Contents

• Legislative News
• Case Law News
  • Practice of the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan
  • Clarification on issues of judicial practice
• Legal Publications

Legislative News

Subsoil Use 

• The Ministry of Energy has amended the Rules for monitoring subsoil users' compliance with the terms and conditions of subsoil use contracts regarding the annual scheduled / unscheduled visits to subsoil users. In particular, now the legal grounds for including the subsoil user in the annual list of visits, inter alia, is the inspection agency's inability to confirm failure to comply with contractual terms based on the reports analysis.

  With regard to due administrative procedure, the notice must specify the subject of the visit, the duration of the visit, the period visited, and the composition of the visiting committee. In addition, information for the period up to only two years preceding the current year is subject to study within a scheduled visit. There is also an important practical clarification that during the visit, the subsoil user, upon the written request of the committee members, is obliged to provide only the necessary information for study, which is relevant to the subject of the visit (previously there was no such clarification, which could lead to a number of practical issues and misuses by the inspection agency). 

• The Ministry of Energy has changed their approach and rules for determining the amount of damage caused by a subsoil user of hydrocarbons and uranium as the result of a violation of the requirements for the rational and integrated use of subsoil. This is about damage as actual losses of hydrocarbons and uranium in excess of their approved rated values. Now the amount of damage can be determined not only by identifying the damage factually, but also by information received from the subsoil users or governmental agencies. The amount of the damage will be now calculated on the basis of the average cost according to the official quotations of product prices for the reporting period (regardless of whether the subsoil user sold products in such reporting period or not), rather than on the basis of the average selling price of products by the subsoil user for the reporting period. 
• The Ministry of Industry and Infrastructure Development has restated the Rules for the transition to the licensing mode of subsoil use for common and solid minerals in a new edition. The restated rules contain a significant number of changes in the procedure and requirements for documents necessary for re-issue of the subsoil use right. 

Gas Supply

• The Ministry of Energy has approved marginal prices for wholesale sales of marketable gas on the domestic market. The marginal prices are set for each region of Kazakhstan for the period from 1 July 2023 to 30 June 2028. 

Land Relations

• The Ministry of Agriculture has changed a number of provisions in a standard lease agreement for agricultural land. What is more significant is that the government previously had the right to enforced seize of the land that was not used for its designated purpose for two consecutive years from the initial identification of the fact of non-use, as for now this period has been reduced to one year. 
• The Law which provides the creation of the State Unified Immovable Property Cadastre in Kazakhstan to centrally include information from the land cadastre and legal cadastre has been enacted. The development of the State Unified Immovable Property Cadastre will be managed by the Ministry of Justice and the Committee for Land Management of the Ministry of Agriculture. In addition, instead of technical passports, a system of the unified identification document is being implemented - cadastral passport - which will include the technical, identification characteristics of units (i.e. buildings, structures, premises) on a land plot and the identification characteristics of the land plot itself. 

Energy

• The Antimonopoly Authority has approved the Rules for access of market entities to key power in the market for decentralized sale and purchase of electrical energy. It should be reminded that the peculiarity of the decentralized electric energy market is that transactions are concluded between market entities directly outside the trading platform. Energy generation organizations that occupy a dominant or monopoly position, being the owners of key power, are obliged to sell electric power to market entities, since otherwise the latter will not be able to produce and sell goods on adjacent commodity markets. Such power generation organizations must develop a standard sales contract and post it on their own website and the antimonopoly authority website. 
• The Ministry of Energy has defined the Settlement and Financial Centre for Support of Renewable Energy Sources LLP to be a unified purchaser of electrical energy in Kazakhstan. 

Public Services

• The Ministry of Justice has approved the rules and procedures for the provision of public services for correcting mistakes contained in the movable property pledge register (register), which are not subject to mandatory state registration. The State Corporation "Government for Citizens" corrects the mistakes in the register by making an additional record in the register and in the pledge registration certificate. As a result of public service, a new registration certificate of pledged movable property will be issued, and the previously issued certificate of registration will be considered invalid.

Investment Activities

• National Company Kazakh Invest JSC is determined to be the national company in attracting investments to Kazakhstan. Although, Kazakh Invest has previously acted as a "one contact" for investors on the state support measures, but now it will be assigned a number of additional functions provided for in Article 282-2 of the Entrepreneurial Code of the Republic of Kazakhstan. 

