Jurisdiction of tax disputes in which the investor is a party
According to the statistical data of IP "Torelik", the definitions of the specialized judicial board of the Supreme Court of the Republic of Kazakhstan have sent 13 or 59% of applications from large investors by jurisdiction. Of these, 7 applications from large investors to the State Revenue Departments of various regions to appeal notifications of additional taxes and other mandatory payments to the budget, for failure to confirm the authenticity of the excess value-added tax refund, were sent to the Astana City Court due to their attribution to other disputes related to investment activities. It followed from the content of the submitted applications that the disputes were related to the fulfillment by investors of the general provisions of tax legislation, and not any individual terms of the investment agreement (in particular, subsurface use), for example: 1) the application of JSC "O" to the RSU "Department of State Revenue for the West Kazakhstan region" on appeal of the notification dated February 10, 2016 on non-confirmation of the authenticity of the amount of excess value-added tax presented for refund; 2) the application of LLP "U" to the State Revenue Agency "Department of State Revenue for the West Kazakhstan region" on appealing the notification dated September 28, 2015 on additional charges for emissions into the environment; 3) the application of JSC "K" to the State Revenue Agency "Department of State Revenue for the Mangystau region" on appealing the notification dated January 12, 2016 of the year on additional corporate income tax, excess profit tax and social tax. 4) the application of JSC "C" to the Russian State Institution "Department of State Revenue for the Aktobe region" on appealing the notification dated January 28, 2016 on additional corporate income tax, excess profit tax, and commercial discovery bonus. 5) the application of the Company "M" to the Russian State Institution "Department of State Revenue for the Mangystau region" on appealing the notification of non-confirmation of the authenticity of the amount of value-added tax presented for refund. According to the Prosecutor General's Office and the State Revenue Committee of the Ministry of Finance, such disputes are within the jurisdiction of district and equivalent courts and should be dealt with in a generally prescribed manner, since they do not arise from the investment activities of investors.
In connection with the emergence of a dispute over the jurisdiction of these cases between the investor applicant, the state authorities and the prosecutor involved in the case, as part of their consideration by a specialized judicial board, rulings on giving an opinion to the members of the International Council at the Supreme Court were sent in accordance with Article 77 of the CPC. According to these conclusions, investor disputes with government agencies based on relations of authority and subordination (for example, disputes with tax, customs, and environmental protection authorities) that arose as a result of the exercise by these authorities of the competence prescribed by the state, even if these authorities, within their competence, verified the fulfillment of obligations established in the contract, They cannot be classified as investment projects. Such non-contractual investor disputes with government agencies as "other disputes related to investment activities" are subject to consideration by the Astana City Court. In addition, tax disputes between investors and state revenue authorities have been classified by the Supreme Court as disputes related to investment activities (referred to the jurisdiction of the Astana City Court) due to the following circumstances. As you know, the majority of foreign investors have invested their capital in subsurface use. Based on the contracts concluded with them, the state has assumed an obligation to provide benefits and preferences, including by explicitly specifying in legislative acts (for example, special provisions of the Tax Code are provided for subsurface users in the field of uranium mining). Violation by the state revenue authorities of the taxation procedure established for investors is regarded by the latter as a violation of obligations on the part of the state, therefore it directly affects their investment activities. Judicial practice has shown the correctness of this approach, since the bulk of the investment disputes received are related to investors appealing notifications of additional taxes and other mandatory payments to the budget.
