Commentary to article 40. Transfer of the right of subsurface use to the Code of the Republic of Kazakhstan “On Subsurface and Subsurface Use”

Home / Codes / Commentary to article 40. Transfer of the right of subsurface use to the Code of the Republic of Kazakhstan “On Subsurface and Subsurface Use”

1. The transfer of the right of subsurface use (a share in the right of subsurface use) is carried out in the case of alienation of the right of subsurface use (a share in the right of subsurface use) to another person on the basis of civil law transactions or in other cases provided for by the laws of the Republic of Kazakhstan.

2. It is prohibited to transfer the right of subsurface use (shares in the right of subsurface use):

1) under a license for exploration of solid minerals in the first year of its validity;

2) under license for geological exploration of subsurface;

3) under a mining license.

3. The transfer of the right of subsurface use (a share in the right of subsurface use) is carried out by renewing the license for subsurface use or, accordingly, making changes to the contract for subsurface use.

In order to renew a subsurface use license or amend a subsurface use contract, the acquirer of the subsurface use right applies to the state body that issued the subsurface use license or concluded the subsurface use contract.

The application must be accompanied by:

1) the original document on the basis of which the right of subsurface use is acquired;

2) documents confirming information about the acquirer of the right of subsurface use:

for individuals – the surname, first name and patronymic (if it is indicated in the identity document) of the applicant, place of residence, citizenship, information about the applicant's identity documents;

for legal entities – the applicant's name, location, information on state registration as a legal entity (extract from the commercial register or other legalized document certifying that the applicant is a legal entity under the legislation of a foreign state), information on legal entities whose shares are traded on the organized securities market, states, international organizations and individuals who directly or indirectly control the acquirer;

3) documents confirming the acquirer's compliance with the requirements of this Code for persons applying for the right to subsurface use under a contract for the exploration and production or extraction of hydrocarbons, uranium mining, or under a license for the exploration or extraction of solid minerals, licenses for the extraction of common minerals.

In case of amendments and additions to the subsurface use contract, a draft supplement to the subsurface use contract signed by the applicant shall be attached to the application.

In case of acquisition of the right of subsurface use by a permit issued in accordance with Article 44 of this Code, instead of documents confirming information about the acquirer, the acquirer has the right to attach to the application a written confirmation that the information about him has not changed compared with the information provided by him for obtaining the specified permit.

The application and the documents attached to it must be written in Kazakh and Russian. If the application is submitted by a foreigner or a foreign legal entity, the documents attached to it may be drawn up in another language with a mandatory translation into Kazakh and Russian attached to each document, the accuracy of which is certified by a notary.

The state body shall reissue the license or conclude an addendum to the contract with the acquirer of the right of subsurface use, or give a reasoned refusal to reissue or conclude an addendum to the contract within seven working days from the date of receipt of the application.

4. The state body refuses to renew the license or amend the contract in the following cases::

1) non-compliance of the application with the requirements of paragraph 3 of this Article;

2) non-compliance of the terms of the transfer of the right of subsurface use with the issued permit, if such transfer is carried out in accordance with such a permit;

3) the absence of a permit for the transfer of the right of subsurface use, when such a permit was required in accordance with this Code;

4) if the transfer of the right of subsurface use (a share in the right of subsurface use) is carried out in a subsurface area on which the subsurface user is prohibited from conducting subsurface use operations or certain types of work in accordance with the imposed administrative penalty;

5) if the transfer of the right of subsurface use (a share in the right of subsurface use) is prohibited by this Code;

6) if the transfer of the right of subsurface use (a share in the right of subsurface use) entails a violation of the provisions of international treaties concluded by the Republic of Kazakhstan.

The refusal to renew the license or amend the contract may be appealed by the acquirer of the right of subsurface use in accordance with the legislation of the Republic of Kazakhstan within ten working days from the date of receipt of the notification of refusal.

Refusal to renew the license or amend the contract on the grounds of subparagraph 1) of part one of this paragraph does not deprive the acquirer of the right of subsurface use to re-apply for renewal of the license or amendments to the contract.

A refusal to renew a license or amend a contract on the grounds of subitems 2) and 3) of part one of this paragraph does not deprive the applicant of the right to reapply for a permit to transfer the right of subsurface use.

__________________________________________________________________________________________

(Yereshev D.E.)

