Kazakhstan continues improving the regulatory framework of concessions and public-private partnerships

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On January 2, 2021, Kazakhstan introduced amendments to various laws including the Concession Law and PPP Law (the “Amendments”).

The Amendments aim to clarify and improve a number of provisions of the Concession Law and PPP Law. Although we find these improvements generally positive, there remain open issues, that have long been debated by industry players, but which have not been dealt with in these Amendments. The following key amendments are notable:

  • The Amendments introduce the qualification requirement for a potential private partner to have its own funds of not less than 20% of the value of the PPP object. This qualification requirement already exists under the Concession Law but the threshold is 10%. Curiously, there is no officially explained rationale behind the difference in the thresholds.
  • The tender (auction) documentation for a PPP project must now identify the terms of the tender (auction) which cannot be amended during negotiations with the bidder.
  • A PPP agreement (PPPA) for a project of special significance can be concluded with a company established by the tender (auction) winner, provided this was envisaged in the tender (auction) bid. (This option already existed under the Concession Law).
  • Additional agreements amending or terminating the PPPA require approvals by the state bodies concerned. Similarly, any amendment affecting the amount of the state obligations is subject to the budget commission’s approval.
  • All terms of the PPPA listed in Article 46.1 are now considered material terms and the absence of any such term would mean that the parties have not reached an agreement.
  • Importantly, the grantor under the Concession Law is now defined as a government body(-ies) acting on behalf of the Republic of Kazakhstan or the Government or local executive bodies acting on behalf of an administrative-territorial unit. This is in contrast with the PPP Law, which defines the public partner as the Republic of Kazakhstan, represented by central and local executive bodies, as well as state entities and quasi-state entities. While the Amendments bring the Concession Law in line with the general principles under the Civil Code, they are silent as regards the inconsistency on this matter with the PPP Law.  The latter continues to define the Republic of Kazakhstan as the public partner, including in those cases when quasi-state entities act as a public partner. Accordingly, there would be different implications associated with the identity (and hence the pertaining liability) of the public partner under the Concession Law and PPP Law respectively, and this needs to be factored when structuring a PPP/concession project.

To sum up, while some of the Amendments are aimed at reconciling the two laws, it is clear that major differences still persist. Also, although there was a question as to whether the Concession Law would be repealed following the adoption of the PPP Law, it appears that for now both laws will continue to exist in parallel.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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