Key Kazakhstan legal developments for the last two months and clarifications from the state authorities, case law news and legal publications have been discussed by our team.
I. Legislative News
Environment
- The Parliament has amended the Administrative Offences Code to strengthen administrative liability for environmental offenses. Most notably, a new corpus of administrative offence was introduced in Article 380 1. Violation of protection regime of specially protected natural territories. This shall be effective from 5 March 2023.
Subsoil Use
- The Ministry of Energy has approved the Rules and Requirements for Equipping Production Facilities of Petroleum Supply Points with Control Metering Devices. It should be reminded that sale, shipment, transportation and pumping of petroleum products are subject to mandatory movement of petroleum products through such control metering devices.
- The antitrust authority has extended the regime of temporary state price regulation on retail sales of liquefied petroleum gas for refuelling vehicles at gas stations until 30 June 2023.
- A joint order of the Minister of Energy, Minister of Finance, Minister of Internal Affairs, Chairman of the National Security Committee has banned the export of gasoline, diesel fuel and certain petroleum products (EAEU CNFEA 2709 00, 2710, 2902, 3403, 3811, 3826 00). This ban shall be effective from 1 February to 1 July 2023.
- For subsoil users engaged in exploration or production of solid minerals, a new version of the reporting form on purchased goods, works and services and the share of their domestic value has been approved.
- The Government has approved the Concept of Geological Industry Development for 2023 – 2027.
Entrepreneurial Activities
- An amendment to the Commercial Code (Article 83-1) has entered into force providing for the formation and maintenance by the Ministry of National Economy of a publicly accessible register of mandatory requirements in the field of entrepreneurship. Such a register refers to the regulatory framework setting out the requirements that must be met by business entities in various areas of entrepreneurship. First of all, the register will ensure that entrepreneurs are aware of the exhaustive list of requirements compulsory for their activities. In this regard, the Government has also approved the Mandatory Entrepreneurship Requirements Register Rules.
- An amendment to the Commercial Code (Articles 144-1 – 144-4) has entered into force regulating the procedure for (1) preventive control (with or without a visit) and (2) investigation of business entities.
- The antitrust authority has clarified the Rules of Price Monitoring in Commodity Markets with regard to requesting commodity market price information. Consequently, the antitrust authority may now request information by conducting a telephone survey, including via cellular communication, or using social networks and messengers. The commodity market price information collection form has also been approved. It should be reminded that the antitrust authority has the right to request and receive information from state bodies and market entities, as well as from any natural persons and legal entities, which information is required for the exercise of its powers.
- The Ministry of Justice has amended the Rules for Provision of Public Services on State Registration of Legal Entities and Record Registration of Branches and Representative Offices. In particular, a new version of the list of basic requirements for the provision of the following public services has been approved:
(i) State registration of legal entities, record registration of their branches and representative offices;
(ii) State re-registration of legal entities, record re-registration of their branches and representative offices;
(iii) State registration of amendments to the constituent documents of a legal entity that is not a private entrepreneurship, and of a joint stock company, the provisions of their branches (representative offices);
(iv) State registration of termination of a legal entity, de-registration of a branch and representative office; and
(v) Issuance of certificate of registration (re-registration) of legal entities, record registration (re-registration) of their branches and representative offices.
Financial System
- Kazakhstan has permitted second-tier banks to export cash Russian rubles from the Republic of Kazakhstan until 26 February 2023.
- The Government has set debt limits for the public and quasi-public sector. As such, the upper limit of public debt and quasi-public sector debt in aggregate must not exceed 53.2% of the gross domestic product, including the debt of the quasi-public sector of no more than 21.2% thereof. More details can also be found in the Public Finance Management Concept of the Republic of Kazakhstan until 2030.
Tax Administration
- The Government has extended the implementation period of the pilot project on the transfer by the second-tier banks of information on monetary settlements in the sale of goods, works and services to the state revenue authorities. The pilot project shall be implemented until 31 December 2023.
- The Ministry of Finance has initiated a pilot project to apply a different order of tax administration for persons providing services using Internet platforms. The pilot project shall be implemented until 31 December 2023.
Bankruptcy
- The Parliament has adopted the Law on Solvency Restoration and Bankruptcy of Citizens of the Republic of Kazakhstan. The law shall be effective from 3 March 2023. As a result of this law, a number of amendments have been made to other legislative acts relating to the solvency restoration and bankruptcy of citizens: Civil Code, Civil Procedure Code, Banks and Banking Activity Law, Securities Market Law, etc. Below is a summary of the key provisions of the law.
- First of all, it is important to note that the law regulates the procedures for solvency restoration and bankruptcy of citizens of the Republic of Kazakhstan. The law does not apply to individual entrepreneurs, foreign citizens who have property and debts in Kazakhstan.
- The following procedures may be applied to citizens:
(i) solvency restoration;
(ii) out-of-court bankruptcy; and
(iii) judicial bankruptcy.
