Project Finance 2014 - Kinstellar · Ali Sharif Zu’bi Advocates & Legal Consultants CPSC 129...

Project Financein 48 jurisdictions worldwide

Contributing editor: Phillip Fletcher 2014

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Published by Getting the Deal Through

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Al Busaidy Mansoor Jamal & Co (Barristers and Legal Consultants)Ali Sharif Zu’bi Advocates & Legal Consultants CPSC

Anzola Robles & AssociatesArbe Abogados Corporativos Financieros

ArzingerBaker Botts LLP

Baker & McKenzie (Gaikokuho Joint Enterprise)Cárdenas & Cárdenas Abogados

Chibesakunda & Co AdvocatesColibri Law Firm

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Dr Adam & AssociatesEmery Mukendi Wafwana & Associates

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G Elias & CoHamzi Law Firm

Herbert Smith Freehills CIS LLPHeuking Kühn Lüer Wojtek

Jeantet Associés AARPIKinstellar LLPLex Caribbean

López Velarde, Heftye y Soria SCMarval, O’Farrell & MairalMehmet Gün & Partners

MENA City Lawyers – MCLMilbank, Tweed, Hadley & McCloy LLP

Miranda, Correia, Amendoeira & AssociadosMkono & Co Advocates

Nagy és TrócsányiPeliFilip

Pillsbury Winthrop Shaw Pittman LLPRodríguez & Mendoza

Simmons & Simmons LLPSoemadipradja & Taher

Souza, Cescon, Barrieu & Flesch AdvogadosStaiger, Schwald & Partner

Taxgroup pravno svetovanje d.o.o.Vandenbulke

Žurić i Partneri Law Firm

Overview Phillip Fletcher and Cathy Marsh Milbank, Tweed, Hadley & McCloy LLP 3

Angola Alberto Galhardo Simões Miranda, Correia, Amendoeira & Associados 7

Argentina Luis E Lucero Marval, O’Farrell & Mairal 16

Bangladesh Amina Khatoon and A B M Nasirud Doulah Doulah & Doulah 23

Barbados Alana Goodman Smith Lex Caribbean 30

Brazil Roberto M A Lima Neto Souza, Cescon, Barrieu & Flesch Advogados 36

Cambodia David Doran and Sambo Ly DFDL 45

Colombia Bernardo P Cárdenas Martínez and Ofelia Díaz Bermúdez Cárdenas & Cárdenas Abogados 50

Croatia Dinka Kovačević and Maja Komljenović Žurić i Partneri Law Firm 57

Democratic Republic of the Congo Emery Mukendi Wafwana, Nady Mayifuila, Jonathan van Kempen, Rigobert Nzundu, Alain Kasende and Séverine Losembe Emery Mukendi Wafwana & Associates 64

England & Wales Andrew Petry, Adam Cooper and Helen Forsey Simmons & Simmons LLP 71

France Jean-François Adelle Jeantet Associés AARPI 80

Georgia Revaz Javelidze and Nino Begalishvili Colibri Law Firm 88

Germany Adi Seffer Heuking Kühn Lüer Wojtek 97

Hungary Zoltán Varga and Imre Nyéky Nagy és Trócsányi 103

Indonesia Rahmat Soemadipradja, Robert Reid and Barryl Rolandi Soemadipradja & Taher 111

Japan Naoaki Eguchi, Gavin Raftery and Yasuhisa Takatori Baker & McKenzie (Gaikokuho Joint Enterprise) 122

Jordan Khaled Asfour, Leena Nusseir and Dima Al-Khuffash Ali Sharif Zu’bi Advocates & Legal Consultants CPSC 129

Kazakhstan Joel Benjamin and Adlet Yerkinbayev Kinstellar LLP 136

Laos Walter Heiser, David Doran and Duangkamol Ingkapattanakul DFDL 145

Lebanon Fady Jamaleddine, Amanda El Madani, Marcus Tadros and Nour Awada MENA City Lawyers – MCL 151

Luxembourg Denis Van den Bulke and Laurence Jacques Vandenbulke 158

Mexico Rogelio López-Velarde and Amanda Valdez López Velarde, Heftye y Soria SC 166

Morocco Zineb Idrissia Hamzi Hamzi Law Firm 174

Mozambique Fernanda Lopes Fernanda Lopes & Associados 181

Myanmar James Finch and Jaime Casanova DFDL 186

Netherlands Rutger de Witt Wijnen, Frenk Huisman and Viviana Luján Gallegos Simmons & Simmons LLP 193

Nigeria Fred Onuobia, Oluwatoyin Odewole and Olajumoke Arowolo G Elias & Co 201

Oman Graham Mouat and Ravinder Singh Al Busaidy Mansoor Jamal & Co (Barristers and Legal Consultants) 207

Panama Erika Villarreal Zorita and Nadia de Halman Anzola Robles & Associates 214

Peru César Arbe and Jessica Valdivia Arbe Abogados Corporativos Financieros 222

Republic of the Congo Emery Mukendi Wafwana, Antoine Luntadila Kibanga, Nady Mayifuila, Jonathan van Kempen and Sancy Lenoble Matschinga Emery Mukendi Wafwana & Associates 228

Romania Alina Stancu Bîrsan and Oana Bădărău PeliFilip 235

Russia Artjom Buligin, Olga Davydava and Olga Revzina Herbert Smith Freehills CIS LLP 243

Saudi Arabia Christopher Aylward and Babul Parikh Baker Botts LLP 251

Slovenia Miha Mušič and Dušan Jeraj Taxgroup pravno svetovanje d.o.o. 258

South Africa Eric le Grange, Gary Anderson and Kerryn Esterhuizen ENS (Edward Nathan Sonnenbergs) 264

Sudan Mohamed Ibrahim M Adam Dr Adam & Associates 274

Switzerland Mark-Oliver Baumgarten Staiger, Schwald & Partner 282

Tanzania Angela Thorns, Kamanga Wilbert Kapinga and Anayaty Tahir Mkono & Co Advocates 288

Thailand Roy Lee, David Doran and Duangkamol Ingkapattanakul DFDL 295

Tunisia Achour Abdelmonem Achour Law Firm 303

Turkey Orçun Çetinkaya and Alişya Bengi Danışman Mehmet Gün & Partners 309

Ukraine Oleksander Plotnikov and Oleksander Zadorozhnyy Arzinger 316

United States Robert A James and Philip Jonathan Tendler Pillsbury Winthrop Shaw Pittman LLP 325

Uzbekistan Sofia Shaykhrazieva Colibri Law Firm 335

Venezuela Reinaldo Hellmund, Carlos Martinez and Miguel Velutini Rodríguez & Mendoza 344

Vietnam Martin Desautels, Hoang Phong Anh and Jérôme Buzenet DFDL 351

Zambia Eustace Ng’oma Chibesakunda & Co Advocates 357

Quick Reference Tables – US State PPP 365

Project Finance 2014Contributing editor Phillip Fletcher Milbank, Tweed, Hadley & McCloy LLP

Publisher Gideon Roberton

Business development managers Alan Lee George Ingledew Dan White

Account manager Megan Friedman

Trainee account managers Cady Atkinson Joseph Rush Dominique Destrée Emma Chowdhury

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Marketing manager (subscriptions) Rachel Nurse [email protected]

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Project Finance 2014 Published by Law Business Research Ltd 87 Lancaster Road London, W11 1QQ, UK Tel: +44 20 7908 1188 Fax: +44 20 7229 6910 © Law Business Research Ltd 2013 No photocopying: copyright licences do not apply.First published 2007 Seventh edition

ISSN 1755-974X

The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on the information provided. This information is not intended to create, nor does receipt of it constitute, a lawyer–client relationship. The publishers and authors accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2013, be advised that this is a developing area.