Digital Assets

• The Ministry of Digital Development, Innovation and Aerospace will deal with licensing the digital mining activities in Kazakhstan.
• The Ministry of Digital Development, Innovation and Aerospace has approved the Rules for the provision of public services for issuing a permit for issuance and circulation of secured digital assets. The Rules contain the procedure for providing public services, a list of requirements for public services provision and an application form for issuing a permit. 

Transport Activity

• The Ministry of Industry and Infrastructure Development restricted the possibility of exporting certain types of scrap and waste of ferrous and non-ferrous metals from Kazakhstan for a period up to 7 November 2023 by a certain type of vehicle. 

Social Sphere

• The Social Code of the Republic of Kazakhstan had been enacted on 1 July 2023, except for some of its provisions which are coming into force in stages. The Social Code systematizes the regulation of social and pension protection, and has cancelled ten laws at once: Law on Employment of the Population, Law on Pension Provision in the Republic of Kazakhstan, Law on Compulsory Social Insurance, Law on Special Social Services, Law on State Benefits for Families with Children, Law on Social Protection of Persons with Disabilities in the Republic of Kazakhstan, Law on State Targeted Social Assistance, Law on Special State Benefits in the Republic of Kazakhstan, the Law on Amendments and Additions to Certain Law Acts of the Republic of Kazakhstan on Pension Provisions and the Law on State Social Benefits for Disability and Loss of a Supporter in the Republic of Kazakhstan. 

Privatization

The Ministry of National Economy has approved rules and procedures for engaging an independent consultant on state property privatization transactions. Legal entities including foreign ones, participants in appraisal, investment activities and financial consulting may be involved as an independent consultant in order to assess the market value of a privatization target and/or support a privatization transaction. It is important to note that legal relations regarding the choice of an independent consultant are not covered by the legislation on public procurement, therefore the rules cover all matters from the method of engagement to the content of the contract with such an independent consultant. 

Case Law News

1. Practice of the Judicial Board for Civil Cases of the Supreme Court of the Republic of Kazakhstan

The Supreme Court Ruling No. 6001-23-00-ЗГ/1408 dated 3 April 2023 on the claim from Liquefied Petroleum Gas Storage Park LLP
The claim to invalidate withdrawing electronic invoices is not subject to civil proceedings since the invoices themselves cannot be challenged. 

The Supreme Court Ruling No. 6001-23-00-ЗГ/838 (2) dated 3 April 2023 on the claim from the State Revenue Department for Ekibastuz 
The taxpayer's right to allocate expenses to deductions and VAT as offset arises only if the actual financial and business transactions are proved and counterparties have labour and material resources required for the supply of goods, services and works. However, the availability of contracts, invoices, and their formal compliance with all requirements have not yet been evidence of the actual performance of financial and economic transactions.

The Supreme Court Ruling No. 6001-23-00-Зг/805 (2) dated 3 April 2023 on Everest Finance LLP's petition
Сonclusions of the court of appeal, which indicated that the arbitration award violates public order of the Republic of Kazakhstan due to partial non-compliance of the parties' contract with the provisions of applicable law, namely the method of calculation of payments on loans, approved by the Board of the National Bank of Kazakhstan № 8 on 28 January 2016, are incorrect. This circumstance is not a violation of public order since it affects the private interests of the debtor and the creditor. By doing so, the court of appeal has actually reconsidered the arbitral award, which, based on the arbitration specifics, is unacceptable and inadmissible.

Accordingly, non-compliance of the contract with the provision of legislation affecting the interests of the parties does not yet show that the arbitral award is contrary to the public order of the Republic of Kazakhstan. 

The Supreme Court Ruling No. 6001-23-00-3гп-71 dated 5 April 2023 on Valery Olegovich Khlebnikov's claim
Non-payment for the sold goods cannot be considered to be a material breach of the contract by the other party, and accordingly, this is not grounds for terminating the contract in court under Article 401.2 of the Civil Code of the Republic of Kazakhstan. In case of non-payment for goods, a lawmaker has provided another way to protect violated rights, as provided for in Article 439 of the Civil Code of the Republic of Kazakhstan, stating if the buyer fails to pay for the goods transferred in accordance with the contract, the seller is entitled to require to pay for the goods and penalty rather than to require to terminate the contract. 

