Fulfillment of contractual obligations with subsurface use
According to the provision of the Rules for granting the Right of Subsurface use, approved by Resolution of the Government of the Republic of Kazakhstan No. 1456 dated December 30, 2010, the granting of the right of subsurface use for exploration, production, combined exploration and extraction of minerals, with the exception of common ones, is carried out by the competent authority.
The competent authorities for granting the right of subsurface use are:
1) for exploration, production, combined exploration and production of hydrocarbons, uranium and coal, – Ministry of Energy of the Republic of Kazakhstan;
2) for exploration, extraction, combined exploration and extraction of groundwater, therapeutic mud and solid minerals, except for uranium and coal, – the Ministry of Investment and Development of the Republic of Kazakhstan.
The right of subsurface use for exploration or extraction of common minerals is granted by local executive bodies of regions, cities of republican significance, and the capital.
The granting of the right of subsurface use for the construction and (or) operation of underground structures not related to exploration or production is carried out by local executive bodies of regions, cities of republican significance, and the capital.
Paragraph 2 of Article 2 of the Law "On Subsoil and Subsurface Use" stipulates that civil law relations related to the right of subsurface use are regulated by the norms of the civil legislation of the Republic of Kazakhstan, if they are not regulated by the norms of this Law.
If an international treaty ratified by the Republic of Kazakhstan establishes rules other than those contained in this Law, the rules of the international treaty shall apply.
Thus, by the ruling of the specialized interdistrict Economic Court of the Almaty region dated March 30, 2015, the statement of claim of the Industrial and Innovative Development Department of the Almaty region against JSC NC SEC Zhetysu for the termination of the subsoil use contract was returned on the basis of paragraph 1 of part 1 of Article 154 of the Civil Procedure Code of the Republic of Kazakhstan (hereinafter - CPC), with all attached documents in connection with the plaintiff's failure to comply with the pre-trial dispute resolution procedure.
At the same time, the court motivated its conclusions by the norms of Article 402 of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code), according to which a party may file a claim to amend or terminate a contract with the court only after receiving a refusal from the other party to the proposal to amend or terminate the contract or failure to receive a response within the time period specified in the proposal or established by law or by contract, and in its absence – within thirty days.
We believe that the return of the statement of claim on such grounds is incorrect, since the procedure for concluding, amending, and terminating contracts is regulated in the special Law "On Subsoil and Subsoil Use" dated June 24, 2010 No. 291-IV (hereinafter referred to as the Law).
By virtue of article 128 of the Law, disputes related to the execution, modification or termination of a contract are resolved through negotiations. If disputes related to the performance, modification or termination of a contract cannot be resolved in accordance with paragraph 1 of the said article, the parties have the right to resolve disputes in accordance with the laws of the Republic of Kazakhstan and international treaties ratified by the Republic of Kazakhstan.
According to paragraph 2 and subparagraph 1) of paragraph 3, paragraph 6 of Article 72 of the Law of the Republic of Kazakhstan "On Subsoil and Subsoil Use", early termination of the contract is allowed by agreement of the parties, as well as in cases provided for by this Law, at the request of one of the parties. The competent authority has the right to unilaterally terminate the contract ahead of schedule in the following cases::
1) if the subsurface user fails to eliminate more than two violations of obligations established by the subsurface use contract or project documents within the time period specified in the notification of the competent authority; Violation of the terms of the contract, completely eliminated by the subsurface user within the time period specified in the notification of the competent authority, is not grounds for early termination of the contract unilaterally.
The local executive body of a region, a city of republican significance, or the capital has the right to unilaterally terminate the contract for exploration or extraction of common minerals ahead of schedule if the subsurface user fails to eliminate more than two violations of obligations established by the subsurface use contract or project documents within the period specified in the notification of the competent authority.
Violation of the terms of the contract, which is completely eliminated by the subsurface user within the time period specified in the notification of the local executive body of the region, the city of republican significance, the capital, is not a reason for early termination of the contract unilaterally.
It follows from this provision of the Law that in case of non-fulfillment of the terms of the contract or violations of its terms, the Competent Authority has the right to terminate it unilaterally.
Thus, in case of violations, the Competent Authority, without going to court with a claim for termination of the contract, has the right to terminate the contract unilaterally ahead of schedule.
Article 72 of the Law regulates the procedure for termination of a subsurface use contract at the initiative of the competent authority and the subsurface user. The application of the competent authority to the court with a claim for termination of the contract is not provided for by this Law.
It follows that claims by the Competent Authorities for termination of the contract are not subject to consideration in civil proceedings, since this issue does not fall within the jurisdiction of the court.
At the same time, in accordance with the norm of paragraph 8 of Article 72 of the Law, the claims of the subsurface user for early termination of the contract are subject to judicial review, or the subsurface user has the right to unilaterally cancel the contract on the grounds established by the contract.