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CONTENTS

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LawBusinessResearch

KazaKhstan Kinstellar LLP

136 Getting the Deal Through – Project Finance 2014

KazakhstanJoel Benjamin and Adlet Yerkinbayev

Kinstellar LLP

1 CollateralWhat types of collateral are available?

Kazakh civil law recognises the following methods of security:• penalty;• pledge;• takingpossessionofthedebtor’sproperty;• suretyship;• guarantee;and• depositpayment.

Inadditiontotheabove,thepartiescanagreetouseothermethodsofsecuringliabilities(eg,assignment).Thetypicalformsofsecurityintheprojectfinancecontextare

thepledgeandtheguarantee.

PledgesUnder the law, collateral under the pledge agreementmay eitherremaininthepossessionofthepledgororbetransferredintothepledgeholder’spossession.Thelawrecognisesapledgeovergoodsincirculation.Kazakhlawpermitsanypropertytobeusedascollateralexcept

for:• property that is withdrawn from commercial circulation (eg,certaintypesofland);

• claimsthatareintrinsictoanindividual(eg,alimonypayments,claimsforharmtoone’shealthorlife);and

• rights that may not be assigned to third parties by law (eg,recourseclaims).

Thelawpermitstouseascollateral:• propertythatwillbeacquiredinthefuture;and• a‘propertycomplex’(theentireenterprise).

Themostcommonlyusedtypesofcollateralintheprojectfinancecontextare:• land,buildingsandotherimmoveableproperty;• shares and participating interests in the charter capital of anentity;

• funds (including on bank accounts and in the form of bankdeposits);

• receivables;and• contractualrights.

2 Perfection and priorityHow is a security interest in each type of collateral perfected and how

is its priority established? Are any fees, taxes or other charges payable

to perfect a security interest and, if so, are there lawful techniques

to minimise them? May a corporate entity, in the capacity of agent or

trustee, hold collateral on behalf of the project lenders as the secured

party?

Perfection of pledgesDependingonthetypeofasset,perfectionofapledgemayrequireregistration,thegovernment’sconsentornotificationoftherelevantperson.

RegistrationRegistrationrequiredforpledgesofallpropertytoestablishprior-ity over subsequent registered pledgeholders and all unregisteredpledgeholders(namely,perfection).Registrationofapledgeisrequiredinordertoensurethevalid-

ityofthepledgewherethecollateraliseitherimmoveablepropertyormoveablepropertythatissubjecttomandatorystateregistration.Mandatoryregistrationisrequiredforapledgeover,interalia:• land,buildingsandotherimmoveableproperty;• shares;• participatinginterestsinthechartercapitalofanLLPifthecom-pany’sregistryofparticipantsismaintainedbyanindependentregistrar;

• vehicles;and• subsurfaceuserights.

Apledgeagreementmustalsoberegisteredifitprohibitsre-pledgeofthecollateralorspecificallyrequiresregistrationinordertobevalidevenifthecollateralisnotsubjecttomandatorystateregistration.Registrationofapledgeovermoveablepropertygrantedbya

foreignentityrequirespriorregistrationofsuchanentitywiththeKazakhtaxauthoritiesasataxpayer.ThetaxregistrationisrequiredinordertoenableregistrationofthepledgegrantedbysuchforeignentitywiththeKazakhregistrationauthorities.Subsequentamendmentofapledgeagreementdoesnotrequire

registration thereof with the relevant Kazakh registration authorities unless:• suchamendmentchangesthecollateral;or• the parties to the pledge agreement wish to register suchamendment.

Kinstellar LLP KazaKhstan

www.gettingthedealthrough.com 137

ConsentsPriorconsentfromtheauthorisedstatebodyisrequiredforapledgeover,interalia:• subsurfaceuserights;and• ‘strategicobjects’,beingassetsthataredeemedtobestrategicobjects(suchasoilandgaspipelines,nationalelectricitygrid,oilrefineries,internationalairandseaports,etc)andequityinter-ests in entities holding such assets or in the entities that directly orindirectlydefineorinfluencedecisionsoftheentityholdingsuchassets.

NotificationsAnotificationisrequired,interalia,for:• apledgeoverrights(eg,receivables)–thedebtormustbenoti-fied;and

• apledgeovermoniesonabankaccountorintheformofabankdeposit–thebankmustbenotified.

Perfection of guaranteesThere are no specific registration requirements in respect ofguarantees.

Fees and taxesThefeeforregistrationofapledgeoversharesisapercentageofthevalueof thesharesbeingpledged.Feesforregistrationofpledgesoverothertypesofassetsarenominal.Therearenoother feesor taxespayable for registrationofa

pledge.

Security agents or trusteesThereisnoconceptofasecurityagentorsecuritytrusteeinthelocallaw.Further,anon-creditorisnotpermittedtobeapledgeholderorabeneficiaryunderaguarantee.Inviewoftheserestrictions,asecurityagentortrusteemayact

onbehalfofthecreditorsaspledgeholderorbeneficiaryofaguar-anteeonly if the securityagent isalsoacreditoror thefinancingagreementcontainsa‘paralleldebt’provisionmakingthesecurityagent or trustee a ‘creditor’.Although the ‘parallel debt’ conceptisnotexplicitlyrecognised inthe law, it isoftenused inpractice.However,thereisariskthatthevalidityofsuchaprovisionmaynotbeupheldbyacourt.

3 Existing liensHow can a creditor assure itself as to the absence of liens with priority

to the creditor’s lien?

Theregistrymaintainedbytherelevantregistrationauthoritymustcontain all security interests that have been registered with thatauthority.An extract from the registrywill be sufficient to confirm the

absenceofanyregisteredthird-partysecurityinterestsinrespectofthecollateral.Inpractice,athirdparty(eg,acreditor)maynotbeabletoobtaintheextractitselfandmayhavetoaskthepledgortoobtainanextract.

4 Enforcement of collateralOutside the context of a bankruptcy proceeding, what steps should a

project lender take to enforce its rights as a secured party over the

collateral?

