Legal Alert: July - August 2019

SIGNUM regularly provides Legislative/Regulatory Alerts to keep Clients informed about important laws and regulatory changes in the Republic of Kazakhstan (“RK”). This Alert includes recent developments introduced in July and August 2019 related to:

• The United Nations Convention on International Settlement Agreements Resulting from Mediation;
  

• Attracting investments;
  

• New Currency Regime;
  

• Regulation and Development of Financial Market, Microfinance Activities and Taxation;
  

• Healthcare;
  

• Intellectual Property;
  

• Solid Minerals’ Subsoil Plots Exploration or Production-related Auction;
  

• Domestic Trade Rules;
  

• Passenger Carriage Rules.
  

From 1 July 2019, Kazakhstan has entered into a new currency regime¹, providing for the following changes:

• Branch offices of foreign companies with a few exemptions, are recognized as Kazakhstan residents;
  

• Transfer of currency values into trust management and transfer of the said values as part of brokerage agreement are now also recognized, among others, as currency operations;
  

• Simplified procedures for collection of information on currency operations;
  

• Capital outflow control toughened;
  

• Non-bank foreign exchange offices are now entitled to purchase and sell mini gold bars issued by the National Bank.
  

For more detailed information on new currency regime please refer to our special edition at the following link.

2. Financial Market, Microfinance Activities and Taxation

In July 2019, the new law was enacted, which provides for the following novelties²:

• From 1 July 2020, individual entrepreneurs and legal entities are restricted from providing financial loans to citizens and such agreements will be null and void. The said restriction does not apply to the following cases:
  

1. bank loans or microloans;
   

2. employer’s loan to its current and retired former employees;
   

3. loan by a legal entity to its founder (shareholder, participant);
   

4. contracts aimed at transferring funds or things ascertained by generic characteristics, providing for a loan, including in the form of an advance payment, prepayment, deferral and installment payment for goods (works and services).
   

• The new agency for regulation and development of financial markets was established. The agency will carry out control and supervision as well as state regulation of financial market and financial organizations, in particular, over the activities of microfinance organizations.
  

3. Healthcare

The Ministry of Health approved the lists of medicinal products³  which import and sales turnover are VAT exempt. The full list can be found at the following link.

Retail and wholesale marginal prices for the trade names of medicinal products’ have been updated⁴. The list of prohibited for medical use narcotic drugs and psychotropic substances⁵  was approved. You can find the said lists at the following links:

http://adilet.zan.kz/rus/docs/V1900019037

http://adilet.zan.kz/rus/docs/P1900000470

4. Intellectual Property

The following IP protection-related services standards⁶  were approved:

• Registration of granting the right to use a trademark, selection achievement and industrial property;
  

• Registration of transfer of exclusive right for a trademark, selection achievement and industrial property;
  

• Trademark registration;
  

• Registration of the right to use the appellation of origin;
  

• Issuance of titles of protection in the field of industrial property;
  

• Issuance of title of protection for a selection achievement;
  

• Registration of integrated circuit topographies;
  

• Providing extracts from state registers of trademarks, appellations of origin.
  

5. Solid Minerals’ Subsoil Plots Exploration or Production-related Auction

The Auction rules for solid minerals’⁷  subsoil plots for exploration or production are supplemented by the following provisions:

• The auction notice must contain, among others, information on a number of blocks, their code(s) that the exploration subsoil plot consists of, as well as geographic coordinates and size of the production subsoil plot;
  

• Bidders applying for several subsoil plots submit an application for each subsoil plot separately;
  

• The auction application form is accompanied by a document confirming the applicant’s financial and professional capabilities to conduct exploration or production, as well as the certificate confirming absence of tax arears exceeding 6 MCI⁸  and issued no earlier than 10 calendar days before the filing date.
  

• The rules determine deadlines for other procedures taking place following the announcement of the auction results:
  

1. An exploration license is issued within 10 business days following the auction announcement date;

2. A notice on coordination and examination of the mining plan and the liquidation plan is sent to the winner of the auction within 3 business days and posted on the web site of the competent authority within 2 business days following the auction results announcement date;

3. A production license is issued no later than 5 business days following the date of submission of positive conclusions of the state examinations.

