Foreign investors say that should still have the right to go to international arbitration in case of disputes about mineral resource use

February 24. Interfax-Kazakhstan. Almaty

The foreign investors have asked the Kazakh parliament to return to the mineral resource law the clause allowing them to go to international arbitration to seek resolution of disputes in the mineral resource sector.

Interfax-Kazakhstan has been informed by a source in the oil and gas sector that Kasym-Zhomart Tokayev, the chair of the Senate (the upper chamber of the Kazakh parliament) has received a written request letter signed by Kazakhstan’s Council of Foreign Investors, Kazakhstan Petroleum, the U.S. Chamber of Commerce in Kazakhstan, European Business Association of Kazakhstan, the International Center for Taxes and Investments, Kazakhstan’s Association of Oil and Gas Lawyers.

The source reminded that on February 17 this year the Majilis (the lower chamber of the Kazakh parliament) approved the draft law “On Mineral Resources and Mineral Resources Management”, which is now in the Senate. The bill does not provide for any mechanism to refer disputes in the oil and gas sector that involve foreign investors to international arbitration.

If the bill is not changed accordingly before it is approved and signed into law, the foreign investor may become overcautious when deciding on mineral resource projects and choosing between the Caspian region and other countries of the world, the source said.

He also reminded that Kazakhstan is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. In order to make Kazakhstan more attractive for the foreign investors, the right of international arbitration was included in the law on foreign investments adopted in 1994, in the existing laws on investments, mineral resources and oil.

In this connection the organizations and companies that signed the abovementioned letter have asked the parliament to return the right of international arbitration to the new law on mineral resources.

As reported, the Majilis proposed that the law should allow issuing one license for both exploration and production of those fields that are of strategic importance or have a complex geological structure. Such licenses will be subject to the approval of the Kazakh government, the Majilis’s committee for environment and mineral resource management says in a report.

The proposed law significantly revises the requirements for the Kazakh contents, according to the report. Thus, the draft law contains new clauses aimed at increasing the Kazakh content in the personnel of the mineral resource companies and their purchased goods and services.

Unlike the existing law, the draft law does not require that the facilities and equipment of the mineral resource company, with which the government terminates the contract prematurely, will be returned to the state ownership. Instead, the parliament members proposed a mechanism for transfer of such property to a management company before the contract is concluded with a new mineral resource company.

The Kazakh government submitted a draft law on mineral resources and their management to the Majilis in January last year. “The purpose of the law is to protect the interests of the state, which is the owner of the mineral resources,” Sauat Mynbayev, the minister of energy and mineral resources, told the Majilis members when presenting the law.

According to Mynbayev, the new law will eliminate the existing Law on Minerals Resources and Their Management and the Law on Oil.

Besides, the minister said, the new law will abolish the single contract on both exploration and extraction of mineral resources as such a contract, when it is concluded, does not give a clear picture of what activities will be performed, deadlines established and expenses incurred.

The draft law also cancels the existing classification of mineral resources contracts as production sharing agreements (PSA), concession agreements, service agreement, etc.