Types of enforcement procedureApledgeisenforcedbywayofeither:• acourt-administeredsale–intheabsenceoftheparties’agree-

ment to use an out-of-court sale or in situations where the col-lateral is such that it requires a court-administered sale (eg,subsurfaceuserights);or

• anout-of-courtsale–insituationswherethepartiesexplicitlyagreeinthepledgeagreementtoanout-of-courtsale.

Inbothcases,thereisapublicsale(auction)ofthecollateral.Asaleisnotrequiredinthecaseofenforcementofapledgeovermoniesandreceivables.Apledgeoverthistypeofcollateralisenforcedbywayofatransferofthemoniestothepledgeholder.

Steps required to enforce the pledgeAnout-of-courtsaleisorganisedbyanattorneyappointedbythepledgeholderor,ifthereisanagreementbetweentheparties,boththepledgeholderandthepledgor.The followingnotices are required tobegiven foranout-of-

court sale of collateral:• anoticeofdefault–thisnoticemustbeprovidedtothepledgorandregisteredwiththeauthoritythatregisteredthepledge;and

• anoticeoncarryingoutthesaleofthecollateral–thisnoticecanbeissuednoearlierthan30daysafterthenoticeofdefault,andmustbeprovidedtothepledgorandthepledgeholderandreg-isteredwiththeauthoritythatregisteredthepledge.Thenoticemustalsobepublishedinthenewspapersatleast10daysbeforetheauctiondate.

AuctionAnyperson–includingtheprojectlenders,thepledgeholder(ifdif-ferentfromtheprojectlenders)andthepledgor–canparticipateasbuyersinthesaleofthecollateral.Thecollateralcanbetransferredintothepledgeholder’sowner-

shipatitsappraisalvalueifthecollateralisnotsoldattheauction.Salesinforeigncurrencyarenotpermittedunlessthecurrency

controllawallowstransactionsinforeigncurrencyinrespectofthistypeofcollateral(eg,securitieshavinganominalvalueinforeigncurrency)orthebuyerisanon-resident.

Self-help remediesSelf-helpremediesareavailableintheory.

ConsentsGovernmentconsentsmayneedtobeobtainedinconnectionwiththesaleandpurchaseofthecollateral.Dependingonthetypeofthecollateral,agovernmentconsentmayberequiredtobeobtainedby:• apledgeholderforthesaleofthecollateral(eg, inthecaseofauctioninrespectof‘strategicobjects’)orforthetransferofthecollateralintothepledgeholder’sownership(eg,wheresuchcol-lateralisintheformofsubsurfaceuserights);

• anypersoninorderforhimorhertobeabletoparticipateintheauction(eg,inthecaseofauctioninrespectofsubsurfaceuserights);or

• an acquirer (eg, in a case where antimonopoly consent isrequiredtobeobtainedbytheacquirer,suchas,forinstance,forthepurchaseofmorethan25percentofthesharesorpartici-patinginterestsinacompanyifcertainthresholdsaremet).

5 Bankruptcy proceedingHow does a bankruptcy proceeding in respect of the project company

affect the ability of a project lender to enforce its rights as a secured

party over the collateral? Are there any preference periods, clawback

rights or other preferential creditors’ rights (eg, tax debts, employees’

claims) with respect to the collateral? What entities are excluded from

bankruptcy proceedings and what legislation applies to them? What

processes other than court proceedings are available to seize the

assets of the project company in an enforcement?

Creditors’ rights in the context of bankruptcy proceedingsBankruptcyisthemaininsolvencyprocedureunderKazakhlaw.Followingtheinitiationofbankruptcyproceedings,allcreditors

including a secured lender may enforce its rights only in the course



ofthebankruptcyproceedings.Thereisnorighttoforecloseonthecollateralafterbankruptcyproceedingshavebeeninitiated.Inbankruptcy,creditors’claimsaresatisfiedeitherincashorin

kind(namely,bywayoftransferofpropertytothecreditor),pro-videdthecreditoragreestoin-kindsatisfactionofitsclaims.Asarule,foreigncreditorsaretreatedthesameaslocalcreditors

inalltypesofinsolvencyproceedings.

Priority of secured creditors’ claimsInthebankruptcycontext,claimssecuredbyapledgeoverthedebt-or’sassetsaretreateddifferentlyfromclaimssecuredbyothertypesofsecurity.

Claims secured by pledgeClaimssecuredbypledgearesatisfiedafter:• claims foralimonypaymentsandcompensation forwrongfuldamagetoone’shealthorlife;and

• claimsforpaymentunderemploymentcontracts,relatedsocialsecurityandmandatorypensionpayments,andundercopyrightagreements.

Taxclaimsandclaimsforothermandatorypaymentsintothebudgetandallothercreditors’claimsaresatisfiedafterclaimssecuredbypledge.Securedclaimsaresatisfieduptothevalueofthecollateral.Any

claimsthatexceedthevalueofthecollateralaretreatedasunsecuredclaims.Ifthedebtor’sassetsarenotsufficienttopaycreditorswitha

ranking aheadof creditors secured by pledge, the claims of suchcreditorswillbesatisfiedattheexpenseofthecreditorssecuredbypledge.

Claims secured by other types of securityClaimssecuredbyothertypesofsecurity(eg,bywayofaguarantee)willrankparipassuwithallothercreditors’claims.

Clawback periodsThe following transactionsmay be challenged in the case of thedebtor’sbankruptcy:• A transaction made within three years prior to initiation ofbankruptcy involving the transfer of property free of charge,belowmarketpriceorwithoutsufficientgroundstothedetri-mentofthecreditors’interests.

• A transaction made within three years prior to initiation ofbankruptcyinvolvingthetransferofpropertytoacreditoriftheobligationstosuchcreditorwerefulfilledpriortomaturitytothedetrimentofthecreditors’interests.

• A transaction thatwasmadeafter the initiationof thebank-ruptcyproceedingsifsuchtransactionleadstopreferentialsatis-factionofoneofthecreditor’sclaims.

Theseclawbackprovisionsapplyinthecaseofrehabilitationofadebtor(discussedbelow).Intherehabilitationcontext,theclawbackperiodsapplytotransactionsenteredintobythedebtorwithinthreeyearspriortoinitiationofrehabilitation.

Entities excluded from bankruptcy proceedingsBankruptcyproceedingsdonotapplytostateenterprisesandstateinstitutions.Thereisnoinsolvencyprocedureinthelocallawforthesetypes

ofentities.

Rehabilitation procedureInadditiontothebankruptcyprocedure,Kazakhlawprovidesforarehabilitationprocedure.TherecentamendmentstotheLawonBankruptcymaketherehabilitationprocedureanattractivetoolforrehabilitatinginsolventdebtors.Therehabilitationregimeaffordsto

thedebtorprotectionsanalogoustotheonesavailableinthebank-ruptcycontext(including,forinstance,theabilitytoclawbackcer-tain transactions entered intoprior to initiationof rehabilitation)except that at the endof the rehabilitation the entity resumes itsoperationsasagoingconcern.

