INVESTIGATION BY CABAR.ASIA
Online Auction in Uzbekistan: A Long Path from Winner to Owner
New system launched three years ago undermines trust to bidding.
By: Mirzo Subkhanov
By: Mirzo Subkhanov
Participation in an official online auction in Uzbekistan resembles a lottery. If you are lucky, everything will be fine and the buyer will become a legal owner of property.
However, sometimes good luck can pass by. Then, despite the citizen's compliance with all procedures and conditions, former owners can contest the auction results and get revocation even of the court judgement. It happens because of officials' intervention at the local level.
To make the process of sale of property seized under court judgements transparent and to make it compliant with easy-to-understand rules, the state created the online bidding platform, E-IJRO AUKSION, in 2017.
So far, the state sells all state assets, land plots, as well as property put up for sale under court judgements via this platform.
However, sometimes good luck can pass by. Then, despite the citizen's compliance with all procedures and conditions, former owners can contest the auction results and get revocation even of the court judgement. It happens because of officials' intervention at the local level.
To make the process of sale of property seized under court judgements transparent and to make it compliant with easy-to-understand rules, the state created the online bidding platform, E-IJRO AUKSION, in 2017.
So far, the state sells all state assets, land plots, as well as property put up for sale under court judgements via this platform.
The main page of the e-bidding website E-IJRO AUKSION
Old norms regarding submission of written applications and bidding process in "physical" format were cancelled.
Central agencies explained the need for introduction of these improvements as follows: "The new system will not accept price manipulations and misuse on the part of various officials. It will also ensure wide access of individuals and legal entities, including foreign investors, to the unified electronic online auction of the country."
Central agencies explained the need for introduction of these improvements as follows: "The new system will not accept price manipulations and misuse on the part of various officials. It will also ensure wide access of individuals and legal entities, including foreign investors, to the unified electronic online auction of the country."
"Historical" decree of the president of Uzbekistan should have provided equal opportunities to all citizens regarding participation and procurement of assets via bidding.
However, some bids that ended up with a republican-level scandal showed that the system is far from perfect.
Analysis of this electronic system shows there are frequent violations of legal rights and interests of buyers who cannot get in time the assets they bought afterwards. Results of online bidding can be cancelled by court judgements despite the facts and proofs provided by legitimate winners; no one compensates for losses and penalties incurred by buyers as well as their loss of time and nerves.
What was previously?
Before the unified online platform E-IJRO AUKSION was created, the state property and facilities seized under court judgements were sold via local bidding held by city (district) branches of the state committee for property.
Entrepreneurs and lawyers have noted many times that such bidding was held with gross violation of the law. For example, announcements about the forthcoming bidding were printed in the regional newspaper in less than 500 copies. Therefore, no one knew about them.
Organisers used various manipulations not to allow "strangers" to participation, not to mention foreign investors. By decision of the heads of city and district state administrations, land plots could be passed into the ownership of natural entities free of charge.
Before the unified online platform E-IJRO AUKSION was created, the state property and facilities seized under court judgements were sold via local bidding held by city (district) branches of the state committee for property.
Entrepreneurs and lawyers have noted many times that such bidding was held with gross violation of the law. For example, announcements about the forthcoming bidding were printed in the regional newspaper in less than 500 copies. Therefore, no one knew about them.
Organisers used various manipulations not to allow "strangers" to participation, not to mention foreign investors. By decision of the heads of city and district state administrations, land plots could be passed into the ownership of natural entities free of charge.
A fatal purchase
A Samarkand entrepreneur Sanat Kadyrov thought it was the end of old machinations and lawlessness. However, he was grossly mistaken.
The entrepreneur purchased a group of buildings from the machine and tractor fleet for 1 billion 539 million 328 thousand sum (nearly 150 thousand dollars) (lot №0097993). Forensic bailiffs earlier seized it.
However, 1 year later, despite a 100-per cent payment, he cannot still become a full-fledged owner of the facility, or, speaking legal language, get the right of possession.
The previous owner, Samarkand Agroservis MTP Limited Liability Company, hinders it. A group of buildings of MTP was seized and put up for auction by a court judgement for failure to fulfil the above-mentioned LLC's loan obligations to the bank.
The entrepreneur purchased a group of buildings from the machine and tractor fleet for 1 billion 539 million 328 thousand sum (nearly 150 thousand dollars) (lot №0097993). Forensic bailiffs earlier seized it.
However, 1 year later, despite a 100-per cent payment, he cannot still become a full-fledged owner of the facility, or, speaking legal language, get the right of possession.
