Administrative lawsuits on the recognition of illegal refusal to grant permission to transfer the right of subsurface use  

             A quarter of all lawsuits filed, or more than half of the lawsuits against central government agencies, are filed by subsoil users against MIIR.

The requirements vary, but most of them can be attributed to several basic requirements, such as lawsuits related to the work of expert commissions on subsurface use, auctions, and other lawsuits challenging administrative acts.

According to article 45 of the Code, from the date of receipt of the application for a permit to transfer the right of subsurface use, the competent authority submits them for consideration by the expert commission on subsurface use.

In practice, violations of the state agency are associated with failure to send applications within the appropriate time. Although in the commission itself, the majority of members are MIIR employees themselves, and its chairman is the supervising Vice Minister of MIIR.

The claim of LLP "B" to MIIR on the recognition of the unlawful refusal to grant permission to transfer the right of subsurface use, expressed in the form of a response (letter).

According to article 45 of the Code, an application for a permit to transfer the right of subsurface use must be considered within one month. Upon receipt of the application, the competent authority sends it to the expert commission within five working days, which makes appropriate recommendations.

After receiving the relevant recommendations, the competent authority makes a decision on the application for satisfaction or refusal to satisfy it.

Meanwhile, as follows from the case file, the defendant considered the plaintiff's application for 10 months and did not send it to the expert commission.

In other words, the decision was made without consideration of the application by the expert commission and its recommendation.

In this regard, SMAS G. Astana considered the plaintiff's arguments about the violation of the deadlines and the procedure for considering his application to be justified, and the claim was satisfied (No. 7194 22-00-4/2723).

By the ruling of the appellate instance, the decision of the court of first instance remained unchanged.

At the same time, the Code provides in the transitional provisions that, under a contract to which another government agency is a party, an expert commission is established by its decision (paragraph 12 of Article 278 of the Subsoil Use Code).

These transitional provisions are often more important than the Code itself, for example, they regulate the procedure for extending the term of a subsoil use contract (paragraph 14 of article 278 of the Subsoil Use Code).

Another category of disputes concerns the work of auctions for obtaining the right of subsurface use. Similar claims are being filed against the Ministry of Energy.

At the same time, government agencies often do not pay enough attention to compliance with all the requirements established by law when putting deposits up for auction.

For example, MIIR has put up for auction a plot in the contours of groundwater deposits, which is not allowed by law. The claim of D LLP to MIIR for invalidation of the auction results for lot No. 12 for the Shakhtnoye Field No. 33-34 deposit for obtaining the right to use solid minerals has been fully satisfied due to the fact that the defendant did not take into account the norms of current legislation (No. 7194-23-00-4/1771 dated July 18, 2023).

Thus, satisfying the plaintiff's claims, the local courts established the following: according to subparagraph 5) of paragraph 1 of Article 25 of the Environmental Code, it is prohibited to conduct subsurface use operations in the contours of deposits and groundwater areas that are used or can be used for drinking water supply.

In accordance with paragraph 2 of Article 120 of the Water Code, in the contours of deposits and groundwater areas that are used or can be used for drinking water supply, it is prohibited to conduct subsurface use operations, the placement of radioactive and chemical waste burials, landfills, cemeteries, cattle burial grounds (biothermal pits) and other facilities that affect the state of groundwater.

Thus, under the established circumstances, the court considered that the defendant's putting up for auction of the subsoil plot for lot No. 12 "Shakhtnoe Pole No. 33-34" is illegal due to the direct prohibition of legislation on conducting subsurface use operations.

Problematic issues of auctions can also be attributed to the main claims of subsurface users against the Ministry of Energy. This means that the improvement of auctions should have an integrated approach at the level of the Government of the Republic of Kazakhstan.

It should also be noted the mistakes of the local courts related to the inadequate examination of all the circumstances of the case. For example, the provisions of the APPC on the simplified administrative procedure are not taken into account.