6 Foreign exchangeWhat are the restrictions, controls, fees, taxes or other charges on

foreign currency exchange?

Generally, foreign currency exchange transactions are carriedoutwithout restrictions. Certain types of transactions are subject toeitheraregistrationregimeoranotificationregime.Ifsucharegimeapplies,itisthesoleobligationoftheresidenttocomplywiththeregime’s requirements.A non-residentmaynot be held liable fortheresident’sfailuretocomplywiththeregime’srequirements.Intheory,ifaresidentfailstocomplywiththerequirements,anon-res-identmaysuffernegativeconsequencesfromsuchafailurebecauseabankmayrefusetotransactpayments.However,inpractice,allpaymentsthataresubjecttotheregimesmustbecarriedoutthroughbanks,whicharecurrencycontrolagentsandarerequiredtoensurecompliancewiththeregime.Thetransactionsthataresubjecttotheseregimesinclude,inter

alia,thefollowingtransactionsbetweenresidentsandnon-residents:• acommercialcreditforaperiodexceeding180days;• adirectinvestmentwherebyanon-residentacquires10ormorepercentofthevotingsharesorinterestsinaKazakhstanentityoratransactioninvolvingthepurchaseofequitycapital(sharesorinterests)orderivativefinancialinstruments;

• aloanforaperiodexceeding180days;• apurchaseofimmoveableproperty;and• apurchaseofintellectualpropertyrights.

Inrespectofapurchaseorsaleofforeigncurrency,thelawrequiresthat any purchase or sale of foreign currencywithinKazakhstanmustbecarriedoutthroughaKazakhstanbank.Thereisnonotifi-cationorregistrationrequirementforthistypeoftransaction.

Registration regimeThe registration regime involves the initial registration of the trans-actionbytheresidentwiththeNationalBankofKazakhstan(NBK)andthesubsequentfilingofcertainquarterlyreportstotheNBK.Theregistrationregimeappliestocertaintransactionssuchascom-mercialcredits,direct investments, loansandpurchaseof intellec-tualpropertyrightsiftheycreateanobligationbytheresidenttopay to thenon-residentanamountexceedingUS$500,000or theequivalent.

Notification regimeThenotificationregimeinvolvestheinitialnotificationoftheNBKbytheresidentregardingthetransactionandthesubsequentfilingofquarterlyreportswiththeNBK.Thenotificationregimeappliestocertaintransactionssuchastransactioninvolvingthepurchaseofequitycapital(sharesorinterests)orderivativefinancialinstruments(other than the direct investments) and purchase of immoveableproperty,iftheycreateanobligationbytheresidenttopaytothenon-residentanamountexceedingUS$500,000ortheequivalent.

FeesTherearenofeesortaxesthatapplytoforeignexchangetransactions.

Special currency regimeThelawallowsthestatetointroducea‘specialcurrencyregime’onatemporarybasisinthecaseofathreattotheeconomicsecurityofKazakhstanandthestabilityofitsfinancialsystem.Ifthisregimeisintroduced,thenthestatemayrestrictcertaintypesoftransactionsbetweenresidentsandnon-residents.Forinstance,theregimemay



providearequirement(i) toplaceapercentageofthetransactionamountonanon-interest-bearingdeposit; (ii) toobtain a specialpermissionforcarryingoutatransaction;or(iii)tosellforeignearn-ingsinKazakhstan.Thisregimemaybeintroducedforamaximumperiodofoneyear.

7 RemittancesWhat are the restrictions, controls, fees and taxes on remittances of

investment returns or payments of principal, interest or premiums on

loans or bonds to parties in other jurisdictions?

There are no restrictions on remittances of investment returns or paymentsofprincipal,interestorpremiumsonloansorbondstopartiesinotherjurisdictions.Theresidentwhomakessuchremittancesmayberequiredto

complywiththenotificationorregistrationregimes.Theremittancesmaybesubjecttotheapplicablewithholding

tax,whichmaybe reducedbyapplicationofdouble tax treaties.Therearenootherfeesonsuchremittances.

8 RepatriationMust project companies repatriate foreign earnings? If so, must they

be converted to local currency and what further restrictions exist over

their use?

AKazakhcompanymustrepatriatetoitsKazakhbankaccount:• earnings in foreign andnational currency from the export ofgoods,worksorservices;and

• foreignandnationalcurrencytransferredbyittoanon-residentunderacontractfortheimportofgoods,worksorservicesifthenon-residentfailstoperformitsobligationsunderthecontract.

Therepatriationrequirementisdeemedtohavebeensatisfiedincer-taincircumstanceswithoutactualrepatriation(eg,inthecaseofset-offofanon-resident’sobligationagainstaclaimagainsttheKazakhcompany).AKazakhcompany isnot required to convert into local cur-

rencyitsforeignearningsonKazakhbankaccounts.AKazakhcompanymayuseforeignearningsonKazakhbank

accountsforanylegitimatepurpose.AKazakhcompanymaynotwithdrawfromitsKazakhbank

accountsforeignearningsintheformofcashexcepttomakecertainpaymentsincashtoindividuals(eg,forpaymentofsalariestoitsnon-residentemployees).

9 Offshore and foreign currency accountsMay project companies establish and maintain foreign currency

accounts in other jurisdictions and locally?

AKazakhcompanymayestablishandmaintain foreign currencyaccountsinotherjurisdictionsandinKazakhstan.In practice, the Kazakh company is limited in its ability to

accumulate funds on its offshore bank accounts by the repatria-tionrequirement(seequestion8).Theexceptionfromtherepatria-tionrequirementincludes,interalia,thecompany’srighttosecurethecompany’sobligationsunderaloanfromanon-residentortofinanceitsoverseasbranchesandrepresentativeoffices.In respect of its offshore bank accounts, a Kazakh company

must:• notifytheNBKofopeninganoffshorebankaccountwithin30daysfromthedateofsigningofthebankaccountagreement;

• provide theNBKwithquarterly reports in respectof theoff-shorebankaccount;and

• providetheNBKwithmonthlyreportsifthecompanymakesorreceivespayments through itsoffshorebankaccount inanamountexceedingtheequivalentofUS$50,000oranequiva-lentandsuchpaymentrelatestoanagreementfortheexportorimportofgoods,worksorservices.

10 Foreign investment and ownership restrictionsWhat restrictions, fees and taxes exist on foreign investment in or

ownership of a project and related companies? Do the restrictions

also apply to foreign investors or creditors in the event of foreclosure

on the project and related companies? Are there any bilateral

investment treaties with key nation states or other international

treaties that may afford relief from such restrictions? Would such

activities require registration with any government authority?

RestrictionsKazakhlawrestrictsforeignownershipinthefollowingsectors:• telecommunications–foreignentitiesandindividualsmaynotownorhold(directlyorindirectly)morethan49percentofthesharesor interestsofanoperatorof intercityor internationalcommunications or both, which ownsmain communicationslines;

• massmedia–foreignentitiesandindividualsmaynotownorholdormanage(directlyorindirectly)morethan20percentofthesharesorinterestsofamassmediacompany;and

• certainothersectors(eg,privateguard(security)service).

