On 29 June 2020, the Kazakhstan president signed the new Administrative Procedures Code, which will come into effect on 1 July 2021. The Administrative Procedures Code introduces major changes in a state authority’s exercise of public power and the resolution of disputes between private persons and state authorities.
During the drafting process of the Administrative Procedures Code (APC), the Kazakhstan government reasoned the need for a novel APC by establishing a better dialogue between the state authorities and a private entity or individual (both referred to further as “persons” or, individually, as a “person”), strengthening the fight against corruption within the state officials and making Kazakhstan an attractive place for foreign investors.
It took almost two years for the government to get the APC approved, while having intensive discussions with the public about the new rules in administrative procedures. On 29 June 2020 the president signed the approved APC. The APC will come into effect on 1 July 2021, and by that date, a lot of changes are expected to be made into numerous laws and regulations vis-à-vis streamlining or introducing new administrative procedures.
Starting 1 July 2021, the existing laws On Administrative Procedures and On Order for Considering Letters from Individuals and Legal Entities will be abolished and replaced with the APC. Unlike those two laws, the APC will also regulate court procedures with respect to the disputes between a person and a state authority in connection with an administrative act (defined in the APC as a written decision of a state authority within its competence with respect to rights or duties of a person or a limited group of identified persons) or the actions (or lack of actions) of the state authority. These rules on court procedures will be cut from the Civil Procedures Code that currently regulates such disputes.
In general, the APC provides several new rules that, even despite somewhat ambiguous language (that we do not consider here since the topic of this LawFlash is different), leave the positive first impression that the above objectives of the government in introducing this new law might be met.
Some of the major new rules to be introduced by the APC are summarized as follows.
NEW PRINCIPLES
The APC establishes several new principles that are woven in the new procedural rules and are mostly aimed at protecting the interests of a person against the abuse of power by a state authority. The major new principles are as follows.
Limited Administrative Discretion
The APC introduces a new term, “administrative discretion,” which is defined as the power of a state authority to make one out of all possible decisions upon evaluating their lawfulness. A state authority may exercise such administrative discretion within the limits established by law, and any administrative act or action (lack of action) must be made within the purpose of the administrative discretion. For some reason, this principle has not been expressly stated anywhere in Kazakhstan law yet. After enshrining this principle in the APC, there should be less abuse and more transparency of the decisionmaking process by state authorities.
Adequacy
The APC requires that any administrative act or action (lack of action) must be adequate, i.e., useful (serving certain lawful goal), necessary (must only limit rights, interests, and freedoms to the minimum extent possible), and proportionate (social benefit as a result of limited rights, interests, and freedoms under such administrative act or action (lack of action) must be higher than the damage caused by such limitation). While exercising its administrative discretion, a state authority must secure a fair balance of interests of the society in general and of a concrete person.
Protection of Right to Trust
The provisions of the APC are based on the presumption of the public trust in the activities of a state authority. Given this, (1) an administrative act or action (lack of action) is deemed legal unless proved otherwise by a higher state authority or court; (2) any illegal administrative act or action (lack of action) made at the fault of a state authority may not create burdensome consequences for a person, and (3) such trust may not be abused as a reason for illegal actions (lack of action). This principle is aimed primarily at establishing and protecting a person’s trust in the legal and fair behavior of the state authorities.
Priority of Rights
Any doubt, contradiction, or ambiguity in the law on administrative procedures (including APC and any law or regulation that sets out administrative procedures rules) must be interpreted in favor of a person (rather than in favor of a state authority).
This is a breakthrough principle that does not seem to exist or have been tested in such a post-Soviet country, like Kazakhstan, where interests of a state authority were always prioritized over a person’s rights and interests on business matters. It might take some time to encapsulate this principle in a daily practice after such a long history of prioritizing state interests.
Presumption of Information Accuracy
The APC establishes a new principle, according to which any information provided by a person is deemed accurate unless a state authority, as a recipient of such information, proves otherwise. Some may argue that a state authority would spend taxpayer time and money to prove such inaccuracy and it might be cheaper for a person to do so, but an abuse of such burden of proof at the taxpayers’ expense seems to be balanced by the referred principles of limited administrative discretion and priority of rights, and the general limitation of the state budget spending by each state authority.
