Conclusion and Amendment of Subsoil Use Contract

Conclusion and Amendment of Subsoil Use Contract

According to the Law of the Republic of Kazakhstan on Subsoil and Subsoil use dated 24 June 2010 (hereinafter – the ‘Subsoil Law’), to perform subsoil use operation it is required to enter into the subsoil use contract (for exploration, production, combined exploration and production). The draft subsoil use contract shall be developed by the winner of a tender and shall be agreed with the competent authority. In connection with this, when supporting projects on acquiring a subsoil use right and conclusion of contracts our lawyers pay special attention to the terms and conditions of the concluded contract.

Given that  conditions specified in the tender bid for granting of a subsoil use right and to be included into the contract will affect the fact of whether this or that participant will be considered as the winner, the qualified legal assistance may often be required even at the stage of  preparation and submission of the tender bid.

Since the draft subsoil use contract shall be subject to the obligatory state examination (legal, economic, environmental), the development the conditions of the draft subsoil use contract should engage not only those lawyers, who specialise in mining, but also those, who practice in the areas of taxation, environment, etc. Our lawyers have extensive experience in drafting subsoil use contracts, and availability of the branch of our Firm in Astana allows us to be regularly informed on the status of subsoil use contracts submitted to the competent authority. Moreover, it allows us be aware of the contract status at the stage of examination by other state authorities and, therefore, provide a flexible response in case of the need to complete the draft contract in order to address comments of the respective state authorities.

Changes in the legislation, extension of the contract term, re-registration of a geological allotment are, as a rule, the grounds for modification of the contract. Amendments to the contract are acceptable upon agreements of the parties. Since an amendment to the contract is an integral part thereof and contains provisions replacing or supplementing any of its terms and conditions, drafting of an amendment shall be as thorough as drafting of the contract. Our team will assist you in amending the contract and settlement of all legal disagreements.

Within support of conclusion of the subsoil use contract, as well as within the procedure for contract modification, our experts offer:

• preparation of the tender bid;
• representation of the Client’s interests when submitting and registering the tender bid, in course of negotiations with the state authorities that are a part of the working group on consideration of the draft contract, in course of approval and examination of the draft contract, as well as when signing and registering the contract;
• drafting the contract and amending final version thereof if required;
• drafting additional agreements to the contract;
• negotiating with the working group and state authorities in course of obtaining necessary approvals and expert evaluations;
• development of final version of the draft additional agreement to the contract, signing and registration thereof.

Experience:

• advising a large Russian company on the acquisition of large coal assets and subsoil use right in Kazakhstan (conducting a complex legal analysis (due diligence), transaction structuring, drafting sale-and-purchase agreement, obtaining permit from the competent authority and the state waiver of its pre-emptive right);
• advising a large international company on the proposed acquisition of an oil company owning assets in Kazakhstan, including due diligence;
• advising a large Korean mining company on the proposed acquisition of several Kazakhstani mining companies, including legal audit, development of agreements, drafting memorandums and official legal opinions;
• advising a top-tier Kazakhstani holding on development of subsoil use contracts regarding coal deposits, approval of the contract with state working groups, registration, completion and approval of amendments to the subsoil use contract;
• advising one of the foreign participants in the Production Sharing Agreement on changes in work program and procedure of procurement of goods, works and services under the subsoil use contract;
• advising a large group of Russian companies in connection with obtaining approvals under Kazakhstani subsoil legislation within the frameworks of  selling a Kazakhstani gold-mining company;
• advising a Russian law firm on the necessity to obtain the consent of the competent authority and the state waiver of its pre-emptive right in connection with the issue of Eurobonds by the parent company owning oil assets in Kazakhstan.

Publications:

• The changes in the investment climate due to the adoption of the new law on subsoil and subsoil use