The court of first instance satisfied the claim of LLP "B" to the Ministry of Foreign Affairs of the Republic of Kazakhstan on the recognition of illegal inaction to not consider the appeal in the order of the administrative procedure and oblige to consider the appeal in the order of the administrative procedure, since the defendant violated the requirements of part 1 of Article 73 of the CPC, which resulted in violations of the plaintiff's rights (No. 4794-22-00-4/165).

In particular, the court found that the Defendant, without considering the plaintiff's appeal dated February 23, 2022 in accordance with the requirements of part 1 of Article 73 of the CPC, terminated the administrative procedure.

The ruling of the appellate instance remained in force. Meanwhile, the SCAD of the Supreme Court found that the plaintiff sent a statement, not a complaint, through the e-otinish electronic portal.

According to the second part of Article 87 of the APPC, a simplified administrative procedure is carried out by a state body and their officials in accordance with the procedure established by Section 3, with the specifics established by Chapter 12 of the APPC. Subparagraph 1) The first and second parts of Article 88 of the CPC provide that a simplified administrative procedure is subject to termination in the presence of a repeated communication, where new arguments or newly discovered circumstances are not given, and the materials of the previous communication contain the necessary inspection materials and the applicant was given answers in accordance with the established procedure, and the decision to terminate the simplified administrative procedure is made by the head of the entity considering a message, a suggestion, a response, a request, or its substitute.

On March 17, 2022, the Ministry of Industry sent a response to the Partnership, adhering to the position indicated in the letter previously sent to the Partnership.

Thus, the Ministry of Industry has issued an essentially correct act.

The above response is the decision of the MIIR official, which is confirmed by his signature, that is, the decision was made in a simplified administrative procedure in accordance with Chapter 12 of the APPC.

With this in mind, the SCAD of the Supreme Court overturned the decisions of the local courts and issued a new decision to dismiss the claim. Thus, practice shows that in the absence of a dialogue between a government agency and a subsurface user, legal relations turn into judicial proceedings.

The issues of subsurface use occupy a significant place in the economy of the Republic of Kazakhstan. The President of the Republic of Kazakhstan, K.K. Tokayev, in his Message to the People of Kazakhstan dated September 1, 2022, noted the task of "simplifying legislation and procedures for attracting investments in subsurface development."

Thus, the need to increase the attractiveness of the subsurface use sector is directly related to the policy of developing the investment climate in Kazakhstan, implemented on behalf of the Head of State.

During a meeting with foreign investors on June 9, 2022, the President of the country noted that systematic work to improve the investment climate will be accompanied by large-scale reforms.

The Head of State signed a Decree "On measures to improve the efficiency of attracting investments into the country's economy" dated December 4, 2023, which gives the Council for Attracting Investments (Investment Headquarters) special powers.

One of the key tasks of the Investment Staff is to solve problematic issues of investment projects at all levels.

In turn, the investment attractiveness and effectiveness of investments in the field of subsurface use are determined by the legal regime for granting subsurface use rights.

The right of subsurface use is an opportunity provided by the Code of the Republic of Kazakhstan "On Subsurface and Subsurface Use" dated December 27, 2017, to use subsurface resources within the allocated area for business purposes for a certain period of time.

The subjects of the right of subsurface use may be individuals and legal entities. The subsurface use regime, the procedure for state management and regulation in the field of subsurface use, the specifics of the emergence, exercise and termination of rights to subsurface areas, the legal status of subsurface users and their conduct of relevant operations, as well as issues of subsurface use and disposal of the right of subsurface use and other relations related to the use of subsurface resources are regulated by the Code on Subsurface and Subsurface Use.

The adoption of this Code resolved certain shortcomings and gaps that were noted in the earlier Law of the Republic of Kazakhstan dated June 24, 2010 "On Subsoil and Subsoil Use". However, the Code itself has created new gaps, which is confirmed by the fact that 16 laws of the Republic of Kazakhstan have been amended and supplemented in six years. That is, the changes were conditionally made every 4-5 months. All this affects the stability of the legislation of the Republic of Kazakhstan on subsoil and subsurface use and becomes one of the causes of legal disputes between subsurface users and administrative authorities.

The statistics of court review of disputes in the field of subsurface use and investment disputes clearly show that currently the legislation on subsurface and subsurface use needs further improvement.