1. The 1992 Code on Subsoil and Processing of Mineral Raw Materials did not provide for the turnover of the right of subsurface use. The turnover of the right of subsurface use at the legislative level was first provided for by the Decree on Oil of 1995 and the Decree on the Subsoil of 1996.

To be more precise, Article 53 of the 1995 Decree on Oil stipulated that "a contractor may transfer to another legal entity or individual, or an international organization, all or part of its rights and obligations under the contract, including through the alienation of a controlling stake, only with the written permission of the Licensing and Competent Authorities." That is, initially on the basis of According to the Decree on Oil of 1995, the rights under the contract for exploration and (or) production of oil could be transferred by way of assignment. This is due to the fact that the original version of the Decree on Oil in 1995 I did not consider the right to conduct oil operations as a property right. The exploration and/or production contract granted the right to conduct oil operations, not a subsurface area. At the time of the entry into force of the 1995 Oil Decree, oil exploration and/or production contracts were essentially service contracts. It is no coincidence that the Decree on Oil of 1995, until its repeal

The term "contractor" was used along with the term "subsurface user". A person became a subsurface user after obtaining a license, and after concluding a contract, such a person changed his status from a subsurface user to a contractor.

It was only in the Decree on the Subsoil of 1996 that the right of subsurface use was formulated as a property right, since the object of legal relations between the state and the investor was a subsoil plot. At the same time, the Decree on the Subsoil of 1996 allowed for the turnover of the right of subsurface use. Thus, it was stated that in addition to granting the right of subsurface use, the right of subsurface use could arise in the event of its transfer from one person to another, as well as during the transfer of the right of subsurface use in the order of universal succession. Article 12 of the Decree on Mineral Resources of 1996 It established that the transfer of the right of subsurface use meant the endowment of a person with the right of subsurface use by another subsurface user, and the transfer of the right of subsurface use in the order of universal succession was understood as the emergence of the right of subsurface use by the legal successor during the reorganization of the legal entity.

Article 14 of the Decree on the Subsoil of 1996 described in detail the procedure for transferring the right of subsurface use to another person. Such a transfer could only be carried out with the permission of the state, i.e. from the moment of its legal registration as a real right, the right of subsurface use was initially limited in circulation. According to the aforementioned Article 14 of the Decree on Subsoil of 1996, any transfer of the right of subsurface use to another person, regardless of its grounds, presupposed the need to obtain state permission. Depending on who granted the right to subsurface use, permits were issued by the relevant government agency. Separately, the Decree on the Subsoil of 1996 singled out the transfer of the right of subsurface use as collateral (art. 15). The procedure for the transfer of the right of subsurface use as collateral was regulated by the subordinate legislation. Unlike the transfer of the right of subsurface use, the transfer by way of universal succession did not require obtaining a permit, unless otherwise stipulated in the terms of the license (art. 39 of the Decree on the Subsoil of 1996).

That is, according to the Decree on the Subsoil of 1996, the main difference between the transfer and transfer of the right of subsurface use was the need to obtain a permit in the first case, and in the absence of such a need in the second.

It should be noted that at the time of the adoption of the Decree on Subsoil in 1996, it did not contain a detailed procedure for issuing permits for the transfer of subsoil use rights, this issue was entirely at the discretion of the licensing authority.

In 1999, Articles 14 and 15 were amended, which provided for the grounds for refusal to grant a permit, the requirements and conditions for the partial transfer of the right of subsurface use, the procedure and procedure for registering a pledge of the right of subsurface use, etc. Also, Article 14 was supplemented by the norm according to which the transfer of the right of subsurface use is considered completed from the moment of registration of the relevant amendments and additions to the contract.

Particularly significant were the amendments to the Decree on Subsoil of 1996, adopted in December 2004 and October 2005, which significantly influenced the legislative regulation of the transfer of subsoil use rights.

Thus, in Article 14 of the Decree on the Subsoil of 1996, the individual grounds for the transfer of the right of subsurface use were detailed, the general mention of the need to obtain permission for the transfer of the right of subsurface use was supplemented by such conditions as compensation and gratuitousness, transfer as a contribution to the authorized capital of a legal entity, when transferring as part of a property complex in bankruptcy. It should be noted that from a legal point of view, these amendments did not expand the scope of the licensing procedure, since the norm in force at that time included all possible cases of transfer. To a greater extent, these were clarifying amendments.