Active Role of Court
Unlike in civil court procedures in accordance with the Civil Court Procedures, in accordance with the APC a judge will have a right to request and collect evidence and other materials for full and unbiased consideration and resolution of a dispute.
This is another novelty that is introduced by the APC. There were intensive debates in the legal community during the process of APC drafting and approval. The majority of lawyers expressed concerns about the new principle and the current bias of courts in favor of state authorities. Indeed, the APC is not perfectly drafted, and it does not prevent a case where a judge can exercise his/her rights of active role in favor of a state authority, rather than a person. The hope remains, however, that judges would take into account the above other new principles that protect against abuse of power from different angles, and would exercise this active role to reach an unbiased and fair decision.
TWO TYPES OF ADMINISTRATIVE ACTS
The APC establishes two types of administrative acts depending on the consequences of such act on a person: (1) burdensome, which restricts, limits, or terminates certain rights of a person or creates new obligations or worsens the person’s situation otherwise; and (2) favorable, which supports a right or cancels an obligation or improves a person’s situation otherwise.
The APC supports cancellation of any illegal or legal (unless cancellation of such legal administrative act is prohibited by law) burdensome administrative act. However, it will be difficult to cancel a favorable administrative act, even if it is illegal. An illegal favorable administrative act may be cancelled in a limited number of cases, e.g., if there is a breach of a third party’s right, such act contradicts the Constitution, or there was an incident of crime or use of inaccurate information in making such administrative act.
MANDATORY HEARING ON ADMINISTRATIVE ACT
Currently, there is no rule on a mandatory hearing of a person’s arguments prior to a state authority’s issuing of an administrative act, especially if it is expected that there will be a burdensome administrative act.
The APC provides for different rules on this. At least three days prior to issuing an administrative act, a state authority must invite an interested person for a hearing that must be recorded. During such hearing a person will be able to explain and argue its case and provide all required information so that the state authority would be able to take a well-grounded decision. Such hearing will not be required if the administrative act to be issued is favorable, the administrative procedure must be finished within less than three days, the interested person requested to skip the hearing, etc.
NEW RULES ON APPEAL TO HIGHER AUTHORITY
While currently an appeal must be submitted to the higher state authority directly, the APC requires such submission to take place through the state authority, whose administrative act or action (lack of actions) is appealed, so that such state authority might rectify its challenged act or action (lack of action) by issuing a favorable administrative act or taking a satisfactory action. The term of appeal procedure is decreased from the current 30 business days to 20 business days.
Unlike the current rule stating that a challenged administrative act or action (lack of action) may not be suspended during the appeal process unless otherwise provided by law or a decision of the higher state authority that will consider a relevant appeal, the APC will establish an opposite rule requiring mandatory suspension of all challenged administrative acts or action (lack of action) except for those that (1) have affected a third party’s rights, (2) are related to certain banking and finance matters, or (3) are carved out from such rule in accordance with certain laws.
NEW ADMINISTRATIVE COURT PROCEDURES
Twenty-one new administrative courts will be established by 1 July 2021. These courts will consider appeals against administrative acts or actions (lack of actions).
Currently, any claim against state authority must be filed at the defendant’s place. In accordance with the APC, the rule will remain, but it will be possible to file such claim at the claimant’s place if the subject matter of the claim is an administrative act in electronic form. Or, the parties to a dispute may agree on the chosen court. This rule exists in the Civil Procedures Code, but has never been exercised in a dispute with a state authority. Hopefully, since it will be clearly set out in the APC, the state authorities will be more flexible in agreeing on the preferred jurisdiction.
The APC explicitly permits the parties to a dispute to settle in accordance with an agreement before a court decision is made on such dispute and provided that a defendant - state authority has a required administrative discretion for such settlement. A judge will have a right to set fines on any party in case of a breach of the administrative procedures (including a fine on a state authority that does not perform the court decision on time).
Of course, the APC is not perfect and, as mentioned before, there are several technical ambiguities in the APC that, hopefully, will be changed prior to the effective date of the APC. But, in general, the introduction of the above new rules in the APC seems to be a significant positive first step in improving the dialogue between the state and private business, and hopefully the expected related amendments to other laws and regulations and post-APC practice would not spoil such impression.
We will continue to monitor further changes in Kazakhstan law in connection with the new rules to be set by the APC in 2021 and will update our clients and readers as new information comes to light.
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