The previous owner, Samarkand Agroservis MTP Limited Liability Company, hinders it. A group of buildings of MTP was seized and put up for auction by a court judgement for failure to fulfil the above-mentioned LLC's loan obligations to the bank.
The results of the auction were cancelled by a local court judgement. The governor of Samarkand region Erkinzhon Turdimov was also involved in this process. The fact of unjustified intervention of a high-ranking official was confirmed by official documents, which were at the disposal of the editorial office during the journalistic investigation.
Sanat Kadyrov is not the only buyer who has faced this kind of difficulties. In local media, one can often find publications about violations of the rights of buyers at E-IJRO AUKSION.
Soyibzhon Buvozhonov, a local entrepreneur from Fergana region, purchased confiscated property worth 279 million sum (about 27 thousand dollars) at an online auction in October 2018. The property purchased at the auction was located in the Rishtan district of Fergana region and previously belonged to joint-stock company Uzagrokimyokhimoya. 51% of shares of this enterprise belong to the state.
In February 2019, the Rishtan Interdistrict Civil Court nullified the results of the online tender. Despite the objection raised by the prosecutor's office, the Fergana Regional Court affirmed the decision of the district court.
A year later, in March 2020, the Supreme Court of the Republic of Uzbekistan, having considered this civil dispute in the exercise of supervisory power, restored the results of online bidding and recognised the legal right to the purchased property of entrepreneur Soyibzhon Buvozhonov. Previous decisions of the regional and district courts were recalled.
The situation with the first hero, businessman Sanat Kadyrov, is controversial. In March 2020, the court of first instance, Samarkand City Civil Court, retained ownership of Kadyrov and did not annul the online auction that had taken place.
However, in July 2020, Samarkand Regional Civil Court cancelled the first instance court judgement n appeal and declared the results of the E-IJRO AUKSION auction invalid.
Sanat Kadyrov is not the only buyer who has faced this kind of difficulties. In local media, one can often find publications about violations of the rights of buyers at E-IJRO AUKSION.
Soyibzhon Buvozhonov, a local entrepreneur from Fergana region, purchased confiscated property worth 279 million sum (about 27 thousand dollars) at an online auction in October 2018. The property purchased at the auction was located in the Rishtan district of Fergana region and previously belonged to joint-stock company Uzagrokimyokhimoya. 51% of shares of this enterprise belong to the state.
In February 2019, the Rishtan Interdistrict Civil Court nullified the results of the online tender. Despite the objection raised by the prosecutor's office, the Fergana Regional Court affirmed the decision of the district court.
A year later, in March 2020, the Supreme Court of the Republic of Uzbekistan, having considered this civil dispute in the exercise of supervisory power, restored the results of online bidding and recognised the legal right to the purchased property of entrepreneur Soyibzhon Buvozhonov. Previous decisions of the regional and district courts were recalled.
The situation with the first hero, businessman Sanat Kadyrov, is controversial. In March 2020, the court of first instance, Samarkand City Civil Court, retained ownership of Kadyrov and did not annul the online auction that had taken place.
However, in July 2020, Samarkand Regional Civil Court cancelled the first instance court judgement n appeal and declared the results of the E-IJRO AUKSION auction invalid.
What does the law say?
Head office of E-IJRO AUKSION. Photo: official website
The owner of the E-IJRO AUKSION trading platform is the State Unitary Enterprise (SUE) "Centre for the Organisation of Electronic Online Auctions". It was created as a division of the Office of the General Prosecutor's Office under the Bureau of Compulsory Enforcement. Subsequently, this SUE was transferred to the jurisdiction of the Agency for State Assets Management of the Republic of Uzbekistan.
The decree of the President of Uzbekistan, which served as the basis for the creation of an online auction, states:
"The protocol on the results of the auction has the force of a purchase and sale agreement, is the basis for lifting the arrest of the property, transferring it to the winner of the auction, and also serves as the basis for registration in the name of the winner of the property, ownership of it or other property rights" (Clause 52 of the Resolution of the President of the Republic of Uzbekistan No. PP-3149 of July 27, 2017).
However, according to information received from the same Centre for the Organisation of Electronic Online Auctions, cases related to the cancellation of the results of the E-IJRO AUKSION auctions by courts can be seen even today.
"From 2017 to 2020, 32.9 thousand open auctions were held through the electronic platform" E-IJRO AUKSION ". In only 42 cases, the bidding results were cancelled. This is only 0.1% of all trades," the State Assets Management Agency of the Republic of Uzbekistan replied to the request from CABAR.asia.