These amendments also introduced the priority right of the state to acquire the alienated right of subsurface use (Article 71 of the Decree on the Subsoil of 1996), which undoubtedly became an additional limitation on the turnover of the right of subsurface use.

Adopted in 2010. The Law of the Republic of Kazakhstan "On Subsoil and Subsoil Use", which replaced the 1995 Oil Law and the 1996 Law on Subsoil, also retained the conceptual approaches laid down in the 1996 Law on Subsoil in terms of regulating the transfer of subsoil use rights. As in the 1996 Law on Subsurface Resources, the 2010 Law on Subsurface Resources provided for a permissive procedure for both the transfer of subsurface use rights and the pledge of subsurface use rights. No permit was required to transfer the right of subsurface use. At the same time, in addition to the reorganization of a legal entity, the concept of succession included the inheritance of the right of subsurface use in the event of the death of a natural person subsurface user.

The 2010 Law on Subsoil also provided for a number of exceptions from the general licensing regime for individual cases of transfer of the right of subsurface use. It was not necessary to obtain permission to transfer the right of subsurface use in favor of a subsidiary in which the subsurface user owns at least ninety-nine percent of the participation (block of shares), as well as between legal entities in each of which

of which at least ninety-nine percent of the shares (blocks of shares) are owned directly or indirectly by the same person, provided that the acquirer of all or part of the right of subsurface use, objects related to the right of subsurface use, is not registered in a state with preferential taxation. This approach was aimed at simplifying administration in cases of company restructuring while maintaining the status quo in terms of the composition of the main beneficiaries of the company.

The 2010 Law on Subsurface Resources established a general ban on the transfer of the right of subsurface use within two years from the date of entry into force of the contract, taking into account individual exceptions to this rule. A similar provision has been contained in the 1996 Law on Subsoil since 2007, which was replaced by the 2010 Law on Subsoil.

2. According to paragraph 1 of Article 116 of the Civil Code of the Republic of Kazakhstan, objects of civil rights may be freely alienated or transferred from one person to another by universal succession (inheritance, reorganization of a legal entity) or in any other way, if they are not withdrawn from circulation or restricted in circulation. Paragraph 3 of the same Article of the Civil Code prescribes that the types of The assets that are limited in turnover are determined by the legislation.

According to the Constitution, the subsoil is state property. For this reason, the right of subsurface use has a special legal regime. The state, granting the right of subsurface use, establishes special requirements for persons applying for it. These conditions must also be observed when transferring the right of subsurface use, regardless of the grounds for such transfer.

Therefore, the Subsoil Code establishes a special procedure for the transfer of the right of subsurface use, which should ensure respect for the interests of the state as the owner of the subsoil, and at the same time guarantee the turnover of the right of subsurface use by establishing clear conditions for the transfer of the right of subsurface use.

3. The commented article applies in the case of transfer of the right of subsurface use from one person to another in the case of alienation on the basis of civil law transactions, as well as in other cases involving the transfer of the right of subsurface use to another person. Such cases, in addition to civil law transactions, may include transfer by way of universal succession (Article 116 of the Civil Code of the Republic of Kazakhstan), foreclosure (Article 222 of the Civil Code of the Republic of Kazakhstan), etc.

Any transfer of the right of subsurface use must be carried out taking into account the provisions of art. 40 of the Subsoil Code. However, this will be true only in cases where the right of subsurface use acts as an object of civil law relations, since for the purposes of legislation on

The right of subsurface use is considered primarily as an object of civil rights. For this reason, the commented article cannot be applied, for example, in cases of confiscation as a punishment in criminal proceedings and other similar cases in which the transfer of the right of subsurface use occurs in the public interest. In such cases, the question arises about the future fate of the right of subsurface use.

4. Paragraph 1 of the commented article establishes that the transfer of the right of subsurface use is carried out in the case of alienation of the right of subsurface use from one person to another on the basis of civil law transactions, or on other grounds provided for by the laws of the Republic of Kazakhstan. This means that if the transfer of the right of subsurface use is supposed to be carried out on the basis provided for by foreign legislation (for example, if one of the subjects is a foreign person), but which is not known to Kazakh law and, accordingly, is not regulated by it, then the transfer of the right of subsurface use will be impossible, although, in our opinion, this approach is controversial. For example, in a situation where, by virtue of conflict-of-laws rules, foreign law may be applied due to the fact that a foreign person acts as the subject of the right of subsurface use.

