Kazakhstan Law News Digest for February – March 2023

I. Legislative News

Subsoil Use

• The Ministry of Industry and Infrastructure Development ("MIID") has approved the Solid Commercial Minerals ("SCM") and Hydrocarbons Reserves Classification Methodology, as well as the Instructions for SCM, Hydrocarbons and Groundwater Reserves Estimation. With the adoption of the new Methodology and Instructions, the 2005 Instructions for Classification of Reserves of Fields, Prospective and Forecast Petroleum and Natural Hydrocarbon Gas Resources are no longer in force. It bears reminding that the classification and guidance for estimation of mineral reserves are, first of all, required for accounting of the state fund of subsoil resources. The Geology Committee under the MIIR is in charge of the state accounting of mineral reserves.
• The Ministry of Energy has made significant amendments to the Rules for Funding the Hydrocarbons and Uranium Training of Kazakhstani Personnel by Subsoil Users during the Production Period. The changes are to come into force on 24 April. In particular:
  • such concepts as professional development, dual training, professional practice, retraining and training have been articulated;
  • now a subsoil user may send any of its employees to be trained, not only those involved in the production activities;
  • now in addition to goods, a subsoil user may purchase works and services necessary to improve the material and technical base of state educational organisations that provide training. The works include construction, capital and current repairs of buildings and structures, and the services include architectural and design works, complex engineering services related to construction, capital and current repairs of buildings and structures;
  • such type of financing of training as transfer of funds to the state budget for training of Kazakhstani personnel was removed. However, in case any arrears remain as per the reporting period results, the subsoil user shall still transfer such arrears to the state budget; and
  • invoice and a copy of the official enrolment document of a citizen of the Republic of Kazakhstan in the educational organisation shall be the evidence of discharge of the obligations to fund the training.
• The Ministry of Energy has approved new reporting forms for subsoil users when carrying out exploration and production of hydrocarbons, carrying out operations involving production and turnover of oil, crude gas, uranium, coal, and pilot production and mining of uranium. The new reporting forms shall be effective from 16 May 2023.
• The Ministry of Energy has banned exports from the Republic of Kazakhstan beyond the customs territory of the Eurasian Economic Union of the following types of oil products until 31 December 2024:
  • light distillates;
  • jet fuel and diesel fuel;
  • gas oils;
  • toluene, xylenes; and
  • petroleum bitumen.

Entrepreneurial Activities

• The Ministry of Foreign Affairs has approved the Conclusion Rules and the Model Form of Investment Agreement. It bears reminding that the Investment Agreement shall be concluded on the basis of the Government decision by and between the state body authorised by the Government and the investor legal entity, including those legal entities incorporated under the jurisdiction of the Astana International Financial Centre for a period of 25 years. Under the Investment Agreement, an investment project shall be implemented with investment of not less than 7,500,000 times the monthly calculation index ("MCI")¹ and a number of investment preferences shall be provided by the state.

Construction

• The Ministry of Industry and Infrastructure Development has made a number of changes and additions to the Rules of Comprehensive Independent Expert Review of Feasibility Studies and Design and Estimate Documentation. In particular, the Rules now clarify that, when the customer changes the previously approved design and estimate documentation in the course of construction in terms of the sequence of construction (including start-up complexes and stages), there is no need to apply for a repeated comprehensive independent expert review, if such changes do not lead to an increase in construction costs and do not affect pre-existing design solutions and approved key technical indicators.

Labour Relations

• The President has signed a Law that strengthens regulation of a mediation panel's activities when it considers individual labour disputes. Accordingly, now the formation and the activities of the mediation panel shall be defined in a special аgreement on the proceedings of the mediation panel ("аgreement") or in the collective bargaining agreement, the contents of which the employer is obliged to familiarise the employee with. The Law also provides for mandatory provisions with respect to the mediation panel, which the agreement or the collective bargaining agreement must contain. The deadline for execution of the mediation panel's decision now is one month from the date of adoption of the decision. It is also important to note that former employees also have the right to apply to the mediation panel. For them, a similar period of appeal has been established – one year from the day when the former employee found out or should have found out about the violation of his or her right. The Law comes into force on 18 April 2023.

Currency Monitoring

• Now banks and branches of non-resident banks in the Republic of Kazakhstan must submit reports on the attraction of financial loans from non-residents to the National Bank on a monthly basis by the eighth day (inclusive) of the month following the reporting period. Previously, the deadline was until the tenth day, inclusive.