Investmentbyaforeignorlocalinvestorintocertaintypesofentitiesorassets requiresgovernmentalapproval.Suchapprovalmustbeobtainedpriortomakingtheinvestment.Dependingonthetypeoftheentityorassetinvolved,theapprovalmayneedtobeobtainedbyeithertheacquirerortheseller.Incertaincases,thestatehasastatutorypre-emptiverighttoacquiretheentityorassetinvolved.Generally,theapprovalmaynotberefusedsolelyonthebasis

thattheinvestorisaforeignentity.However,incertaincases(suchasinthecasewheretheapprovalforthesaleofa‘strategicobject’issought)thelawgrantstotherelevantgovernmentauthoritytherighttorejectanapplicationforapprovalwithoutspecifyingthereasonsforsuchrejection.Theaboverestrictionsalsoapplyintheeventofforeclosureon

therelevantcompany.Bilateral investment treaties do not afford relief from such

restrictions.

TaxesTherearenotaxesorfeespayableonforeigninvestmentorowner-shipofalocalprojectcompany.

RegistrationsForeigninvestmentmayrequireregistrationasa‘directinvestment’withtheNBKornotificationtotheNBK,dependingonthesizeoftheinvestment.

11 Documentation formalitiesMust any of the financing or project documents be registered or

filed with any government authority or otherwise comply with legal

formalities to be valid or enforceable?

Written formAsarule,allagreementsmustbereducedtowrittenform.

LanguagesAllagreementsbylocalentitiesmustbeformulatedintheKazakhlanguage.However,atpresent,thereisnopenaltyforafailuretocomplywiththisrequirement.



Typically,mostagreementswithforeignpartiesareformulatedinEnglishand,wherethepartieswishtodoso,alsoinRussian.

FilingsFormosttypesoffilingswiththestateauthoritiesitissufficienttoprovideeitheraRussianorKazakhtranslationoftheagreement.However, certaindocumentsmustbedrafted inbothKazakh

andRussian inorder for theirregistrationorfilingwith thestateauthorities(eg,acharterofalegalentity).

NotarisationGenerally,notarisation isnot required except for certain typesofdocuments(suchaschartersoflegalentities,agreementsforthesaleandpurchaseofimmoveableproperty,etc).

ApostilleApostilleorlegalisationmayberequiredwhereforeigndocumentsneedtobeprovidedtostateauthorities.

12 Government approvalsWhat government approvals are required for typical project finance

transactions? What fees and other charges apply?

Investments Investmentsmayrequirethefollowinggovernmentapprovals:• antimonopoly consent is usually required for acquisition ofmorethan25percentinthechartercapitalofanentity;and

• otherconsentsmayberequiredifthetargetcompanyoperatesinasectorthatrequiresgovernmentconsentforacquisitionofsharesinsuchcompany(suchas,forexample,oilandgasandmining,financialsector).

InvestmentmayalsobesubjecttoregistrationwiththeNBK.

LoansGovernmentapprovalsarenotrequiredforloans.Loansbetweenresidents and non-residents exceeding certain thresholdsmust beregisteredwithornotifiedtotheNBK.Generally, granting of security for a loan does not require

governmental approval. However, government approvals mayberequiredforgrantingsecurityovercertaintypesofassets,suchas, inter alia, assets that are deemed to be strategic objects and subsurfaceassets.

OperationsThere are various government approvals required for companiesoperatingincertainsectorsoftheKazakheconomy.Forinstance,acompanymayberequiredtoobtainalicencefromtherelevantstateauthorityinordertobeabletocarryoutaparticulartypeofactivity.Otherapprovalsmayberequired,including,interalia,approvalsforconstruction,etc.

Transactions and remittances by foreign parties or by local companies owned or controlled by foreign partiesTherearenospecialgovernmentapprovalsrequiredfortransactionsandremittancesbyforeignpartiesorbylocalcompaniesownedorcontrolledbyforeignparties.

FeesIn all of the above cases, there are either no fees payable or theamountofsuchfeesisnominal.

13 Foreign insuranceWhat restrictions, fees and taxes exist on insurance policies

over project assets provided or guaranteed by foreign insurance

companies? May such policies be payable to foreign secured

creditors?

Kazakh lawprohibits foreign insuranceovermost typesofassetslocatedontheterritoryofKazakhstan.Theseassetsmustbeinsuredby local insurance companies. Local insurance companies mostoftenwillreinsuretheirriskswithforeigninsurancecompanies.Mandatory insurance with local insurance companies is

requiredforcertaintypesofassetsandrisks,suchasecologicalrisks,insuranceofemployer’s liability inthecaseofaccidents involvingan employee that occurswhen the employeeperformshis or heremploymentduties,liabilityofavehicle’sowner,liabilityrelatingtothedrillingofwellsofanownerofhazardousobjects,etc.Inrespectofthemandatorytypesofinsurance,thelosspayeeis

determinedbylaw(usually,athirdpartytowhomliabilityisowedasaresultofaninsuranceevent).Thelosspayeemaybeaforeignsecuredcreditorinrespectofvoluntarytypesofinsurance.

14 Foreign employee restrictionsWhat restrictions exist on bringing in foreign workers, technicians or

executives to work on a project?

Work permitsAworkpermitfromstateauthoritiesisrequiredinordertoemployaforeignworker.Therearecertainexceptionsfromtheworkpermitrequirementforcertaincategoriesofforeignworkers,suchas,forinstance,theheadofabranchorrepresentativeofficeofaforeignentity.Workpermitsareissuedonthebasisofanannualquotaforthe

numberofforeignersemployedineachregionofKazakhstanandthecitiesofAlmatyandAstana.Beforesubmittinganapplicationforaworkpermit,anemployer

mustnotifythecompetentbodyaboutanyavailablevacancies.Suchnotificationshallbemadeat least15dayspriortosubmittinganapplicationforaworkpermit.Applicationsforworkpermitsareevaluatedonapoints-based

systemthattakesintoaccountthecandidate’sexperience,educationandthelikelihoodthatthevacancycanbefilledbyalocalworker.Obtainingaworkpermittakesaboutthreemonths,althoughitmaytakelongerincertaincases.Theapplicationsare subject toacashdeposit requirement to

securetheforeignworker’sdeparturefromKazakhstanupontermi-nationofhisorheremployment.Workpermitsmaybeissuedsubjecttocertainconditions,such

asarequirementtotrainlocalstaffortocreateadditionaljobsforlocalstaff.Workpermitsarealsousuallygrantedforalimitedperiodonly(eg,aninitialperiodofoneyearandtworenewals)sometimeswiththerequirementthattheforeignemployeebereplacedattheendofthetermbyalocalemployee.IndividualswhocometoKazakhstantocarryoutentrepreneur-

ialactivitiesarenotrequiredtoobtainaworkpermitonthebasisofanexceptionavailablefor‘business-immigrants’.Foreignemployeeswithcertainqualificationsmayobtainwork

permits for themselves.Authoritiesmay grant aworkpermit forself-employedpersonsforuptothreeyears,aslongasthetotalnum-berofforeignemployeesdoesnotexceedtheapprovedstatequota.Theworkpermitforself-employedpersonsisvalidwithinonlyoneregionofKazakhstan.



