Comment to Article 9. Integrity of subsoil users to the Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use”  

In the process of exercising state control over subsurface use operations, when exercising the rights granted to them by subsurface users and fulfilling the obligations provided for in this Code, the integrity of the actions of subsurface users is assumed.

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(Yereshev D.E.)

1. For the legislation on subsoil use, the principle of good faith is a new principle that has not previously been declared by the legislator as such.

The principle of good faith is also provided for in the tax legislation. As a rule, this principle is typical for those branches of legislation in which regulation is based or administrative-governmental methods of regulation prevail.

In the relations between the state and the subsurface user, the state always acts as the prevailing force. As has been noted more than once, the specifics of subsurface use relations are that they include both civil law relations and public law relations (see commentary to art. 1).

2. The inclusion of the principle of good faith as a principle of legislation on subsurface use was due to the emerging trend of dominance of administrative and governmental methods of regulation in the field of relations on subsurface use, which was laid down by the Law on Subsurface Resources of 2010. For example, the specified Law paid special attention to project documents, which were given a special status in the field of subsoil use. Conducting subsurface use operations in violation of project documents entails the imposition of appropriate sanctions on the subsurface user. Moreover, project documents began to determine the content of work programs that are an integral part of the subsoil use contract. Unfortunately, in practice, it turned out to be quite a difficult task to determine a clear line between the violation of the project document and the need to take into account objectively changing conditions of subsurface use. And this led to the fact that, as a rule, the subsurface user was obliged to prove that his actions were conditioned by the need to comply with the terms of the contract and (or) legislation.

3. This principle is intended to change the current trend. It requires the state body, and not the subsurface user, to prove the existence of violations on the part of the subsurface user. Moreover, it follows from the principle of good faith that in conditions of legal uncertainty or lack of clear legal guidance, the actions of a subsurface user should be recognized as good faith unless proven otherwise.

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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