Statutory Regulation of Electronic Document Management in Kazakhstan

To date, there are many services which offer electronic management of documents. The advantages of electronic document management seem quite obvious and imperative such as; reduction in cost of paper (due to low usage) and its related consumables, significant reduction in the costs and time for exchange of such documents as well as for preservation & maintenance of them. However, electronic document management is not very prevalent, especially among small and medium scale businesses.

This could be due to the following reasons:

1. The norms governing electronic document management are not clear in their regulations of matters relating to and resulting from electronic document flow

2. The extent to which government bodies are ready to accept electronic documents is still unclear

In this article, we look at answering a few questions relating to the use of electronic document management.

Legal status of electronic documents: what constitutes an electronic document and EDS?

Let’s begin with what an electronic document really is and in what form it should be. In accordance with sub-clause 12 of Article 1 of the Law of the Republic of Kazakhstan “On Electronic Document and Electronic Digital Signature” dated January 7, 2003 (hereinafter - “Electronic Document Law”), an electronic document is a document in which information is presented in a digital form and certified by means of an electronic digital signature (hereinafter - “EDS”).

EDS is a set of electronic digital symbols created using a set of software and hardware, which helps create and verify the authenticity of EDS, thereby confirming the authenticity of an electronic document, its identity and immutability of content. Electronic documents must necessarily be signed by EDS. These do not include scanned versions of documents.

At present, almost all Kazakhstan electronic document management systems use the EDS of the National Certification Authority.

How and where is the electronic document generated?

Since it is a mandate that an electronic document must be signed with EDS; a system or platform is developed that allows such documents to be drawn up and signed with EDS.

According to the Electronic Document Law, the Electronic Document Management System (hereinafter referred to as “EDMS”) is an electronic document exchange system, the usage of which is governed by the Electronic Document Law and other regulatory legal acts of the Republic of Kazakhstan. EDMS may be used by individuals or legal entities, a government body or an official involved in the collection, processing, storage, transmission, search and distribution of electronic documents.

User identification in EDMS data is carried out by EDS issued by the National Certification Authority. The cost and offering of an EDMS may differ based on the requirement of the participant. For example, synchronization with Microsoft Outlook, with 1C Accounting, reporting, KPI tracking, etc. As a rule, EDMS distributed in the territory of the Republic of Kazakhstan allows a participant to experience a testing / trial period of the system and thereby decide whether the EDMS is appropriate for their business activity or needs.

Which documents can be issued in an electronic form?

One of the fundamental principles for using electronic document management in state and non-state information systems is that electronic documents can be developed in any areas of activity where information and communication technologies are used to create, process, store and transmit data.

Thus, the Civil Code of the Republic of Kazakhstan explicitly allows transactions to be written on paper or developed in an electronic form. At the same time, when making a transaction, EDS can be used, if it does not contradict the law or the requirement of any one of the participants i.e., all participants of the transactions must consent to an electronic transaction.

Under the Civil Code of the Republic of Kazakhstan the actions of citizens and legal entities aimed at establishing, changing or terminating civil rights and obligations are qualified as a deal (with some exceptions). In particular, transactions requiring notarization under law should not be concluded electronically.

Furthermore, the Electronic Document Law stipulates that an electronic document which conforms to the requirements of this law and is authenticated by the EDS of the person having the authority to sign it, shall be equivalent to a signed paper document.

The Chairman of the State Revenue Committee of the Finance Ministry issued a clarification that subject to the terms of the Tax Code, Law of the Republic of Kazakhstan On Accounting and Financial Reporting dated 28 February 2007, and Electronic Document Law, the electronic document is recognized and may be used as a primary document confirming legitimacy of deduction of costs, provided such costs are related to income-generating activities. At the same time while preparing primary documents and accounting registers in an electronic format, companies should also make copies of such documents on paper.

One can infer that; unless otherwise mentioned in the law; documents such as contracts, additional agreements thereto, notices, as well as primary accounting documents (invoices, acts of performed works/services rendered), can be issued electronically and will be equivalent to a paper document.

Risks: Are there any legal implications of using electronic document management?

