Compulsory alienation of property for state needs in exceptional cases provided for by law may be carried out on condition of its equivalent compensation.

LLP "A" (hereinafter referred to as the partnership) filed a lawsuit with the Mayor of Kostanay (hereinafter referred to as the akim): - to declare illegal the decree of the Akimat of Kostanay (hereinafter referred to as the Akimat) No. 395 dated February 14, 2014 "On the beginning of compulsory alienation of land in connection with the seizure for state needs" (further, Resolution No. 395), according to which a land plot of 0.4103 hectares owned by the partnership, located at 74 Gogol Street, Kostanay, is subject to seizure for state needs.; - compensation for moral damage in the amount of 5,000,000 tenge. JSC "B" (hereinafter referred to as the bank) was involved in the case as a third party who does not make independent claims on the subject of the dispute, on the side of the plaintiff, on the side of the defendant, the State Institution "Department of Land Relations of the Akimat of Kostanay" (hereinafter referred to as the Department of Land Relations), the State Institution "Department of Architecture and Urban Planning of the Akimat of the city Kostanay", the State Institution "Department of Housing and Communal Services, Passenger Transport and Highways of the Akimat of Kostanay" and the State Enterprise "Kostanay City Park of Culture and Recreation" (hereinafter referred to as the city Park).

The claim was denied by the decision of the specialized interdistrict Economic Court of Kostanay region dated November 10, 2014. By a decision of the appellate judicial board of the Kostanay Regional Court, the decision of the court of first instance was overturned regarding the refusal to declare illegal resolution No. 395, with a new decision in this part to satisfy these requirements. The resolution of the Akimat No. 395 was declared illegal and canceled. The rest of the decision of the court of first instance remains unchanged. By the decision of the cassation judicial board of the Kostanay Regional Court, the decision of the court of appeal regarding the satisfaction of the claim was canceled, while the decision of the court of first instance remained in force. Otherwise, the appeal ruling remained unchanged. The Supervisory Judicial Board for Civil and Administrative Cases of the Supreme Court overturned the decision of the cassation instance, upholding the decision of the appeals board of the same court dated January 15, 2015 on the following grounds. It follows from the case file that the partnership owns a property complex – the building of the cinema "40 years of Kazakhstan" with a fast-food snack bar and a disco, two plots of land: - 0.1573 hectares under the cadastral number 12-193-013-167, with the intended purpose for servicing the cinema "40 years of Kazakhstan"; - 0.4103 hectares under the cadastral number 12-193-013-1074, with a specific purpose – for the construction of an entertainment center with a cinema, restaurant, playgrounds, offices and hotel rooms.

The partnership's ownership of the property complex arose on the basis of a purchase and sale agreement dated October 10, 2012, and was registered with the authorized body on October 16, 2012. The property complex was acquired by the partnership for the purpose of further reconstruction, the financing of which needed state support. Therefore, the project "Acquisition of a property complex for the purpose of its further expansion" was developed, submitted by the partnership for consideration by the authorized body. Bulletin of the Supreme Court of the Republic of Kazakhstan No. 12/2015 20 The Regional Coordinating Council for Accelerated Industrial Development of Kostanay region, chaired by Deputy Akim of the region D., approved the possibility of state support for this project in the form of subsidizing the interest rate on a bank loan under the Business Roadmap 2020 program (minutes of the meeting dated November 28, 2012 No. 126). This circumstance was the basis for the conclusion between the partnership and the bank of an agreement on the provision of a credit line under the Business Roadmap 2020 program as part of the implementation of the first direction dated November 30, 2012 No. 11/30/12/KOS/816. Under this agreement, the bank provided the partnership with a credit line in the amount of 616,435,000 tenge, for a period of 120 months (until November 29, 2022), with the payment of remuneration for the use of the loan at eleven percent per annum, of which seven percent is subsidized under the Business Roadmap 2020 program.

The first tranche of the loan – 350 million tenge - was received by the partnership on November 30, 2012. The fulfillment of the borrower's obligations is secured by the pledge agreement No. 816 dated September 5, 2013, the subject of the pledge is the property that will become the property of the partnership in the future: the building of the entertainment center with land plots of 0.1573 and 0.4103 hectares. The reconstruction of the property complex was authorized by Akimat Resolution No. 2640 dated December 13, 2012 (hereinafter referred to as Resolution No. 2640), the architectural and planning assignment was issued on December 26, 2012, all necessary approvals and permits were received, and on August 27, 2013, the partnership notified the authorized body of the start of construction and installation work. However, Resolution No. 2640 was repealed by Akimat Resolution No. 2846 dated December 24, 2013 (hereinafter referred to as Resolution No. 2846). In turn, Resolution No. 2846 was repealed by Akimat Resolution No. 427 dated February 20, 2014 (hereinafter referred to as Resolution No. 427). The issuance of Resolution No. 427 was actually formal, since on February 14, 2014, the Akimat issued the contested resolution No. 395, according to which, for the construction of public facilities, a land plot of 0.4103 hectares owned by the partnership under cadastral number 12-193-013-1074 is subject to compulsory alienation due to seizure for state needs. The notice of compulsory alienation of the land plot was sent to the partnership on February 20, 2014. The Partnership, considering Resolution No. 395 illegal, filed the lawsuit in question. The court of first instance dismissed the claim, citing the defendant's compliance with all legal requirements during the procedure of compulsory alienation of the land in connection with the seizure for state needs.

The cassation board agreed with this position, pointing out that the court of appeal, in making a different decision, went beyond the scope of the dispute. Meanwhile, the conclusions of the court of appeal on the illegality of the contested resolution No. 395 are based on the law and the circumstances relevant to the case. By virtue of paragraph 3 of Article 26 of the Constitution of the Republic of Kazakhstan, compulsory alienation of property for state needs in exceptional cases provided for by law may be carried out subject to equivalent compensation. Exceptional cases for the compulsory alienation of a land plot for state needs are established in article 84 of the Land Code of the Republic of Kazakhstan. Indeed, the above-mentioned norm mentions the construction of public facilities in populated areas, which is referred to in the contested resolution. However, it was reliably established in the court proceedings that the seizure of the land plot was initiated by the city park "in order to accommodate various concert venues and other public facilities."  In fact, the only letter from the city park was the basis for the issuance of the contested resolution No. 395, which did not specify for the construction of which public facility it was necessary to seize a privately owned land plot. The letter from the city park also does not disclose which public facility is planned to be built on the seized land. At the same time, the partnership uses the land plot belonging to it for its intended purpose, in accordance with the general development plan of the city of Kostanay. The seizure of the land precludes the possibility of the partnership implementing an investment project approved by the Coordinating Council for Accelerated Industrial Development of Kostanay region and subsidized from budget funds under the Business Roadmap 2020 program. In such circumstances, the court of appeal came to the correct conclusion that the proposed construction of facilities for the city park does not fall under the exceptional case that allows the compulsory seizure of land for public needs. 

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