6. Domestic Trade Rules

The following changes and additions were introduced to the domestic trade rules⁹:

• New definitions, such as ‘information and advertising marketplace’, ‘specialized electronic marketplace’, ‘trade mark-up’, ‘e-commerce’, ‘electronic marketplace’ were introduced;
  

• In e-commerce, protection of the rights and legitimate interests of consumers is ensured by at least the level of protection provided in other forms of trade;
  

• Before selling, an online store provides the consumer with information about the product (work, service), its cost, payment procedure, conditions and cost of delivery, warranty period (if any);
  

• Information on the product (work, service) name, cost and purchase conditions, as well as information on the main consumer properties of the product (work, service), on the nutritional, biological and energy value of the product, as well as information about contraindications for their use in certain diseases is communicated to the consumer in the Kazakh and/or Russian languages through the information and communication technologies;
  

• When selling products (works, services) through social media, the seller ensures meeting the statutory requirements on consumer protection and trade regulation;
  

• Sale of products (works, services) through social media is allowed subject to provision of the links to Internet sources, which contain information about the main consumer properties of the product (work, service), seller’s name, legal address and telephone number registered with the mobile network operator of the RK;
  

• The components of the infrastructure of e-commerce on the electronic marketplace and the infrastructure of the information and advertising marketplace are now determined, such as the possibility of filing a complaint against the seller or his products, the possibility of making wire payments, etc.;
  

• Electronic marketplace, information and advertising marketplace in e-commerce cannot do the following:
  

1. Disclose the information contained in electronic documents;
   

2. Transmit electronic documents to third parties, including the information contained therein, unless otherwise provided by an agreement concluded with other e-commerce participants, or by Kazakh laws;
   

3. Change the content of electronic documents, unless otherwise provided by an agreement concluded with other e-commerce participants;
   

4. Place the information on products (works, services), which advertising is prohibited.
   

• The rules were supplemented by the procedure for sale of certain used non-food products.
  

7. The United Nations Convention on International Settlement Agreements Resulting from Mediation

On 2 August 2019, the President of the RK signed the Decree aimed at signing the UN Convention on International Settlement Agreements Resulting from Mediation¹⁰. The document provides for the cross-border compliance with mediation agreements, as a result of which companies around the world will be more confident in using mediation agreements to resolve cross-border commercial disputes.

8. Investments Attraction

On 30 July 2019, the Decree of the Government of the RK ‘On the Further Attraction of Investments in the Republic of Kazakhstan’ has entered into legal effect¹¹. The document provides, inter alia, for the following activities of quasi-public sector and government authorities within the framework of the approved Investment Promotion Roadmap:

• Including recommended clauses regarding the Astana International Financial Centre (‘AIFC’) law as the governing law of the contracts and the arbitration clause of the International Arbitration Centre (IAC) or AIFC Court in the model contract for implementation of an investment project/model special investment contract;
  

• Addressing tax benefits unification within the AIFC, the International Technology Park of IT start-ups “Astana Hub”, National Company Astana EXPO-2017 JSC and Nazarbayev University JSC;
  

• Taking measures to immediately address the structural problems of the development of international air communications in the country and raise attractiveness of the capital city’s airport for air carriers;
  

• Approval of the Unified Republican Media Plan for the international promotion of ‘Invest in Kazakhstan’ brand and investment opportunities in Kazakhstan.
  

9. Passenger Carriage Rules

Order of the Minister of Industry and Infrastructure Development of the RK “On Amending the Rules for Passenger Transportation” entered into force from 28 August 2019¹².

The document primarily affects the clearance and travel of organized groups of passengers by railway service. Legal entities can now apply by using its EDS (electronic digital signature) and a railway ticket will be issued for each passenger individually as opposed to issuing a ticket in one form for the entire group as it used to be before.