The main defendants in disputes in the field of subsoil use

The defendant is "an administrative body or official who is sued in court" (subparagraph 15) of part 1 of Article 4 of the CPC).

Administrative bodies for disputes in the field of subsurface use are mainly M&E (akimats, departments of akimats, regional municipal administrations and institutions), as well as individual CSOs and their structural divisions.

The defendant is "an administrative body or official who is sued in court" (subparagraph 15) of part 1 of Article 4 of the CPC). Administrative bodies for disputes in the field of subsurface use are mainly M&E (akimats, departments of akimats, regional municipal administrations and institutions), as well as individual CSOs and their structural divisions.

Private definitions and monetary penalties

For the most part, private definitions drew the attention of the administrative authorities to the violations committed in the claims.

The claims were related to: refusals to issue a license for subsurface use; violations in conducting an electronic auction; extension of contracts for subsurface use; refusals to transfer the right of subsurface use; assignment of the obligation to perform an administrative action.

There is a case of imposing measures of procedural coercion in the form of monetary penalties on the plaintiffs (No. 7194-22-00-4/4467).

In this case, the court found that the plaintiff was abusing his procedural rights.

Part 3 of Article 127 of the CPC stipulates that the court has the right to impose a monetary penalty on a person who abuses procedural rights.

5 monetary penalties were imposed on the defendants in three cases.

Thus, in one case, the reason for the imposition of a monetary penalty was the late provision by the defendant of a response and complete documents during the preparation of the case for a preliminary hearing (No. 5194-22-00-4/851).

In another case, the court requested materials on the tender, but the documentation was not fully submitted by the defendant to the court (No. 7194-23-00-4/3205).

Finally, in one case, three monetary penalties were imposed on different representatives of the defendant at once.

The reasons were the late provision of a review without valid reasons, contempt of court and delay in the consideration of the administrative case in court (No. 5194-21-00-4/462).

The right of the court to impose a monetary penalty upon establishing the facts of non-fulfillment of procedural duties follows from the principle of independence and independence of the judiciary and serves as one of the manifestations of the discretionary powers of the court necessary for the administration of justice in the context of administrative justice.

The determination of the validity of the reasons for the failure of a participant in the process of procedural duties is within the competence of the court and is established on the basis of an analysis of specific factual circumstances.

Refunds of claims

The return of cases on administrative claims is carried out on the grounds provided for in the second part of Article 138 of the CPC.

Most of the returned claims are related to the fact that the case is not subject to administrative proceedings or is beyond the jurisdiction of an administrative court.

A significant part of the case was related to actions surrounding the subsoil use contract, for example, challenging the notice/order to terminate the contract. At the same time, the termination of the contract was caused by non-fulfillment of obligations under the contract. Consequently, the essence of the dispute proceeded from the contesting of contractual relations and was not based on administrative or other authority subordination or dependence by virtue of the powers of administrative bodies, and did not relate to public relations. (№ 7594-21-00-4/2084; № 1594-21-00-4/376 and so on).

The above case is quite typical for such claims, the circumstances of the case and the conclusions of the courts are often repeated. There are other grounds, for example, a claim for recognition as illegal and cancellation of the decision to refuse to extend the period of exploration under the Contract (No. 7194-22-00 4/3130). Extension issues are part of the contractual legal relations of the parties and should be considered in the framework of civil proceedings.

According to subparagraph 2) of part 7 of Article 3 of the CPC, cases whose procedure is provided for by the criminal procedure, civil procedure legislation of the Republic of Kazakhstan and the legislation of the Republic of offenses are not subject to consideration in administrative proceedings. Kazakhstan on Administrative matters

At the same time, the circumstances of the case may require its consideration within the framework of the APPC. For example, the court of appeal overturned the ruling of the court of first instance and the case was sent for a new hearing.

The plaintiff's demands consisted in forcing the deposit to be excluded from the list of subsurface areas put up for auction. By the ruling of the court of first instance, the claim was returned on the basis of subparagraph 11) of part 2 of Article 138 of the CPC. The Court of First Instance found that the contract had been terminated due to the expiration of its term, and therefore there were no public relations between the parties.

