Constitutional Framework of Subsoil Management: Issues and Perspectives

The legal institute of state governance subsoil use and protection is a core subsoil legal institute. Its essence constitutes subsoil state governance, including: the exercise by the state of its subsoil ownership right, state supervision over subsoil protection and monitoring; state control over subsoil survey and use and subsoil operations; subsoil state expertise; the state register of mineral reserves; the state cadastre of mineral deposits and occurrences; the state cadastre of hazardous and radioactive wastes burials, and waste water discharges into subsoil; the state cadastre of man-caused mineral formations.

This presentation addresses only the issues of the exercise by the state of subsoil ownership right, analysis of constitutional rules as a basis for subsoil management, and discusses the existing concerns and identifies available options for improvement of state regulation of relations in this key sphere of the national economy.

Thus pursuant to clause 3 of Article 6 of the Constitution of the Republic of Kazakhstan and Article 193 of the Civil Code of the Republic of Kazakhstan, land and underground resources, waters, flora and fauna, other natural resources shall be owned by the state. Therefore, objectively the right of state ownership of subsoil constitutes a combination of legal rules that regulate the relations of state ownership of the assets and provide the state with an opportunity at its discretion to possess, use and dispose of subsoil. The right of state ownership of subsoil and minerals contained therein is also stipulated by the RoK Law «On Subsoil and Subsoil Use» (Article 10). Thus, the state ownership of subsoil is one of the constituents of the state sovereignty of the Republic of Kazakhstan.

However, regardless of express legal regulation of the right of state ownership of subsoil, there are a lot of disputes on its concept, interpretation and exercise.

The above position on the «inequality of the parties» causes doubts as to its indisputability both from the common theory of law and theory of civil law perspectives. This thesis can be supported by the constitutional provision which specifically stipulates that subsoil and other natural resources are the state property. However neither Article 6 of the RoK Constitution nor other constitutional rules contain procedures and rules that regulate the disposal of state property. On the contrary, there are regulations that state and private property are recognized and equally protected in the Republic of Kazakhstan; that property imposes liability, its use should benefit the community; the holder of the right of ownership and the object of the right of ownership, the scope of and limits to the rights, guarantees and their protection are stipulated by the law (parts 1 and 2 of Article 6 of the RoK Constitution). By the essence of these constitutional provisions the study of the role and place of the state in subsoil use contracts is subject to legislative acts that regulate relations arising in connection with possession, use and disposal of property, specifically to the civil law rules.

In this connection there should be noted the fundamental rules determining the right of ownership as the right of its holder, which is recognized and protected by the legislative acts, to possess, use and dispose of the property belonging to him/her. Further the right of disposal constitutes a legally secured capacity to determine the legal fate of property, however the exercise by the owners of their powers should not infringe upon the rights and legal interests of other parties and the state (Article 118 of the Civil Code of the Republic of Kazakhstan).

Thus, the constitutional provisions and civil law rules do not establish specific rules for possession, use and disposal of property. The exercise of the ownership right shall be subject to the general rules stipulated in the Civil Code of the Republic of Kazakhstan. This conclusion gives the ground for an assumption that different approaches to a specific role of the state in contractual relations in the area of subsoil use, which prejudice the equality of the parties to civil relations, are not indisputable. Also, this conclusion can be supported by the works of other participants in this academic discussion, who assume that the state (the Republic and its political subdivisions) should first of all be considered as a party to public relations where it acts as the authority obliging other parties to legal relations to obey the requirements of the government authorities which express political will to the extent of their powers. Moreover the state can on its own behalf enter into civil relations characterized by «mutual independence of the participants, their legal equality and their mutual responsibility for the violation of their civil obligations».^[288]

The reference to the legislative rules applicable in the period of contemporary history of Kazakhstan and regulating subsoil use relations, specifically to regulations establishing the procedure for granting subsoil use rights, namely to the former Code of the Republic of Kazakhstan on subsoil and processing of mineral raw materials dated May 30, 1992, makes it clear that subsoil blocks could be granted for use to the entities with foreign participation, foreign entities and individuals on the basis of a contract or concession, i.e. on contractual terms (part 3 of Article 10). Another rule of this Code (Article 14) established that the right of granting subsoil blocks for mining and processing of mineral raw materials or for other purposes is exercised by the Government of the Republic of Kazakhstan or local Soviets of the People’s Deputies by entering into an agreement with a subsoil user.

