Legislative News. November-December 2017

This Client Update covers the key amendments to the laws of the Republic of Kazakhstan (‘RK’) and various legal developments introduced in November-December 2017. Most of the novelties introduced in this period deal with adoption of two important Codes in Kazakhstan – the Subsoil Use Code of the RK and the Customs Code of the RK[1]. The considerable part of the novelties concerns customs, land, ecological and administrative matters.

NOVELTIES IN LEGISLATION

The laws covered by the present Client Update are related to both public and private sectors. Some of them may be of interest to you as they may affect your business in Kazakhstan.

We would like to draw your attention to the following legal acts.

INTERNATIONAL TREATIES

International Carriage in the Eurasian Economic Union

On 19 December 2017, the Board of the Eurasian Economic Commission signed the Resolution No.178 ‘Regarding Declaration on Completed Transactions with respect to International Transport Vehicles Located Outside the Customs Territory of the Eurasian Economic Union and Defined as Goods Placed Under the Customs Procedure for Temporary Import (Admission)’.

The Resolution introduces a template application form, outlines the procedure for filling in/amending declarations on completed transactions, as well as the procedure for customs transactions.

The Resolution comes into force on 21 January 2018.

Documents Confirming the Status of Goods of the Eurasian Economic Union

On 7 November 2017, the Board of the Eurasian Economic Commission signed the Resolution No.139 ‘On Documents Confirming the Status of Goods of the Eurasian Economic Union”.

This Resolution sets the following list of documents confirming the status of goods of the Eurasian Economic Union for placing such goods under the customs procedure for customs transit:

• way bill, delivery note, a document confirming conclusion of the shipping contract, invoice, specification, shipping (packaging) leaf or other transport (transportation) documents, business documents labelled ‘Goods of the Eurasian Economic Union’, certified by a sender or a customs applicant – in case of transportation of goods from one part of the customs area of the Union which is not a territory of the free (special) economic zone to another part of the customs area of the Union through territories of the states which are not members of the Union and (or) the sea;

• declaration on goods, according to which goods were issued in a member state of the Union according to the customs procedure of release for internal consumption or the customs procedure of reimport, transit declaration confirming commodity importation of the Union on the territory of the free (special) economic zone in accordance with customs procedure of customs transit, other documents used according to the legislation of member states of the Union for confirmation of the status of goods of the Union – in case of transportation of goods from one part of the customs area of the Union which is a free (special) economic zone to another part of the customs area of the Union through territories of the states which are not members of the Union and (or) the sea.

The Resolution becomes effective following entry into force of the Customs Code Treaty of the Eurasian Economic Union dated 11 April 2017 on 1 January 2018.

LAWS

Subsoil Use

On 27 December 2017, the President of the RK signed the Law No.126-VI ‘On Amendments to the Legislative Acts of the Republic of Kazakhstan on Subsoil Use Matters’ (‘the Law No.126-VI’). The Law No 126-VI envisages amending a number of statutory acts, namely:

1. The Land Code dated 20 June 2003, among others, was amended as follows:

• Granting the subsoil user the right to claim a private easement over neighboring or other land plot;

• Granting the subsoil user the right for exploration or geological survey on state lands on the basis of public easement without obtaining such lands for ownership or land use;

• The land use right to a land plot is granted under a license for subsoil use due to the introduction of the licensing institute.

2. The Environmental Code dated 9 July 2007, among others, was amended as follows:

• Electronic submission of the documentation for state environmental expertise and obtaining emissions permit;

• Subsoil project documentation to be agreed with the competent body for environmental control, is no longer subject to mandatory state ecological expertise;

• Ecological expertise of projects was listed among the types of ecological expertise.

3. The Administrative Code dated 9 January 2007, among others, was amended as follows:

• Administrative fine was introduced for violation of the rules for rational and integrated use of subsoil use during subsoil use operations. In particular, hydrocarbons and uranium related violations, which led to deterioration in the quality of the remaining reserves, unreasonable and excessive losses of minerals:

– for small-size business – 30 MCI[2],

– for medium-size business – 50 MCI,

– for large-size business – 150 MCI;

• Administrative fine was introduced for undertaking exploration and/or mining operations of solid minerals, using types, means and methods of work not provided in the project document:

– for small-size business – 30 MCI,

– for medium-size business – 50 MCI,

– for large-size business – 150 MCI;

• Administrative fine of 20 MCI was imposed for carrying out hydrocarbon mining absent state expertise of mineral resources. This sanction is now envisaged exclusively for hydrocarbon production;