VisasAforeignworkermusthaveavalidpassportand,ifrequired,aworkvisainordertobeabletoenterKazakhstan.Aworkvisaisissuedonthebasisofaworkpermitandisvalidonlyforthetermofsuchworkpermit.Majorforeigninvestorsmayapplyforinvestors’visasforCEOsandtopmanagement.Amultipleentryinvestor’svisacanbeissuedforaperiodofuptothreeyears.

Citizens of most CIS countries do not need a visa to enter Kazakhstanbutwillneedaworkpermit towork inKazakhstan.However,citizensofcountriesthatarepartoftheCustomsUnion(namely,RussiaandBelarus)donotrequireaworkpermitinordertoworkinKazakhstan.

Registration requirementsAforeignworkermustregisterwiththestateauthoritieswithinfivecalendardaysofarrival.

15 Equipment import restrictionsWhat restrictions exist on the importation of project equipment?

Theimportationofprojectequipmentissubjecttotherequirementsofthecustomslegislation(eg,paymentofapplicablecustomsduties,etc).Asof1July2010,Kazakhstan isamemberof theCustomsUnionbetweenBelarus,KazakhstanandtheRussianFederation.Importationofprojectequipmentorgoodsmayrequireobtain-

ing of a licence. The licensing regime applies to certain types ofgoods (eg, explosive substances). Importation may also requireobtainingofacertificateofcomplianceoradeclarationofcompli-anceinrespectofequipment.Thisrequirementappliesto,interalia,vehicles,agricultureequipment,electronicmachinesandequipment,constructionmaterials,etc.Importationmayalsobesubjecttorestrictionsappliedbythe

government,interalia,asanti-dumpingmeasuresortemporarypro-tectivemeasuresintheformofspecialprotectivedutiesorquotasforimportationofgoods.

16 Nationalisation and expropriationWhat laws exist regarding the nationalisation or expropriation of

project companies and assets? Are any forms of investment specially

protected?

Thelawonstatepropertyregulatesnationalisationorrequisitioningofprivateproperty.

NationalisationNationalisationmayonlybecarriedoutintheinterestsofthesoci-etyinordertoensurenationalsecurity.Thelawprovidesthatthestatemustnationalisewithoutdiscrimination,inatransparentman-ner,andonlyafterallotherpossible legalmeansofalienationofpropertyprovidedforbytheCivilCode(eg,saleandpurchase)areexhausted.Nationalisationofparticularpropertymayonlybecarriedout

on thebasis of a law that specifically allows that property tobenationalised.Wherepropertyhasbeennationalised,theownerofthatprop-

ertyhasthefollowingrights(protections):• theownerhastherighttoreceivemarket-valuecompensationforthenationalisedpropertyandotherdamages;

• compensationcannotbepaidininstalments;• propertyshallbehandedovertothestateonlyaftertheownerreceives‘equivalentcompensation’;and

• theownerhastherighttojudicialreviewoftheowner’srights(eg,compensation),butnottojudicialreviewofthenationalisa-tionitself.

RequisitionPrivatepropertymayberequisitionedeither:• in the caseof an emergency situation causedby anatural orman-madedisaster;or

• in the case that it is required for defence purposes during aperiodofmartiallaw.

In the first instance, requisition is limited to the territory of theemergencyandcanbecarriedoutonlyinexceptionalcircumstanceswhen the state’s reserves are not sufficient to protect people, theenvironmentandcertainotherobjectsfromthatemergency.Thelawguaranteesmarketvaluecompensationtotheownersoftherequi-sitionedproperty in the caseof an emergency situation.The lawexplicitlyprovidesthatthevaluationofthepropertyandthedeci-siontorequisitionpropertymaybeappealedincourtbytheowner.Inthesecondinstance,thelawdoesnotprovideforsimilarguar-

anteestotheownersofpropertythat issubjecttorequisition.Assuch, the lawonly states that the compensation for the propertyrequisitioned for thepurposesofdefence ispaid fromthebudgetandtheprocedureforcompensationmustbesetforthinthegovern-ment’sregulation.

ProtectionsTherearenoprotectionsforspecificformsofinvestments.Certainprotectionsmaybeavailablepursuanttobilateraltreatiesonpro-tection of investments betweenKazakhstan and the relevant for-eign country and multilateral treaties and conventions to which Kazakhstanisaparty.

17 Fiscal treatment of foreign investmentWhat tax incentives or other incentives are provided preferentially

to foreign investors or creditors? What taxes apply to foreign

investments, loans, mortgages or other security documents, either for

the purposes of effectiveness or registration?

Thecurrenttaxregimeappliesequallytolocalandforeigninvestors.Therearenotaxincentivesthatarespecificallyprovidedtoforeigninvestors.Investorsintoprioritysectorsoftheeconomymayobtainincentivesonthebasisofaninvestmentcontractwiththestateintheformofwaiversofapplicablecustomsdutiesandapplicablelandandpropertytaxes,grantsofstatepropertyandindustrialincentivesforlegalentitiesthatconductstrategicprojectsinlocationswithalowlevelofsocio-economiclife.Therearenotaxespayableforthepurposesofeffectivenessof

foreigninvestments,loansorsecuritydocuments.Nominalfeesarepayableforthepurposesofregistrationofsecuritydocuments.

18 Government authoritiesWhat are the relevant government agencies or departments with

authority over projects in the typical project sectors? What is the

nature and extent of their authority? What is the history of state

ownership in these sectors?

TheMinistryofOilandGas(MOG)hascomprehensiveregulatoryandsupervisoryauthorityoverthepetroleumsector(includingoilandgasandchemicalrefining).MOGpreparestendersforgrant-ingrightsforexploration,developmentandproductionofhydro-carbons;representsthestateinnegotiationsandsignsallsubsurfaceusecontractsinthesector;approvesworkprogrammes;andhastherighttoamend,suspendandterminatecontracts.TheMinistry of Industry of New Technologies (MINT) has

comprehensiveregulatoryandsupervisoryauthorityoverthemin-ingsector.MINThasthesameauthoritiesasMOGbutinrelationtominingratherthanoilandgas.