In doing so, the Supreme Court tries to partly resolve a classic problem in our law enforcement, that is related to the competition of remedies/claims. Thus, the possibility for the affected to choose the way to protect their right - a special composition (require to pay for goods and penalty under Article 439 of the Civil Code of the Republic of Kazakhstan) or use of the common method (terminate in court and claim for losses) is questioned because, as the Supreme Court notes, while the lawmaker has specifically regulated a legal remedy, it is not necessary to apply another one bypassing it. 

The Supreme Court Ruling No. 6001-23-00-3гп/99 dated 12 April 2023 on the claim from the foreign company Xinjiang Engineering and Construction Company (group) with Limited Liability under CSCEC
When the contract is concluded by the branch on its own behalf without reference to the conclusion of the contract on behalf of the company as a legal entity, it should be clarified whether the head of the branch had the appropriate powers expressed (i) in the regulation on the branch and (ii) in the power of attorney when the contract is signed. If the transaction is made by the branch head having such authority, the transaction should be then considered made on behalf of the legal entity. 

The Supreme Court Ruling No. 6001-23-00-3Г/1688 dated 24 April 2023 on Hasil Kimsanovich Ismayilov's claim
When challenging a transaction on the grounds provided for in para. 9 of Article 159 of the Civil Code of the Republic of Kazakhstan (a deal made under the influence of deception, violence, threats or enslaving deal), the claimant indicated that the bank loan agreements were concluded under the influence of third parties' fraud. However, the Supreme Court notes that deception may consist in the active actions by the other party to the transaction (stating about the non-existent qualities of a thing, presenting false documents, etc.) or in conscious inaction when one participant in the transaction realizing that the other has made a mistake, and thus takes advantage of such mistake. Therefore, a transaction can be declared to be invalid on this ground only if the deal was made as the result of illegal intentional actions of the other party to the transaction rather than third parties. 

The Supreme Court Ruling No. 6001-23-00-3г/1567 dated 24 April 2023 on Vladimir Alekseyevich Levadny's claim
According to the current legislation of the Republic of Kazakhstan, the right to claim to the debtor for reimbursement of the value of the sold pledged property shall not pass to a collateral guarantor whose property is sold by a pledge creditor, if such right is not provided for in the pledge agreement. Para. 3 of Article 344 of the Civil Code of the Republic of Kazakhstan establishes that the creditor rights may be transferred to a collateral guarantor as a result of the fulfilment of obligations under a pledge agreement only in cases expressly provided for by law acts. The rights of claims that are transferred to the guarantor and surety, provided that they fulfil the debtor's obligations are directly provided for by Article 334 of the Civil Code of the Republic of Kazakhstan, but are not provided for in relation to a collateral guarantor. 

Consequently, a collateral guarantor is not entitled to claim against the debtor for reimbursement of the value of the sold collateral property and losses (if any), if such right is not provided for by the pledge agreement. 

The Supreme Court Ruling No. 6001-23-00-3ГП/123 dated 26 April 2023 on Kurma Abilkasimovna Izdibayeva's claim 
When challenging imaginary transactions (Article 160.1 of the Civil Code of the Republic of Kazakhstan), it is important to consider that in such transaction, both parties have no intention to execute it, or are required to fulfil it. Therefore, in order to justify the imaginary nature of the challenged transactions, the courts should establish that when they are made, the true will of all parties in the transaction has not originally aimed at creating the legal consequences that occur when such transactions are made. 

The Supreme Court Ruling No. 6001-23-00-3г/1632 dated 2 May 2023 on Magzhan Magauiyevich Slyamov's claim
As one of the necessary conditions for recognizing the ownership by prescription, the bona fide possession of property should mean a legal situation when the actual owner wrongly believes (as a result of a mistake) that the thing they possess does not belong to anyone else, and they have acquired it on legal grounds for ownership. In other words, the acquirer may be recognized as a bona fide owner if, upon receiving the property, they did not know and should not have known that there is no basis for their right of ownership.