The grounds for the application of the above procedures is the existence of arrears in an amount not exceeding 1,600 times the amount of the monthly calculation index. In addition to the amount of debt, a number of other conditions listed by the law (Articles 5-6) must also be met. All procedures can only be initiated at the request of a citizen.
- The out-of-court bankruptcy procedure can only be applied when the creditor is a bank, a branch of a foreign bank, a microfinance organisation and a collection agency. As for the other two procedures, any person can be a creditor.
- A citizen declared bankrupt as a result of a judicial or extrajudicial bankruptcy procedure shall be barred from getting a loan (by banks, microfinance institutions) for five years from the date of completion of judicial or extrajudicial bankruptcy procedures and declaration of bankruptcy. In addition, no collateral in the form of pledge, guarantee and surety under any bank loan and microcredit agreements shall be accepted from a bankrupt citizen for a period of five years.
- An authorised body will be established within the framework of the state revenue authorities, which will be responsible for general management in the area of solvency restoration and bankruptcy of citizens. This authorised body will, among other things, receive and review applications for out-of-court bankruptcy procedures.
- The procedures of solvency restoration and judicial bankruptcy shall be initiated in the court at the debtor’s place of residence. A specific aspect of these court proceedings is participation of a financial receiver to be appointed by the authorised body. The financial receiver may be a citizen of the Republic of Kazakhstan who is also an auditor, legal adviser, professional accountant or administrator (carrying out their activities under the Rehabilitation and Bankruptcy Law). The activities of a financial receiver are subject to notification in accordance with the Permits and Notices Law. A financial receiver performs a similar role as an interim receiver, administrator, bankruptcy manager in bankruptcy proceedings of legal entities.
- Solvency restoration and judicial bankruptcy cases will be tried by the court in a special action proceedings similar to the procedure for bankruptcy of legal entities.
- The solvency restoration procedure is essentially analogous to the rehabilitation procedure of legal entities. The financial receiver prepares a solvency restoration plan which is then negotiated with the creditors and approved by the court. Should the terms of the solvency restoration plan fail to be met, the debtor must apply to the court for the application of the judicial bankruptcy procedure. The decision to apply the judicial bankruptcy procedure by the court shall be taken subject to the opinion of the financial manager as to the status of the debtor’s solvency.
Digital Assets
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The Parliament has passed the Digital Assets Law. The law aims to regulate the process of issue, placement and circulation of digital assets, as well as the activities of a digital miner. As a matter of fact, a digital asset is a property created in electronic digital form with an assigned digital code, including through the use of cryptography and computer calculations, registered and secured by the immutability of information based on the technology of a distributed data platform.
Securities Market
- The Financial Market Regulation and Development Agency (“FMRDA”) has revised the list of information to be disclosed by an issuer during the circulation of their securities. Specifically, now issuers are under no obligation to provide the financial statements depositary (dfo.kz) with:
- prospectus of any securities issue, including when it is amended and/or supplemented;
- details of the stock placement report; and
- details of cancellation of any issue of equity securities and/or redemption of equity securities.
- In addition, now when an issuer discloses:
- details of an obtained loan in an amount of 25% or more of the total book value of the issuer’s assets, as well as full repayment of the principal debt and accrued interest on such loan; and
- details of a pledge (re-pledge) and release from pledge (re-pledge) of the issuer’s property worth 10% or more of the total book value of the issuer’s assets,
only the dates of contracts shall be disclosed if such a contract contains a banking secret, insurance secret, trade secret or other secret protected by law. Other data may only be disclosed with the consent of the counterparty.
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FMRDA has amended the Rules for Brokers and Dealers’ Activities in the Securities Market. More specifically, the changes affected the content of the brokerage services agreement in terms of the possibility for a broker or a dealer to use the client’s money in the interests of their other clients. It should be remembered that, as a general rule, a broker or a dealer may not use clients’ money or securities on the broker’s accounts in their own interests or in the interests of third parties, except in cases stipulated by an FMRDA regulatory legal act.
From now on, the brokerage contract must contain a provision allowing or prohibiting the use of the client’s money by the broker or the dealer for the benefit of their other clients. If the brokerage contract allows, the client’s money can be transferred by the broker or the dealer to other clients for the purchase of securities. Such transfer is recognised as an interest-bearing loan. If the other client fails to repay the money, the broker or dealer shall pay the obligation to the client (whose money has been used) at the expense of their own assets.
Public-Private Partnerships (PPP)
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The Ministry of National Economy has changed the limits of state obligations under PPP and concession projects approved for 2022–2024 for each region and city of national significance.
- An amendment has entered into force that expands the concept and characteristics of PPPs as defined in the Commercial Code (Article 70). From now on, PPP projects must meet the criterion of having an investment period and an operational period:
- investment period includes design, construction and/or reconstruction, and/or modernisation or creation of a PPP facility;
- operational period includes operation of a PPP facility in accordance with its functional purpose or maintenance, or management of the PPP facility infrastructure.
