CASE STUDY: Compensation For Environmental Damage As A Result Of Production Of Commonly Occurring Mineral Resources

Dear colleagues, in this newsletter we would like to share an interesting experience that occurred in our recent litigation practice. At first glance, the quite common dispute regarding compensation for environmental damage has some aspects that are interesting from a practical point of view. For example, determining the person responsible for compensation for damage; resolution of the issue of liability for the actions of third parties; and finally, the correct calculation of environmental damage. This publication should be regarded solely as a description of a particular case from the point of view of a party in the dispute. Therefore, this coverage does not purport to be an objective and comprehensive analysis. We hope that the information about the existing court practice will be helpful should similar disputes arise, and will help to resolve disputes in a positive manner.

Thus, here is a brief introduction. Our client's program of deposit infrastructure development provides for the construction of oil platforms and access roads to them. In order to carry out the construction, the subsoil user engaged contractors.

The work included subgrade flooring and subsequent soil compaction and graveling. The project documentation stipulated the use of either imported soil, or "local" soil from side thrusts for compaction of the subgrade. During construction, the roughness of relief was leveled (uplands were dismantled and lowlands were covered, including via the use of soil left from the dismantlement of uplands).

Based on the results of a survey of the subsoil user's activities, the Ecology Department (ED) filed a claim against the subsoil user for compensation for damages to the environment as a result of unauthorized production of COMR in 2012-2014 in the amount of 3.9 bln. tenge.

Claimant's position

The ED reasoned their position as follows:

(1) Contractors used "local" soil for work—i.e., they carried out production of COMR without a permit. Because the use of soil involved removing soil from side thrusts, the ED considers such use as production of minerals.

In accordance with Article 35 of the Law "On Subsoil and Subsoil Use," the subsoil use right for exploration or production of COMR is performed via conclusion of a contract with the local executive body. Thus, by permits, the ED implies the contracts for production of COMR.

At that, the ED provided no references to the legislation that would have proved that (1) the use of soil involved...