Legislative News

This CLIENT UPDATE includes amendments to the legislation of the Republic of Kazakhstan (“RK”) in November 2013.

The legislation outlined in this Client Update concern both public and private sectors. Some of them may be of interest to you as it may affect your business in Kazakhstan in certain way.

This month we would like to draw your attention to the following legal acts:

PERSONAL DATA LAW

1) The Law “On Personal Data” came into force on 25 November 2013. We mentioned about the Law “On Personal Data” in our June edition of Monthly Client Update last year.

The Law is important in that the personal data protection will now be ensured in various areas, and not only in relation to employer vis-à-vis employee, which was the case before.

Just to recap, the law sets rules for processing personal data of an individual, including collection, systematization, storage, update, change, use, dissemination, blocking and destruction of personal data.

The Draft Law was approved by Mazhilis on 23 October 2013.

MINISTRY OF ENVIRONMENTAL PROTECTION OF RK REORGANIZED

1) By the Decree of the President of RK dated 29 October 2013 the Ministry ofEnvironmental Protection of RK was reorganized into the Ministry of Environment and Water Resources of RK.

The Ministry of Environment and Water Resources was granted some additional functions and authorities on formation and implementation of the government policy in the following areas:

• water supply to water consumers or their associations and its diversion for irrigation purposes – the authority delegated from the Ministry of Agriculture of RK;

• rational and complex use of underground waters, other than for the purposes of geological subsoil study related to underground waters – the authority delegated from the Ministry Industry and New Technologies of RK.

The Decree came into force on 19 November 2013.

QUOTA FOR HIRING FOREIGN LABOR

1) The Resolution of the Government of the RK established an annual quota for foreign

hires for 2014 in the ratio of 0.7 % against economically active population. As at end of 2013, economically active population in RK equaled to about 8.6 million people.

Hence, as per the quota, approximately 60,200 expatriates may come and work in RK in 2014 subject to obtaining work permits and visas where required.

The Resolution came into force on 15 November 2013.

THE CUSTOMS UNION

1) The President of RK signed the Law of the RK dated 12 December 2008 No. 140-V ZRK “On ratification of the Protocol on amendments to the Protocol on conditions and procedure for application in exceptional cases of the import customs duties rates other than those set by the Customs Union.

According to the Protocol the Parties cannot exceed the term for application of a higher or a lower rate, which is six months, unless otherwise provided by the respective decision of the Commission Board.

The Protocol came into force on 18 November 2013.

2014 BENCHMARK RATES CHANGED

The following benchmark rates are effective as from 1 January 2014:

1) minimum wage – KZT 19,966;

2) state benchmark pension payment – KZT 9,983;

3) minimum pension – KZT 20,782;

4) monthly calculation index for estimating allowances and other social benefits, as well as for imposing punitive sanctions, taxes and other payments in accordance with the RK legislation – KZT 1,852;

5) minimum daily allowance for calculation of benchmark social benefits – KZT 19,966.

CONSUMER PROTECTION AGENCY OF RK

1) The President of RK signed the Decree on formation of the Agency for ConsumerProtection (“Agency”).

According to the Decree the Agency became a successor of the abolished Committee for Public Sanitation and Epidemiologic Oversight within the Ministry of Health of RK and has been granted functions and authorities in the following areas:

• consumer protection – the authority delegated from the RK Agency for Protection of the Competition;

• sanitation and epidemiologic wellbeing of the population – the authority delegated from the Ministry of Health of the RK;

• control over and oversight of compliance with requirements set out by technical regulations and normative documents for products and services supplied to consumers, as well as for food safety at the selling stage – the authority delegated from the Ministry of Industry and New Technologies of the RK.

The Decree became effective on 14 November 2013.

UNIFIED PENSIONS SAVINGS FUND (“UPSF”)

1) By the Resolution dated 27 August 2013 No. 222 the RK National Bank Board approved “The Rules for selecting foreign organizations managing UPSF pension assets, including requirements for them, when assigning them to take actions necessary for management of UPSF pension assets” (“Rules”).

The Resolution sets forth rules for external management of UPSF assets, in particular whereby UPSF transfers assets for trust management to a foreign organization, which specializes in trust management of clients’ assets and undertakes activities in international financial markets.

According to the Rules, the maximum total amount of UPSF pension assets transferred to one external managing company for external management should make no more than 10 percent of the UPSF pension assets in foreign currency.

The transfer of the UPSF pension assets for external management aims at, among others:

  1. mitigating risks related to management concentration through diversification;
  2. increasing profitability of UPSF pension assets due to experience, analytical materials, researches and technical resources of the external managing company, etc.

The Resolution became effective on 9 December 2013.

DRAFT LAWS

1) On 20 November, Mazhilis (the Lower House) of the Parliament of RK approved the Draft Law “On amendments into certain legislative acts of the RK concerning social security”.

The Draft Law proposes subsidizing additional compulsory pension contributions for women during maternity leave, including child care leave up to one year) The aggregate rate of compulsory pension contributions for such recipients constitutes 10 percent from the income, whereby 4 percent will be allocated from obligatory social insurance, and 6 percent will be paid out of budgetary funds.

Among other important changes proposed by the Draft Law it is worth mentioning introduction of compulsory professional pension contributions for workers occupied at works with harmful (extremely harmful) labor conditions.

2) On 20 November, Mazhilis of the Parliament of RK approved the Draft Law “On rehabilitation and bankruptcy” at the first reading.

The Draft Law sets forth grounds for applying rehabilitation procedure, accelerated rehabilitation procedure and bankruptcy, as well as for holding the debtor bankrupt. It further sets out the procedure and terms for undertaking rehabilitation and bankruptcy procedures and other matters arisen due to the debtor’s inability to settle all creditors’ claims.

According to the Draft Law, a creditor may seek bankruptcy adjudication of a debtor in case of the debtor’s insolvency, i.e. if the debtor has not fulfilled his/her obligations within three months of the date when such fulfillment became due subject to certain conditions.

In addition, it should be noted that the Draft Law proposes holding corporate officers severally liable, inter alia, for failure to claim bankruptcy adjudication and for concealment of information about the financial and economic activity of the company, and holding liable for deliberate or false bankruptcy.

The Draft law provides other important changes on bankruptcy procedure.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please seek for a specific advice in relation to any questions. Please note that Kazakhstan and Turkmenistan are emerging economies and their legislation and legal systems are in constant development. Should you have any questions or would like to discuss subjects addressed in this Client Update please contact us.