Did You Initiate Amendments to the Contracts as Required by New Subsoil Use Code?

With the new code ‘On Subsoil and Subsoil Use’ (the code) coming into effect, various subsoil users may be required to amend their contracts as the depth of their contract territories was previously undetermined.

The former Kazakhstan laws, in particular the Law ‘On Subsoil and Subsoil Use’ dated 24 June 2010, did not contain the requirement for mandatory determination of the depth of the contract territory. According to Article 70, paragraph 1 of the said Law, the subsoil plot (subsoil plots) could be limited to a certain depth. Similar optional provision was also contained in the former Law ‘On Subsoil and Subsoil Use’ dated 27 January 1996.

According to the new amended Code, the requirement to limit the subsoil block in depth is now mandatory.

Article 19, paragraph 1 of the Subsoil Code states that the spatial boundaries of the subsoil block are formed by conditional planes emanating from straight lines between points with geographic coordinates (the territory of the subsoil block) and the depth forming the upper and lower spatial boundaries.

In this case, according to Article 277 paragraph 3 of the Code, this provision, contained in Article 19 paragraph 1 of the Code, is applicable to previously concluded contracts.

Furthermore, according to Article 278 paragraph 1 of the Code, subsoil use contracts concluded before this Code came into effect, as well as all acts of the Kazakhstan executive bodies related thereto, retain their validity, save for cases provided for in Chapter 35 of the Code (Article 278, paragraph 3).

Hence, we assume that the competent body has a legitimate reason to require subsoil users; whose subsoil plots are not limited in depth; to set the lower boundary for their subsoil blocks in accordance with the Code.

We believe that this may primarily affect those subsoil users whose contract territories (in whole or in part) coincide with the sites that are proposed for inclusion or are included in the Management Program of the State Subsoil Fund. Please see the Interactive Map of the Committee of Geology and Subsoil Use for said sites.

As for the depth of the lower boundary of the subsoil block in this case, subsoil users must keep in mind that Article 19, paragraph 1 of the Code applies to their contracts entirely without any exceptions.

According to Article 19, paragraph 1 of the Code, the lower spatial boundary of the subsoil block is located at depths accessible for geological study and development. Also, in cases provided for by the Code, the upper and/or lower spatial boundaries of the subsoil block may be located at a different depth.

In other words, if the lower boundary of the subsoil block was not previously determined, then said boundary, according to Article 19, paragraph 1 of the Code, must be determined as the depth accessible for geological study and development.

At the same time, one must keep in mind that, according to Article 278, paragraph 16 of the Code, under subsoil use contracts concluded before the introduction of this Code, the boundaries of the subsoil area were altered by appropriate amendments to the contract. In this case, the spatial boundaries of the subsoil block are determined by the territory designated by the corner points in the geographic coordinate system and the conditional planes emanating from the boundaries of such territory to a certain depth.

This means that before amending the contract, the subsoil user must be guided by the existing geological allotment, and in case of initiating the issue of the depth of the user’s subsoil block, the competent body will not be entitled to unilaterally determine the depth of such a block.