Attracting investments and disputes involving investors
In the context of current trends in the global economy, attracting investments is becoming a key factor in the country's sustainable economic growth and prosperity. This was also noted by President K.K. Tokayev, who in his message dated September 1, 2023, "The Economic Course of Fair Kazakhstan" indicated that "the main problem limiting economic growth is the lack of investment.
A lack of investment equals a lack of growth in the future." The importance of attracting investments and increasing the investment attractiveness of certain sectors of the economy was also noted by the Head of State in his message dated September 1, 2022. 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. All this indicates the involvement of the Republic of Kazakhstan in the process of working with foreign investors and creating a favorable investment climate.
The policy of government agencies is aimed at implementing the instructions of the Head of State and working directly with investors.
Thus, today there is a tendency for states to compete for investments. In this context, transparency and efficiency of the judicial system are important conditions, which can ensure the protection of investors and increase the attractiveness of the market for investments.
The work of judicial authorities also influences the creation of a stable legal environment, which, in turn, increases the confidence of entrepreneurs and investors.
According to paragraph 1 of Article 296 of the Entrepreneurial Code of the Republic of Kazakhstan (hereinafter referred to as the PC), an investment dispute is a dispute arising from contractual obligations between investors, including large investors, and government agencies in connection with their investment activities.
The concept of an investor is also enshrined in Article 274 of the Tax Code, according to which "an investor means individuals and legal entities making investments in the Republic of Kazakhstan." A major investor is an individual or legal entity that invests in the Republic of Kazakhstan in the amount of at least two million times the monthly calculation index.
In turn, according to paragraph 1 of Article 274 of the Investment Code, investments are all types of property (except goods intended for personal consumption), including financial leasing items from the moment of conclusion of the lease agreement, as well as the rights to them invested by the investor in the authorized capital of a legal entity or an increase in fixed assets used for entrepreneurial activities, as well as to implement a public-private partnership project, including a concession project.
Taking this into account, it is necessary to analyze the existing problems of judicial review of investment disputes in order to develop the most favorable direction for legislative reforms.
The Constitutional Law "On Amendments and Additions to the Constitutional Law of the Republic of Kazakhstan "On the Judicial System and the Status of Judges of the Republic of Kazakhstan" dated March 20, 2021, the Law of the Republic of Kazakhstan dated March 20, 2021 No. 20-VII "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on the modernization of the judicial system" in Under the conditions of the implementation of the APPC and the action of the CPC, the instance jurisdiction of disputes involving investors has been established, and judicial boards for administrative cases have been established in regional courts and the Supreme Court.
According to Parts 1-2 of Articles 27 of the Civil Procedure Code of the Republic of Kazakhstan (CPC) and Part three of Article 102 of the Administrative Procedural Procedure Code of the Republic of Kazakhstan (APPC), disputes involving investors arising from public law relations are considered by the courts according to the rules of the APPC in the first instance by the specialized interdistrict Administrative Court in Astana (SMAS).
According to the rules of the CPC, disputes involving investors and government agencies that do not arise from public law relations are resolved in the first instance by the specialized interdistrict Economic Court in Astana (SMEC). Investment disputes resolved in the SMAS and the SMES are subject to review in the judicial boards for administrative cases of the Astana City Court and the Supreme Court according to the rules of the APPC and CPC. At the same time, the peculiarities of the approaches of procedural laws applied by courts in the consideration of cases generate different results of their resolution. This state of affairs is facilitated by the prevailing principles in two types of legal proceedings. According to the APPC, the principle of the active role of the court (inquisitorial), according to the CPC – competitiveness and equality of the parties (dispositive).
In implementing the inquisitorial principle, the court is obliged to assist in eliminating formal errors, clarifying unclear expressions, filing petitions on the merits of an administrative case, supplementing incomplete factual data, and submitting all written explanations relevant to the full definition and objective assessment of the circumstances of an administrative case at all stages of the process.
If the evidence presented by the participants in the administrative process is insufficient, the court collects it on its own initiative (parts one and two of Article 130 of the CPC). It is important to note that in the APPC, the burden of proof is generally placed on the defendant, an administrative body.
The APPC also established a number of new and effective principles of administrative procedure (proportionality, limits of administrative discretion, the principle of priority of rights, protection of the right to trust, prohibition of abuse of formal requirements, presumption of reliability, etc.).
Thus, the administrative procedural legislation can guarantee the protection of the investor's rights in his disputes with the administrative body.
In this regard, the objectives of the presented analysis are to study the current judicial practice, the practice of applying legislation, and to identify problematic issues that arise when considering investment disputes, and to develop proposals for improving legislation.
