Kazakhstan: Investment Court In Kazakhstan

Last Updated: 21 September 2016
Article by Talgat Sariev and Perizat Nurlankyzy

On 31 October 2015, the President of the Republic of Kazakhstan (hereinafter – the "RK") signed the new Civil Procedure Code (hereinafter – the "CPC"), which came into force on 1 January 2016. One of the major innovations is the change in the jurisdiction of investment disputes that (depending on the size of investment) will be considered by the Court of Astana and the Supreme Court of the RK as a matter of the court of first instance.

What do investment and investment activity imply?

Investment refers to all types of property (other than goods intended for personal use), including financial leasing of objects and the rights to them, invested by the investor for the charter capital of legal entity, or for the increase of fixed assets used for entrepreneurial activities, as well as for the implementation of public-private partnership project, including concession project. The investors are individuals and legal entities engaged in investment in the RK. Investor's activities for the implementation of such investments are regarded as investment activities.1

Which disputes are recognized as investment disputes?

Investment dispute refers to a dispute arising from contractual obligations2 between investors, including major investors and state authorities3 in connection with the investment activities of the investor.4

The following types of disputes are regarded as investment disputes:

  1. disputes related to conclusion, amendment, and termination of investment agreements;
  2. disputes relating to the investor's compliance with tax, customs, social, environmental, and other liabilities arising from investment agreement, including investor's challenging of the amounts accrued under the agreement;
  3. disputes concerning the investor's appeal of actions (failure to act) of state authorities in the course of inspection on the compliance with the terms of investment agreement;
  4. disputes related to the return of property given to the investor as a state in-kind grant or the recovery by state authority of its value in case of early termination of the investment agreement;
  5. other disputes, both for claims of investors and government agencies, related to the performance of mutual obligations under the investment agreement.

Disputes considered by the Supreme Court of the Republic of Kazakhstan

In accordance with the new CPC, the Supreme Court of the RK considers and decides the civil cases on investment disputes, a party to which is a major investor as a matter of the court of first instance.

A major investor is an investor who implements investments in the Republic of Kazakhstan in the amount of not less than two million-fold monthly calculation index (4.242 bln tenge in 2016)5, or approximately $12.5 million USD.6

Disputes considered by the Court of Astana

In accordance with Article 27 paragraph 4 of the CPC, the Court of Astana city considers and decides the following civil cases as a matter of the court of first instance:

  1. on investment disputes, a party in which is an investor, with an amount of investment less than two million-fold monthly calculation index;
  2. on other disputes between investors and government agencies that are related to the investor's investment activities (violation of the legitimate rights and interests of investors, violation of investment legislation of the RK).

Such disputes may include:

  • disputes on admission of the investors for implementation of investment activity;
  • disputes on invalidation of actions (failure to act) of public officials of state authorities who violate the rights of the investor (in the sphere of licensing, and assessment of tax, customs, and other obligatory payments to the budget, not related to the contract for implementation of investment);
  • disputes on recovering by the state authority concerning the investor of the amounts of taxes and other obligatory payments towards the budget, and customs duties not related to the contract for implementation of investments;
  • disputes on compulsory seizure of property of the investor (nationalization, requisition) for state needs and as compensation of damages;
  • disputes related to compensation of damage to the investor as a result of the issuance of acts by state authorities that do not comply with the laws of the Republic of Kazakhstan;
  • other disputes between state authorities and investors, not related to the performance of obligations under the contract for implementation of investments.

Current practice

As of the date of this publication, the Supreme Court of the Republic of Kazakhstan, by the rules of the court of first instance, has considered one court case involving a major investor, and registered approximately 5 more lawsuits.

In the case considered by the Supreme Court, a major investor challenged the act of documentary tax audit, in accordance with which the state revenue authorities compelled the investor to pay 1.36 billion tenge towards the budget. However, the court ruled in favour of the investor and satisfied his claims in full.

Footnotes

[1] Article 274 of the Business Code of the RK

[2] Contractual obligations imply contractual obligations of an investor and state authorities executed in the form of investment agreements or any other agreements on implementation of investments, including concessional agreements and public-private partnership agreements.

[3] State authorities imply those authorities that concluded investment agreement on behalf of itself as well as on behalf of the Republic of Kazakhstan (investment agreement, subsoil use contract, etc.).

[4] Article 296 of the Business Code of the RK

[5] Article 274 of the Commercial Code of the RK

[6] As of 28 June 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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