Localauthorities(Akimats)areresponsibleforgrantinglanduserights, forcontrolandsupervisionover theuseandprotectionofland,waterandtheenvironment,andformonitoringcompliancewithlocalcontentobligations.Usage and protection of the water fund, water supply and

water disposal regulation is carried out by the Committee onWater Resources of the Ministry of Agriculture, the Agency onConstruction,HousingandUtilitiesandtheAkimats.MINTistheprimaryregulatorofthepowersector.MINTissues

licences for theproduction, transmission,distributionand saleofelectricity.TheMinistryofTransportationandCommunications (MTC)

regulatestransportation(includingair,railroad,seaandautomobiletransportation)andcommunicationservices(eg,telephones,televi-sion,radioandpostalservices).MTCissueslicencesfortheprovi-sionoftransportationandcommunicationsservices.The competent authority responsible for the management of

stateownership is theMinistryofFinance.Themajorityof stateassets(includingstakesinthenationalcompanies)areownedbytheNationalWelfareFund‘Samruk-Kazyna’.

19 International arbitrationHow are international arbitration contractual provisions and awards

recognised by local courts? Is the jurisdiction a member of the ICSID

Convention or other prominent dispute resolution conventions? Are

any types of disputes not arbitrable? Are any types of disputes subject

to automatic domestic arbitration?

Kazakhstan is a party to the 1958 New York Convention onRecognition and Enforcement of Foreign Arbitral Awards(the Convention). Like the Convention, the Kazakh Law ‘OnInternational Commercial Arbitration’ provides for the enforce-mentofforeignarbitralawards.AforeignarbitralawardobtainedinastatethatisapartytotheConventionwillbeenforceablebyaKazakhcourt,subjecttothequalificationsintheConventionandcompliancewithKazakhcivilprocedureandtheproceduresestab-lishedbytheKazakhlegislationoncommercialarbitrationfortheenforcementofarbitralawards.KazakhstanisalsoapartytotheICSIDConvention.There arenodisputes that are subject to automatic domestic

arbitration.Thepartiesmayagreetosubjectdisputestodomesticarbitration.DisputesrelatingtoimmoveablepropertylocatedinKazakhstan

andcertainotherdisputesmaynotbe subject to internationalorlocalarbitrationbutarereservedforKazakhcourts.

20 Applicable lawWhich jurisdiction’s law typically governs project agreements? Which

jurisdiction’s law typically governs financing agreements? Which

matters are governed by domestic law?

Most project agreements are typically governed by foreign lawexceptformattersthataresubjecttoKazakhlaw(eg,pledgeagree-ments as to collateral in Kazakhstan). Financing agreements aretypicallygovernedbyforeignlaw.Kazakhlawprovidesforfreedomofchoiceinrespectofacon-

tract’sgoverning law.However,Kazakh lawprevails in situationswhere: • foreignlawconflictswiththepublicpolicyofKazakhstan;• theimperativenormsofKazakhlawapply;or• thecontractincludesmattersthatmustbegovernedbyKazakhlaw (eg, matters relating to immoveable property located inKazakhstanandotherpropertyincludedintheKazakhstanstateregistryorregulationofrelationshipsbetweentheparticipantsofaKazakhcompany).

21 Jurisdiction and waiver of immunityIs a submission to a foreign jurisdiction and a waiver of immunity

effective and enforceable?

A submission to foreign jurisdiction will be recognised by localcourts as a valid submission. However, judgments of courts ofmostwesternjurisdictions(includingtheUnitedStates,theUnitedKingdomandmostwesternEuropeancountries)willnotbeenforce-able in Kazakhstan because Kazakhstan does not have relevantinternationalagreementswithsuchjurisdictions.JudgmentsofcourtsofmostCIScountrieswillbeenforceable

inKazakhstansinceKazakhstanisapartytorelevantinternationalagreementswiththesecountries.Awaiverof immunitybystate institutions ispossible,willbe

recognisedaseffectiveandwillbeenforceable.Privatecompaniesandcompanieswithstateparticipationdonothavestateimmunity.

22 Title to natural resourcesWho has title to natural resources? What rights may private parties

acquire to these resources and what obligations does the holder

have? May foreign parties acquire such rights?

Thesubsurfaceandnaturalresourcescontainedtherein, includingminerals,water,land,plantsandanimalsareownedbythestate.Individualsand legal entities canobtain subsurfaceuse rights

inaccordancewiththeLaw‘OnSubsurfaceandSubsurfaceUse’.Naturalresourcesextractedunderasubsurfaceusecontractbecomethepropertyofthesubsurfaceuser.Theholderofasubsurfaceuserightmust complywith the termsof the subsurfaceuse contract.Subsurface use contracts must provide for the financing of localdevelopmentprojects(eg,constructionofschools,kindergartensandhospitals), training of local personnel, environmental obligationsandthereclamationoflandsuponthecompletionofoperations.Ingeneral,landisownedbythestateandmaybegrantedinto

private ownership to individuals and legal entities (including for-eigncitizensandforeignlegalentities)subjecttocertainexceptionsspecified in the Land Code. Private ownership is permitted overlanddesignatedforconstruction(orundergoingconstruction)andindustrial and non-industrial buildings, including land designatedfortheuseofsuchbuildings.Agriculturalandforestrylandscan-notbeownedby,butmaybeleasedby,foreigncitizensandforeignlegalentities.NotethatforeignindividualsmaynotownresidencesinKazakhstan.

23 Royalties on the extraction of natural resourcesWhat royalties and taxes are payable on the extraction of natural

resources, and are they revenue- or profit-based?

Thefollowingmaintaxesapplytosubsurfaceuseoperations:• Signaturebonus– thisbonus isafixedpayment for therighttoconductsubsurfaceuseoperationsinthecontractarea.Theminimumamountofthebonusisdeterminedbasedonacalcu-lation taking into account the estimated amount of reserves and thedeposit’seconomicvalue.Theactualamountofthebonusisdeterminedbasedontheresultsofthewinningbid.

• Commercialdiscoverybonus–thisbonus ispayableforeachcommercial discovery and is based on the actual volume ofdiscoveredmineral deposits approved by the authorised stateagency.

• Mineral production tax – this tax replaced the previous roy-altytaxandispayableatfixedratesonaslidingscalebasedonactualproductionlevels.

• Exportrenttax–thistaxappliestoexportedcrudeoilandgascondensate.Exportrenttaxisdeterminedonthebasisofaslid-ingscaleprovidedbytheTaxCodeanddependingonthe‘mar-ketprice’ofoilandgascondensate.



• Customs duties – duties are payable in respect of exports ofcrudeoil,lightandheavyoilproducts.

• Excessprofittax–thistaxisbasedonthecontractor’snetdis-posableincome.

• Historicalcostsreimbursement–thisisafeepayabletocompen-satethestateforexplorationexpendituresincurredbythestatebeforetheconclusionofasubsurfaceusecontract.Partoftheamountofthehistoricalcostsmustbepaidfortheacquisitionofgeologicalinformation.Thebalanceofthehistoricalcostsmustbepaidattheproductionstageafteracommercialdiscoveryisestablished.

Thereisnotaxstabilisationforsubsurfacecontractsaccordingtothe current Tax Code. However, production-sharing agreementsconcluded prior to 1 January 2009 and that have gone throughmandatory tax expertise, and subsurface use contracts that havebeenapprovedbythepresident,arestillstabilised.

