Commentary to article 37. Amendments and additions to the subsoil use contract to the Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use”
1. Amendments and additions to the subsurface use contract shall be made by concluding an addendum to the contract by the parties.
2. An addendum to the contract is concluded in the following cases::
1) changes in information about the subsurface user:
for individuals – last name, first name, patronymic (if it is indicated in the identity document), citizenship;
for legal entities – names and locations;
2) changes in information about the competent authority;
3) transfer of the right of subsurface use and (or) a share in the right of subsurface use;
4) securing the mining site(s) and the preparatory period(s);
5) securing the site(s) and the period(s) of extraction or the period(s) of extraction;
6) prolongation of the exploration or production period(s);
7) increasing or decreasing the subsurface area(s);
8) allocation of a subsurface area(s);
9) in relation to strategic subsurface areas, changes in the economic interests of the Republic of Kazakhstan that pose a threat to national security.
3. Conclusion of an addendum to the contract in the case provided for in subparagraph 1) paragraph 2 of this article, is made at the request of the subsurface user, which must contain:
1) last name, first name, patronymic (if it is indicated in the identity document), the name of the subsurface user;
2) the number and date of registration of the subsoil use contract;
3) an indication of the information about the subsurface user that is being changed.
4. The application must additionally be accompanied by:
1) documents confirming the need to make changes to the information about the subsurface user;
2) an addendum to the contract signed by the subsurface user, providing for changes to the information about the subsurface user.
5. The application is subject to consideration within twenty working days from the date of its receipt by the competent authority. Based on the results of the examination of the application, the competent authority concludes an addendum to the contract with the applicant and sends the applicant a signed copy of it or refuses to conclude an addendum.
6. The competent authority refuses to conclude an addendum if the application does not comply with the requirements established by this Code.
The refusal of the competent authority to conclude an addendum does not deprive the subsurface user of the right to submit a second application.
7. Conclusion of an addendum to the contract in the case provided for in subparagraph 2) paragraph 2 of this article, is carried out on the initiative of the competent authority.
8. The conclusion of an addendum to the contract in the cases provided for in subparagraphs 3) – 9) of paragraph 2 of this Article shall be carried out in accordance with this Code.
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(Nogaibai Z.M., Ilyasova K.M., Zhursunov R.M.)
1. In order to ensure uniformity of approaches when making amendments and additions, the legislator immediately stipulates in paragraph 1 of the commented article that amendments and additions to subsurface use contracts are made by adding additions to contracts. This rule reflects the established long-term practice, including at the legislative level. From a terminological point of view, the meaning of the norm is a clear answer to the question of what the agreements between the Republic of Kazakhstan and the subsurface user on amendments and additions to subsurface use contracts should be called. If the norms of other articles of the Code on Mineral Resources
or the by-laws refer to "additions to the contract for subsurface use," which means that it is intended not only to supplement the contract, but also, possibly, to amend it.
2. The norm of paragraph 2 of the commented article contains a list of cases when additions may be made to subsurface use contracts. The Code, however, may provide for cases not mentioned in paragraph 2 of Article 37, but explicitly specified in other provisions of the Code on Subsoil.
The reason for the attempt to detail the list of cases where additions may be made to the contract is, apparently, the conceptual provision that, firstly, contracts do not cover design indicators (with the exception of Article 143 of the Subsoil Code, which, however, states that the fulfillment of critical indicators is a contractual obligation, but the indicators themselves are set in projects). Secondly, the contracts are based on a standard form (paragraph 1 of Article 36 of the Code on Subsoil). In this regard, they do not undergo additional examinations upon initial signing, and the parties (both the subsurface user and the competent authority) should not be able to change (distort) the content of the contract from its original terms throughout the entire (usually long) period of the contract's validity. Thirdly, along with the purpose of preserving the original legal content of the standard contract form, paragraph 2 of the commented article probably pursues the goal of preventing subsequent unjustified changes in the quantitative obligations of the subsurface user stipulated in the contract (for example, the minimum program of work for the exploration period, obligations for local maintenance, etc.).
One of the conceptual goals of the Subsoil Code was to exclude volatile indicators of project documents from contracts, "break" the link between the contract (legal conditions) and the project (volatile financial and technical conditions), simplify the work on approving and concluding contracts, as well as minimize the need to amend contracts and maximize the "protection" of subsurface users from the influence of current changes (work programs in the previous understanding are excluded), leaving only the legal conditions and quantitative indicators of the work program within the boundaries of contracts. The flip side of these goals was the situation when it was necessary to put a legal "barrier" in the form of paragraph 2 of the commented article in the way of possibly unjustified changes and additions to contracts.
It would be a mistake to assume that the commented norm has anything to do with stabilizing the terms of the contract and, thus, additional protection of subsurface users. Regardless of,
Whether the list of cases of additions is limited or unlimited, as a general rule, amendments and/or additions to concluded contracts are possible only if both parties to the contract agree to this.
