Changes in the Licensing System of the Republic of Kazakhstan
At the end of December 2012 the Government of the Republic of Kazakhstan approved several legal acts in the sphere of licensing. Also, the Government of Kazakhstan is actively conducting work on the draft Law 'On permissions and Notifications' as part of the Initiative of further reforming Kazakhstan’s permit system for 2012-2015 (Initiative).
Following GRATA Law Firm's practice of informing clients about important legal changes, which may influence their activities, and in connection with the expansion of the range of services, rendered by us in the regions, we draw your attention to the recent modifications in Kazakhstani licensing law.
1. General information
According to an Initiative approved by the Government, the Government of the Republic of Kazakhstan ('Government') is conducting active work on simplifying the permit system and eliminating excess administrative barriers in order to develop entrepreneurship in Kazakhstan. Accordingly, at the end of 2012, the list of Regulations of the Government on licensing for several types of activities was adopted. These changes are described in more detail below.
The Government has also set the Ministry of Regional Development of the Republic of Kazakhstan together with a working group, the task of drawing-up a draft law 'On Permissions and Notifications' ('Draft Law'), included in which will be a comprehensive list of all permit documents.
2. The Draft Law 'On Permissions and Notifications'
Following the adoption of the Law 'On Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan regarding the Reduction of Permits and Optimization of Control and Supervisory Functions of State Bodies' dated July 10, 2012, which led to a significant (30%) reduction of licenses and permits, the Government actively began to formulate the Draft Law. Thus the working group was organized, which includes many licensor bodies such as the Ministry of Industry and Trade, the Ministry of Oil and Gas, the Ministry of Internal Affairs, the Ministry of Finance and the Ministry of Justice, as well as representatives of Atameken Union, JSC 'Economic Research Institute' , the World Bank and other organizations ('Working Group').
The main activities of the Working Group are:
- introducing new principles in permit legislation;
- reducing the administrative burden on business;
- eliminating corruption in the licensing system.
It should be noted that the Initiative of further reforming Kazakhstan's permit system for 2012-2015 provides the implementation the Draft Law by the following means:
- classification of permit documentation (for production, individual movable and immovable objects, including vehicles, buildings, facilities and professional activities of individuals);
- categorization of permit documentation (license for performing highly dangerous activities, all other licensing procedures (documents) produced and used in accordance with the classification of licensing procedures (e.g. notification of commencement of the business or individual actions in respect of the activities or actions of a minor degree of danger) ;
- development of unified principles of the licensing system ('Personal responsibility of the representative of the state body for a decision', 'The Presumption of innocence of the applicant', 'Any duties and taxes must be justified by law');
- development of a comprehensive list of permit documents.
In addition, the Ministry of Regional Development is planning to introduce a Draft Law to the Parliament of the Republic of Kazakhstan in December 2013, thus itself a new law will be available on the website of the Ministry of Regional Development in July 2013.
Such changes regarding the reduction of the licensing and permit burden indicate the willingness of the Government to support business.
However, we have yet to see how the new Draft Law will contribute to the development of the business environment through the implementation of the principle of 'integrated permit system'.
3. Changes in the rules for licensing of certain activities
The government has changed the eligibility requirements for an applicant to obtain a license in the following areas:
- architecture, urban planning and construction;
- production and turnover of ethyl alcohol and alcoholic beverages;
- commodity exchanges;
- production state symbols;
- organizing and conducting lotteries;
- implementation of security activity by legal entities;
- manufacture of tobacco products;
- turnover of toxic substances;
- informatization and communication;
- ensuring information security.
The licensing system of Kazakhstan is undergoing numerous changes aimed at simplifying the procedures for obtaining licenses, namely:
1) The Government of the Republic of Kazakhstan December 21, 2012 by its Resolution No. 1655 'On Some Issues of Licensing and the Notification Procedure' has approved the form of state license, which is applied as a general rule, as well as the forms of licenses and applications for licenses for certain types of activity (e.g., the form of licenses for activities in the field of gambling and a form of application for a license to operate in the field of education). In addition, the Government by the given Resolution approved a unified application form for a license, both for individuals and for legal entities, in which the applicant states that:
- those specified in the documentation are official contacts, and they can be sent any information regarding issues relating to the refusal to issue a license, and (or) the application for a license;
- the applicant is not prohibited by a court to engage in licensable and (or) a subspecies of activity;
- all attached documents are true and valid.
Please note that from January 2013 licensors began issuing licenses through the e-government portal (www.elicense.kz). Therefore, all applicants for a license (including foreign individuals and foreign legal entities) need to get a digital signature to obtain a license through the e-government portal.
2) The Resolution of the Government dated June 7, 2012 № 753 'On Certain Issues of Licensing', which had earlier consolidated a unified list of licensors and the list of public agencies in charge of coordinating the issuance of a license in terms of the applicant's compliance with legislation, is now no longer in force. Now the list of such authorities for certain type of activities is consolidated in the Regulation of the Government which defines the qualification requirements for certain types of activities.
3) For each licensed activity there is a list of qualification requirements, but also a clear list of documents for confirming that these qualifications are met. However, in practice, public authorities - licensors at their own discretion and depending on the type of activity may require that the documents should include more detail and be supplemented with additional documents, which significantly delay the process of obtaining a license.
4) In addition, for each type of licensed activity a certain form of information is set, which is filled out and signed by the applicant. This information form structures a large number of documents requested by the licensor to confirm the applicant's compliancy with the qualification requirements. In most cases, the applicant must attach to the form of information a list of documents confirming such information.
5) The qualification requirements for applicants for a license in the field of architecture, town planning and construction have been changed, in particular:
- the work experience of foreign entities intending to obtain a license in the field of architecture, town planning and construction, can be confirmed by 'equivalent' licensing document obtained outside Kazakhstan. We draw your attention to the fact that the term 'equivalent' is not clearly explained in the Law and in practice it is likely to be interpreted by state authorities at their own discretion;
- if it is not possible to provide reviews from customers and/or users of work previously performed by the applicant, the applicant is allowed to provide positive feedback from interested local executive bodies. In this case since the definition of state bodies and the extent of their 'interest' is not covered by the law. Therefore, we assume that it will be defined by the licensing organs at their discretion;
- in order to prove an applicant's experience gained under general contractor or subcontract arrangements it is allowed to submit acts of commissioning or acts which evidence that work that has been completed. The total number of acts should be submitted in an amount established for the confirmation of such works under subcontracts. However, there is a practical issue regarding these acts, because in countries other than Kazakhstan, proof of the completion of construction or the completion of specific project or construction activities is attested by other types of documents.
We believe that amendments in Kazakh Law as well as measures provided by the Draft Law would lead to the significant reduction in the numbers of administrative barriers in Kazakh permit system. Thus, the emergence of the electronic portal of the Government, as well as the establishment of certain rules for licensing for each activity, have led to a significant reduction in burden for of applicants, who can now without much effort find all the necessary information in the electronic portal of the Government, as well as in the laws and regulations.
However, experience shows that gaps still exist in the legislation on licensing. For example, in the guidelines for public services there is not a comprehensive list of documents which has been approved for renewing/reissuing a license and/or its annexes. In each case (for example, change of legal address, the name of the legal entity, the reorganization of the legal entity) the public authorities determine the list of required documents at their own discretion, which significantly complicates the process of renewing/reissuing the license and/or its annexes, despite the fact that the law strictly defines a period of thirty days to submit the documents, failure of which will give a rise to administrative liability.
GRATA Law Firm