24 Export of natural resourcesWhat restrictions, fees or taxes exist on the export of natural

resources?

Theexportofnaturalresourcesmaybesubjecttobothtariffregula-tion(eg,paymentofcustomduties)andnon-tariffrestrictions(eg,exportlicensingandexportlimitation).Thegovernmenthasapre-emptiverighttoacquiremineralsto

ensureinternalsuppliesofcertain‘strategic’naturalresourcesandinthecaseofcertainemergencycircumstances.Thepriceofacquisitionofnaturalresourcespursuanttothepre-emptiverightmustbeequaltoathird-partycontactpriceor,intheabsenceofsuchcontract,tointernationalmarketprices.

25 Environmental, health and safety lawsWhat laws or regulations apply to typical project sectors? What

regulatory bodies administer those laws?

EnvironmentalmattersareprimarilyregulatedbytheEnvironmentalCodeandtheLawonSpeciallyProtectedNatureReserves.TheselawsareadministeredbytheMinistryofEnvironmentProtection.Health-relatedmattersareprimarilyregulatedbytheCodeon

Health of the People and the SystemofHealth and the SanitaryRegulations adopted by theMinistry ofHealth. These laws andregulationsareadministeredbytheMinistryofHealth.Safety-relatedmatters are primarily regulated by the Law on

Fire Safety; theLawon Industrial Safety atDangerous IndustrialFacilities;andtheFireSafetyRegulationsadoptedbytheMinistryofEmergencySituations.TheselawsandregulationsareadministeredbytheMinistryofEmergencySituations.

26 Project companiesWhat are the principal business structures of project companies?

What are the principal sources of financing available to project

companies?

Business structuresKazakh project companies are usually established in the formofeitheralimitedliabilitypartnershiporajoint-stockcompany.

Limited liability partnershipThemainfeaturesofalimitedliabilitypartnershipareasfollows:• lowminimalchartercapitalrequirement;• aparticipant’sliabilityislimitedtothevalueofitscontributiontothechartercapital;

• eachparticipanthasarightoffirstrefusalinthecaseofasalebyanotherparticipanttothirdpartiesofitsinterestsinthechartercapital;

• thefoundationagreementgovernstherelationshipbetweentheparticipants;

• simple management structure (supervisory board – namely,equivalenttoaboardofdirectors–isoptional);

• noannualauditrequirement;and• minimalreportingobligations.

Joint-stock companyThemainfeaturesofajoint-stockcompanyareasfollows:• highminimalchartercapitalrequirement;• ashareholder’sliabilityislimitedtothevalueofthesharesheldbyit;

• sharescanbeissuedintheformofcommonsharesthathavevoting rights andpreference shareswithaguaranteedannualdividendandnovotingrights,exceptforcertainlimitedcircum-stances(suchasnon-paymentoftheguaranteeddividend);

• sharesarefreelytransferablewithnopre-emptiverightbyothershareholders;

• mandatorytenderofferrequirementinthecaseofacquisitionof30percentormoreoftheissuedcommonsharecapital;

• managementstructureincludestheshareholders’meeting,boardofdirectorsandanexecutiveboardorchiefexecutive;

• independentdirectorrequirementforboardofdirectors;• interestedpartyandcertainothertransactionsmustbeapprovedandotherminorityshareholderprotectionsexist;

• annualauditrequirement;and• reportingobligations.

Financing sourcesTheprincipalsourcesoffinancingare:• localandforeignbankdebt–localcommercialbanksoftenpro-videfinancing;foreigndebtintheformofbilateralandsyndi-catedloansisalsoverycommon;

• debtfromstate-ownedinstitutions–Kazakhstanprovidesfinanc-ing through various institutions, including a number of statedevelopmentinstitutionsforthepromotionofentrepreneurship;

• debtfrommultilateraldevelopmentinstitutions–anumberofinternational development institutions operate in Kazakhstanand provide financing in the project finance area, includingthe EurasianDevelopment Bank and the European Bank forReconstructionandDevelopment;

• bondfinance–localentitiescanissuebondsbothunderlocallawand foreign law; listingon theKazakhstockexchange isattractiveduetoanexemptionfromwithholdingtaxforlistedbonds;and

• equity–equityfinancingissometimesavailablefromlocalandforeignsources;listingontheKazakhstanstockexchangeispos-sibleforjoint-stockcompanies.

27 Public-private partnership legislationHas PPP enabling legislation been enacted and, if so, at what level of

government and is the legislation industry-specific?

ThereisPPP-enablinglegislationatthenationallevelintheformoftheLawonConcessions.Thislawisnotindustry-specific.Inaddi-tion,therearecertainindustry-specificlawsthatcontainprovisionsrelatingtoconcessions(eg,theLawonRailroads).TherecentlyrevisedLawonProjectFinanceandSecuritisation

createsalegalbasisforimplementationofconcessionprojectsusingtheframeworkofthesecuritisationlegislation.Thelegislationonconcessionsisstilldevelopingand,fromour

experience,asofthedateofthispublication,thebankabilityofcon-cessionprojectsunderthecurrentlegislationisproblematic.



28 PPP – limitationsWhat, if any, are the practical and legal limitations on PPP

transactions?

Thefollowingaresomeofthepracticalandlegallimitationsoncon-cessionprojectsinKazakhstan:• aprojectinrespectofwhichaconcessionisproposedmustbelistedinthegovernment’slistofapprovedconcessionprojects;

• tariffsformosttypesofconcessionprojects(eg,forrailroad,air-port,electricitylines)aresubjecttostateregulationandcannotbeguaranteed;

• theperiodofconcessionislimitedto30years;• projectassetsremaininstateownership;• securityoverprojectassetscannotbegrantedwithoutthestate’sapproval;and

• thestatehastherighttounilateralamendmentorterminationofaconcessionagreement.

29 PPP – transactionsWhat have been the most significant PPP transactions completed to

date in your jurisdiction?

Presently,therearesixconcessionprojectsunderimplementationinKazakhstanwithatotalinvestmentuptoUS$500million.FollowingaresomenotablePPPtransactionsinKazakhstan:

• constructionandoperationofthenewShar–Ust-Kamenogorskrailwayline;

• constructionandoperationofinter-regionalNorthKazakhstan–Aktobeoblastpowertransmissionline;

• construction and operation of the passenger terminal of theinternationalairportinAktau;

• construction and operation of a turbo-gas power station inKandyagash,Aktobeoblast;

• construction and operation of the railway line Yeraliyevo –Kuryk;and

• electrificationoftheMakat-Kandyagashrailwaysection.

Joel Benjamin [email protected] Adlet Yerkinbayev [email protected]

Nurly Tau Business Center Tel: +7 701 722 3000

Block 1B, Office 503 www.kinstellar.com

19 Al-Farabi Avenue

Almaty 050059

Kazakhstan

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