pawning of Property at Pawnshops and Other
Organizations Conducting Pawning Operation
1. The agreement on pledge of property to a pawnshop
will be perfected by means of issuance by the pawnshop of a
nominal pawn note signed by both parties. The pledge of property
as security for a bank loan will be perfected by means of
issuance to the pledgor of a pledge certificate. The form of the
note and of the certificate will be approved by the Central Bank
of Turkmenistan.
2. The pawnshop (other organization conducting pawning
operations) must insure the property accepted as pledge, on the
account of the pledgor, pursuant to the appraisal made upon
acceptance of the property as pledge by agreement of parties.
3. In the event of failure to repay the loan secured by
pledge at maturity, the pawnshop (other organization) will be
entitled to sell through a commission shop such property, but not
for less than the determined value. After deduction of debt and
of other expenses (Article 26), the balance of the proceeds will
be returned to the pledgor immediately.
4. The regulation on the state pawnshop will be
approved by the Cabinet of Ministers of Turkmenistan.
5. The pawnshops based on non-governmental form of
ownership, as well as other organizations conducting pawning
operations, will follow in their activity this Law and their
Bylaws.


SECTION V. PLEDGE OF RIGHTS

Article 59. Provisions of Agreement on Pledge of Rights
1. The agreement on pledge of rights, along with the
provisions set forth in Articles 12 and 13 of this Law, must
provide for the person acting as debtor with respect to the
pledgor. The pledgor must notify his debtor of the created
pledge of rights.
Unless the agreement on pledge of rights provides
otherwise, the person acting as debtor with respect to the
pledgor must perform the obligation before the pledgee.
2. In the agreement on pledge of rights that do not
have a monetary value, the value of collateral will be determined
by agreement between the parties.

Article 60. Obligations of Pledgor In Case of Pledge of Rights
1. In case of pledge of rights, unless the agreement
provides otherwise, the pledgor must:
a) Undertake actions necessary to secure the validity of the
pledged right;
b) Not assign the pledged debt;
c) Not undertake actions leading to termination of the pledged
right;
d) Take measures necessary to protect the pledged right from
attempts by third parties;
e) Notify to the pledgee the information on changes occurred in
the pledged right, on the violations thereof by third parties,
and on claims of third parties to such right.
2. The rules provided in paragraph 1 of this Article
will apply to the successors of the pledgor with respect to the
pledged rights.

Article 61. Rights of Pledgee In Case of Pledge of Rights
1. In case of pledge of rights, unless the agreement
provides otherwise, the pledgee may:
§ Regardless of the occurrence of maturity for performance of the
obligation secured by pledge, claim in court the assignment to
himself of the pledged right for the period up to performance of
the obligation secured by pledge, if the pledgor failed to comply
with the obligations provided in Article 60 of this Law;
§ Act as a third party in the dispute regarding the pledged
right;
§ In the event of failure by the pledgor to comply with the
obligations provided in paragraph (d) of Article 60 of this Law,
to independently take measures necessary to protect the pledged
right from attempts by third parties.

Article 62. Form of Agreement on Pledge of Rights to Land Plots
and Other Natural Objects
The agreement on pledge of rights to plots of land, parcels
of forestry, entrails of the earth, waters, must be subject to
notarial authentication and registration.

Article 63. Consequences of Performance by Debtor of Obligations
to Pledgor
1. Should the debtor of the pledgor perform his
obligation prior to performance by the pledgor of the obligation
secured by pledge, everything received in such event by the
pledgor will become collateral, which fact must immediately
notified by the pledgor to the pledgee.
2. Upon receipt from his debtor of money repayments,
the pledgor must transfer the respective amounts, at the demand
of the pledgee, as repayment of obligations secured by pledge,
unless the pledge agreement provides otherwise.


SECTION VI. PLEDGE OF SECURITIES

Article 64. Manner of Formation of Agreement on Pledge of
Securities
1. The pledge of a draft or other security that can be
transferred by means of transferable inscription (endorsement),
is effected by means of endorsement and handing over to the
pledgee of the endorsed security, unless the law or agreement
provide otherwise.
2. The pledge of security not transferable by means of
endorsement will be effected by means of agreement between the
pledgee and the person to whom the security was issued.

Article 65. Object of Agreement on Pledge of Securities
Unless the law or agreement provide otherwise, the
certificates of interest, dividends and other income earned from
the right expressed in the security will serve as objects of
agreement of pledge only when such certificates are passed to the
creditor of the obligation secured by pledge.


SECTION VII. GUARANTEES OF RIGHTS OF PLEDGEE

Article 66. Unchangeable Character of Pledge Agreement
Should the legislation, after formation of the pledge
agreement, set forth rules worsening the position of the pledgor
and (or) pledgee, the terms of the agreement will preserve the
force for the entire period of effectiveness thereof.

Article 67. Forms of Protection of Rights of Pledgee to Pledged
Property
The pledgee is entitled to demand pursuant to the general
rules of civil legislation:
§ Transmission of property serving as collateral, from foreign
unlawful possession, including from possession of the owner;
§ In the events when the pledgee is entitled to use the
collateral transmitted to him, to eliminate all violations of his
right, although they are not connected with the deprivation of
possession.

Article 68. Protection of Interests of Pledgee Upon Cessation of
His Rights and of Rights of Pledgor to Pledged Property on
Grounds Provided by Law
1. In the event of enactment by Turkmenistan of
legislative acts ceasing the pledge right, or the right of the
pledgor to the pledged property, the damages caused to pledgee as
a consequence of enactment of such acts will be compensated
thereto by the state in entirety. The disputes regarding
compensation of damages will be settled by the respective courts.
2. In the event of taking of measures of forceful
forfeiture by the state of the pledged property or rights - such
as nationalization, requisition, confiscation, sequestration, as
well as other measures analogous by their consequences, the state
must compensate for the damages to the pledgee caused by taking
of such measures.
3. In the events of cessation of title to the pledged
property, or cessation of pledged property rights in connection
with a decision of a governmental authority, not oriented
directly toward forfeiture of pledged property or pledged
property rights, including the decision on forfeiture of a land
plot whereupon a house, other constructions, buildings or
plantations pledged as security are situated, the damages caused
to pledgee as a consequence of adoption of such decision will be
compensated to the pledgee by such authority in entirety. The
disputes regarding compensation of damages will be settled by the
respective courts.

Article 69. Invalidity of Acts Violating Pledge Right
1. If the rights of the pledgee with regard to
possession, use and disposal of collateral were infringed as a
consequence of adoption by a governmental or other authority of
Turkmenistan of a regulation inconsistent with the law, then such
regulation, upon petition filed by the pledgee, will be
recognized as invalid by the Megilis of Turkmenistan.
2. In the event of violation or restriction of the
rights of pledgee, he is entitled to appeal in court the actions
of responsible officers of the respective authority.
3. The consequences provided by paragraph 1 of this
Article will also arise in the events of deprivation of pledgor
of the right to full economic administration or operative
management of collateral.
4. The damages caused to the pledgee as a consequence
of adoption of regulations indicated in paragraph 1 of this
Article will be compensated by the authority adopting such
regulations in entirety.


PRESIDENT OF TURKMENISTAN SAPARMURAT TURKMENBASHI

City of Ashgabat
October 1, 1993