• Administrative fine of 20 MCI was introduced for violation of the order and terms of reporting;

• Administrative fine of 25 MCI was introduced for failure to ensure reliable accounting of extracted solid minerals, hydrocarbons;

• Administrative fine was introduced for failure to eliminate the consequences of subsoil use operations within the statutory timeframes:

– for small-size business or non-commercial organizations – 30 MCI,

– for medium-size business – 50 MCI,

– for large-size business – 150 MCI;

• Administrative fine was introduced for refusal to or avoidance from providing the government authorities with timely, complete and reliable information on the use of mineral resources, extracted minerals and geological information:

– for small-size business – 6 MCI,

– for medium-size business – 10 MCI,

– for large-size business – 40 MCI.

The Law No. 126-VI comes into force on 28 June 2018, save for certain provisions expressly specified in the Law.

On Ratification of the Agreement on the Customs Code of the Eurasian Economic Union

On 13 December 2017, the President of the RK signed the Law No.115-VI ‘On Ratification of the Agreement on the Customs Code of the Eurasian Economic Union’. This law provides for ratification of the Agreement on the Customs Code of the Eurasian Economic Union, which was signed on 11 April 2017 in Moscow.

Agreement on the Customs Code of the Eurasian Economic Union came into force on 1 January 2018.

DECREES

Counterfeit Products

On 13 November 2017, the Prime-Minister of the RK signed the Decree No.736 ‘On Approval of the Agreement on Cooperation in the Field of Counteracting the Production and Distribution of Counterfeit Products’ (‘the Decree No.736’).

The Decree No. 736 provides for approval of the Agreement On Cooperation in the Field of Counteracting the Production and Distribution of Counterfeit Goods (manufactured and distributed by means of breaching intellectual property rights), including those in the digital environment, as well as legislative measures to effectively fight against trafficking of counterfeit goods, expanding interaction of government authorities of the CIS countries.

The Decree No.736 came into force on 13 November 2017.

Immigration

On 6 December 2017, the Prime-Minister of the RK signed the Decree No.814 aimed at amending the immigration rules in Kazakhstan (‘the Decree No.814’).

The Decree No.814 introduces the following amendments:

• Legal grounds for terminating the permitted period of stay of immigrants in the RK are added by:

– expiry of the visa term;

– expiry of the registration term specified in the certificate of temporary registration of the immigrant;

– expiry of the registration term specified in the attachment to the passport on immigration registration.

• The list of supporting registration documents was supplemented with the RK visa;

• When crossing the state border the RK visa foreign holders must specify address of an inviting party.

The Decree No.814 comes into force on 1 July 2018, save for certain provisions expressly specified in the Decree.

Licensing

On 17 December 2017, the Prime-Minister of the RK signed the Decree No.754 concerning the definition of the licensor in the oil and gas sector (‘the Decree No.754’).

The Decree No.754 specifies licensors for the implementation of licensing activities:

• License for design (technological) and (or) operation of mining productions (raw hydrocarbons), oil chemical productions, operation of main gas pipelines, gas pipelines, oil products pipelines in the oil and gas sphere – the Ministry of Energy of the Republic of Kazakhstan;

• License for works and services for environmental protection in servicing individuals and legal entities – the Committee for Environmental Regulation and Control of the Ministry of Energy of the Republic of Kazakhstan.

The Decree No.754 came into force on 3 December 2017.

Public-Private Partnership

On 6 November 2017, the Prime-Minister of the RK signed the Decree No.710 concerning implementation of the Public-Private Partnership (‘the Decree No.710’).

The Decree No.710 expressly excludes the following list of objects from public-private partnerships, including concession:

• Land, water (save for transfer of the right of temporary unpaid land use), flora and fauna;

• Specially protected natural areas;

• Military property assigned as the right of operative administration to government institutions of the Armed Forces, other troops and military formations;

• Backbone railway network, navigable waterways, beacons, devices and navigation signs that regulate and guarantee safety of navigation, sea terminals;

• Water supply facilities (dams, hydro-units, other hydrotechnical constructions) of special strategic importance, save for facilities providing water supply to certain cities of the RK (water intake facilities, pumping stations, water purification facilities);

• Health organizations that carry out activities in the field of blood services and HIV/AIDS prevention (save for acquisition of medical equipment and their servicing), organization of medicine in case of disasters;

• Objects of historical and cultural heritage and cultural values;

• Collection and depositories of pathogens of particularly dangerous infections and industrial microorganisms.

The Decree No.710 came into force on 19 November 2017.

