Comment to Article 57. Pledge of a bank deposit as security for liquidation of the Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use”
1. By virtue of the pledge of a bank deposit, the Republic of Kazakhstan has the right, in case of non-fulfillment by the subsurface user of the liquidation obligation, to receive satisfaction from the amount of the pledged bank deposit primarily to other creditors of the subsurface user.
2. In accordance with this article, only a bank deposit placed in a second-tier bank may be the subject of collateral.
3. The contribution can be made in tenge or in a foreign currency.
4. The requirements for the size of a bank deposit, which is a security, are established by this Code.
5. It is prohibited to re-pledge a bank deposit that is a security.
6. In the event of liquidation of a subsurface user who is a legal entity, including its bankruptcy, the subject of the pledge is not included in the bankruptcy estate, and the mortgagee is not a creditor involved in satisfying its claims at the expense of other property of the subsurface user.
7. The bank deposit pledge agreement as a way to ensure fulfillment of obligations to eliminate the consequences of subsurface use operations is concluded in Kazakh and Russian in accordance with the standard form.
The procedure for concluding a bank deposit pledge agreement and its standard form are approved by the competent authority.
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(Mukhamedov R.N.)
1. The pledge of a bank deposit is the main form of ensuring the fulfillment of the obligation of a subsurface user to liquidate and is recognized by the legislator as the most "reliable" instrument. According to paragraph 2 of the commented article, a deposit that is the subject of collateral can only be placed in a second-tier bank. At the same time, it is impossible to draw an unambiguous conclusion from the content of the commented article that it refers only to banks operating in accordance with the Law of the Republic of Kazakhstan “On Banks and Banking Activities in the Republic of Kazakhstan”. However, this follows from the content of paragraph 2 of art. 56 of the Subsoil Code, where the legislator separates the concepts of "second-tier bank" and "foreign bank".
2. The 2010 Law on Subsoil provided for the formation by the subsoil user of a liquidation fund in the form of a deposit in a second-tier bank through annual deductions in the amount of at least 1% of the annual exploration (production) costs, which, with the permission of the competent authority, could be partially used by the subsoil user to finance liquidation costs.
In turn, the deposit formed in accordance with the Subsoil Code is the subject of collateral and cannot be used by the subsoil user, which leads to the need to raise funds for liquidation in double the amount. To a certain extent, this issue can be resolved by partially fulfilling liquidation obligations, recalculating the cost of work and changing the amount of the contribution, which will be discussed in more detail in the comments to the relevant articles of the Subsoil Code.
3. According to clause 1 of Article 307 of the Civil Code of the Republic of Kazakhstan, the pledge agreement must specify the subject of the pledge, the substance, amount or maximum amount and the term of performance of the obligation secured by the pledge. There is a point of view based on this provision that only monetary obligations can be secured with collateral, to which liquidation does not apply. In our opinion, this
The position seems to be incorrect, since in this case the amount of the obligation (as in the case of the guarantee) is determined by the cost of liquidation work.
4. Another issue may arise in connection with the sale of mortgaged property. Thus, according to paragraphs 1-1 of Article 319 of the Civil Code of the Republic of Kazakhstan, when money and rights (claims) under a monetary obligation are pledged, the sale of this pledged property is carried out by transferring money to the pledgee that is the subject of the pledge or owed under the pledged rights (claims) under the monetary obligation, and if it is impossible to transfer money at the time of foreclosure - by transfer of the mortgagor's rights to the pledged item to the mortgagee. At the same time, since we are talking here about the transfer of rights to claim money for a deposit, the subsurface user, referring to the specified norm of the Civil Code of the Republic of Kazakhstan, may declare the need to first obtain his consent to transfer the rights.
These risks are offset by securing the consent of the pledgor to such a transfer in the pledge agreement, which necessitated the approval of the standard form of the bank deposit pledge agreement. As a result, the Law of the Republic of Kazakhstan dated January 2, 2021 No. 401-VI SAM “On Amendments and additions to certain Legislative Acts of the Republic of Kazakhstan on Environmental issues” supplemented the commented article with a new paragraph 7, according to which the competent authority is given new competence to approve the rules for concluding and standard forms of a bank deposit pledge agreement as a method of ensuring the fulfillment of obligations to eliminate the consequences of subsurface use operations.
At the moment, the relevant order has been approved only for solid, widespread minerals, the use of subsurface space and mining operations, while for hydrocarbons and uranium mining, the draft order is under development.
5. According to paragraph 3 of the commented article, a deposit in a second-tier bank, unlike a guarantee, can be denominated not only in tenge, but also in any foreign currency. It seems that in this case, the amount of the deposit should be determined based on the exchange rate of the corresponding currency to tenge, established by the National Bank of the Republic of Kazakhstan on the date of the conclusion of the pledge agreement.
At the same time, if, due to fluctuations in exchange rates, the amount of the deposit ceases to provide liquidation obligations expressed in tenge, the subsurface user, guided by paragraph 7 of Article 55 of the Subsoil Code, will have to replace this security within sixty calendar days.
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Kazakh Association of Organizations of the Oil and Gas and Energy Complex KAZENERGY
Nur Sultan 2022
The Kazenergy Association expresses its sincere gratitude for the support in preparing the commentary to the following companies: North Caspian Operating Company NV, NC KazMunayGas JSC, Mangistaumunaygas JSC, Karachaganak Petroleum Operating BV, White & Case Kazakhstan LLP, Haller Lomax LLP)", "Erlicon CG" LLP, "Signum Law Firm" LLP. © Kazenergy Association, 2022 © team of authors, 2022 © authors, 2022
Dear readers!
We offer you a scientific and practical commentary prepared by a group of Russian specialists with extensive practical experience in legislation on subsoil and subsoil use and who participated in the preparation of the Code on Subsoil and Subsoil Use.
Subsurface use is a very complex and specific area of public relations, the regulation of which has its own historical background and takes into account the technological specifics of the process of subsurface development, as well as environmental, commercial, legal and other features of exploration and development of deposits.
Kazakhstan's legislation on subsoil and subsurface use has passed through several stages in its development, and has always been based on a balance of interests between the state and subsurface users, transparency, striving for the maximum possible degree of protection of the rights and legitimate interests of investors, ensuring sustainable social, economic and environmental development of the country.
The Code "On Subsoil and Subsoil Use", adopted at the end of 2017, was developed taking into account many years of accumulated experience and law enforcement practice, as well as the results of extensive discussions with experts working in the industry.
It reflects specific, important measures on the part of the state to increase the investment attractiveness of exploration and further reduce administrative barriers.
Nevertheless, practice and legislation do not stand still, constantly evolving, taking into account new challenges facing both the subsurface use industry and the economy as a whole.
In this regard, this commentary is intended to serve as an aid for a wide range of interested persons – specialists working in the industry, in
understanding the meaning of the norms, their historical context, the interrelationship and mutual influence of the various provisions of the Code.
We also hope that studying the commentary will serve as an incentive for new generations of young domestic specialists to work scientifically and practically in this important industry, for the benefit of the development of our country, current and future generations of Kazakhstanis.
Sincerely, U. Karabalin, Deputy Chairman of the Kazenergy Association, Hero of Labor of Kazakhstan