The appellate instance found that the court of first instance had not clarified the reason for the defendant's abandonment without permission of the plaintiff's appeal. Also, the court of first instance did not give a legal assessment to the plaintiff's arguments about filing an appeal within the time period established by the Code on Subsoil. According to the APPC, consideration of appeals and making decisions on them are an administrative procedure.

In addition, article 116 of the CPC provides that the court assists the party in formulating and/or amending the claims with a preliminary explanation of the legal consequences. However, in violation of the principle of the active role of the court, taking into account the arguments and evidence presented in the claim, the court did not explain to the plaintiff the need to clarify the stated requirements (case No. 7194-22-00-4/1504).

In these cases, the reason for the cancellation of the rulings of the court of first instance was an incorrect assessment of the circumstances of the case. In one case, it is an error in determining whether the contested act is an administrative act, and whether it entails legal consequences for the plaintiff. In others, the disputed legal relationship is incorrectly classified as contractual.

An administrative act is the main external form of administrative activity of administrative bodies and officials.

It is adopted by an administrative body in public law relations, has an authoritative character and is a unilateral decision of an administrative body endowed with authority, mandatory and enforced by state coercion, and is aimed primarily at the realization of subjective public rights and obligations, addressed to a specific person or an individually defined circle of people.

For reference: according to part 2 of Article 102 of the CPC, the courts have jurisdiction in administrative proceedings over disputes arising from public law relations provided for in this Code.

In accordance with Part 1 of Article 4 of the APPC:

4) an administrative act is a decision taken by an administrative body, an official in public relations, exercising the rights and obligations of a certain person or an individually defined circle of persons established by the laws of the Republic of Kazakhstan;

9) an administrative claim is a claim filed in court for the purpose of protecting and restoring violated or disputed rights, freedoms or legitimate interests arising from public law relations.

It follows from this definition that an administrative act must meet a number of criteria:

- to be an authoritative measure, that is, a conscious expression of will in the form of a decision, action (inaction), through which the public authority of an administrative body is exercised.;

- must come from an administrative authority (within the meaning of subparagraph 7) of the first part of Article 4 of the APPC); - to have a regulatory effect, that is, to be a measure aimed at establishing, canceling or changing any legal relationship;

- be individually defined, have a specific addressee to whom the administrative act was sent;

- accepted in the field of public law. This is due to the fact that an organ or organization can act not only as an administrative entity, but also as an economic entity. Only those acts that have been adopted in the field of public law and are of a public law nature can be administrative;

- external orientation, that is, the legal impact of the act should be directly external when the addressee is a person located outside the administrative body.

Thus, when deciding whether to return a claim, local courts should take into account the totality of the circumstances of the case and correctly identify the signs of a public law dispute.

The courts also make mistakes in specifying the grounds for returning claims.

For example, the court returned the claim on the basis of subparagraph 17), whereas in terms of content, the claim should have been returned on the basis of subparagraph 11) of part 2 of Article 138 of the CPC.

Despite this, the appellate and cassation instances noted that despite the erroneous determination of the grounds for the return of the claim, the procedural decision to return the claim was made correctly by the court of first instance (No. 7194-22-00-4/1818).

In general, claims by subsurface users in the framework of investment disputes related to contractual relations were often returned to the court on the grounds of non-jurisdiction.

In accordance with paragraph 1-2 of Article 27 of the CPC of the CMES Astana considers civil cases on investment disputes, except for cases under the jurisdiction of the SMAS Astana, as well as lawsuits filed by government agencies against investors related to the investor's investment activities.

In other cases, the plaintiffs filed lawsuits in violation of the territorial jurisdiction of the dispute.

In accordance with the provisions of parts 1 and 3 of Article 106 of the CPC, administrative cases are subject to consideration at the place where the administrative act was issued or at the location of the defendant. An administrative act issued in the form of an electronic document is considered at the place of residence (location) of the plaintiff.