"From 2017 to 2020, 32.9 thousand open auctions were held through the electronic platform E-IJRO AUKSION. In only 42 cases, the bidding results were cancelled. This is only 0.1% of all trades," the State Assets Management Agency of the Republic of Uzbekistan said to CABAR.asia.
The State Assets Management Agency said the main reason for cancellation of auction results by courts was "illegal actions of bailiffs when placing property for open auctions".
The Office for the Enforcement of Judgments - the Bureau of Compulsory Enforcement under the Prosecutor General's Office - also recognises the facts related to the illegal actions of bailiffs when placing property for online auctions.
The decree of the President of Uzbekistan, which served as the basis for the creation of an online auction, states:
"The protocol on the results of the auction has the force of a purchase and sale agreement, is the basis for lifting the arrest of the property, transferring it to the winner of the auction, and also serves as the basis for registration in the name of the winner of the property, ownership of it or other property rights" (Clause 52 of the Resolution of the President of the Republic of Uzbekistan No. PP-3149 of July 27, 2017).
However, according to information received from the same Centre for the Organisation of Electronic Online Auctions, cases related to the cancellation of the results of the E-IJRO AUKSION auctions by courts can be seen even today.
"From 2017 to 2020, 32.9 thousand open auctions were held through the electronic platform" E-IJRO AUKSION ". In only 42 cases, the bidding results were cancelled. This is only 0.1% of all trades," the State Assets Management Agency of the Republic of Uzbekistan replied to the request from CABAR.asia.
"From 2017 to 2020, 32.9 thousand open auctions were held through the electronic platform E-IJRO AUKSION. In only 42 cases, the bidding results were cancelled. This is only 0.1% of all trades," the State Assets Management Agency of the Republic of Uzbekistan said to CABAR.asia.
The State Assets Management Agency said the main reason for cancellation of auction results by courts was "illegal actions of bailiffs when placing property for open auctions".
The Office for the Enforcement of Judgments - the Bureau of Compulsory Enforcement under the Prosecutor General's Office - also recognises the facts related to the illegal actions of bailiffs when placing property for online auctions.
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To avoid and prevent such cases in the future, strict supervision has been established over responsible persons, who are the respective deputies of regional departments," Deputy Director of the said bureau Shavkat Khaidarov said to the request of CABAR.asia.
However, some entrepreneurs and lawyers are sure that the cancellation of the results of online auctions by courts with reference to the alleged "illegal actions" of bailiffs or other bodies is only a pretext that might hide interests of third parties who are interested in returning previously sold property.
In the case of Samarkand businessman Sanat Kadyrov, the governor of Samarkand region Erkinzhon Turdimov personally spoke in favour of cancellation of the online auction results. Although, at first glance, there is no direct connection between the regional administration and the property sold.
In a letter from Governor Turdimov to the chair of the Samarkand Regional Economic Court, Oibek Asadov, he wrote:
"We are asking you to consider this court case taking into account that the property of Ishtikhon Agroservis MTP pledged and sold through the auction is the state property, to take into account the cases of possible damage to the state interests when the property of an enterprise with a state participation is being disposed."
In the case of Samarkand businessman Sanat Kadyrov, the governor of Samarkand region Erkinzhon Turdimov personally spoke in favour of cancellation of the online auction results. Although, at first glance, there is no direct connection between the regional administration and the property sold.
In a letter from Governor Turdimov to the chair of the Samarkand Regional Economic Court, Oibek Asadov, he wrote:
"We are asking you to consider this court case taking into account that the property of Ishtikhon Agroservis MTP pledged and sold through the auction is the state property, to take into account the cases of possible damage to the state interests when the property of an enterprise with a state participation is being disposed."
Office of the Samarkand region . Picture from samarkand.uz
The chair of the Samarkand Regional Court for Economic Affairs Oibek Asadov, commenting on the Governor's appeal to the court to CABAR.asia, said that "this letter from the Governor of the Samarkand Region is not binding for case consideration."
"Besides, the court said it did not admit this letter as an evidence in this case," said Asadov to CABAR.asia.
However, the court does not explain the reason for entering this letter on the court record, given that the state administration of the Samarkand region was not a party to this lawsuit.
The editorial staff of CABAR.asia appealed to the Samarkand regional khokimiyat with a request to comment on the content of the letter of its head Erkinzhon Turdimov.