The former Law of the Republic of Kazakhstan «On Subsoil and Subsoil Use» of January 27, 1996 and the current law with the similar title dated June 24, 2010 also contain the rules by which granting, transfer or passing of the right to use subsoil are made on the basis of a contract or another civil transaction. In this connection, one of the participants in theoretical discussion of the issue in question, based on the provisions of civil and international law writes that «the state entering into private law relations acts as a typical entity governed by the private law, losing its authoritative functions and the right to judicial immunity».^[289]

Sharing this point of view and summarizing the above, it can be noted that the state should participate in all these civil subsoil management transactions equally with other participants in legal relations, as any contracts should be executed and performed subject to the fundamental principles of the civil legislation. This conclusion is based on the assumption that relations with respect to subsoil development are in essence economic commodity-money relations. In addition, civil legislation treats the subsoil use right as a type of property right and refers it to the objects of tenancy (clause 2 of Article 541 of the Civil Code of the Republic of Kazakhstan). It also stipulates that legislative acts can establish specific terms for tenancy of «subsoil blocks and other separate natural objects», including on the basis of concession agreements (clause 4 of Article 541 of the Civil Code of the Republic of Kazakhstan).

However, it should be noted that the current Law of the Republic of Kazakhstan «On Subsoil and Subsoil Use» practically lacks private law principles and does not include these relations in the jurisdiction of the civil law. The law does not contain specific rules which allow applying civil law institutes and categories in the regulation of subsoil use relations. In general, currently subsoil use relations are characterized by the administrative law regulation method.

The existing disagreements with respect to the issue of the role and place of the state in the regulation of subsoil use relations evidence for a necessity to identify the role of the state in the area of economy based on the classical concepts of the constitutional law, civil law and subsoil law. It is assumed that to bring different viewpoints on this issue together the following provisions are to be stipulated by the legislation.

First, based on the right of state ownership the absolute priority in the area of subsoil use is to be given to the state and public interests. However this priority should be based on the legislative acts of Kazakhstan in order to ensure the equilibrium of public law and private law principles. The violation of such equilibrium should be subject to judicial protection.

Secondly, it is necessary to clearly differentiate the competence of the state as a sovereign in public relations and as an independent and equal entity in civil law (private law) relations.

Thirdly, subsoil blocks (deposits) should be granted to subsoil users regardless whether they are national or international only based on open bidding (tender) by execution of a contract (agreement) under the rules of the civil law; moreover, specific terms of bidding, execution and implementation of a contract should be stipulated in a special subsoil act.

Fourthly, the main terms of a subsoil use contract pertaining to the issues of taxes and other obligatory payments should be consistent with the applicable tax legislation. In addition, the imperative (private law) rules stipulating specific types and amounts of taxes and other obligatory payments should automatically be included in a contract.

Fifthly, for the purpose of secured provision of the state interests of Kazakhstan with strategic and deficit subsoil resources which determine national security of the country and ensure its sovereignty (strategic mineral resources, major deposits), it is necessary to allocate separate land plots (used and unused) from the state fund and assign to them the status of strategic assets as well as to determine the national fund of reserve deposits. In this connection it should be noted that currently the Government of the Republic of Kazakhstan has identified a list of strategic subsoil blocks (deposits), however, it contains both major subsoil blocks which have a strategic significance for the national economy and less significant blocks, hence theoretically and practically devaluating this legal act and the initiative of identification of key state-owned assets per se.

Sixthly, the role of the state in geological study of subsoil should be specified, the principles and mechanisms of economic and other stimulation of investment in this type of subsoil use should be determined; the principle of recovery of historical costs of the state for exploration and assessment of mineral deposits should be replaced with the principle of acquisition from the state of geological information required by a subsoil user for each specific subsoil block (deposit). Perhaps the state needs to waiver such obligatory payment as commercial discovery bonus payable by a subsoil user based on the results of exploration and discovery of mineral resources.

Seventhly, the principles of support to and encouragement of innovative technologies which improve the ratio of recovery of minerals and help reduce the loss of minerals in-situ need to be stipulated by the legislation. At the same time scientific criteria for a high level of deep reserve depletion, reserves hard to recover, and uncommon types of minerals are to be introduced, and the principles of economic and other stimulation of its development are to be established.