Public-Private Partnerships (“PPP”)

• The Ministry of National Economy has approved the limits of state obligations under PPP and concession projects for the years 2023-2025 for each region and city of republican importance.

Energy

• The Ministry of Energy has approved new marginal auction prices for the purchase by the settlement and financial centre for renewable energy support of electricity produced by a renewable energy sources ("RES") facility. It bears reminding that since 2018, Kazakhstan has had a regime of auction bidding for the selection of RES projects, which replaced the regime of fixed tariffs. Below is a comparative table:

International Relations

• The Parliament has ratified the Treaty between the Republic of Kazakhstan and the French Republic on Mutual Legal Assistance in Criminal Matters, made in Astana on 28 October 2021. Under the terms of the Treaty, the countries have agreed to extend the widest possible mutual legal assistance in any procedures relating to criminal offences, as well as civil claims in criminal cases. In particular, mutual assistance includes sending and serving court and procedural documents, requesting information on bank accounts and transactions.

Public Services

• The Ministry of Digital Development, Innovation and Aerospace Industry has approved a new version of the Public Services Register.
• On 21 May 2023, amendments to the Code "On Taxes and Other Obligatory Payments to the Budget" will come into force, which establish the upper limit of the state duty for filing a claim of property nature in court:
  • for individuals – 1% of the amount of claim, but not more than 10,000 MCIs; and
  • for legal entities – 3% of the amount of claim, but not more than 20,000 MCIs.
• On 21 May 2023, amendments to the paragraph 2 of the Article 610 of the Code "On Taxes and Other Obligatory Payments to the Budget" will come into force explaining that when applying for a reconsideration of judicial acts in cassation proceedings on disputes of non-property and property nature, the state duty is charged in the amount of 50% of the corresponding state duty rate, depending on the subject of the appeal (1% for individuals and 3% for legal entities).

II. Clarifications from the State Authorities

Response of the Minister of Justice dated 15 March 2023 – Concerning the requirement to indicate in the Charter the full name of a legal entity, if the holder of the golden share is a legal entity.

III. Case Law News

Constitutional Court

Concerning the review for compliance with the Constitution of the Republic of Kazakhstan of item 1) of paragraph 1 and paragraph 2 of Article 610 of the Code "On Taxes and Other Obligatory Payments to the Budget" dated 25 December 2017 (the "Tax Code").

Circumstances of the case

• By the decision of the Atyrau City Court dated 28 February 2018 (upheld by the decision of the Atyrau Regional Court dated 15 May 2018) (the "Judicial Acts"), the damage of 129,639,381 tenge and the state duty of 3,889,182 tenge were awarded against Dosmagambetov E.N. in favour of the state in a dispute with the tax authority
• The provisions of the Tax Code set the rates of state duty when a claim of property nature is filed with the court:
  • 1% of the amount of claim for individuals and 3% of the amount of claim for legal entities (item 1 of paragraph 2 of Article 610); and
  • when filing petitions for reconsideration of judicial acts in cassation – 50% of the corresponding rate of state duty determined when filing a claim (paragraph 2 of Article 610).
• The court of cassation requires that Dosmagambetov E.N., the defendant in the claim by a legal entity, in filing a petition for reconsideration of judicial acts in cassation proceedings, pays a state duty of 50% of the rate of state duty established for legal entities, which amounts to 1,944,590 tenge.
• Dosmagambetov E.N. appealed to the Constitutional Court to recognise item 1) of paragraph 1 and paragraph 2 of Article 610 of the Tax Code as inconsistent with the Constitution.

Dosmagambetov's case

• Dosmagambetov E.N. states that his difficult financial situation does not allow him to pay large sums of state duty, and his lack of funds deprives him of the right to judicial protection provided for by the Constitution (Article 13, paragraph 2).
• In the opinion of Dosmagambetov E.N., the establishment of percentage rates of state duty for filing claims of property nature and petitions for reconsideration of judicial acts in cassation, in the absence of any provisions determining a reasonable upper limit of state duty or providing for exemption from its payment, deferral, instalment of its payment, de facto limit access to justice.