The application of an electronic document’s circulation raises significant questions regarding safety of its content.

A risk of data loss, unauthorized access and other technical risks are associated with electronic document flow during implementation of electronic document management. Such risks may also entail legal consequences. For instance, an absence of proof of transaction due to lack of a physical document and lack of access to EDMS is a huge potential risk.

In addition to technical risks, there are legal risks, which consist of the following. In accordance with the Civil Code, non-compliance with a simple written form of the deal deprives the parties, the right to confirm its execution, content or performance by testimony in case of a dispute. In case of non-compliance with a simple written form, the foreign trade transaction qualifies as void. This raises an important question of what should be considered as a ‘simple written form’? Whether a simple written form is equivalent to either a written form or an electronic document? In our opinion, a simple written form is a written form; otherwise, there would be no sense in using electronic document.

Transition to electronic document management: How to switch to an electronic document management?

The Rules of documentation, document management and use of EDMS in state and non-governmental organizations were approved by the Government of the Republic of Kazakhstan on 31 October 2018. These Rules lay down the procedure of documentation, preparation and registration of documents, processing of incoming and outgoing documents, internal documents, their registration, use of EDS etc.

Legal status of the suppliers of the EDMS: Do they require permission?

No permissions or notifications are required to develop and provide an EDMS.

The basic principles of electronic document management are:

(1) Operation of various EDMS

2) Use of electronic documents in any areas of activity where information and communication technologies are used for the creation, processing, storage and transmission of data

3) Transfer of electronic documents using any information systems

Thus, it is assumed that an electronic document created in one EDMS should be accessible and used in another EDMS as well.

Electronic documents are stored in state and (or) non-state information systems. The order of their storage is established by the rules of documentation, document management and use of EDMS in state and non-governmental organizations. Terms of storage of electronic documents and obligatory registration of their paper originals are established by the list of standard documents approved by the authorized body.

Electronic documents are stored in the format in which they were formed, sent or received, with the possibility of simultaneous storage of the generated EDS under the relevant electronic documents.

Security/Document safety issues

EDMS is essentially a document management software. It can work both online and offline, i.e., the server for processing and storage of data can be stored in the cloud or on the personal server of the company. Therefore, security and data protection issues are more about securing such cloud services and servers.

Regulation of the use of EDMS in terms of personal data protection laws

Personal data of counterparties, employees, etc. can be processed and stored in EDMS, and the Electronic Document Law does not regulate the protection of personal data. However, their protection is ensured by the Law of the Republic of Kazakhstan ‘On Personal Data and Its Protection’ dated 21 May 2013 (hereinafter referred to as the ‘Personal Data Law’) and the Law of the Republic of Kazakhstan ‘On Informatization’ dated 24 November 2015 (hereinafter referred to as the ‘Informatization Law’). Thus, according to the Informatization Law, the owner or owner of electronic information resources containing personal data, must acquire consent of the subject of personal data or its legal representative before collecting and transferring such data, except in certain cases provided by the Personal Data Law.

Owners of information systems, who receive electronic information containing personal data, are obliged to take measures on protecting this data, in accordance with the Informatization Law and the standards effective in Kazakhstan. This obligation arises from the moment of receipt of electronic information resources containing personal data and before their destruction or depersonalization.

Therefore, companies using EDMS must obtain the consent of the subjects of personal data or their legal representatives to collect and process personal data using EDMS. In addition, such organizations are obliged to take measures to protect personal data in accordance with the legislation on protection of personal data.

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From the foregoing, we conclude that an electronic document is equivalent to a paper document. However, for recognition of an electronic document it is necessary to comply with the requirements established by legislation for documents on paper and requirements of the Electronic Document Law, in particular, signing EDS. There are many advantages of electronic documentation, and EDMS can be convenient especially for companies working with a large number of suppliers and clients. As there will be no need to constantly request originals of primary accounting documents on paper thereby reducing costs associated with obtaining such original documents. But one needs to consider the following when dealing with Electronic documents: protection against unauthorized access, data backup to reduce the risk of its loss, obtaining the consent of the subjects of personal data for processing of their personal data using EDMS and preventive measures on personal data protection.

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.