General Provisions of the Law of the Republic of Kazakhstan "On Investments"

RusEnergyLaw JOURNAL • 2'2003/Table of Contents • Article

Investments are an important part of the state economics. The annual investments in capital estimated by the International Bank of reconstruction and development is $0,7-1,2 trillion, including $0,13-0,24 trillion of direct investments and $0,12-0,67 trillion of portfolio investments.

Since the moment of independence, the Republic of Kazakhstan actively takes part in international relations. Kazakhstan is the attractive object for foreign investments, and the main reason is rich natural resources. The state holds 13th place in the world due to it’s natural resources: 2,2 billion tons of oil, 5,5 trillion cubic meter of the natural gas, and 0,7 billion tons of condensate. In regard to iron ore resources, Republic of Kazakhstan takes 11^thplace in the world.

During the period from 1994-1999, Kazakhstan has attracted investments in the amount of $7794,2 million. In 2001 investment dollars increased to $18 million, and in 2002 - more than to $20 million.

The public investment policy of the Republic of Kazakhstan is facilitated by consideration and ratification of laws and state programs.

The important event in the investment policy is an enactment of a Law "On Investments". The Law of the Republic of Kazakhstan "On Investments" (hereinafter "the Law") dated 08.01.2003 includes 4 Chapter, 23 articles and has a range of particularities:

1. The legislator does not use a term "foreign investments", consequently the Law has no definition of foreign and domestic investments;

2. The Law "On Investments" has no definition of direct and indirect investments;

3. In accordance with provisions of the Law, investment preferences will be determined individually in each investment project. The duration of investment preferences should not exceed 5 years from the moment of coming into effect of the investment project.

4. To settle disputes in the court, it is necessary to have agreement of the parties (the State and the Investor) to determine the competent court, when the Law of the Republic of Kazakhstan "On foreign investments" dated 27.12.1994 granted such right to the investor.

5. Reduced the list of guarantees to investors within territory of Republic of Kazakhstan.

In essence, the Law "On Investments" dated 08.01.2003 formed from two legal parts: legal regime of investments, and state support of investments.

According to art. 1 of the Law, investments recognized as all types of assets (except goods designed for personal consumption), including subject of leasing from the date of conclusion of leasing contract, and rights to such assets invested by the investor to charter capital of the legal entity, or to increase in assets usable in business activity.

Investors have the right to invest in all objects and types of business activity with the exception of cases established by the current legislation of the Republic of Kazakhstan.

Investment guarantees

Investors have the following guarantees within the territory of the Republic of Kazakhstan:

1) The guarantee of legal defense of investors’ activity within the territory of Republic of Kazakhstan;

2) The guarantee of using a revenue earned by the investor;

3) Publicity of activity of state authorities in respect to investors.

4) The guarantee of investors’ rights in case of nationalization and requisition.

Investment preferences

The Law "On Investments" stipulates that the below investment preferences obtained by investors at the moment of concluding the Contract with the Competent state authority of the Republic of Kazakhstan (in present – the Investment Committee of the Republic of Kazakhstan):

1) investment tax preferences;

2) exemption from customs duties;

3) state grants in kinds.

Conditions to provide these investment preferences are the following:

1) concordance of specified investment activity to the list of priority types of activity alleged by the Government of the Republic of Kazakhstan;

2) investment of capital to fixed assets of the legal entity of the Republic of Kazakhstan to establish new production, extend and/or update operating enterprises by using higher technologies;

3) submitting necessary documents sustaining presence of finance, technical and managerial resources of the investor to realize investment project.

Application on receiving investment preferences should be submitted to the Competent authority of the Republic of Kazakhstan. The Competent state authority makes decision on providing investment preferences and notifies the investor on this, in writing within 30 days from the date of registration of the application.

In general, investment preferences remain in force till the validity term of the appropriate investment contract.

Conclusion and termination of the Investment contract

The Competent authority of the Republic of Kazakhstan prepares the Investment contract, on the basis of provisions of the Model contract, for signing within 10 days after making decision to provide by the investment preferences. The Investment contract becomes effective from the moment of it’s state registration, which takes place within 5 days from the moment of signing the Contract by the parties.

In compliance with art. 22 of the Law "On Investments" the Investment contract may be terminated at any time upon:

1) under mutual agreement of the parties;

2) in one-sided order.

A basis to terminate the Investment contract, in one-sided order by the Republic of Kazakhstan, is falsification or suppression of information submitted by the applicant, and also non-performance it’s obligations under the contract by the investor.

International regulation of the investment process also has positive influence on the state economics. For this purposes, the Republic of Kazakhstan has entered the international organisations, concluded bilateral and multilateral treaties directed to defence and stimulation of investments. Thus, on 6^thof December 2001, the Republic of Kazakhstan passed the Law "About membership of the Republic of Kazakhstan in International Monetary Fund, International Bank of reconstruction and development, International Finance Corporation, International Development Association, Multilateral Agency on investment guarantees, International Centre of settlement of investment disputes, European Bank of reconstruction and development, Asian Bank of development, and the Islamic Bank of development" which regulates questions of membership in above organisations.

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