The Law of the Russian Federation "On Subsoil" (hereinafter – the Law of the Russian Federation). Articles 20 and 21 of this Law regulate the grounds and procedure for termination of subsurface use contracts. It follows from these norms (paragraphs 2.3 and 5 of part 2 of Article 20) that the decision to terminate the right to use the subsoil by the competent authority may be taken after three months from the date of receipt by the user of the subsoil of a written notification of violations committed by him, provided that the user has not eliminated these violations within the specified period; systematic violation by the user of the established rules of subsurface use; in case of violation of the essential conditions of the licenses and did not start using the subsoil in the prescribed volumes.
The use of subsurface resources is terminated immediately after the competent authority makes a decision on this with a written notification to the user of the subsurface. Article 50 of the said Law provides for the right of a subsurface user to appeal in court the decision of the competent authority to terminate the right of subsurface use.
Thus, Russian legislation does not provide for the provision on termination of a contract in court on the initiative of the competent authority.
At the same time, this issue is subject to discussion and requires clarification, since there is no judicial practice of the Supreme Court of the Republic of Kazakhstan in these categories of cases.
In accordance with paragraph 5 of Article 68 of the Law of the Republic of Kazakhstan "On Subsoil and Subsurface Use", the conclusion of a contract is the basis for registration of a land plot by a local executive body of a region, city of republican significance, capital within thirty working days from the date of the request of the subsurface user, except in cases of forced withdrawal of a land plot (land use rights) for state needs in accordance with with the land legislation of the Republic of Kazakhstan.
From the analysis of this provision of the law, it follows that within thirty working days from the date of the subsurface user's request, the local executive body must submit the land use right if the requirements provided for in Article 43 of the Land Code (as amended at the time of the dispute) are met.
The state institution (hereinafter referred to as the State Institution) "Management of Entrepreneurship and Industry of the Akmola region" filed a lawsuit against the Limited Liability Partnership (hereinafter referred to as LLP) "Quarry-Cum" for the obligation to fulfill obligations, arguing that the defendant violated the requirements of the contract for the combined exploration and production of construction sand on the site "Romanovsky" of the Tselinograd district
Akmola region No. 50 dated 08/19/2005 and the legislation on subsoil and subsoil use. The contract was terminated by Order No. 69 dated 14.10.2014. The claim was satisfied by the decision of the specialized interdistrict economic court of Akmola region dated April 28, 2015.
The court decided: to oblige Quarry-Kum LLP to fulfill its obligations to restore the Romanovsky contract territory of the Tselinograd district of the Akmola region of the Republic of Kazakhstan to a state safe for the health and life of the population and the environment and to take measures to eliminate the consequences of its activities related to subsurface use operations under contract No. 50 dated 08/19/2005, in within six months from the date of entry into force of the decision. The court's decision was not appealed and entered into force on June 15, 2015.
The court's conclusions are based on the following provisions of the law and the terms of the contract. According to clause 7.2.19 of the Contract, the contractor is obliged to restore the plots of land and other natural objects, the condition of which was violated by the Contractor's activities under the Contract, to a condition suitable for further use in accordance with the requirements of the legislation of the State.
In accordance with paragraph 9 of Article 72 of the Law, termination of the contract does not release the subsurface user from fulfilling obligations to return the contract territory to the state and eliminate the consequences of subsurface use operations in accordance with the requirements of the legislation of the Republic of Kazakhstan.
According to subclause 25) of clause 1 of Article 76 of the Law, a subsurface user is obliged to restore land plots and other natural objects violated as a result of subsurface use operations to a condition suitable for further use, in accordance with the legislation of the Republic of Kazakhstan.
Paragraph 1 of Article 80 of the Law establishes that upon termination of subsurface use operations, all production facilities of the subsurface user and land plots must be brought into a condition that ensures the safety of life, public health and environmental protection, and the consequences of the activities of subsurface users must be eliminated in accordance with the procedure established by the legislation of the Republic of Kazakhstan.
Legislative framework
The main regulatory legal acts regulating disputes concerning the conclusion, amendment, and termination of subsurface use agreements are:
The Constitution of the Republic of Kazakhstan,
The Law of the Republic of Kazakhstan "On Subsoil and Subsoil Use" dated June 24, 2010,
Environmental Code of the Republic of Kazakhstan,
The Civil Code of the Republic of Kazakhstan,
The Land Code of the Republic of Kazakhstan,
The Civil Procedure Code of the Republic of Kazakhstan,
Rules for granting the right of subsurface use, approved by Resolution of the Government of the Republic of Kazakhstan No. 1456 dated December 30, 2010, etc.
The Law of the Republic of Kazakhstan "On Subsoil and Subsurface Use" is the basic legislative act that regulates relations arising during the implementation of subsurface use operations.
Attention!
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