Paragraph 2 establishes a ban on the transfer of the right of subsurface use in the following cases:

1) under a TPI exploration license in the first year of its validity;

2) under license for geological exploration of subsurface;

3) under a mining license.

These restrictions are set taking into account the specifics of the respective types of subsurface use. In the first case, the prohibition on the alienation of the right of subsurface use under an exploration license in the first year of its validity is associated with minimizing the risks of speculative transactions in the market. Similar bans apply in other countries, such as Western Australia. A complete ban on the alienation of a license for the geological exploration of subsurface is due to the fact that this license is not exclusive and an unlimited number of licenses can be issued on the same subsurface area. For this reason, the rights under such a license cannot be transferred.

A mining license is issued only to individuals and assumes the direct participation of the license holder in conducting subsurface use operations. In this regard, the prospecting license is inalienable.

At the same time, it should be noted that Article 40 of the Subsoil Code does not regulate situations where the withdrawal of the rightholder occurs due to reasons beyond the control of the subject's will, for example, in connection with death.

a natural person who is a subsurface user. Based on the literal meaning of the norm of clause 2 of Article 40 of the Subsoil Code, if such a situation occurs with respect to a mining license, in the first year of the license for exploration or under a license for geological exploration of the subsoil, then the transfer of rights under the license is not allowed.

This provision is not entirely consistent with other provisions of the Subsoil Code. For example, with Article 33 of the Subsoil Code, which establishes an exhaustive list of cases of termination of a license for subsurface use. This list does not provide for such grounds for termination of a license as the death of its holder, except in the case of recognition of the license as extortionate property in accordance with civil law.

In the event of such a situation, a transfer ban cannot be grounds for termination of a subsurface use license, as this is not provided for by the Code on Subsurface Resources.

Paragraph 3 of the commented article establishes the procedure for renewing the license (making changes to the contract) upon transfer of the right of subsurface use. The procedure for reissuing the license (making changes to the contract) is necessary to record the fact of a change of the right holder in respect of all or a share in the right of subsurface use due to a transaction or other event that resulted in the transfer of the right of subsurface use to another person.

Until March 1, 2021, the renewal of the license (amendment of the contract) in connection with the transfer of the right of subsurface use was carried out at the request of the person to whom this right is transferred. On March 1, 2021, amendments were introduced to Article 40 of the Subsoil Code, which changed the procedure for submitting the specified application. These amendments stipulate that the application must be submitted jointly by the person who is the holder of the right of subsurface use and the person who is the recipient of the right of subsurface use.

It should be noted that in some cases this condition cannot be fulfilled, for example, when the transition occurs in the order of inheritance. Thus, in the event of the death of an individual who was a subsurface user, the application cannot be joint. In such cases, the absence of the possibility of submitting a joint application should not serve as a reason for refusing to register the transfer of the right of subsurface use, since the Code on Subsurface Resources does not restrict the transfer of the right of subsurface use by inheritance, except in the cases specified in paragraph 2 of the commented article. There is a legal gap in this provision, which should not serve as a formal basis for limiting the turnover of the right of subsurface use in these cases.

The application is submitted to the state body that issued the license or concluded the contract for subsurface use. However, it should be borne in mind that according to Article 44 of the Constitution, the structure of the Government is determined by the President of the country on the recommendation of the Prime Minister. As a result of the reorganization of the Government structure, the competence of State bodies may change, for example, the functions of the competent authority may be transferred to another State body. However, this does not mean that an application for the transfer of the right of subsurface use must be submitted to the state body that issued the license or concluded the contract for subsurface use, if the specified functions were transferred to another state body. This provision should be considered as an indication of the state body responsible for issuing the appropriate type of license or concluding a contract for subsurface use at the time of transfer of the right of subsurface use.

According to paragraph 3 of the commented article, the transfer of the right of subsurface use requires a renewal of the license or amendments to the contract.

The item under consideration establishes a list of documents that must be submitted to the state body for registration of the transfer of the right of subsurface use.

According to subclause 1 of Part 3 of clause 3 of the commented article, documents confirming the transfer of the right of subsurface use are attached to the application for the transfer of the right of subsurface use. Moreover, such documents must be submitted in the original. This means that the transfer of the right of subsurface use is formalized upon the completion of the transaction (the occurrence of an event) on the alienation of the right of subsurface use.

