On Novelties Of Subsoil Use Code

Please note that Subsoil Use Code dated 27 December 2017 ? 125-VI ??? (further « the Code») contains critical changes to the existing Kazakhstan subsoil use legislation. We have been following the progress of the draft Code and did our best to advise you in a timely manner of the most important novelties and changes to the Code. Please click on the following references in order to see our previous publications: (1), (2) и (3).

In the present client update, we will further inform you of certain changes that, in our opinion, will affect businesses with regards to existing and potential subsoil users.

Security of obligations of subsoil users on liquidation of subsoil use consequences after-effects; Notification on change of control over a subsoil user; and Changes in the procedure of realization of the State's priority right. Forms of securing of execution of liquidation commitments of a subsoil user

Under the Law on Subsoil and Subsoil Use dated 24 June 2010 ? 291-IV ZRK (further the «Subsoil Use Law»), for the purposes of securing an obligation to eliminate after-effects of subsoil use operations, a subsoil user undertakes to create a liquidation fund by way of transferring financial means to a special deposit account in any bank within the territory of the Republic of Kazakhstan. The conditions of the formation of a liquidation fund, the amount of payments to the liquidation fund, and the frequency of payments shall be established in a subsoil use contract.

The Code envisions certain changes to the procedure of securing of liquidation commitments of the subsoil user.

So, the Code provides the following security mechanisms, such as:

a warranty; a bank deposit of a subsoil user under pledge by the State; and insurance. In the case a subsoil user fails to execute the liquidation upon agreed terms, the security amount shall be withdrawn in favour of the State.

Warranty as a security of obligation for liquidation

Under warranty, a guarantor commits to be accountable to the State for execution of liquidation commitments by a subsoil user.

A 2nd-tier Kazakhstani bank, a foreign bank or an organization of which shares are issued in a securities market for the purposes of securing execution of liquidation commitments can become a guarantor. In relation to a situation where the guarantor is a foreign bank or an organization with shares that are issued in a securities market, additional terms on minimum individual credit ratings in foreign currency...