The proposed institutional changes in the sphere of state governance of subsoil are identified with a combination of interrelated legal, economic, social and other institutes which in essence structure the system of state control. The combination of these institutes constitutes a specific institutional matrix logically summarizing actual relations and institutes engaged in the control over subsoil users’ activities. These are regulatory legal acts, standards, norms and rules, regulations and sanctions, instructions and methods, controlling entities and the objects of control. Multiple year experience in theoretical research and practice of state control and supervision in the area of subsoil use in Kazakhstan show that institutional changes are able to ensure the efficiency of state legal regulation of subsoil use relations. In general, in order to provide for these priorities, the parameters of state legal regulation should meet the requirements of: optimality, accomplishability and controllability. The practice of state legal regulation needs uniform methodological approaches based on express legislative requirements ensuring simultaneous and equal effect of public law and private law rules.^[290]

Given the development of market relations in Kazakhstan, the state also needs to use economic stimuli for effective use of subsoil by establishing scientifically based subsoil use payments, provision of benefits and preferences for high-tech and safe methods of subsoil development, maintaining the stability of law and contractual provisions, formation of a uniform law enforcement practice of dispute resolution between the state and subsoil users.

Only such approach would fully ensure the implementation of the constitutional rules pertaining to the right of state ownership of subsoil.

History and landmarks of the Kazakhstan law on subsurface resources

and subsurface resources use

History of civilizations is closely related to the resources, which predetermine their origin, development, existence, decline and death, therefore society as any other organism is producing and using resources, which represent material and intangible benefits.

As is known, use of subsurface resources has been performed in the territory of present Kazakhstan a few millennia ago, although in the primitive form. For example, the modern history is familiar with the stage of the Adronovo culture that corresponds to the early Bronze Era (XVIII-XVI centuries BC) and the middle (XV-XII centuries BC) Bronze Era. The development of cuprum (Zhezqazghan, Zyryanovsk, Karchiga, Dzhaltyr, Ashyly, Uro-Tobe, Kushykbai), stannum (Atasu mountains, Kalbynskyi and Narynskyi Ranges) and gold (Stepniak, Kazanchukur, Baladzhal, Akdzhal, Daibai, Maikopchegai, Akabek) has begun in primitive forms in the territory of present Kazakhstan at this particular time. These places represented one of the ancient metallurgy centers based on the mining operations. Unfortunately, history doesn’t keep facts on the way these relations were being regulated, but it is known for sure that these territories were safeguarded and protected by the Andronovo period ancient tribes residing in these mining places^[291].

Later, relations connected with possession of land and its subsurface resources have been regulated by the Kazakhs’ customary law until first Russian acts of the Petrine period appeared. Thus, some early researchers of the Kazakhs’ customary law, for example A.I. Miakutin (1910), A.Kh. Golmsten (1902) have marked that the characteristic features of common property included private ownership of the land by separate «hordes, clans and tribes» and, later, by the khans and their attendants. Separate notions such as «land» and «subsurface» did not exist during that period, because the first one covered them both. The Kazakhs’ customary law stipulated liability for «lawless use of foreign property», in particular, for the unwarranted «stone digging»^[292], in other words, practically for digging anything from the ground and subsurface. According to this provision the Kazakhs’ customary law could relate any mineral raw material and deposit excavated from the ground to the notion of «the stones».

Liability for the lawless use of foreign property, including the land use, was based on the documents as well. Thus, S. Uzbekuly, while researching the reign period of Tauke Khan and «Zhety Zhargy» law monument, gives in his work one of the «seven settings» stated by Kazangap Baibolov in the «Tole bi history» dastan, in the following form^[293]:

«The first one land law

Is crucial for You,

Avaricious neighbor, extorter or host

If You try to grab our grounds the most!»

Later, practically beginning from the reign period of Peter the First in the Russian Empire and up to the collapse of the Soviet Union, relations regarding ownership, use and disposition of land and subsurface have been regulated by the statutory and other acts, pertaining to the system of various branches of law, in particular, the land and mining law.

Therefore, governmentally and socially regulated items of subsurface use have been important on the Eurasian space at all times. Meanwhile, regulation of these relations in the territory of Kazakhstan during different stages of its statehood development has been performed in different ways, depending on the social and political system, social and economic basis and on the state ideology. Naturally, scientific researches of these relations could not have been isolated from the political, economic and social realia as well. Let’s review the history and landmarks of the Kazakhstan law on subsurface resources and subsurface resources use on the basis of this conclusion through the perspective of three periods of the country’s development: a period when Kazakhstan was a part of the Russian Empire, the Soviet period and the period after the USSR\'s disintegration (period of the modern history of Kazakhstan).

