Environmental Inspections: Practical Recommendations for Subsoil Users on Supporting and Appealing Environmental Inspections

Environmental Inspections: Practical Recommendations for Subsoil Users on Supporting and Appealing Environmental Inspections

Every subsoil use company is subject to regular environmental inspections, in the course of which the state inspectors often breach the letter of the law on their implementation. It is for this reason that companies should know the requirements, in order to prevent infringement of their rights and, if necessary, to defend them in a superior court of law.

Types of environmental inspections

Environmental inspections may be planned or unplanned.

A planned inspection is an inspection appointed in relation to a specific company on the basis of an inspection plan approved by the controlling state body. Planned inspections are based on a system of assessing the risks to a human’s health, the environment, and the proprietary interests of the state, taking into account the aftermath of the harm.

The Law ‘On Private Entrepreneurship’ dated 31 January 2006 (hereinafter referred to as the Law ‘On Private Entrepreneurship’) emphasises three degrees of risk – high, medium and insignificant. Companies imposing a high threat are subject to inspections no less than once a year; companies imposing a medium threat are subject to inspections no less than once in three years; and companies imposing an insignificant threat are subject to inspections ne less than once in five years.

An unplanned inspection is an inspection appointed by the controlling state body in relation to a specific company for the purpose of remedying a direct threat to life, environment, legal interests of individuals, legal entities, and the state.

The frequency of unplanned inspections is not stipulated, although such inspections may be carried out only in situations stipulated by the Law ‘On Private Entrepreneurship’.

Practice shows that in many cases, the state bodies ignore the requirements of the law stipulating the possibility of carrying out unplanned inspections, subject to the existence of grounds provided in the Law ‘On Individual Entrepreneurship’. Inspections are very often appointed on the basis of an ‘instruction’ from a state body or official (e.g. Premier Minister or attorney). In accordance with the Law however, an unplanned inspection may be appointed after ‘obtaining information or requests from individuals or legal entities, state bodies, deputies of the Parliament of the Republic of Kazakhstan and local representative bodies on the infliction of a significant harm or a threat to the life, health, environment and legitimate interests of individuals, legal entities, and the state’. If significant harm or the threat is absent, then instructions to the controlling body sent by the other state body does not constitute a ground for carrying out an unplanned inspection. The concept of significant harm is not however explained in the Law. We think that this term will be interpreted by the state controlling bodies and courts differently in each individual case, taking into account the facts of a particular case. There is however no established practice and therefore, it is not possible to talk about the tendencies of interpreting the term ‘significant harm’. 

It should be noted that groundless inspections (both planned and unplanned) constitute gross violations of the Law ‘On Private Entrepreneurship’ and thus such inspections are void (Articles 40-2 of the Law ‘On Private Entrepreneurship’). Further, in accordance with Article 153.1 of the CoAW of the RK, a fine ranging from 10 to 20 MCI may be imposed in connection with ungrounded inspections.

Inspection forms

According to the Law ‘On Private Entrepreneurship’, an inspection of a private entrepreneur is carried out if one of the following actions is taken:

1.   a physical inspection of the controlled object by an authorised person of the controlling state body;

2.   a request of information concerning the subject matter of an inspection (apart from cases where information is necessary for other forms of state control stipulated by the law of the RK);

3.   an invitation from a private entrepreneur to the state body for the purpose of obtaining information on compliance with the laws and decrees of the Government of the Republic of Kazakhstan.

In practice, the controlling bodies often require private entrepreneurs to submit certain documents showing compliance with the laws of the RK. Such requests are however independent inspections and therefore, they may be directed to private entrepreneurs only in cases of full compliance with the requirements on carrying out inspections: on the basis of sufficient grounds, an act of appointing an inspection, after a preliminary notification of the private entrepreneur on the commencement of the inspection, etc. Otherwise, the request of the state body amounts to an illegal inspection, which shall be declared void.

