Unilateral Withdrawal from a Contract

Challenging a unilateral withdrawal from a contract may be carried out by filing a claim to declare such withdrawal invalid.

LLP “B” filed a lawsuit against RSI “Z” seeking to challenge the unilateral termination of the contract.

By the decision of the Specialized Interdistrict Economic Court (SIEC) of Pavlodar Region dated November 30, 2023, the claim was dismissed. By the ruling of the Judicial Panel for Civil Cases of the Pavlodar Regional Court dated February 27, 2024, the first-instance court’s decision was overturned and a new decision was issued to satisfy the claim.

In this civil case, on July 10, 2018, a contract was concluded between LLP “B” and a local authority for conducting fish farming activities on Lake Karasor in the Maysky District of Pavlodar Region for a period of 42 years. Under the terms of the agreement, the plaintiff, as the user, was obligated to ensure protection and reproduction of wildlife resources, establish a ranger (gamekeeping) service, and organize security activities. In case of breach of obligations by the user, the local authority was granted the right to unilaterally terminate the contract.

Due to the identification of more than two dozen cases of gross violations of fishing rules involving the use of numerous prohibited fishing methods, initiation of administrative and criminal proceedings, and the plaintiff’s failure to properly fulfill obligations for the protection of fish resources, the defendant sent a notice to the plaintiff on September 2, 2022, regarding early termination of the contract. The court of first instance, having considered numerous violations of legislation and contractual terms, dismissed the claim.

The appellate court, overturning the first-instance decision, generally stated that the violations of obligations by LLP “B” were not proven, and also referred to the fact established in court on February 7, 2022, of unlawful allocation by the local authority of a territory partially adjacent to the lake to a third party.

By the ruling of the Judicial Panel for Civil Cases of the Supreme Court of the Republic of Kazakhstan dated July 30, 2024, the appellate decision was overturned, and the first-instance decision was upheld. The cassation court took into account the insufficient provision of security measures by LLP “B” (only one ranger employed for a lake area of 4,430 hectares), the fact that only 30% of the water body borders a neighboring land plot, and other circumstances established in the case, which fully refuted the plaintiff’s arguments.

Jurisdiction

Jurisdiction over disputes concerning amendment and termination of contracts is determined by the provisions of Chapter 3 of the Civil Procedure Code. As a general rule, such disputes fall under the jurisdiction of the court at the location of the defendant (Article 29 of the CPC). Additionally, the law provides for jurisdiction of investment disputes (Parts 1–2 of Article 27 of the CPC), optional jurisdiction at the plaintiff’s choice where the place of performance is specified in the contract (Part 6 of Article 30 of the CPC), exclusive jurisdiction for disputes over rights to immovable property (Part 1 of Article 31 of the CPC), and contractual jurisdiction (Article 32 of the CPC).

Analysis of the studied civil cases shows that courts generally comply with legal requirements regarding territorial jurisdiction. However, there are individual violations.

By the ruling of the judge of the Balkhash District Court of Almaty Region dated December 20, 2022, the claim of A.K. against LLP “B” for termination of the contract and recovery of a monetary amount was returned. According to the case materials, a contract for the manufacture and installation of windows and doors with advance payment terms was concluded between the parties. Referring to prolonged breach of contractual obligations, the plaintiff filed a claim at the defendant’s location. However, the judge concluded that the dispute did not fall within the jurisdiction of this court, indicating that the claim could be filed at the place of conclusion or performance of the contract in the city of Almaty.

By the ruling of the Judicial Panel for Civil Cases of the Almaty Regional Court dated February 14, 2023, the act of the first-instance court was overturned, and the civil case was referred back to the same court for consideration on the merits. The appellate instance proceeded from the fact that earlier, on December 29, 2021, by a ruling of District Court No. 2 of the Auezov District of Almaty, the civil case had been transferred for consideration to the Balkhash District Court of Almaty Region due to the established actual location of the defendant within that district.

Thus, the conclusions of the first-instance court regarding lack of jurisdiction were inconsistent with the law. Under the general rule of Part 1 of Article 29 of the CPC, a claim is filed at the location of the defendant. In the repeated claim submitted to the Balkhash District Court, the plaintiff indicated the defendant’s registration in that district. The judge’s reference to lack of jurisdiction based on Part 9 of Article 30 of the CPC contradicts the law governing optional jurisdiction. In cases of alternative jurisdiction, the choice of venue belongs to the plaintiff.

State Duty (Court Fee)

Article 35 of the Constitution of the Republic of Kazakhstan establishes the general requirement that payment of taxes and other mandatory payments is the duty and obligation of everyone.

The rates of state duty in courts are determined by Article 610 of the Tax Code. As a general rule, for claims of a pecuniary nature, the state duty is calculated as a percentage depending on the claim amount.

According to Part 1 of Article 104 of the CPC, the claim value is determined. In claims for early termination of a property lease agreement (except residential lease), the claim value is determined by the total amount of payments for the remaining term of the contract, but not exceeding three years.

At the same time, Subparagraph 7 of Article 610 of the Tax Code provides that for claims on amendment or termination of a residential lease agreement, as well as for non-pecuniary claims or claims not subject to valuation, the state duty is set at 0.5 of the monthly calculation index (MCI).

In judicial practice, claims for amendment and termination of contracts are generally treated as non-pecuniary. However, from the perspective of improving legal regulation, there is a need to harmonize the CPC and the Tax Code regarding such claims.

Where claims for amendment or termination of a contract are combined with claims for recovery of property or monetary amounts, the state duty is paid for each type of claim separately.

Part 2 of Article 104 of the CPC requires the plaintiff to indicate the claim value. If the indicated value clearly does not correspond to the actual value of the property, the judge determines it.

Courts must properly verify the correctness of the claim value and completeness of state duty payment.

Legislation

The main regulatory legal acts applicable to this category of civil cases include:

• Constitution of the Republic of Kazakhstan (August 30, 1995);

• Civil Code of the Republic of Kazakhstan (General and Special Parts);

• Civil Procedure Code of the Republic of Kazakhstan (November 3, 2015);

• Code “On Subsoil and Subsoil Use” (2017);

• Land Code (2003);

• Tax Code (2017);

• Law “On Housing Relations”;

• Law “On Financial Leasing”;

• Law “On Consumer Protection”;

• Regulatory Resolution of the Supreme Court of the Republic of Kazakhstan No. 9 dated December 25, 2006;

• Regulatory Resolution No. 9 dated July 18, 1997;

• Regulatory Resolution No. 7 dated November 25, 2016. 

•  

•  

• 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