Press secretary of the khokimiyat Manuchekhr Mirzaev gave a short answer: "In this trial, apart from the plaintiff and the defendant, there are interests of the people and the state." The press secretary did not specify which specific interests were in question.
The intervention of the regional administration in this trial was actually confirmed by Shukhrat Kuchkarov, head of the personnel department of the Ministry of Justice of the Republic of Uzbekistan, in his letter to CABAR.asia.
"Besides, the court said it did not admit this letter as an evidence in this case," said Asadov to CABAR.asia.
However, the court does not explain the reason for entering this letter on the court record, given that the state administration of the Samarkand region was not a party to this lawsuit.
The editorial staff of CABAR.asia appealed to the Samarkand regional khokimiyat with a request to comment on the content of the letter of its head Erkinzhon Turdimov.
Press secretary of the khokimiyat Manuchekhr Mirzaev gave a short answer: "In this trial, apart from the plaintiff and the defendant, there are interests of the people and the state." The press secretary did not specify which specific interests were in question.
The intervention of the regional administration in this trial was actually confirmed by Shukhrat Kuchkarov, head of the personnel department of the Ministry of Justice of the Republic of Uzbekistan, in his letter to CABAR.asia.
"The administration of Samarkand region backed the application of Samarkand Agroservis MTP on April 24, 2020 and filed a letter No. 01-16/769 to the General Prosecutor's Office regarding the protest to the decision of the Supreme Court."
Obviously, this letter to the regional administration became decisive, and made the Deputy Prosecutor General of Uzbekistan Svetlana Artikova step in the trial.
Obviously, this letter to the regional administration became decisive, and made the Deputy Prosecutor General of Uzbekistan Svetlana Artikova step in the trial.
Deputy of the lower house of the Uzbek parliament, Rasul Kusherbaev, spoke in defence of the rights of businessman Sanat Kadyrov. He was outraged at the disregard of local norms practised by the authorities in Tashkent.
To enhance the prestige of E-IJRO AUKSION and prevent the cancellation of the auction results in the future, the following definition was separately added in the presidential decree No.PP-4427 of August 26, 2019: "...a protocol of the results of an electronic online auction may not be cancelled or changed due to non-observance of administrative procedures in the absence of fault of a winner of the auction or persons possessing the rights to the land plot."
To enhance the prestige of E-IJRO AUKSION and prevent the cancellation of the auction results in the future, the following definition was separately added in the presidential decree No.PP-4427 of August 26, 2019: "...a protocol of the results of an electronic online auction may not be cancelled or changed due to non-observance of administrative procedures in the absence of fault of a winner of the auction or persons possessing the rights to the land plot."
Director of the State Unitary Enterprise "Centre for the Organisation of Electronic Online Auctions" Mukhiddin Khodzhaev in his comment in the local media on the situation of cancellation of auction results, associated this to the courts' failure to comply with the norms of the current legislation.
In an article "E-IJRO AUKSION: We demand support for Article 229", Khodzhaev argued that no property may be seized from the buyer of the auction despite the court judgement. However, in practice, courts still cancel them.
According to Article No. 229 of the Civil Code of the Republic of Uzbekistan, reclamation (return) of property from a bona fide buyer is not allowed if this property was sold through an auction as part of the execution of a court judgement.
The Supreme Court of the Republic of Uzbekistan left the request from CABAR.asia asking for a comment without response.
How winners get what they buy
In addition to cancellation of auction results, there are frequent violations of buyers' rights. E-IJRO AUKSION is just a transfer of a paper record to the buyer – "Act of winning", which has the force of a sales contract, but is not a document confirming the right to property. It may take months, and sometimes years, to register the property with the state and come into ownership after the receipt of the "Act of winning" by the buyer.
Khayot Normatov from Dzhizak region in November 2019 bought Lot No. 0133794 "Residential property with a plot" for 159.5 million sum (about 15.5 thousand dollars) in November 2019 via E-IJRO AUKSION, which was placed by bailiffs by court decision. However, despite the fact that no one cancelled the results of the auction, he cannot enter his purchased property. The reason is that people live in the purchased house, and he cannot evict them.
According to Normatov, bailiffs, at the time the property was put up for the auction, did not specify that people lived in it, and that they needed to be evicted through the court by him.
Moreover, the same bailiffs demanded that the buyer pay utility debts of the previous owners, which amounted to nearly 8 million sum (about 800 dollars).
Only after repeated complaints to all authorities, including the president and ombudsman, the prosecutor's office of Pakhtakor district of Dzhizak region found the demands of the officers of the district Bureau of Compulsory Enforcement illegal. The prosecutor's office ordered that utility debts should be recovered from former owners.