Procedure for carrying out inspections

In accordance with the Law ‘On Private Entrepreneurship’, an inspector must show the following at the place of an inspection:

1.   An act of appointment of an inspection (in a form stipulated by the Decree of the Ministry of Environmental Protection of the Republic of Kazakhstan dated 5 April 2007 No. 100-p.) with a notice on the registration of an act with the Committee on Legal Statistics and Special Accounting or its territorial office mentioned in the act. The Act shall be issued for one company;

2.   Work ID;

3.   Permission of the competent body to physically inspect controlled objects, if necessary;

4.   Medical access necessary to enter controlled objects;

5.   Checklist – a document including an exhaustive list of requirements from private entrepreneurs provided by the laws of the Republic of Kazakhstan and Decrees of the Government of the Republic of Kazakhstan, the non-compliance of which leads to a threat to life, health, environment, proprietary interests of citizens, legal entities, and the state.

Checking the aforementioned documents will allow a company to determine whether or not it is required to allow an inspector to physically inspect its objects.

A subsoil user therefore has a right to refuse to allow the inspector to physically examine its objects and enter its building in the following cases:

non-observance of time intervals in relation to the previous inspection;

appointment of inspections by the state bodies, who do not have capacity to do so;

excess or expiration of the terms indicated in the act of appointment of an inspection inconsistent with the terms stipulated by the Law ‘On Private Entrepreneurship’[1];

deliberate appointment of a repeated inspection of an entity in relation to whom a previous inspection was carried out in relation to the same question and for the same period. In several cases provided by the Law ‘On Private Entrepreneurship’ however, a repeated inspection is allowed (for example, if the controlling body receives information on the infliction of, or a threat to inflict, harm to life, health, and the environment from another state body; if the inspection is made of the controlled company’s own initiative and in several other cases);

absence of an act appointing an inspection;

appointment of an inspection for a period outside of the period stipulated in the application, or a notice of the commission or attempt of a crime, or in other requests on the violation of the laws and legal interests of individuals, legal entities or the state (i.e. if an entity whose rights were breached as a result of company activity, provides the controlling body with the period within which its rights were breached, it is prohibited to appoint an inspection covering a different period);

instructing bodies who do not have capacity to carry out inspections;

listing several private entrepreneurs, subject to inspection in the same act of appointment of an inspection;

prolongation of the terms of an inspection for more than 30 working days.

Requirements as to the duration and substance of inspections

The Law ‘On Private Entrepreneurship’ requires every inspection to be undertaken in strict accordance with its purpose. This requirement can be found in the following provisions:

• Each state body approves the forms of checklists, including an exhaustive list of the requirements of the laws and decrees of the Government of the Republic of Kazakhstan applicable to the activities of private entrepreneurs. Checklists may not include requirements unstipulated by the law or decrees of the Government of the Republic of Kazakhstan or they shall include requirements decreasing the degree of risk of activities carried out by private entrepreneurs (Article 38.2 of the Law). The forms of the checklists are published on the websites of the state bodies.
• The checklist shall be demonstrated to the private entrepreneur by an authorised person of the controlling state body (Article 38.6 of the Law).
• The act of appointment of an inspection must state the inspected period. If an inspection was appointed as per the request of an individual or legal entity (in the view of protecting their own rights) or a notice on the commission or attempt of a crime, then the inspected period shall be in accordance with the period indicated in the notice/request. Otherwise, a private entrepreneur has the right to refuse entrance to its objects for the purposes of physical examination (Article 40.1 of the Law);
• In the course of an inspection, an authorised person of the controlling state bodies has a right to require from private entrepreneurs information relating to the subject matter of the inspection and inspected period. Otherwise, a private entrepreneur has a right to refuse to provide information (Article 40.1 of the Law).

In accordance with Article 40-1.2 of the Law ‘On Private Entrepreneurs’, in the course of inspections, authorised persons of the controlling state bodies do not have a right to demand documents, information, product samples, tests examining environmental objects and objects of industry if they are not inspected objects or do not constitute the subject matter of an inspection. If such information and materials were demanded and obtained by an inspector in the course of his inspection, a private entrepreneur has a right on the basis of Article 40-2.2 of the Law to demand the invalidation of the inspection results.