2. Clarification on issues of judicial practice

• On 25 April 2023 the Supreme Court published Bulletin No. 3/2023 containing, in particular, extracts from some rulings of the Judicial Board for Administrative and Civil Cases of the Supreme Court. 
• The Supreme Court prepared Summary for judicial practice in cases of recognition, enforcement and cancellation of arbitral awards for 2019-2022¹. The Summary is quite comprehensive, and quite objectively reflects the existing problems/issues of arbitration practice. The document includes various statistical data on the quantity and quality of consideration of cases by the courts, as well as observations and conclusions of the Supreme Court when studying judicial practice. Below are some important findings.
  • total for 2019-2022, 2479 cases were completed on petitions for the cancellation of arbitration awards, including 2270 cases with rendering of ruling, including 1063 cases (42.8%) were satisfied, 1207 (48.6%) cases were refused to satisfy, 12 (0.4%) cases were dismissed, and 158 (6.3%) cases were dismissed without prejudice.
  • total for 2019-2022, 27,689 materials on applications for recognizing and enforcement of arbitral awards were completed, including 27,328 (98.6%) cases with rendering ruling, including 25,270 (92.4%) cases were satisfied, 1724 (6.3%) cases refused to satisfy; 4 (0.01%) cases dismissed and 214 (0.7%) cases were dismissed without prejudice. 
  • the court notifies time and place of the court hearing to the parties to the arbitral proceedings and also third parties, if they file a petition to cancel the arbitral award (Part 2 of Article 465 of the Civil Procedural Code of the Republic of Kazakhstan). However it is not required to notify the arbitration (arbitrator) which ruling is filed to be cancelled. Meanwhile, the courts continue to summon both the parties to the arbitration proceedings and third parties, as well as arbitrators. Arbitration is not a party; its participation in legal proceedings is not provided for by the law. Arbitrator's summon to the court and its hearing on the arbitral award made by them contradicts the principles of the Civil Procedural Code of the Republic of Kazakhstan.
  • in order to verify the arguments and evidence of the parties, the courts are entitled, on their own initiative, require the arbitration to provide the necessary documents upon proper notification of the parties (these can be notices, summonses, invoices, dispatch registers, receipts, letters from postal organizations, extracts from SMS notifications and any other documents confirming the notification of the parties) (on the basis of Part 4 of Article 15 of the Civil Procedural Code of the Republic of Kazakhstan). 
  • three most common grounds for the cancellation of arbitral awards in the courts of the Republic of Kazakhstan: (a) the parties are not notified by the arbitrations on the arbitral proceedings; (b) there are disagreements related to arbitration agreements or clauses, which excludes to consider the case in arbitration due to its lacked jurisdiction; and (c) the arbitral award is contrary to public order.
  • courts should keep in mind that arbitral awards rendered by foreign international commercial or investment arbitration are not subject to appeal in the Republic of Kazakhstan, they are subject to appeal in the country where they were made according to the rules of the Civil Procedural Code of the Republic of Kazakhstan.
  • violation of the public order of the Republic of Kazakhstan as grounds for the cancellation of arbitral awards or refusal to enforce an arbitral award - the Supreme Court notes that the concept of public order is not revealed by our legislation and applied to the discretion of the court. To develop a specific list of all principles and rules of law at the legislative level that would more fully reveal the concept of "public order" is impossible because this concept is very "flexible". Therefore, each case must be thoroughly substantiated by the court in each specific case. As the Supreme Court rightly noted, an arbitral award can be recognized as violating the public order of the Republic of Kazakhstan only if, actions are committed as a result of arbitral award execution, and such actions are either directly prohibited by law or damage the sovereignty or security of the state, affecting the interests of large social groups.