The application must be accompanied by documents confirming information about the acquirer of the subsoil use right. For individuals, the following information must be confirmed: surname, first name and patronymic (if it is indicated in the identity document), place of residence, citizenship, information about the applicant's identity documents. The wording of Part 3, paragraph 3 of the commented article contains not only an indication of the need to submit documents, but also an indication of what information should be indicated in relation to purchasers. At the same time, the norm in question does not establish a specific list of documents that must be submitted to confirm the required information. In part, an indication of which documents should be submitted is contained in clause 3 itself, from which it follows that information about an individual (full name) must be confirmed by data and identity documents. What

as for information about the place of residence, the situation is more complicated here, since there is no generally recognized document that could confirm information about the place of residence. In this situation, this issue should be attributed to the discretion of the applicant.

For legal entities that acquire the right of subsurface use, in addition to documents confirming information about it, it is necessary to provide information about the controlling persons. The criteria of the controlling person are defined in clause 5 of Article 47 of the Subsoil Code. As follows from the norm under consideration, the ultimate controlling persons may be public joint-stock companies, states, international organizations and individuals. Accordingly, this information should be disclosed up to the final controlling persons.

According to clause 3, part 3, paragraph 3 of the commented article, the person to whom the right of subsurface use is transferred must confirm compliance with the requirements for persons applying for the right of subsurface use. Starting from March 1, 2021, this rule applies only to purchasers of subsurface use rights under contracts for the exploration and production of hydrocarbons, as well as for the extraction of uranium. For subsurface use contracts under the UHF, these requirements are provided for in Article 93. At the same time, such requirements are not provided for in the Subsoil Code for uranium mining contracts.

In practice, it may be difficult to apply subclause 3 of Part 3 of the commented article in terms of confirming compliance with the requirements of the Subsoil Code to persons applying for the right to use the subsoil in the event of the transfer of part of the right to use the subsoil under a subsoil use contract or if the transfer occurs, for example, in the third year of the contract. One of the requirements of art. 93 of the Code on Subsurface Resources, imposed on recipients of the right of subsurface use, is the availability of such a person of the financial resources necessary to meet the minimum requirements for the volume and types of work on the subsurface during the exploration period. Following the literal meaning of the considered norm of the Subsoil Code, it follows that even with a partial transfer of a share in the right of subsurface use, confirmation must be provided as if the transfer concerned 100% of the right of subsurface use, as well as with the transfer of the right of subsurface use after a certain time from the date of conclusion of the contract. However, it follows from the logic of the rule in question that in such cases, confirmation of the availability of financial resources should be provided in proportion to the share of the right of subsurface use or the remaining period of the exploration period.

If the right of subsurface use is encumbered by a pledge, it is also required to provide the consent of the pledgee. This provision duplicates the norm of clause 2 of Article 315 of the Civil Code of the Republic of Kazakhstan.

Starting from March 1, 2021, Part 3 of clause 3 was supplemented by clause 5, which stipulates that the written consent of all joint holders of the right of subsurface use must be attached to the application for the transfer of the right of subsurface use. The Subsoil Code does not contain a definition as to which persons are recognized as joint holders of the right of subsurface use. Article 18 of the Subsoil Code provides that several persons may simultaneously be holders of the right of subsoil use (common ownership). In this case, the norms of the Civil Code of the Republic of Kazakhstan governing the relations of common shared ownership apply to such common ownership. In the Civil Code of the Republic of Kazakhstan, common ownership can take the form of shared ownership and joint ownership. Thus, following the analogy of the Civil Code of the Republic of Kazakhstan, joint holders of the right of subsurface use should be understood as cases when the provisions of the Civil Code of the Republic of Kazakhstan on the right of common joint ownership, for example, joint ownership of spouses, apply to the right of subsurface use. For this reason, we believe that this rule should be brought into account the provisions of art. 18 of the Subsoil Code.

The transfer of the right of subsurface use, as a rule, requires obtaining the prior consent of the state by obtaining a permit (art. 44 of the Subsoil Code). And if the transfer of the right of subsurface use is carried out on the basis of such a permit, in this case, the submission of documents that were previously provided upon receipt of the permit is not required if the applicant has provided written confirmation that the information about him has not changed compared with the information provided by him to obtain the specified permit. We are talking about documents containing the information specified in paragraphs 2 and 3 of part 3 commented articles.

All submitted documents must be in Kazakh and Russian.