Questions about jurisdiction have also been raised by investors' applications to appeal against decisions (actions) of government officials, in particular, the orders of state environmental inspectors on compliance with environmental legislation. For example, a civil case on the application of "T" LLP to appeal the actions of the state environmental inspector for Atyrau region Zh., considered on the merits by the Astana city Court (decision of November 10, 2016). The defendants' representatives argued that the official was not a government agency, so the dispute was under the jurisdiction of the district court. The Supreme Court concluded that, in accordance with the provisions of the Law on Administrative Procedures, an official performs his functions and powers on behalf of a State body, and the procedure for appealing their actions and decisions is identical to the procedure for appealing decisions of State bodies. Since the dispute is related to the investment activity of the subsurface user and entails consequences in the form of compensation for the amounts of economic assessment of environmental damage (as a rule, these are significant multimillion-dollar amounts), it must be considered by the Astana city court. Conclusions and suggestions on the issue of delineating the category and jurisdiction of cases: The imperfection of the norms of the Business Code in terms of defining the concepts of "investment", "investment activity", "investor", the lack of criteria for distinguishing the category of cases: investment disputes from other disputes related to the investor's investment activity, leads to a conditional division of the category and jurisdiction of disputes involving investors between the Astana city court and a specialized judicial board. This situation creates red tape and, as a result, does not contribute to the uniformity of judicial practice and increase investor confidence in the judicial system. 1. It follows from the content of the concepts of "investor" and "investment activity" laid down in Article 274 of the PC that an investor is any person who has contributed money and property to the authorized capital or increased the fixed assets of a legal entity for the purposes of entrepreneurial activity. Practice shows that it is not these individuals who apply to the courts, but legal entities created under the legislation of Kazakhstan, in which foreign investors have invested, or Kazakh branches of foreign companies that have concluded an investment agreement with a government agency. In this regard, taking into account the recommendations of the two round tables held by the Supreme Court on the consideration of investment disputes, as well as the opinions of the members of the International Council, it is proposed, without changing the provisions of the Business Code, to amend and supplement the Code of Civil Procedure. In particular:
In connection with the definition of the concepts of "investment", "investor" and "investment activity" set out in Article 274 of the PC, any business entity is considered an investor who has the right to consider a case with his participation in a new type of legal proceedings.
Accordingly, any corporate or business dispute considered in specialized economic courts can be recognized as an investment dispute. At the same time, it is not the specified persons who apply to the courts, but legal entities created under the legislation of Kazakhstan, in which foreign investors have "invested" or Kazakh branches of foreign companies that have concluded an investment agreement with a government agency. Therefore, in order to specify and differentiate the types of civil law disputes, it is proposed to define in the CPC that specialized investment dispute courts consider civil cases involving: 1) a foreign legal entity that carries out business activities in the territory of the Republic of Kazakhstan through its branch by placing fixed assets in it (for example, oil producing companies that are located outside the Republic of Kazakhstan, but carry out oil production activities in Kazakhstan through a specially established Kazakh branch); 2) a legal entity established with the participation of a foreign investor (an individual or a legal entity) in accordance with the legislation of the Republic of Kazakhstan, in which the share of foreign capital is more than 50% (for example, partnerships in which foreign persons are participants with a share in the authorized capital, joint-stock companies whose major shareholders are foreign persons); 3) domestic investors in the presence of an investment agreement concluded with the state. This is consistent with the Washington Convention on the Settlement of Investment Disputes of March 18, 1965 (the Republic of Kazakhstan joined by Decree of the President of the Republic of Kazakhstan dated July 20, 2004), which defines an "investment dispute" as a dispute between a foreign investor and the State represented by its authorized bodies on all issues related to investments.
Thus, foreign investors acquire priority protection of violated rights, which contributes to the realization of the set goal of improving Kazakhstan's investment attractiveness for foreign capital. Among domestic entrepreneurs, not all business entities receive such protection, but only those that have investment agreements concluded with the state through its authorized bodies aimed at creating new jobs and improving national infrastructure in the long term. Such clarification of the subjects of investment disputes will make it possible to more clearly divide their jurisdiction between the courts dealing with investment disputes and specialized economic courts dealing with other economic disputes. It is also proposed to provide a separate article in the CPC with a specific list of disputes, following the example of the concepts and types of "corporate disputes" specified in Article 27 of the CPC. Such a list has already been determined by the Supreme Court in a legal clarification prepared jointly with members of the International Council, which is published on the Supreme Court's Internet resource. 2. It is proposed to add an addition to Article 149 of the Civil Procedure Code on placing the burden of proving the jurisdiction of the dispute (to the Astana City Court or the Supreme Court) on the plaintiff. The mandatory list of documents attached to the statement of claim should include: 1) copies of investment agreements concluded between the investor and the authorized state body; 2) documents confirming the investor's investment activities (work programs and reports on the fulfillment of contractual conditions, investment programs, etc.); 3) documents confirming the involvement of the investor in administrative responsibility (if any). To establish that the absence of the specified information and documents in accordance with subparagraph 2) of paragraph 1 of Article 152 of the CPC entails the return of the filed statement of claim (application) with all attached documents.
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