Since inspections are usually an inconvenience for entrepreneurs, the Law ‘On Private Entrepreneurship’ sets out the maximum terms for carrying them out. An inspection shall not exceed more than 30 working days, except in certain circumstances arising in the course of tax inspections stipulated by tax law. Due to a significant volume of inspections and for carrying out special investigations, experiments, or expertise, the terms of carrying out inspections may be prolonged once and for 30 working days only (except for in certain circumstances stipulated by tax law of the RK).

If the inspection terms are prolonged, the controlling state body must produce an additional act on prolongation of the inspection and register it with the body on legal statistics. The act shall include the number and date of the previous act on the appointment of the inspection and the reason for the prolongation of the terms of the inspection (Article 38.11 of the Law).

Apart from a prolongation of the terms of an inspection, the law stipulates a possibility for suspending the inspection, where the prolongation of the terms does not exclude its suspension. As a rule, an inspection is suspended in situations where obtaining the required information to carry out an inspection may take a longer time.

An inspection might be suspended only once for a period of no more than a month.

The terms of suspension of an inspection are set out in the following exceptional situations:

• necessity of obtaining information, documents from foreign states important to the inspection;
• carrying out special research, experiments, expertise for a term exceeding 30 working days.

When an inspection is suspended or resumed, this is recorded with an act of suspension or resumption (Article 38.11 of the Law). Registration of the act with the body on legal statistics is not required, although a private entrepreneur shall be notified of the suspension or resumption of the inspection one day before the date of the inspection being suspended or resumed, including a notice to be sent to the body on legal statistics (Article 38.11 of the Law).

Repeated inspections of private entrepreneurs, in relation to whom an inspection was suspended or resumed within the set terms, are disallowed (Article 38.11 of the Law).

Procedure for carrying out inspections

In accordance with the rule, a private entrepreneur is informed of any inspections in advance. He shall be notified not less than 30 working days prior to the date of the inspection setting out the terms and subject matter of the inspection in the case of a planned inspection (Article 38.5 of the Law). He shall be notified not less than 1 day prior to the date of the inspection setting out the subject matter of the inspection in the case of an unplanned inspection (Article 38.5 of the Law).

It is not necessary to notify a private entrepreneur about carrying out an unplanned inspection in cases stipulated by the Law ‘On Private Entrepreneurship’, including:

• carrying out a cross inspection in relation to third parties with whom the inspected private entrepreneur had civil relations;
• carrying out an inspection of the private entrepreneur’s own initiative;
• carrying out inspections on grounds stipulated by the Criminal Procedural Code of the Republic of Kazakhstan.

A breach of the terms of inspection is a ground for holding the inspection void (Article 40-2.2 of the Law), as well as imposing a fine ranging from 5 to 10 MCI on the party at fault.

An inspection is commenced from the time the private entrepreneur receives an act of appointment of an inspection (Article 38.7 of the Law), where the inspection can only be carried out by a person(s) indicated in the act (Article 38.9 of the Law).

In accordance with any findings, a person carrying out an inspection prepares two copies of an act of inspection results including information as required by Article 38.14 of the Law ‘On Private Entrepreneurship’.

If a private entrepreneur has notes or objections as to the results of the inspection, he shall put his notes or objections in writing. His notes or objections might be attached to the act of inspection results.

One of the copies of the act of inspection results and copies of appendices apart from documents, the original copies of which are possessed by the company, are submitted to its director for review, so as to take steps to remedy breaches and other actions (Article 38.16 of the Law).

If there are no objections, a private entrepreneur shall within three working days submit information on remedial actions to be taken by him to correct the breaches revealed at the inspection, setting out the terms which will be agreed with the director of the state body who carried out the inspection (Article 38.17 of the Law).

An inspection is deemed to end on the date the private entrepreneur receives the act of inspection results (Article 38.21 of the Law). If he does not receive the act, this can be a ground for invalidating the inspection, as well as imposing a fine ranging from 10 to 20 MCI on the authorised person of the controlling state body at fault, in accordance with Article 153 of the CoAW of the RK.

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In conclusion, we are of the opinion that the Law ‘On Private Entrepreneurship’ strengthens the position of private entrepreneurs, giving them a wide tool kit for defending their interests. This Law creates real conditions for preventing the use of state control mechanisms as coercive instruments on private entrepreneurs, thus decreasing corruption and securing transparency of the state bodies.