Disputes related to the execution of the contract on public procurement of services
Paragraph 10 of the regulatory resolution of the Supreme Court of the Republic of Kazakhstan "On the application of legislation on public procurement by Courts" dated December 14, 2012 No. 5 states that amendments to the public procurement contract may be made during its validity period, since, in accordance with Article 386 of the Civil Code, the expiration of the contract entails the termination of obligations under the contract. "A" (hereinafter referred to as JSC "A") filed a lawsuit against the joint–stock company "Center of Transport Service" (hereinafter referred to as – CTS JSC) on amendments to the agreement on public procurement of services dated December 11, 2019 No. 7/20-3 A-E, concluded between the parties. The claim was denied by the decision of the specialized interdistrict economic Court of the city of Nur-Sultan dated June 9, 2020. By the decision of the Judicial board for civil cases of the Nur-Sultan City Court dated September 2, 2020, the decision of the court of first instance remained unchanged. The Judicial Board for Civil Cases of the Supreme Court upheld the judicial acts of the local courts, the petition of JSC "A" was dismissed on the following grounds. It follows from the case file that on December 11, 2019, CTS JSC (branch owner) and A JSC (branch user) concluded a public procurement agreement for services, according to which the branch owner provides 4,983-meter access road services for rolling stock, provided there is no competitive access road for a total amount of 154,383,688.37 tenge.
Disputes related to the execution of the contract on public procurement of services
The agreement is valid from January 1 to December 31, 2020. JSC "A", pointing out that the length of the access road does not correspond to the actual length of the access road for the delivery of goods to CHP-1, which affects the amount of its costs for services, appealed to the court with the lawsuit in question. In particular, the JSC proposed: – paragraph 5 of section 3 of the contract should be worded as follows: "The expanded length of the access road belonging to the branch owner is 5621.5 meters, of which the length of the access road within the boundaries from switch No. 154 to switch No. 371, provided to the branch user for the passage of rolling stock to CHP-1, is 400 meters"; – in appendix No. 1, column 5 should be worded as follows: "Services for the provision of an access road for the passage of rolling stock to CHP-1 (the length of the access road is 400 meters)"; in columns 8 and 13, change the amount to "KZT 12,392,084.36"; – consider the amendments effective from January 1, 2020; – consider the appendix "Calculation of fees for the provision of access roads for the passage of rolling stock in the absence of a competitive access road for the period from January 1 to December 31, 2020" invalid the power. The plaintiff cited a significant violation of the terms of the contract by the defendant as the basis for the amendment of the public procurement contract dated December 11, 2019, which entails such damage to the plaintiff that he is largely deprived of what he had the right to expect when concluding the contract.
When concluding the contract, JSC "A" did not know the actual length of the access road for the passage of rolling stock to CHP-1, since no contract had previously been concluded for the provision of access road services for this section. The above-mentioned arguments of the plaintiff were not confirmed in court. According to paragraph 2 of Article 401 of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code), at the request of one of the parties, the contract may be amended or terminated by a court decision only: 1) in the event of a material breach of contract by the other party; 2) in other cases stipulated by the Civil Code, other legislative acts or a contract. A violation of the contract by one of the parties is considered significant, which entails such damage to the other party that it is largely deprived of what it was entitled to expect when concluding the contract. By virtue of article 72 of the Civil Procedure Code of the Republic of Kazakhstan, each party must prove the circumstances to which it refers as the grounds for its claims and objections, use remedies, assert, challenge facts, provide evidence and objections to evidence within the time limits set by the judge, which correspond to the fair conduct of the process and are aimed at facilitating the proceedings. Thus, according to the above-mentioned norms of the law, in the case under consideration, a contract can be amended by a court decision only if there are significant violations of the contract on the part of the defendant, and the burden of proving the existence of this violation lies with the plaintiff. At the same time, the requirements of JSC "A" have not been objectively confirmed by anything. The plaintiff did not provide evidence of a significant breach of contract by the defendant. The Board did not consider the existence of such evidence in the arguments of the plaintiff's petition. The explanations of the representative of JSC "A" that in fact they use only 400 meters of track, and therefore there is an excess of unreasonable transportation costs, cannot indicate a violation of the contract by the defendant.
In the case, it was established that the defendant had fulfilled his contractual obligations in full since the beginning of the service period. In addition, during the cassation review, the representative of JSC "A" confirmed that the obligations under the contested agreement had been terminated due to the execution and expiration of the agreement. In accordance with Article 386 of the Civil Code, the expiration of the contract entails the termination of obligations under the contract, and by virtue of paragraph 4 of Article 403 of the Civil Code, the parties are not entitled to demand the return of what they performed under the obligation prior to the amendment of the contract, unless otherwise established by legislative acts or agreement of the parties. Paragraph 10 of the regulatory resolution of the Supreme Court of the Republic of Kazakhstan "On the application of legislation on public procurement by Courts" dated December 14, 2012 No. 5 states that amendments to the public procurement contract may be made during its validity period, since, in accordance with Article 386 of the Civil Code, the expiration of the contract entails the termination of obligations under the contract. The Court correctly established that since the contract was concluded within the framework of public procurement, changes to it can be made in cases provided for by the legislation on public procurement. Paragraph 2 of Article 45 of the Law of the Republic of Kazakhstan "On Public Procurement" (hereinafter referred to as the Law) provides for an exhaustive list of grounds for making changes to the concluded public procurement contract, provided that the quality and other conditions that formed the basis for choosing a supplier remain unchanged. This list is not subject to extended interpretation. The Court did not establish the legal grounds for making changes to the concluded public procurement contract provided for in paragraph 2 of Article 45 of the Law.
Disputes related to the execution of the contract on public procurement of services
During the trial, the plaintiff also did not provide or substantiate the grounds for making changes to the concluded public procurement contract specified in paragraph 2 of article 45 of the Law. The arguments of the petition for non-compliance by the defendant with the norm of subparagraph 34) of paragraph 2 of Article 26 of the Law of the Republic of Kazakhstan "On Natural Monopolies" are untenable. Amendments and additions have been made to the Law "On Natural Monopolies", which establishes the obligation of a natural monopoly entity to charge a fee for the provision of access road services in the absence of a competitive access road based on the actual length of the access road used by the consumer for the passage of rolling stock. In accordance with Articles 4 and 383 of the Civil Code, acts of civil legislation are not retroactive and apply to relations that have arisen after their entry into force. If, after the conclusion of the contract, the legislation establishes rules binding on the parties, other than those in force at the conclusion of the contract, the terms of the concluded contract remain in force, except in cases where the legislation establishes that its effect extends to relations arising from previously concluded contracts. The Law "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on railway transport" dated December 27, 2019 did not give retroactive effect to the regulatory legal act. Consequently, the provisions of subparagraph 34) of paragraph 2 of Article 26 of the Law of the Republic of Kazakhstan "On Natural Monopolies", put into effect after the conclusion of the contract, do not apply to relations that arose before their entry into force.
Attention!
Law and Law Law Law draws your attention to the fact that this document is basic and does not always meet the requirements of a particular situation. Our lawyers are ready to assist you in legal advice, drawing up any legal document suitable for your situation.
For more information, please contact a Lawyer / Attorney by phone: +7 (708) 971-78-58; +7 (700) 978 5755, +7 (700) 978 5085.
Attorney at Law Almaty Lawyer Legal Services Legal Advice Civil Criminal Administrative Cases Disputes Protection Arbitration Law Firm Kazakhstan Law Office Court Cases
