Commentary to article 11. Ownership of the subsoil to the Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use”
1. In accordance with the Constitution of the Republic of Kazakhstan, the subsoil is in state ownership.
2. The State grants the subsoil for use on the grounds, conditions and within the limits provided for by this Code.
3. Actions of individuals and legal entities violating the right of state ownership of mineral resources entail liability provided for by the laws of the Republic of Kazakhstan. Transactions concluded in violation of state ownership of mineral resources are void.
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(Yereshev D.E.)
1. All legislative acts of independent Kazakhstan contained provisions on the issues of ownership of mineral resources, as well as the right to use mineral resources derived from property rights.
What all legislative acts have in common is that they state one of the fundamental constitutional norms declaring the state's ownership of mineral resources.
Regarding the rules governing the ownership of mineral resources, their content has changed at different times, as has the content of the concept of "subsoil" (see commentary to art. 10 of the Subsoil Code).
According to the 1992 Code on Subsoil and Processing of Mineral Raw Materials, the subsoil was the exclusive property of the state, and both private ownership of the subsoil and any turnover of subsoil plots were prohibited. The ownership of the subsoil was carried out by the Supreme Council of the Republic of Kazakhstan.
In the Decree on Mineral Resources of 1996, the article on the ownership of mineral resources, in addition to directly addressing ownership issues, also regulated ownership of minerals and mineral raw materials. According to the Decree on the Subsoil of 1996, mineral matter located in the subsoil was recognized as minerals, while the part of the subsoil containing minerals and extracted to the surface was recognized as mineral raw materials. The purpose of this rule was to determine the moment of the transition of the subsoil from the state of the subsoil, as an object of state ownership, to a new state –
mineral raw materials that are an independent object of civil turnover. Similar provisions were also present in the 1992 Code on Subsoil and Processing of Mineral Raw Materials, but within the framework of the concept of "subsoil".
Also, the Decree on Mineral Resources of 1996 regulated the issue of ownership of TMO as part of the provisions on the ownership of mineral resources. TMO was understood as waste from mining, processing, metallurgical and other types of production (slags, dumps, tailings and others) containing minerals.
The need to separate TMO as a separate regulatory object is due to the fact that they did not relate to the subsoil. The regulation regime of TMO depended on the ownership of TMO. The regime of state-owned TMO was equated to the subsoil. Whereas TMOS, which are privately owned, did not have such a status and were not subject to the provisions of the Decree on Mineral Resources of 1996 regarding the procedure for exploration and extraction of minerals from them.
In general, the regulation of the issue of ownership of the subsoil in the Decree on the Subsoil of 1996 was focused on the rights in relation to the minerals contained in the subsoil. Although the use of subsurface space was mentioned in the Decree on Subsurface Resources of 1996, in general, this component of subsurface resources was not actually regulated from the standpoint of issues of ownership of subsurface.
The same approach was laid down in the 2010 Law on Mineral Resources, the norms of which similarly regulated issues of ownership of mineral resources, including issues of ownership of TMO.
With the adoption of the Subsoil Code, the concept of subsoil was outlined more broadly, which influenced the content of the rule on the ownership of mineral resources, from which the provisions on the ownership of mineral raw materials were removed.
2. Mineral resources, as an object of ownership, have a special status, since their sole owner is the state. Only the state, being both the regulator and the owner, can establish the procedure for the provision, conditions, and limits of the use of mineral resources.
Any actions in relation to subsurface resources that are not authorized by the state are not only legally null and void, but are punishable.
3. Paragraph 1 of the commented article refers to the provisions of the Constitution of the Republic of Kazakhstan, which is a fundamental act defining a special procedure for regulating relations in the field of subsoil use.
Paragraph 2 of the commented article conditionally consists of two parts. The first part of it is a development of paragraph 1 of the same article, which proclaims the State's ownership of the subsoil, as a result of which all derivative rights in respect of the subsoil can be granted only by the State, within the limits and in the manner determined by it.
Tsch. The second part of this paragraph is based on the provisions of Article 61 of the Constitution of the Republic of Kazakhstan, according to which the establishment of fundamental principles and norms on the regime of property and other property rights falls within the competence of the Parliament of the country. In paragraph 2 of the commented article, this provision of the Constitution is disclosed and detailed by indicating that issues of granting the right to use mineral resources cannot be regulated by bylaws.
Paragraph 3 of the commented article indicates that violation of the State's ownership of mineral resources entails not only civil liability, but also administrative or criminal liability. The measures of such responsibility are established by the relevant legislation (Administrative Code of the Republic of Kazakhstan, Criminal Code of the Republic of Kazakhstan). For example, Article 334 of the Criminal Code establishes liability for unauthorized use of mineral resources.
Any transactions that violate the ownership rights to the subsoil are considered null and void. The consequences of the nullity of such transactions are determined by the provisions of the Civil Code of the Republic of Kazakhstan.
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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