In this part, the practice of determining jurisdiction has been developed. At the same time, a case has been established when, at first, the Astana returned the claim on the basis that the administrative act, issued in the form of an electronic document, is being considered at the plaintiff's place of residence (location).

And after the plaintiff applied to the SMAS of Almaty, the claim was returned with an indication that the location of the defendant is the city of Astana, and the administrative act itself was not issued in the form of an electronic document (No. 7594-22-00-4/2496). Such redirection of lawsuits negatively affects the image of the judicial system.

In fact, the withdrawal of a claim is often caused by the fact that the administrative authorities have made a decision that has settled the dispute. Reconciliation should also be considered.

Also, individual returned claims filed by investors in the SMAS of Astana were subsequently filed for consideration in the SMAS of Astana also within the framework of investment disputes.

When returning claims in this category of disputes on the grounds of non-compliance with the pre-trial dispute resolution procedure, the following should be taken into account.

By virtue of subparagraph 1) of part 2 of Article 138 of the CPC, it is established that the court (judge) issues a ruling on the return of the claim if the plaintiff has not complied with the pre-trial dispute settlement procedure established by law for this category of cases and the possibility of applying this procedure has not been lost.

Subsequent norms of the APPC established that if:

1) the law establishes a pre-trial dispute settlement procedure, an appeal to the court may be filed after observing this procedure (part 3 of Article 9);

2) unless otherwise provided by law, an appeal to the court is allowed after a pre-trial appeal (part 5 of Article 91);

3) in the absence of a higher administrative body or official, an administrative act or administrative action (inaction) may be appealed in court, which is notified to the participant in the administrative procedure by the administrative body whose administrative act or administrative action (inaction) is being appealed when making a decision on an administrative case (part 6 of Article 91).

Thus, the totality of the above norms emphasizes the predominance of the sectoral law over the APPC, which also corresponds to the fact that the specifics of administrative procedures are established by the laws of the Republic of Kazakhstan (Part 2 of Article 1 of the APPC).

For example, paragraph 16 of Article 278 (transitional provisions) of the Subsoil Code establishes that the procedure for issuing and re-registering geological and mining allotments is determined by the authorized body for the study of the subsoil.

This provision refers to a by-law, the Order of the Acting Minister of Ecology, Geology and Natural Resources of the Republic of Kazakhstan dated August 3, 2021 No. 285 "On approval of the rules for issuing and reissuing geological and (or) mining allotments."

Paragraph 16 of these Rules for the Issuance and Reissue of geological and mining Allotments establishes a procedure for appealing decisions, actions (inaction) of the service provider on the provision of public services.

However, this procedure was included in the specified Rules in the wording of the order of the Acting Minister of Industry and Construction of the Republic of Kazakhstan dated 12/06/2023. Whereas in the original version, the procedure for pre-trial appeal was not spelled out.

First, from the point of view of legal technology, the key norms and requirements of a codified act should be set out in the codified act itself, and not concentrated in transitional provisions.

Secondly, before making changes to the by-law regulating the pre-trial procedure, there were no relevant norms in it. As a result, this creates problems with the application of the requirements for mandatory pre-trial approval in practice in relation to those legal relations that arose before the relevant changes were made.

For example, the subsurface user's claim was returned by the court of first instance, as the pre-trial dispute settlement procedure was not followed and the possibility of applying such an order was not lost.

The plaintiff filed a private complaint for cancellation, indicating that there are no grounds for returning the claim, since the Code on Mineral Resources does not have a mandatory pre-trial procedure for resolving this dispute.

However, the courts of the first and second instances concluded that it was necessary to apply part 5 of Article 91 of the CPC. It follows from the meaning of this rule that a pre-trial procedure is mandatory, unless the law explicitly provides for the right to go to court without observing it. The appellate instance agreed with the conclusions of the court of first instance.

For reference: case No. 3594-22-00-4/1148. The court of first instance, returning the claim, justified its conclusion by the fact that industry legislation in the field of public law relations between the parties to the dispute does not regulate the procedure for appealing a refusal, therefore, part 5 of Article 91 of the CPC should apply, which presupposes the possibility of filing a lawsuit only after appealing the refusal in a pre-trial manner.