Determination of jurisdiction
The dispute between the courts of first instance located in different regions, cities of republican significance and the capital is resolved by the Supreme Court of the Republic of Kazakhstan upon the submission of the relevant regional or equivalent court (Part 2 of Article 109 of the CPC).
Defendants in investment disputes
The defendant is "an administrative body or official who is being sued in court" (paragraph 15, part 1, Article 4 of the CPC). In turn, the administrative body according to subclause 7) of the first part of Article 4 of the APPC is a state body, a local government body, a state legal entity, as well as another organization that, in accordance with the laws of the Republic of Kazakhstan, are authorized to adopt an administrative act, commit an administrative act (inaction).
The defendant is "an administrative body or official against whom a claim has been brought in court" (paragraph 15, part 1, Article 4 of the CPC). In turn, the administrative body according to subclause 7) of the first part of Article 4 of the APPC is a state body, a local government body, a state legal entity, as well as another organization that, in accordance with the laws of the Republic of Kazakhstan, are authorized to adopt an administrative act, commit an administrative act (inaction).
Refunds of claims
Refunds for administrative claims are carried out on the grounds provided for in the second part of Article 138 of the CPC.
The basis (subparagraph, part two of Article 138 of the CPC)
2) the claim does not comply with the requirements of the second part of Article 131 of this Code
5) there is a dispute between the same parties in the proceedings of the same or another court.
6) the plaintiff has withdrawn the filed claim
9) the parties have concluded an agreement on reconciliation, mediation or dispute settlement
11) the case is not subject to consideration in the order of administrative proceedings
15) the court refused to restore the missed deadline
17) the case is beyond the jurisdiction of this court
A large number of refunds based on subparagraphs 11) and 17) of the second part of Article 138 of the CPC are related to errors made by plaintiffs when filing civil lawsuits with the SMAS.
In accordance with the second part of Article 5 of the CPC, the task of administrative proceedings is the fair, impartial and timely resolution of administrative cases in order to effectively protect and restore violated or disputed rights, freedoms and legitimate interests of individuals, rights and legitimate interests of legal entities in public relations.
It is important to note that public law relations arise between subjects of law in connection with the exercise by one of the participants of his powers in relation to the other.
If we are talking about challenging the terms of a contract, which is a civil contract, then the state body acts in it as a party to the contract and is not associated with the exercise of authority.
Consequently, such cases are considered in civil proceedings.
For example, the SMAS returned the claim, stating that "the defendant's refusal is not an onerous act, does not contain an authoritative expression of will, and is not aimed at the emergence, modification, and termination of the plaintiff's rights and obligations arising from public law relations.
In these circumstances, the claim should be returned, regardless of the wording of the claims, as not subject to consideration in administrative proceedings" (No. 7194-23-00-4/1127).
Or in another case, SMAS noted that "the plaintiff's claims in this case do not relate to public law relations, the plaintiff's claims are based on the terms of the Contract concluded between the parties.
The plaintiff disputes the defendant's refusal to extend the Contract.
Therefore, if there is an investment contract with the State, this dispute cannot be the subject of an administrative claim.
Based on the above, the court considers that the claim is not subject to consideration in administrative proceedings" (No. 7194-23 00-4/675). This is the issue that accounts for the largest number of refunds.
It is described in more detail in section 4.1 of this analysis.
We also note the following regarding the relatively low level of administrative claims. According to Part 1 of Article 120 of the CPC, reconciliation of the parties is allowed if the defendant has administrative discretion, which is the authority of an administrative body or official to make one of the possible decisions based on an assessment of their legality, for the purposes and limits established by the legislation of the Republic of Kazakhstan.
In this regard, the CPC does not oblige the judge to take measures to reconcile the parties, as established by Part 1 of Article 174 of the CPC.
This causes a difference in the number of reconciliations in administrative and civil cases.
In the future, it should be borne in mind that if the concept of an administrative contract is introduced into the APPC, appropriate changes will affect the reconciliation mechanism.
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) SMEC – Specialized Interdistrict Economic Court;
11) The CGO is a central government agency.
Used regulatory sources
The rules of substantive law, which were guided by the courts when considering investment disputes, 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) Business Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V;
4) The Administrative Procedural Code of the Republic of Kazakhstan;
5) The Civil Procedure Code of the Republic of Kazakhstan;
6) Land Code of the Republic of Kazakhstan dated June 20, 2003 No. 442;
7) Budget Code of the Republic of Kazakhstan dated December 4, 2008 No. 95-IV;
8) The Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI "On Taxes and other mandatory payments to the Budget" (Tax Code), etc.
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