The Six Key Questions That The Legislature Should Answer Before Passing The New Act On Investments
Question 1. What provisions of the new bill are expected to improve the investment climate in Kazakhstan?
Comment. With increased political instability in Central Asia and the aggressive investment policy pursued by Russia, some foreign and domestic investors would seek more secure investment opportunities. Do you deem it necessary that the new Kazakh investment law be superior in its quality to those of neighbouring countries, and reflect modern economic and political reality?
Question 2. What is the purpose of the new definition of investments as proposed by the bill’s authors?
Comment. The Act On Foreign Investments contains a more thorough definition of investments than that incorporated in the new law. Thus, in line with the current law, «investments are any material, financial or intellectual assets, which are being devoted to business with the goal of generating income,» whereas the new law defines them as the property «contributed to the authorised capital stock of a commercial entity, or to the formation or expansion of fixed assets.» Doesn’t this mean that the proposed Act will not be applicable to some investment options, such as insurance, banking transactions, investment by non-commercial organisations?
Question 3. What was the reason for excluding from the new bill the stabilisation provisions for investors in all categories?
Comment. Given the current policy of attracting investments to the priority sectors of Kazakhstan’s economy, wouldn’t it be logical to preserve these provisions which protect investors against changes in legislation for these sectors, as has been done in Russia?
Question 4. Why do some international experts hold the view that a legal framework for the redistribution of property is being prepared in Kazakhstan?
Comment. Although the bill does envisage compensation in the case of nationalisation (Article 8, Paragraph 2), it is not stated that payment will be made immediately and in consideration of the real market value of the expropriated property. Do you think that domestic and foreign investors’ concerns about having only their losses, and not the value of property, compensated, is groundless?
Question 5. Why does the new law fail to mention the place of settlement for any investment disputes (i.e. court, international arbitrage) that might arise as a result of the nationalisation of property?
Comment. The Act On Foreign Investments states that any arbitration award is final and binding on the parties of the investment dispute, and shall be effected in the Republic of Kazakhstan as any other award by the courts of the Republic of Kazakhstan. The absence of this provision from the new law formally enables the state court to refuse to effect the arbitration award. Isn’t this the removal of the key mechanism for protecting the investor’s interests? Why is the investor entitled to contest the assessment of his expropriated property only in the Kazakh courts?
Question 6. Why are there no provisions in the new law protecting investors’ interests from political and regulatory risks?
Comment. Initially, the bill did contain a provision for insuring against political and regulatory risks by a specially founded public insurance company. Why is this provision totally absent from the proposed version of the bill?
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