Novelties in Legislation

This Client Update covers the key amendments to the laws of the Republic of Kazakhstan (“RK”) introduced in June-July 2018.

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

1. Intellectual Property (IP)

Following the entry into force on 3 July 2018 of the Law of the RK No. 161-VI[i], significant amendments were introduced to the IP regulation.

• General Issues

The state duty is no longer charged for:

• Issuing a patent;

• Registering a trademark, appellation of origin of goods;

• Registering assignment and pledge contracts, franchising license, license and sublicense contracts related to the use of industrial property objects.

The criteria set for a Patent Attorney no longer require IP-related work experience. A Patent Attorney candidate must have just a general work experience for no less than 4 years.

• Selection Achievements

Granting of the right to use a selection achievement with an option for the licensor to use it but not to issue licenses to other persons is now referred to as the sole license as opposed to the exclusive license.

Granting of the right to use a selection achievement along with the right to issue licenses to other persons but restricted to use such selection achievement is now referred to as the exclusive license as opposed to the full license.

The patent duration term for a selection achievement can be extended by the patent holder only subject to advance payment for each year of extension but no more than for 10 years.

Disputes related to validity of the patent for a selection achievement may now be brought to the court.

• Trademarks and Appellations of Origin of Goods

Restrictions on the owners’ rights to use the trademark resulting from the requirements that could jeopardize distinctiveness of the trademark are no longer allowed.

Right for a trademark in relation to all goods and services or part thereof can now be transferred by the right holder to another person under the contract without reference to classes of goods and services specified in the certificate.

Only the court will now make determination on the legality of the use of a trademark or a trade designation similar to it to a degree of confusion, or of a well-known trademark.

The right holder is now entitled to demand the removal of an illegally placed trademark or a trade designation similar to it to a degree of confusion from the counterfeit goods and their packages. Previously, the law did not vest a holder with such right.

Counterfeit goods are now defined to mean the product and its packaging, on which a trademark or a trade designation similar to it to a degree of confusion is placed without the right holder’s consent.

A well-known trademark is now defined as a trade designation or a trademark recognized as well-known based on the decision of the competent body, whereas previously such recognition was determined based on international treaties, on the decision of the competent body or a court.

Trademark expertise timelines were changed as follows:

• Preliminary expertise – within 10 business days following the application date;

• Full-fledged expertise – within 7 months following the application date.

It is expressly prohibited to restrict the use of a trademark along with another trademark, the use of a trademark in a modified form, including a different font, colour, shape or its use in such a way, which can damage the trademark’s ability to distinguish goods (services) of some individuals or legal entities from homogeneous goods (services) of other individuals or legal entities.

An exclusive trademark right in relation to all goods (services) or parts thereof can be now transferred only based on an assignment contract.

Dissolution of a business can no longer serve as a ground for trademark’s deregistration.

Trademark is now subject to deregistration, among others, in case the trademark’s identity or similarity to a degree of confusion with a well-known trademark in the RK provided the use of a trademark can mislead a consumer about the good or its manufacturer.

The courts can also hear disputes on trademark’s registration effectiveness due to its non-use, trademark’s deregistration due to its identity or similarity to a degree of confusion with a well-known trademark in the RK provided the use of the trademark can mislead a consumer about the good or its manufacturer are now also considered in court.

The use of a trademark in relation to goods, which were legitimately put into circulation in any Member of the Eurasian Economic Union directly by the trademark’s owner (right holder) or other persons with his/her consent, does not violate the exclusive right.

If the fact of the offense is proven, the right holder instead of compensation for losses is now entitled to demand compensation in the amount determined by court. The compensation is determined based on nature of violations, market value of homogeneous (original) goods, which a trademark, appellation of origin of goods or a trade designation similar to a degree of confusion are placed with the consent of the owner.

In addition to the registration requirement, legal protection of the appellation of origin of goods is now also provided under an international treaty ratified by the RK.

A person who in good faith used the geographic designation identical or similar to the registered appellation of origin, retains the right to its further use for 7 years from the date of registration of the appellation of origin of goods.

• Copyright

In order to certify personal non-property rights on an undisclosed work only the author is now entitled to insert the necessary information to the State Register of Rights to the Objects Protected by Copyright (hereinafter referred to as ‘Register’). This must be done within the copyright protection duration term.

One can legitimately use public works and extracts from it as illustrations to publications, radio and TV programs, sound and video recordings of an educational nature absent an author’s or any other right holder’s consent and an author’s remuneration payment. Such use must be accompanied by mandatory indication of an author’s name, source of information and must be justified by the set goal and do not generate any income.