Making changes to the initial list of an organized passenger group are now subject to certain restrictions

The new requirements are mostly aimed at eradication of the illegal purchase and resale of railway tickets.

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.

1. Law of the Republic of Kazakhstan ‘On Currency Regulations and Currency Control’ No. 167-VI dated 2 July 2018. The law came into effect on 1 July 2019.
2. Law of the Republic of Kazakhstan ‘On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the Regulation and Development of the Financial Market, Microfinance Activities and Taxation’ No. 262-VI dated 3 July 2019. The law shall come into effect on 1 January 2020, save for certain provisions.
3. Order of the Minister of Health of the Republic of Kazakhstan ‘On Approval of the List of Medicines of all Forms, Including Pharmaceutical Substances (Active Pharmaceutical Substances), Medical Devices, Including Prosthetic and Orthopedic Products and Equipment for Deaf and Blind, as well as Materials and Components for Their Production, Materials, Equipment and Components for Their Production of Medicines of Any Form, Medical Products, Including Prosthetic and Orthopedic Products, Equipment for Deaf and Blind, the Special Means of Transportation Provided to Persons with Disabilities, the Sales Turnover of which and Import are Exempt from Value Added Tax’ No ҚР ДСМ-92 dated 7 June 2019. The order came into effect on 30 July 2019.
4. Order of the Minister of Health of the Republic of Kazakhstan ‘On Approval of Retail and Wholesale Marginal Prices for the Trade Names of Medicinal Products’ No.ҚР ДСМ-104 dated 15 July 2019. The Order came into effect on 3 August 2019.
5. Decree of the Government of the Republic of Kazakhstan ‘On Approval of the List of Narcotic Drugs, Psychotropic Substances and Precursors Subject to State Control in the Republic of Kazakhstan, the Consolidated Table on the Classification of Narcotic Drugs, Psychotropic Substances, Their Analogues and Precursors As a Result of Illicit Traffic, as Small, Large and Especially Large Sizes, the List of Substituents of Hydrogen Atoms, Halogens and (or) Hydroxyl Groups in the Structural Formulas of Narcotic Drugs, Psychotropic Substances’ No. 470 dated 3 July 2019. The Decree came into effect on 5 July 2019.
6. Order of the Minister of Justice of the Republic of Kazakhstan No. 382 dated 5 July 2019 ‘On Amendments to the Order of the Minister of Justice of the Republic of Kazakhstan No. 1481 dated 11 October 2018 'On Approval of Standards of Public Services in the Field of Security and Protection of Intellectual Property Rights’. The Order came into effect on 2 August 2019.
7. Order of the Minister of Industry and Infrastructural Development of the Republic of Kazakhstan No. 465 dated 1 July 2019 ‘On Amendments and Additions to the Order of the Minister of Investment and Development of the Republic of Kazakhstan No. 315 dated 11 May 2018 ‘On Approval of the Rules for Conducting an Auction of Subsoil Plots for Solid Minerals Exploration or Production’. The order came into force on 20 July 2019.
8. MCI – Monthly Calculation Index. In 2019, one MCI equals KZT 2,525.
9. Order of the Minister of Trade and Integration of the Republic of Kazakhstan No. 5/1 dated 19 July 2019 ‘On Amendments and Additions to the Order of the Acting Minister of the National Economy of the Republic of Kazakhstan No. 264 dated 27 March 2015 ‘On Approval of the Rules of Domestic Trade’. The order came into effect on 16 August 2019.
10. UN Convention on International Settlement Agreements Resulting from Mediation, signed in Singapore on 7 August 2019 by 46 members of the organization including the USA and China.
11. Decree of the Government of the RK dated 30 July 2019 No. 548 ‘On the Approval of the Roadmap for the Further Attraction of Investments in the Republic of Kazakhstan’.
12. Order of the Minister of Industry and Infrastructure Development of the RK dated 2 August 2019 No. 611 “On Amending the Order of the Minister for Investments and Development of the RK dated 30 April 2015 No. 545 “On Approving the Rules for the Carriage of Passengers, Baggage, Cargo, Cargo Luggage and Mail"