ORDERS

Domestic Market Wholesales of Liquefied Petroleum Gas

On 5 December 2017, the Minister of Energy of the RK signed the Order No.423 ‘On Approval of the Marginal Price of Wholesales of Liquefied Petroleum Gas on the Domestic Market’ (‘the Order No.423’).

The Order No.423 approves marginal price of wholesales of liquefied petroleum gas on the domestic market of the RK for the period from 1 January to 31 March 2018 in the amount of KZT 38,701 per ton net of VAT.

The Order No.423 came into force on 22 December 2017.

National Standards

In November 2017, certain national standards were introduced.

• Ensuring Uniformity of Measurements

On 17 November 2017, the Decree No.327-од was signed, which set the following national standards of the RK in the field of ensuring uniformity of measurements:

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Gas Volume Correctors. Methods and Means of Verification.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Systems for Measuring the Quantity and Quality of Oil Equipped with Turbine Flowmeters. Verification Methods.’ ST RK;

• ‘Organic Products. Requirements for the Production Process.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Gas Flow Measurement Systems Using a Volumetric Measurement Method By Means of Turbine, Rotary and Vortex Flowmeters. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Liquefied Gas Dispensers. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Tensile and Universal Machines for Static Testing of Metals and Structural Plastics. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Exemplary and General Mass Measures. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Buoyancy Level Transmitter. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Fuel-Dispensing Unit. Verification Methods.’ ST RK;

• ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. Gas Flow Measurement System. Gas Measurement by Volumetric Method Using Ultrasonic Flow Converters. Standard Program of Metrological Certification.’ ST RK.

From 1 January 2018, the Order No.327-од cancels the national standard ST RK 2.21-2007 ‘State System for Ensuring Uniformity of Measurements of the Republic of Kazakhstan. The Order of Testing and Type Approval of Measuring Instruments.’

The aforementioned standards will come into force on 1 January 2019.

• Liquids Transportation

On 1 November 2017, the Order No.298-од was signed, which sets the following standards:

• ‘Vehicles for Liquids Transportation. Technical Conditions.’ ST RK;

• ‘Mobile Spray Station. Technical Conditions.’ ST RK.

The aforementioned standards will come into force on 1 March 2018.

• Coal

On 1 November 2017, the Order No. 296-од was signed, which sets the following standards:

• ‘Exploration and Development of Coalbed Methane. Terms and Definitions.’ ST RK;

• ‘Method for Determination of Methane Content in Coal Seams.’ ST RK;

• ‘Utilities for Coal Enrichment. Determination of Effectiveness’ ST RK.

The Order cancels the following national standards as from 1 April 2018:

• ST RK 2146-2011 ‘Coal Processing Products. Medium Temperature Resin Coal. General Technical Specifications.’;

• ST RK 2147-2011 ‘Coal Processing Products. Boiler Fuel From Resin Coal Medium Temperature. General Technical Specifications.’;

• ST RK 2145-2011 ‘Solid Fuel. Medium-Temperature Coke From Kazakhstan Coal. General Technical Specifications.’;

• ST RK 2148-2011 ‘Coal Processing Products. Medium Temperature Coal. General Technical Specifications’.

The aforementioned standards will come into force on 1 July 2018.

DRAFT LAWS

Gas and Gas Supply

In December 2017, Dossier for the Draft Law of the RK ‘On Amendments to the Law of the Republic of Kazakhstan ‘On Gas and Gas Supply’ (‘the Draft Law’) was submitted for review to the Mazhilis of the Parliament of the RK.

The Draft Law proposes, among others, the following amendments to the Law of the RK ‘On Gas and Gas Supply’:

• Exclusion of the accreditation institution of gas network organizations;

• Introduction of the integrated information system for collection, storage, analysis and processing of subsoil use and oil and gas industry related information;

• Introduction of the concept of ‘electronic trading platform’ for conducting trades in liquefied petroleum gas as part of the supply plan and ensuring automation of the transaction process, as well as collection, storage, processing and information disclosure. The concept is introduced in connection with the proposed mechanism for supply of liquefied petroleum gas to the domestic market through electronic trading platforms;

• Empowering the competent authority to approve the marginal prices of liquefied petroleum gas sold as part of the supply plan, and the procedure for price determining in connection with the proposed change in the procedure for state regulation of prices for the CIS and its supply to the domestic market.

[1] SIGNUM covers these new Codes separately in thematical updates.

[2] MCI (Monthly Calculation Index) in 2018 is KZT 2,405.