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Zhanara Iskhakova GRATA Law Firm , March , 2014

Getting the Subsoil Use Right in Kazakhstan. Zhanara Iskhakova GRATA Law Firm , March , 2014. BACIS PRINCIPALS All subsoil deposits are the property of the Republic of Kazakhstan;

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Zhanara Iskhakova GRATA Law Firm , March , 2014

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  1. Getting the Subsoil Use Right in Kazakhstan Zhanara Iskhakova GRATA Law Firm, March, 2014

  2. BACIS PRINCIPALS • All subsoil deposits are the property of the Republic of Kazakhstan; • Foreign legal entities and persons have the same rights and obligations as Kazakhstani legal entities and persons (if other are not specified by the law); • Guarantees for subsoil users: • Protection of the rights is guaranteed; • Stability of the contract (except of changes into the laws related with national security, ecology, health protection, taxes, customs duties). • Pre-emptive right of the State.

  3. TYPES OF SUBSOIL USE CONTRACTS • Exploration Contract (term is 6 years with a right to extend for 2 years for oil development on sea); • Development Contract (term is stipulated by the project document with the right to extend); • Contract for combined exploration and development; • Contract for construction and maintenance of underground facilities which are not related with subsoil use; • Contract for state geological subsoil survey. MODEL CONTRACT

  4. How to get the subsoil use rights: Direct from the “primary owner” • Tender procedures; • Without tender (direct negotiations): • Subsoil user announced the commercial discovering under the Exploration; • Subsoil user is planning to construct and maintain of underground facilities which are not related with subsoil use; • Company which is going to execute contract with the Kazakhstan National Company for exploration and/or production;

  5. How to get the subsoil use rights: Direct from the “primary owner” (cont’ed) • Without tender (direct negotiations): • Company which will perform an industrial and innovation project in exploration and/or development; • With the sole qualified participant of tender process if all other participants were announced as unqualified; and • With company planning to develop underground water for internal use of the company’s activities.

  6. On secondary market • M&A transaction: • Direct or indirect purchase of shares of existed subsoil use company; and • Purchase of subsoil use contract Important: • Do due diligence of subsoil use contract and/or subsoil use company; • Choose right jurisdiction and governing law; • Obtain a state waiver and other required permits (for example from Antimonopoly Agency); • Taxes (for example, VAT in case of buying assets). • On stock exchange

  7. News: • Cancellation of moratorium from 2007 for granting the subsoil use rights The main criteria for granting rights are: • to provide raw material for existing businesses; • to support new industrial projects, were to be the introduction of new technologies and energy efficiency; • to increase of local content in goods, works and services, improvement of environment, etc.

  8. News (cont’d): • Amendments into current law • Pre-emptive right will be applied to the blocks having strategic importance (the list of the blocks will be defined by the Government); • Two types of tenders: • Tender as it is now; and • Auction where the winner will be the company proposed the highest amount of signing bonus (English auction). • Developing a New Subsoil Use Code.

  9. THANK YOU! GRATA LAW FIRM Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan, Azerbaijan, Russia, Mongolia United Kingdom, USA

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