Paragraph 4 of the commented article contains a list of grounds for refusing to renew the license or amend the contract based on the results of consideration of the application. One of the grounds for refusal is the non-compliance of the terms of the transfer of the right of subsurface use with the issued permit, if such a transfer is carried out in accordance with such a permit (clause 2, clause 4).

It should be noted that neither the commented article nor Article 44 of the Subsoil Code, which regulates the procedure for issuing permits, contains provisions that provide for the possibility of determining the conditions for the transfer of the right of subsurface use or the conditions for permission to transfer the right.

subsurface use. In the case under consideration, the terms of the transfer of the right of subsurface use or permission to transfer the right of subsurface use should be understood as the information that was indicated by the applicant when obtaining permission to transfer the right of subsurface use in accordance with paragraphs 1-4, as well as other information requested in accordance with Part 6, paragraph 6, Article 44 of the Subsoil Code. Based on this information, the State decides on the possibility or impossibility of issuing a permit for the transfer of the right of subsurface use. Of course, an unscrupulous person may take advantage of the opportunity not to submit the relevant information again, even if in fact this information has changed, however, in this case, the transaction on the transfer of the right of subsurface use will be considered void (see the commentary to art. 44 of the Subsoil Code).

A refusal to register the transfer of the right of subsurface use is made in cases when such a transfer is carried out on a subsurface area on which the subsurface user is prohibited from conducting subsurface use operations or certain types of work in accordance with the imposed administrative penalty. Although the Administrative Code of the Republic of Kazakhstan does not provide for a ban on the alienation of property rights as a measure of administrative punishment, but since a special legal regime applies to the right of subsurface use, the state, as the owner of the subsoil, may establish the specifics of the transfer of the right of subsurface use. This restriction on the transfer of the right of subsurface use is related to the need to ensure the interests of the state when a subsurface user conducts subsurface use operations in violation of the requirements of the legislation, which led to a ban on their conduct. In this case, we are talking about significant violations, since an administrative ban is imposed by a court as a last resort and the alienation of the right of subsurface use should not be used to circumvent the imposed restriction.

The transfer of the right of subsurface use may be refused in cases where such a transfer is prohibited by the Code on Subsurface Resources (see paragraph 2 of the commented article), as well as when the transfer of the right of subsurface use (a share in the right of subsurface use) would entail a violation of the provisions of international treaties concluded by the Republic of Kazakhstan. This requirement is conditioned by the priority of international law over the norms of national law, including the provisions of the Subsoil Code. For example, the development of bordering hydrocarbon deposits can be carried out on the basis of international agreements (see Article 149 of the Subsoil Code). The terms of such agreements may provide for a special procedure for the alienation of the right of subsurface use in such fields. For example, the Republic of Kazakhstan and the Russian Federation have signed a Protocol to

The Agreement between the Republic of Kazakhstan and the Russian Federation on the Delimitation of the Bottom of the Northern Part of the Caspian Sea for the purpose of exercising sovereign rights to Subsurface Use dated July 6, 1998, ratified by both sides. This procedure provides for a special procedure for the transfer of the right of subsurface use in border structures (sites).

Refusal to renew the license on the grounds specified in clause 1, clause 4 of the commented article does not deprive the acquirer of the right of subsurface use to re-apply for renewal of the license or amendments to the contract. Does this mean that if the license is refused to be renewed or the contract is amended for other reasons, re-application is prohibited? We believe not, since the article being commented on does not explicitly prohibit the re-filing of an application. The provisions of paragraph 4 should be considered as an indication that the application should be resubmitted after the grounds that served as a refusal to renew the license or amend the contract have been eliminated.

It should be noted that the provisions of Chapter 5 of the Subsoil Code, according to Article 277, are "retroactive", which raises questions in law enforcement practice regarding the application of certain provisions of Article 4 in relation to contracts for subsurface use concluded before the entry into force of the Subsoil Code.

It should be noted that certain provisions of the commented norm should be applied to previously concluded contracts, taking into account the specifics of regulation and taking into account other provisions of the Subsoil Code governing the specifics of the procedure for making changes to the contract. For example, the provisions of paragraph 2 of Article 40 (prohibition on the renewal of licenses for subsurface use) cannot be applied to previously concluded contracts for subsurface use. In addition, the procedure for making amendments to the subsoil use contract should be carried out taking into account the provisions of paragraph 12 of art. 278 of the Subsoil Code, which define a special procedure for making changes to contracts concluded before the entry into force of the Subsoil Code, and as a special rule it will have priority.

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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