  • judicial practices continues to reconsider arbitral awards on the merits which are regarded by the court of cassation as a violation of the rules of law and entails the cancellation of court rulings. However, every year there is a tendency to reduce such cases in practice.
  • invalidity of the arbitration agreement means that the arbitration agreement has not been concluded, is invalid, has become invalid or cannot be executed. The Supreme Court considers this approach to be correct, since with a narrow understanding of the invalidity of an arbitration agreement, it would be impossible for a court to cancel arbitral awards made by arbitration courts where there is an unconcluded, invalid arbitration agreement or agreement to arbitrate that cannot be executed.
• On 22 May 2023 the Supreme Court published Bulletin No. 4/2023 containing, in particular, extracts from some rulings of the Judicial Board for Administrative and Civil Cases of the Supreme Court.
• On 8 June 2023 the Supreme Court published Bulletin No. 5/2023 containing, in particular, extracts from some rulings of the Judicial Board for Administrative and Civil Cases of the Supreme Court.
• On 23 June 2023 the Judicial Board for Administrative Cases (JBAC) of the Supreme Court published the first Bulletin which is mainly devoted to a set of tax legislation and the analysis of administrative cases on tax issues. Below are some brief conclusions from the JBAC position given in the Bulletin on some common matters of the application of administrative procedural legislation:
  • the taxpayer has the right to choose the procedure for considering their dispute at their own discretion in a pre-trial order in a higher authority (State Revenue Committee, Appeal Commission under the Ministry of Finance of the Republic of Kazakhstan) or immediately apply in a judicial proceeding to a Specialized Interdistrict Administrative Court (SIAC).
  • investment jurisdiction was debatable. As is known, investors' disputes in accordance with Part 3 of Article 102 of the Administration Procedural Code are subject to consideration in the SIAC for Astana. For the purposes of legal proceedings, investors shall mean legal entities holding, for example, a subsoil use contract. Besides, the JBAC tends to believe that in these cases it means contracts for the production and exploration of hydrocarbons (oil and gas) or solid minerals, since such projects provide for investments in certain amounts and submission of reports. As an example, the claim from Nova Zinc LLP to the State Revenue Department for the Karaganda region (SRD). Jurisdiction of the claim from Nova Zinc LLP against the SRD regarding the inaction of the state revenue authority to pay penalties for late VAT refund due to the existence of a subsoil use contract dated June 27, 998 was determined in the SIAC for Astana.
  • investment disputes considered by the Specialized Interdistrict Economic Court (SIEC) for Astana (according to the rules of Article 27 of the Civil Procedural Code of the Republic of Kazakhstan) on appeal are reviewed in the administrative board for Astana and then to the JBAC. For example, the claim from a legal entity that had a contract for the extraction of sand against the Akim in connection with the failure to provide a land in accordance with a mining allotment under a subsoil use contract was considered by the SIEC for Astana as an investment dispute and further to the JBAC. In general, any claimant bringing a claim under investment jurisdiction must provide evidence that they have made an investment in the project. 
  • a legal entity that has an investment contract and a natural monopolist contract when there is a public-private partnership (PPP) agreement including a concession agreement is an investor and such investment dispute is subject to consideration in the SIAC for Astana.
• The JBAC of the Supreme Court prepared a brief overview of the administrative cases considered in the cassation for 1 quarter 2023. Such overview contains a thesis description of administrative cases and the conclusions of the JBAC on various categories of disputes: i.e. tax, customs, environmental protection, land disputes, architecture and urban planning, etc.