Constitutional Court's case

• Examination of the legal nature of state duty in the courts, its purpose, allows us to conclude that the very establishment of a percentage of these rates of state duty is consistent with the provisions of the Constitution.
• The Constitutional Court, however, believes that, in establishing the amount of the state duty, there must be a balance between providing the right to seek judicial protection and ensuring the efficiency of the courts, preventing the filing of knowingly unfounded claims and various abuses of the right. In establishing the rates of state duty, the legislator must find a reasonable balance between accessibility and efficiency of justice.
• Establishment of percentage rates of state duty in the courts for applications of property nature without a legislative limit on its size within the limits available to payers deprives a citizen who is in a difficult financial situation of the opportunity to pay it, and puts him in an unequal position.
• Interpretation and application of paragraph 2 of Article 610 of the Tax Code by the cassation court is not consistent with the conceptual approaches of the legislator to determine the amount of the state duty, depending on the subject of its payment – by individuals or legal entities.
• Item 1) of paragraph 1 of Article 610 of the Tax Code be found to be consistent with the Constitution.
• Provisions of paragraph 2 of Article 610 of the Tax Code be found to be partially inconsistent with the Constitution. The Constitutional Court holds that in interpreting paragraph 2 of Article 610 of the Tax Code, "the state duty shall be charged at 50% of the corresponding rate of the state duty prescribed in paragraph 1 of this Article for filing an administrative claim, statement of claim (application) for such disputes," one should proceed from the subject applying with the request to reconsider court acts in cassation proceedings. In cases where a citizen applies, regardless of his or her procedural role (plaintiff or defendant) in an initial claim, the state duty should be charged at 50% of the corresponding rate of the state duty established for individuals.

Supreme Court

• On 16 March 2023, the Supreme Court published Bulletin No. 2/2023, 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.
• The Supreme Court of the Republic of Kazakhstan has drafted a new Regulatory Resolution on the application of rehabilitation and bankruptcy laws by courts. If the Supreme Court adopts the new Regulatory Resolution, the Regulatory Resolution of 2 October 2015 "On the Practice of Application of the Rehabilitation and Bankruptcy Law" will cease to be effective.
• The Judicial Board for Administrative Cases of the Supreme Court of the Republic of Kazakhstan has prepared a brief overview of the administrative cases considered in the cassation during 2022. The overview contains a thesis description of administrative cases and conclusions of the board on various categories of disputes: tax, customs, environmental protection, land disputes, investment disputes, etc.
• The Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan has prepared Methodological Guidelines for courts and parties to a dispute where the law provides for out-of-court and compulsory pre-trial procedure. In particular, the document describes the ways and peculiarities of pre-trial and out-of-court dispute settlement procedures, as well as recommendations for the court when resolving disputes where pre-trial settlement is required.
• According to the Press Service of the Supreme Court, in its ruling in one of the considered cases, the Supreme Court determined that the right to claim recourse is indisputable and the period of limitation on the recourse claim should be calculated from the moment the judicial act and payment are fully executed. All materials of the case and the text of the ruling have not been made publicly available.

IV. Legal Publications

Zakon.kz / Analytics

• Daulet Abzhanov, PhD in Law – Administrative tort proceedings: changes are needed.
• Daulet Abzhanov, PhD in Law – Administrative offence cases: is reconsideration in cassation impossible?
• Sergey Klimkin, PhD in Law, Senior Research Associate, Institute of Legislation and Legal Information of the Republic of Kazakhstan – Analysis of select provisions of the Law of the Republic of Kazakhstan dated 31 August 1995 No. 2444 "On Banks and Banking Activities in the Republic of Kazakhstan".
• Farkhad Karagussov, Doctor of Law, Senior Research Associate, Institute of Legislation and Legal Information of the Republic of Kazakhstan – Lado Chanturia – the man who opened the concept of legal entities in public law for Kazakhstan.
• Tair Nazkhanov, Attorney – Cyberbullying in simple words.
• Alibek Urazov, Chairman of the Birzhan Sal District Court, Akmola Oblast – Liability for contempt of court.
• Medeu Qurmangali, PhD in Law, Professor, School of Law and Public Administration, Narxoz University – Impact of digitalisation and artificial intelligence on criminal law: a brief review of current foreign studies.
• Zhanar Zhadauova, Leading Researcher, Institute of Legislation and Legal Information of the Republic of Kazakhstan – On the analysis of stability (instability) of the Law of the Republic of Kazakhstan "On Sovereign Wealth Fund".

_{1 MCI = 3,450 tenge in 2023.}

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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