However, we note the following. The fact that the authorized body included in the Rules for issuing and reissuing geological and mining allotments a pre-trial procedure for appealing services indicates that such an order was originally intended and its absence in the original version was a gap in the state agency.

It is also noted that a case has been identified of a claim being returned on the grounds of subparagraph 1) of part 2 of Article 138 of the APPC without proper justification in the court ruling, with only one reference to the requirements of the APPC, which is unacceptable (case No. 3394-22-00-4/216). It should be understood that a dispute in the field of subsurface use may, based on its content, affect legal relations involving a pre-trial procedure.

However, if there is no pre-trial procedure or the possibility of applying to court without having to appeal to a higher authority is provided, it is necessary for the defendant to provide a reasoned position of the head of a higher administrative authority, an official. These requirements have been established since April 8, 2023.

For reference: The Law of the Republic of Kazakhstan dated March 27, 2023 "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on improving procedural legislation and Reforming the judicial system" amended articles 91, 138 of the CPC aimed at implementing the concept of a "Listening State", improving the quality of public administration and ensuring uniform administrative practice. Part 5 of Article 91 of the CPC stipulates that, unless otherwise provided by law, an appeal to the court is allowed after a pre-trial appeal.

If the law provides for the possibility of applying to a court without having to appeal to a higher authority, the administrative body, official, administrative act, administrative action (inaction) which are being challenged, along with the recall, they submit to the court the reasoned position of the head of a higher administrative body, an official.

By part 5 of Article 138 of the CPC, the judge obliges the defendant to submit a written review, prepared and executed in accordance with the requirements of the CPC, and a reasoned position of the head of a higher administrative body, an official with an administrative case (if any) within a period not exceeding ten working days.

Failure to submit them within the time limit set by the judge may be the basis for the application of a monetary penalty and does not prevent the consideration of the administrative case on its merits.

Thus, the legislator determined that the reasoned position of a higher authority is submitted to the court only if the law provides for the possibility of applying to the court without the need to appeal to a higher authority.

Abbreviations used

1) APPC – Administrative Procedural Code of the Republic of Kazakhstan;

2) CPC – The Civil Procedure Code of the Republic of Kazakhstan;

3) Civil Code of the Republic of Kazakhstan;

4) PC – Business Code of the Republic of Kazakhstan;

5) NP VS – Normative resolution of the Supreme Court of the Republic of Kazakhstan;

6) NC – The Tax Code of the Republic of Kazakhstan;

7) SCAD of the Astana City Court - the judicial board for administrative cases of the Astana City Court;

8) SCAD VS – judicial board for administrative cases of the Supreme Court of the Republic of Kazakhstan;

9) SMAS – Specialized Interdistrict Administrative Court;

10) CGO – the central government agency;

11) MIO – local executive bodies.

Used regulatory sources

The norms of substantive law, which were guided by the courts when considering disputes in the field of subsurface use, include the legislative acts currently in force.

The main regulatory legal acts regulating the issues of disputes of the generalized category are:

1) The Constitution of the Republic of Kazakhstan;

2) The Civil Code of the Republic of Kazakhstan dated December 27, 1994 No. 268-XIII;

3) Land Code of the Republic of Kazakhstan dated June 20, 2003 No. 442;

4) Budget Code of the Republic of Kazakhstan dated December 4, 2008 No. 95-IV;

5) Business Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V;

6) The Civil Procedure Code of the Republic of Kazakhstan dated October 31, 2015 No. 377-V;

7) The Code of the Republic of Kazakhstan "On Taxes and other mandatory payments to the Budget" (Tax Code) dated December 25, 2017 No. 120-VI;

8) The Code of the Republic of Kazakhstan "On Subsoil and Subsoil Use" dated December 27, 2017 No. 125-VI;

9) Administrative Procedural Code of the Republic of Kazakhstan dated June 29, 2020 No. 350-VI;

10) Environmental Code of the Republic of Kazakhstan dated January 2, 2021 No. 400-VI, etc.

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