Legal Publications

Zakon.kz / Analytics 

• Maidan Suleimenov, Doctor of Law, Director of the Research Institute of Private Law at the Caspian University, Academician of the National Academy of Sciences of the Republic of Kazakhstan – "Bassin and Kazakh civil law".
• Arstan-Zharak Akhpanov, Doctor of Law, Professor of the Department of Criminal Law Disciplines at L.N. Gumilyov Eurasian National University, Chief Researcher of the Institute of Legislation and Legal Information of the Republic of Kazakhstan, Alexander Khan, Candidate of Law, Professor of the Department of Legal Disciplines of "Bolashaq" Academy – "To be or not to be a preliminary investigation (On the 60th anniversary of the formation of the preliminary investigation units of the internal affairs bodies (6 April 1963)". 
• Askar Kaldybaev, Candidate of Law, – "Excerpts from paper by S.L. Budylin "The Case of Unknown Villains, or Is Cryptocurrency Property? Commentary to case AA v. Persons Unknown & Ors, Re Bitcoin [2019] EWHC 3556 (Comm.), 13 December 2019". 
• Venera Konusova, Candidate of Law, Chief Researcher of the Department of Civil, Civil Procedural Legislation and Enforcement Proceedings of the Institute of Legislation and Legal Information of the Republic of Kazakhstan – "Category of justice in the civil procedural legislation of the Republic of Kazakhstan". 
• Daulet Abzhanov, Candidate of Law – "Return of an erroneous transfer to a payment card". 
• Temirlan Ukibayev – "Protection of the rights of artists to use the image in social networks". 
• Dmitry Bratus, Candidate of Law – "Actual problems of judicial practice (doctrinal analysis)". 
• Askar Kaldybaev, Candidate of Law – "Excerpts from paper by D.A. Zhestovskaya "Contrastability of court rulings in bankruptcy". 
• Zhanna Seydalina, Candidate of Law – "On the claims of tax authorities to recognize transactions as invalid through the prism of the Constitution". 
• M.Ye. Saginayev, MD, A.T. Baizakov, MD, I.V. Kalinger, MD – "Concept and types of state property in Roman law". 
• K.A. Aubakirova, Masters Degree student of the Academy of Justice under the Supreme Court of the Republic of Kazakhstan – "Grounds for the allocation of a share in the authorized capital of a limited liability partnership". 
• S.S. Karzhaubayev Candidate of Law, Acting Head of the Department of Criminal, Criminal Procedural, Criminal Executive Legislation of the Institute of Legislation and Legal Information of the Republic of Kazakhstan – "On the issue of improving the information and digital legislation in the Republic of Kazakhstan". 
• Anatoly Didenko, Kulyash Ilyasova – "Sequence and procedure for satisfying creditors' claims in the course of rehabilitation and bankruptcy (dedicated to the 100th anniversary of Professor Yuri Grigorievich Bassin)". 
• Yelena Nesterova, Candidate of Law, Associate Professor of the Adilet Higher School of Law at the Caspian University, Chief Researcher of the Republican State Enterprise "Institute of Legislation and Legal Information of the Republic of Kazakhstan" – "Legal regime of information and rights thereto under the legislation of the Republic of Kazakhstan". 
• Friederik Zol, professorm, the Jagiellonian University (Krakow, Poland) and the University of Osnabrück (Germany) – "Role of the selection and appointment of judges and principle Curia novit iura (the court knows the law): some aspects". 
• Farhad Karagusov, Doctor of Law, Member of the International Academy of Comparative Law – "Modernization of the Civil Code of the Republic of Kazakhstan cannot be postponed". 
• Laura Agybayeva, Judge of the Supreme Court of the Republic of Kazakhstan – "On some issues for simplifying of pre-trial proceedings". 
• E.B. Mukhamejanov, Doctor of Law, Professor – "On the legislative process and problems of legislative initiative in the Republic of Kazakhstan". 
• Yevgeny Porokhov, Doctor of Law, Director of the Research Institute of Financial and Tax Law, Professor of the Adilet Higher School of Law at the Caspian Public University – "Financial and legal aspects for establishing the legal regime for the national digital currency, digital assets and their turnover in the Republic of Kazakhstan". 
• Rabiyam Serikbayeva, General Director, FINEX LLP, auditor, ACCA DipIFR, tax consultant – "On the issue of introducing the concept "due diligence" in the Republic of Kazakhstan". 
• Azar Aliyev, Doctor of Law, Associate Professor, Department of International Economic and Comparative Law, Martin Luther University in Halle-Wittenberg – "Civil Law of Kazakhstan: outside view". 
• M.Sh. Kurmangali, Candidate of Law, Professor of the School of Law and Public Administration of NJSC "Narxoz University" – "International legal framework for the regulation of artificial intelligence: Challenges and Prospects". 
• Maidan Suleimenov, Doctor of Law, Director of the Research Institute of Private Law of the Caspian University, Academician of the National Academy of Sciences of the Republic of Kazakhstan – "Public trust in authorities and civil law". 
• Arman Baimuratov, Director of the Department of Public Procurement, Legal and Economic Support, RSE "Kazhydromet" – "Problems of legislation on public procurement from the point of view of the Customer". 
• B. Karina, judge, the Pavlodar city court – "Changes in the insurance disputes legislation of the Republic of Kazakhstan".