Exclusion of сlient from the “List of Unreliable Suppliers” under Samruk-Kazyna Contract procurement portal

We successfully represented our client in proceedings challenging its automatic inclusion in the List of Unreliable Potential Suppliers (the “List”) maintained by Samruk-Kazyna Contract, the procurement portal.

Our client had been declared the winner of a public tender conducted by Samruk-Kazyna. However, during the contract negotiation phase following the award, substantial discrepancies were discovered between the tender documentation and the draft contract submitted by the procuring entity. Specifically, the draft contract introduced an expanded scope of work that exceeded the parameters originally agreed upon and could not feasibly be performed by the client’s in-house resource.

The client’s refusal to execute the contract was therefore motivated not by an intent to evade performance, but by a desire to prevent improper performance and potential harm to the procuring entity.

Despite this, the client was automatically blacklisted in the List of Unreliable Suppliers for a two-year period, which effectively barred it from participating in future procurement opportunities within Kazakhstan’s largest quasi-state holding.

The client filed a pre-trial claim with the Samruk-Kazyna reconciliation Commission requesting early removal from the List. The Commission denied the request without substantive reasoning, prompting the client to file an administrative claim before the competent court seeking exclusion from the List.

Client’s Position

(1) Absence of bad faith. The refusal to sign the contract resulted from internal miscommunication and a technical error, rather than any intent to avoid contractual obligations. The employee responsible for the error was later dismissed.

(2) No damage to the procuring entity. The contracting authority ultimately abandoned the project altogether, confirming that the client’s actions caused no financial or reputational harm.

(3) Disproportionate and punitive consequences. The client had already endured over a year of adverse effects, including loss of partners and restricted participation in investment projects, despite the fact that the procurement objectives were not undermined.

Respondent’s Position.

The respondent adopted a purely formalistic stance, arguing that since the contract had not been signed, the company must remain on the List until the expiry of the full two-year period. The reconciliation Commission’s decision lacked any substantive justification as to why early removal was impossible.

The administrative court fully upheld the client’s claim, reasoning as follows:

(1) Automatic inclusion without regard to factual circumstances violates the principles of proportionality, fairness, and reasonableness enshrined in the Administrative Procedural Code of the Republic of Kazakhstan. The court further referenced Article 13 of the Entrepreneurial Code, which mandates that state regulatory measures must be proportionate and preventive, rather than excessively punitive.

(2) Absence of any harm: financial, reputational, or otherwise - to the contracting authority.

(3) The client’s corporate profile demonstrates good faith, evidenced by its impeccable record of tax and social compliance and its continued contribution to Kazakhstan’s economy through active investment.

This case establishes that automatic inclusion in the List of Unreliable Suppliers may be successfully challenged where there is no evidence of bad faith or damage to the procuring authority. It also underscores a growing judicial trend in Kazakhstan’s administrative courts toward the application of proportionality and fairness principles in reviewing administrative and regulatory decisions.