Turkmenistan takes steps to improve its business climate | Morgana Lewis

Turkmenistan, holder of one of the largest natural gas reserves in the world, has recently taken steps to improve its business climate. In May 2022, Turkmenistan acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the United Nations Convention on Contracts for the International Sale of Goods and the Framework Agreement on Trade paperless cross-border in Asia and the Pacific.

NEW YORK CONVENTION

The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) is one of the most widely recognized international treaties and a key instrument in international arbitration. With Turkmenistan, 170 States are parties to the New York Convention.

It provides for the recognition and enforcement of foreign arbitral awards in Turkmenistan and requires Turkmen courts to give effect to the parties’ agreement on arbitration.

The State Court of Turkmenistan will have very limited grounds, specifically enumerated in the New York Convention, to deny recognition or enforcement of an arbitral award (e.g., violation of the right to due process, violation of public order or the non-arbitrability of the dispute under Turkmen law).

Another important role of the New York Convention is the mandatory referral of disputes by national courts to arbitration, where there is a valid arbitration agreement.

Turkmenistan’s PSC model used in major upstream projects in the country envisages the settlement of disputes by international arbitration institutions. It should be recalled, however, that although it allows for international arbitration, the CPS model requires that Turkmen law be the applicable law under the CPS.

In addition, it is important to note that Turkmen law reserves compulsory jurisdiction to local state courts in certain matters. With respect to oil and gas projects, Turkmenistan allows arbitration of disputes related to (1) the suspension and/or cancellation of a license to use subsoil, or (2) the execution by the parties to the underlying host government agreement for the project, for example, a product sharing contract (PSC) or at-risk service contract, while other disputes arising from the project are reserved for state courts premises (Article 59 of the Hydrocarbons Act of 2008).

Therefore, if an arbitral tribunal issues an arbitral award on matters that fall within the exclusive jurisdiction of state courts under Turkmen law, the Turkmen court will most likely reject enforcement and recognition of that award.

The New York Convention will enter into force for Turkmenistan on August 2, 2022.

UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS

The United Nations Convention on Contracts for the International Sale of Goods provides a framework for international trade in goods. Its adoption by Turkmenistan should contribute to the security of trade relations and reduce transaction costs.

The United Nations Convention on Contracts for the International Sale of Goods will enter into force for Turkmenistan on June 1, 2023. Where appropriate, the parties may always choose to exclude its application by an express provision to this effect in a contract between them. .

FRAMEWORK AGREEMENT ON CROSS-BORDER PAPERLESS TRADE

The Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific (Framework Agreement on Cross-Border Paperless Trade) is a United Nations treaty that aims to accelerate the implementation of trade facilitation measures digital technology developed by the Economic and Social Commission for Asia. and the Pacific (ESCAP). It entered into force in February 2021, when five ESCAP member States, including China, joined it.

The framework agreement on cross-border paperless trade does not have immediate effect. Rather, it encourages States to adopt national legislation and policies consistent with its general principles and international standards, thereby harmonizing and enabling paperless trade among ESCAP members that have joined it.

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