3. As noted above, the Code on Subsurface Resources may provide for cases not mentioned in paragraph 2 of Article 37, however, directly indicated in other provisions of the Code on Subsurface Resources.
An example of such a case is the extension of the term of the subsoil use contract by the competent authority for the duration of force majeure circumstances provided for in paragraph 5 of Article 36 of the Subsoil Code. Obviously, such an extension of the contract will require changes to it through the signing by the parties of an addendum to the contract. It should be assumed that, on the basis of the direct rule of clause 5 of Article 36 of the Subsoil Code, the necessary additions to the contract can be carried out on the terms stipulated in it.
4. The determination of the procedure (conditions, necessary documents, terms of consideration, grounds for refusal to supplement contracts, etc.) for making additions to contracts in the cases provided for in paragraphs 3 to 9 of paragraph 2 of the commented article is regulated by the relevant substantive provisions of the Subsoil Code, as indicated in paragraph 8 of the commented article.
In particular, the following key material norms of the Subsoil Code should be kept in mind for CVS contracts:
1) on the transfer of the right of subsurface use and (or) a share in the right of subsurface use – the norms of Chapter 5 of the Code on Subsurface Resources "Transfer of the right of subsurface use and objects related to the right of subsurface use";
2) on securing the mining site(s) and the preparatory period (preparatory periods) – Article 118 of the Code on Subsoil "Preparatory period";
3) to fix the site(s) and the period(s) of production or the period(s) of production – Article 119 of the Code on Subsoil "The period of hydrocarbon production";
4) to extend the period(s) of exploration or production – Article 117 of the Subsoil Code "Extension of the exploration period under the contract for exploration and production of hydrocarbons" and Article 120 of the Subsoil Code "Extension of the period of production of hydrocarbons";
5) to increase or decrease the subsurface area(s), to allocate the subsurface area(s) – the norms of Chapter 16 of the Code on Subsurface "Subsurface areas for exploration and production of hydrocarbons", as well as art.19 of the Code on Subsurface "Subsurface area as an object of the right of subsurface use";
6) with respect to strategic subsurface areas in the event of a change in the economic interests of the Republic of Kazakhstan that poses a threat to national security – paragraph 2 of Article 43 of the Subsurface Code regarding the definition of a strategic subsurface area and Article 106 of the Subsurface Code.
5. Unlike the cases listed in paragraphs 3 to 9 of paragraph 2 of the commented article, the change in information about a subsurface user provided for in paragraphs 1 of paragraph 2 is not subject to regulation of independent (separate) norms of the General or Special part of the Code on Subsurface Resources. In this regard, the basic rules on the procedure for making such changes and additions are regulated directly in paragraphs 3-6 of art.37 of the Code on Subsoil.
It follows from the literal content of subclause 1, clause 3, Article 37 of the Subsoil Code that "information about a subsurface user" in the sense of the commented norm may include information about the surname, first name, patronymic (if it is indicated in the identity document) of a natural person-a subsurface user, the name of a legal entity-a subsurface user.
However, if such data is specified in the contract, then "information about the subsurface user" may also include information about the place of residence, citizenship, information about the identity document of a natural person-a subsurface user, the location of a legal entity-a subsurface user, information about state registration as a legal entity (see, for example, paragraph 1 of Article 94 of the Subsoil Code).
It should be emphasized that the "change in information about a subsurface user" under subclause 1, clause 2, Article 37 is a separate case and differs from the case of "transfer of the right of subsurface use and (or) a share in it" under subclause 3, clause 2, Article 37 of the Code on Subsurface Resources.
6. Unlike the cases listed in paragraphs 3 to 9 of paragraph 2 of the commented article, changing information about the competent authority is not subject to regulation of independent (separate) norms of the General or Special part of the Code on Subsoil.
The legislator limited himself to specifying in paragraph 7 of Article 37 of the Subsoil Code that the conclusion of an addendum to the contract in the case provided for in paragraph 2 of paragraph 2 of the same article is carried out on the initiative of the competent authority. Information about the competent authority may be changed if the authority of the competent authority has been transferred to another government agency, as well as if the name of the government agency responsible for contracts has changed (for example: Ministry of Energy and Mineral Resources of the Republic of Kazakhstan – Ministry of Oil and Gas of the Republic of Kazakhstan – Ministry of Energy of the Republic of Kazakhstan).
7. By virtue of paragraph 3 of Article 277 of the Subsoil Code, the commented article has no "retroactive effect", that is, its provisions are not applicable to relations on
subsurface use contracts concluded prior to the entry into force of the Subsoil Code. With regard to previously concluded contracts, the issues of their amendments and additions are regulated in the final and transitional provisions of the Subsoil Code (Articles 277, 278), which provide for a number of independent rules.
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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