Document Legalisation
- The Ministry of Foreign Affairs has made The Ministry of Foreign Affairs has made some amendments to the document legalisation rules in the Republic of Kazakhstan and by foreign missions of the Republic of Kazakhstan. In particular, documents are now not subject to legalisation in the following cases:
- documents without the signature and seal of an authorised person;
- notarised copies and translations of documents, if the original document lacks the signature and seal of an authorised person;
- electronic documents; and
- original identity documents, other than birth certificates.
Budget
- The National Budget Law for 2023–2025 has come into force. The amount of monthly calculation index used to calculate allowances and other social benefits, as well as penalties, became equal to 3,450 tenge effective 1 January 2023.
Energy
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Majilis of the Parliament is considering a bill on thermal energy. Among the justifications for the need to draft a separate law are the following circumstances:
- lack of a full-fledged legal framework for regulation of the heat power industry and the totality of relations in the area of heat supply;
- lack of an authorised body responsible for the condition and development of the heat power industry as a whole;
- lack of requirements for the design and construction of facilities in the heat power industry.
To date, production and consumption of thermal energy have been regulated at the level of Electricity Law No. 588 dated 9 July 2004 and numerous subordinate acts of the executive authorities. However, the heat power market, as compared to the electricity market, has special technical, economic and social characteristics, which is very likely to justify a separate law. The text of the bill can be found here.
International Relations
- The Parliament has ratified the Agreement between the Government of the Republic of Kazakhstan and the Government of the United Arab Emirates on the Promotion and Mutual Protection of Investments, as made in Abu Dhabi on 24 March 2018.
Law-making
- The Parliamentary Rules have been amended by a resolution of the Parliament. More specifically, the consideration time before Majilis of the Parliament for bills prioritised by the President must not exceed 40 calendar days. In addition, the amendments have detailed the constitutional laws adoption procedure, that from now on will be discussed at a joint session of the Chambers of the Parliament.
Judicial System
- The President has approved the Judicial Administration Regulation. The Judicial Administration is being established through reorganisation (transformation) of the Court Support Department under the Supreme Court. It should be reminded that the Judicial Administration is an authorised state body responsible for organisational and legal, informational and analytical and logistical support of the Supreme Court’s activities.
II. Case Law News
- The Supreme Court has issued a regulatory ruling on certain issues of the application of tax legislation by courts. Due to the adoption of the new clarification, previous normative resolution of the Supreme Court No. 4 of 29 June 2017 on Judicial Practice of Tax Legislation Application is no longer valid.
- On 20 December 2022, the Supreme Court published Bulletin No. 11/2022 containing, inter alia, extracts from certain rulings of the Judicial Board for Administrative and Civil Cases of the Supreme Court of the Republic of Kazakhstan.
- On 30 December 2022, the Supreme Court published Bulletin No. 12/2022 containing, inter alia, extracts from certain rulings of the Judicial Board for Administrative and Civil Cases of the Supreme Court of the Republic of Kazakhstan.
III. Legal Publications
Zakon.kz / Analytics
- Roman Melnik, LL.D., Roman Podoprigora, LL.D. – Information brochure on the application of the Administrative Procedure Code (APC) of Kazakhstan.
- Elena Nesterova, Chief Research Scientist of Institute of Legislation and Legal Information of the Republic of Kazakhstan – The problem of judicial protection of consumer rights under the Republic of Kazakhstan legislation.
- Sergey Klimkin, PhD in Law, Chief Research Scientist of Institute of Legislation and Legal Information of the Republic of Kazakhstan – Venture capital funds in Kazakhstan: legal regulation issues.
- Bakyt Nurmukhanov, Deputy Chairman of the Constitutional Court – Principal issues relating to the activities of the Constitutional Court.
- Daulet Abzhanov, PhD in Law – What about the rights of secured creditors under the Citizens Bankruptcy Law?
- Sholpan Nussupova, Chair of the Judicial Board for Civil Cases of the Astana City Court – On some issues of the application of the land law by the courts.
- Meruert Orozaliyeva, Almaty Notary Public – Morse code from notaries, or what is notarial secrecy?
- Aliya Tulebayeva, Lead Specialist of the Institute of Parliamentarism Republican State Enterprise with the Right of Economic Management – On the issues of forest legislation development in Kazakhstan.
- Evgeniy Porokhov, LL.D., Director of Research Institute of Financial and Tax Law, Professor of Adilet Higher School of Law at Caspian Public University – Current problems of financial and legal regulation of the monetary system organisation in the Republic of Kazakhstan.
- Balgul Raissova, Advisor to the Chairman of the Constitutional Council – Constitutional complaint as a tool to protect the rights of citizens in Kazakhstan.
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