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How will amending the “law on subsoil resources and use of subsoil resources” affect the investment image of our country?
This law project will not affect the investment image of Kazakhstan. We have closely studied the legislation of other countries before adopting these changes. For example, there is criminal code that assigns responsibilities for breaking the law. However, it doesn’t bother us – law-abiding citizens. The same situation is in the sphere of natural resources, if there are violations then the law comes to place, when there are no violations there will be no effect of the law changes on a legitimate producer of natural resources. Today Kazakhstan’s investment climate is formed by the companies that have a good image all over the world and they obey the laws of their countries and the countries where natural resources are produced. Therefore, I think that adopting this legislation project will not scare away a legitimate investor.
Regarding Kashagan, I’d like to say that the legislation project was not developed in connection with this deposit. It is not about Kashagan or Tengiz, however, Kashagan was one of the reasons for reconsideration of Kazakhstan’s legislation in order to protect the country’s interests. We just strengthened the law to stop illegal activities.
Speaking of Kashagan, the actions of the contractor increase the reimbursable expenses, and these are direct losses that refer to national security, because they threaten economic security of our country.
This legislative project is not at all connected with Kashagan. The question of this project has also been raised by the deputies of previous convocations; they have said that it was time to pay attention to the terms of contracts with producers of natural resources, which dishonest with the government.
I mean that the changes to the law allow Kazakhstan to work with the investors on parity conditions.
While the legislative project was developed some investors expressed their discontent. I think that those were dishonest contractors.
Such law is practiced all over the world to protect national interests. For example, Russia’s government has firmly taken its position regarding the project Sakhalin-2, and I think that it is correct. This is also practiced in Argentina and Algeria and other countries, where the legislation clearly defines liabilities of producers of natural resources if they breach economic, ecological or labour legislation.
Regarding the questions of national security, as we know there are different factors that depend on the companies’ activities and influence the social situation in the country. For example, if a company that operates in natural resources sector pays different wage to Kazakhstan’s and foreign specialists for the same volume of work, it increases social tension in the region; doesn’t it refer to the issue of national security?
Violations of ecological legislation may lead to ecological catastrophes or harm health of the citizens. Doesn’t it refer to the issues of national security?
Taking the above into account, the Mazhilis adopted the amendments to the “Law on subsoil resources”.
Interestingly, when the Mazhilis was discussing the amendments, representatives of foreign companies didn’t make any statements, and refused the journalists’ requests to comment the legislative project.
Probably, the investors didn’t want to make any statements before carrying out thorough legal preparations.
During international conference KIOGE-2007 in Almaty Duke of York was the first to react to the legislative initiatives of Kazakhstan.
For Kazakhstan to reach its goals, it should continue to be attractive to foreign investors. I asked the government of to seriously think about the effect these changes may have on the investment image of the country.
Interestingly, when the Mazhilis was discussing the amendments, representatives of foreign companies didn’t make any statements, and refused the journalists’ requests to comment the legislative project.
Probably, the investors didn’t want to make any statements before carrying out thorough legal preparations.
During international conference KIOGE-2007 in Almaty Duke of York was the first to react to the legislative initiatives of Kazakhstan.
The answer of Romano Prodi, Italian Prime-Minister, made during his visit to Astana where he met with the President of Kazakhstan, was in unison with the statements above.
Italian as well as foreign mass media and representatives of business circles are concerned with the new legislation.
We discussed the new amendments to the law. I didn’t ask him if he is going to sign them. However, while expressing my opinion I emphasized that it would be to Kazakhstan’s disadvantage if the law became effective.
Adopting the new changes would harm Kazakhstan’s economy and have serious consequences. If the law is adopted, it may initiate a chain reaction. I sincerely expressed my opinion during the meeting with the President of Kazakhstan as well as the Prime-Minister of Kazakhstan. My point of view reflects the position of a friendly observer.
During the same international conference KIOGE-2007 Gregory J. Vojak, the head of international legal company “Braswell and Giuliani”, expressed his opinion.
If the changes are approved by the Senate and the President, it will have very serious and far reaching consequences. However, the amendments don’t mention compensation in case of nationalisation. It means that, hopefully, the government of Kazakhstan is not trying to nationalise the assets of Kashagan project, as Russia did in Sakhalin-2 project.
The new legislation was developed to show the foreign investors that they have to fulfil their responsibilities, if they want the government to do the same and respect all terms of contracts.
Therefore, adoption of the new legislation will not necessarily increase political and economic risks for foreign investors when running business in Kazakhstan. However, it is crucial that the investors do everything they can to let the government know that they fulfil their contractual liabilities.
“Kazakhstan’s Council of Foreign Investors” association, “Kazakhstan Petroleum” association, “International Taxation and Investment Centre”, “American Chamber of Commerce in Kazakhstan” and “European Business Association in Kazakhstan” addressed a letter to the President of Kazakhstan where they ask to veto the amendments to the “Law on subsoil resources and use of subsoil resources”:
According to article 26.3 of the Constitution, “nobody can be deprived of their property in any way but by decision of the court”. The article 4.1 of the “Law on Investments” provides full and unconditional protection of rights and interests, guaranteed by the Constitution, this law and other legislation of the Republic of Kazakhstan as well as international agreements ratified by the Republic of Kazakhstan. Giving the government the right for one-sided cancellation of contracts without court trial and without compensation contradicts to the article 26.3 of the Constitution and article 4 of the Law on investments.
The current amendments contradict the “Law on investments” and the “Law on subsoil resources”, which guarantee stable legislation for contracts based on the time of their conclusion, and have an opposite effect, that is the government’s right for one-sided cancellation of contracts can extend to indefinitely wide circle of contractors. This is a significant departure from the principles of stability and invariability of contracts declared by Kazakhstan.
We are extremely concerned that the legislation project breaks the previously provided guarantee of stability of contracts, guarantee of resolving conflicts in court or international arbitrage, constitutional guarantees of property protection and guarantee of receiving compensation in case of expropriation. We are sure that these changes deteriorate the investment climate in Kazakhstan.
This letter was addressed to the President when the legislation project has already been approved by both Chambers of the Parliament and arrived for the President’s approval.
Two days have past since then. For the time being, there are no confirmations from Ak Orda that the changes were approved. There is a possibility that the President will veto these changes as did with the “Law on mass media”. However, a different scenario is also possible: the new law may be approved. Some experts think that in such case the country would show determination in making its decisions and the investors will have to concede. There is also a third scenario, which assumes that Nazarbaev may return the legislation project back to the Parliament for improval.
However, the answer to the question was partially uncovered by the words of the investors.