Despite all of the above, the district civil court is still about to consider the eviction of former tenants almost a year after the date of property purchase.
In an article "E-IJRO AUKSION: We demand support for Article 229", Khodzhaev argued that no property may be seized from the buyer of the auction despite the court judgement. However, in practice, courts still cancel them.
According to Article No. 229 of the Civil Code of the Republic of Uzbekistan, reclamation (return) of property from a bona fide buyer is not allowed if this property was sold through an auction as part of the execution of a court judgement.
The Supreme Court of the Republic of Uzbekistan left the request from CABAR.asia asking for a comment without response.
How winners get what they buy
In addition to cancellation of auction results, there are frequent violations of buyers' rights. E-IJRO AUKSION is just a transfer of a paper record to the buyer – "Act of winning", which has the force of a sales contract, but is not a document confirming the right to property. It may take months, and sometimes years, to register the property with the state and come into ownership after the receipt of the "Act of winning" by the buyer.
Khayot Normatov from Dzhizak region in November 2019 bought Lot No. 0133794 "Residential property with a plot" for 159.5 million sum (about 15.5 thousand dollars) in November 2019 via E-IJRO AUKSION, which was placed by bailiffs by court decision. However, despite the fact that no one cancelled the results of the auction, he cannot enter his purchased property. The reason is that people live in the purchased house, and he cannot evict them.
According to Normatov, bailiffs, at the time the property was put up for the auction, did not specify that people lived in it, and that they needed to be evicted through the court by him.
Moreover, the same bailiffs demanded that the buyer pay utility debts of the previous owners, which amounted to nearly 8 million sum (about 800 dollars).
Only after repeated complaints to all authorities, including the president and ombudsman, the prosecutor's office of Pakhtakor district of Dzhizak region found the demands of the officers of the district Bureau of Compulsory Enforcement illegal. The prosecutor's office ordered that utility debts should be recovered from former owners.
Despite all of the above, the district civil court is still about to consider the eviction of former tenants almost a year after the date of property purchase.
The house I live in has no gas supply system and my father has asthma and he should not breathe in smoke from the potbelly stove. Therefore, I've decided to buy this house at the auction and sold all my cattle for that. It's been a year since I have problems with this purchase and I cannot move in. I feel shame before my father.
Khayot Normatov
He cannot move into the house he bought at the online auction for more than a year
A reminder from E-IJRO AUKSION
On their official website, the auction warns winners that if they fail to pay for the lot in full within 5 days after the end of the auction, the results will be deemed invalid and the amount of 5 per cent deposit will not be paid back.
This requirement is specified in the Regulations to the ruling of the President of the Republic of Uzbekistan dated July 27, 2017 No. PP-3419 "On the procedure of organisation and conducting of electronic online auctions to sell property to enforce court orders and decrees of other agencies".
In turn, E-IJRO AUKSION specifies it waives responsibility for damage done to a bidder by a suspended or cancelled electronic online auction. This requirement is justified by the fact that the property put up for the electronic online auction is being sold by request of a state enforcement officer.
According to information taken by CABAR.asia from the Antimonopoly Committee of Uzbekistan, in August 2020 the owner of E-IJRO AUKSION – Centre for the Organisation of Electronic Online Auctions – was registered with the State Register of Entities Dominating in Commodities or Financial Market. Therefore, the activity of E-IJRO AUKSION will be revised given their impairment of rights and interests of consumers in the near future.
On their official website, the auction warns winners that if they fail to pay for the lot in full within 5 days after the end of the auction, the results will be deemed invalid and the amount of 5 per cent deposit will not be paid back.
This requirement is specified in the Regulations to the ruling of the President of the Republic of Uzbekistan dated July 27, 2017 No. PP-3419 "On the procedure of organisation and conducting of electronic online auctions to sell property to enforce court orders and decrees of other agencies".
In turn, E-IJRO AUKSION specifies it waives responsibility for damage done to a bidder by a suspended or cancelled electronic online auction. This requirement is justified by the fact that the property put up for the electronic online auction is being sold by request of a state enforcement officer.
According to information taken by CABAR.asia from the Antimonopoly Committee of Uzbekistan, in August 2020 the owner of E-IJRO AUKSION – Centre for the Organisation of Electronic Online Auctions – was registered with the State Register of Entities Dominating in Commodities or Financial Market. Therefore, the activity of E-IJRO AUKSION will be revised given their impairment of rights and interests of consumers in the near future.
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