2. Taxation

The Order of the Minister of Health of the RK No. 124[ii] approved the following:

1) A list of medicines of any forms, including medicinal substances, as well as materials and components for their production, medical (veterinary) products, sales of which are exempt from VAT (please refer to http://adilet.zan.kz/rus/docs/V1800016840).

2) A list of medicines of any form, medical devices and medical equipment registered in the State Register of Medicines, Medical Items and Medical Equipment, and Medicines, Medical Items and Medical Equipment not registered in the State Register, the import of which is exempt from VAT (please refer to http://adilet.zan.kz/rus/docs/V1800016840).

3. Venture Financing

For the purposes of creating a legal framework for the development of venture financing, the Law of the RK No. 174-VI[iii] introduced the following notions of venture fund and financing:

• A venture fund is a simple partnership or a legal entity in the form of a joint-stock company or a business partnership that attracts and accumulates money and other assets solely for the purposes of venture financing.

• Venture financing means activities related to the financing of persons engaged only in innovative activities, by investing in their charter capital, purchasing financial instruments issued by them or by providing them with a loan.

• The charter of a venture fund established in the form of a legal entity, in addition to the information specified by the Kazakhstan laws, must contain a provision that its exclusive activities would be raising and accumulation of money and other property for the purpose of venture financing in accordance with the requirements established by the Kazakhstan laws on investment and venture funds;

• A venture manager is a legal entity that manages the assets of a venture fund in the interests of venture fund participants acting in accordance with the law and pursuant to an agreement concluded by participants of a venture fund. The venture manager must be a fund participant at the same time;

• The law also sets the requirements for number of participants of a venture fund. There must be no less than two.

4. Currency Regulation and Currency Control[iv]

On 2 July 2018, the President of the Republic of Kazakhstan signed the new Currency Regulations and Currency Control Law, which is expected to come into legal effect from 1 July 2019. The new Law focuses on increasing control and monitoring currency operations, reducing the use of foreign currency in transactions in Kazakhstan, attributing “currency resident” status to branch offices of foreign companies and expanding measures to counter capital withdrawal out of the country.

This law provides for distinct regulation of currency operations carried out by participants of Astana International Finance Center (“AIFC”). AIFC participants are not subject to currency monitoring, save for providing information on transactions carried out with residents and non-residents.

For more information, please refer to our special edition on this matter: https://bit.ly/2M16dMi

5. Employment Matters[v]

On top of the documents confirming the work experience of employees and information on the retention and transfer of money to their pensions, the employer must now also deliver the compulsory social insurance documents of employees to the state archive.

“Disciplinary punishment” is now defined as a disciplinary action measure imposed by an employer or a CEO of the national managing holding on an employee for committing a disciplinary offense. Previously, only the employer was allowed to apply the action.

Now the state control over observance of the employment legislation is carried out in the form of inspection and preventive control along with visiting the subject (object) of control, unless otherwise stipulated by international treaties ratified by the RK. Previously, control was carried out only in the form of inspection.

6. Gas and Gas Supply [vi]

The amendments provide for the staged deregulation of wholesale prices for liquefied gas by means of a new supply mechanism of liquefied gas to the domestic market of Kazakhstan via electronic trading platforms (ETPs). It is proposed to introduce an additional (in addition to direct distribution) mechanism for compulsory gas supply to producers on the domestic market via the ETP starting from 1 January 2019. The marginal price approved by the Ministry of Energy of the RK will apply to such gas supply.

7. Customs Matters

The rates of import customs duties of the Common Customs Tariff of the Eurasian Economic Union for certain types of goods were established[vii] (please refer to https://www.garant.ru/products/ipo/prime/doc/71862570/).

The Board of the Eurasian Economic Commission by its decision dated 2 May 2018 No. 83[viii] established the procedure for calculating additional charges for determining the customs value of goods imported into the customs territory (please refer to https://www.garant.ru/products/ipo/prime/doc/71853644/).

[i] The Law dated 20 June 2018, came into force on 3 July 2018.

[ii] The Order dated 20 March 2018, came into force on 15 June 2018.

[iii] The Law dated 4 July 2018, came into force on 21 July 2018.

[iv] The Law dated 2 July 2018, will come into force on 1 July 2019.

[v] The Law dated 2 July 2018, came into force on 14 July 2018.

[vi] The Law dated 4 July 2018, came into force on 21 July 2018.

[vii] The Decision of the Board of the Eurasian Economic Commission No. 94 dated 5 June 2018. It will come into force not earlier than 1 September 2018.

[viii] The Decision of the Board of the Eurasian Economic Commission No. 83 dated 22 May 2018. Came into force on 24 June 2018.