As it is known from the historical sources, an annexation of Kazakhstan into the Russian Empire, which had begun in 1930s of the XVIII century by annexation of the Junior Zhuzh headed by Abulkhair Khan (in 1731) and then of the Middle Zhuzh (1732-1740), ended in the XIX century by colonization of the Elder Zhuzh (in 1824).

Thus, the first stage of development of law on the subsurface resources and subsurface resources use in Kazakhstan refers to the development period of the country as a part of the Russian Empire up to October 25, 1917, that is up to the October Socialist Revolution date.

Meanwhile, long before the Junior Zhuzh joined the Russian Empire on August 24, 1700, Peter the First had issued an Order signed by his own hand «On Institution of the Order on Mining» reading as follows: «In Moscow, gold and silver and other mining to be the responsibility of okolnichy Alexei Timofeyevich Likhachev and clerk Kozma Borin, to be sat separately in the Great Treasury Department and be referred to as the Mining Department». This date is considered the day of creation of the Russian mining and geological service. However, it was abolished in 1711 and functions of the mines inspectorate were delegated to the governors.

Later an Imperial Order «On Prospecting for Gold, Silver, Copper and Other Ores Throughout Muscovy» was issued on November 2, 1700; an Order of Peter the First «On Freedom of the Prospecting and Mining Enterprise» was issued on December 15, 1717; an Imperial Order established the Berg-College on December 10, 1719; Peter the First has issued an Order «On the Upkeep of Workers at Mining Plants» on June 26, 1724; the project «On Mining Enactment» was developed in 1806; public and criminal liability of miners for accidental injury and death of the workers was imposed in 1807; the decision to commit the miners guilty of the mine workers’ death or injury for trial was made in 1818; the Mining Statute of the Russian Empire was approved in 1832, and it has provided the base for the redrafts of this act in 1842, 1857, 1893, 1912 and 1914; «Transitional Provisions on Use of Explosive Materials in Mining», «Instruction on the Performance of Mine Surveying Work», «Rules of Mining Works in View of Their Safety», «Rules for Prevention and Extinguishment of Fires at the Oil-Fields of the Baku Province» were approved from 1887 to 1891; Metallurgical Inspection was established on March 9, 1882; the «Rules for Accident Prevention During Works on Mining Plants» were approved in 1904; new «Rules of Mining Works in View of Their Safety» were approved on August 31, 1911. Several other important and less important acts of legal and technical nature have been approved from the Petrine times up to the October Socialist Revolution (in 1917)[294].

Therefore, the above mentioned regulations of the Russian Empire approved in the course of just a little more than 200 years, have given grounds for the regulatory control of the subsurface resources exploitation. These acts also applied to the Kazakhstan territory, because in the Petrine times it has been already known about the Altai mining resources. Thus, expedition of I.D. Bukhgolts in 1715, and expedition of A.T. Likhachev in 1720 marked the beginning of an active mining development in the East Kazakhstan. Silver ore and copper ore prospecting in the East Kazakhstan was activated due to the imperial orders of 1761 and 1786, when the rewards for the discoverers increased, including, in particular, locksmith’s apprentice Zyrianov who has discovered the Zyrianov deposit at the Chudsky mines in 1791. An expedition of F. Ridder in 1786 has revealed polymetallic ore deposits there as well. The Ridder mine marked the beginning of exploration and development of new mining allotments: Kriukovskyi - in 1812, Filippovskyi - in 1817, and Sokolnyi - in 1820. By the middle of the XIX century The Ridder mine group included more than two dozens of mines and allotments, which contained gold and silver additionally to lead and copper deposits. It is important to mark that mining industry was the main branch of economy of the Ore Altai in the second half of the XVIII century and in the first half of the XIX century. Later, in 1905 the Ridder mine group was sold to the Turn and Taksis, an Austrian company and the mine passed into the ownership of the British in 1914^[295].

Beginning from the XVIII century the south-east part of the Caspian Plain was being studied as well. The first data on the region geology and its natural resources are given in the reports of the first scientific expedition organized in 1768, which involved famous Russian scientists - S.G. Gmelin, N.I. Lepekhin, P.S. Pallas and others. Later, beginning from 1911 the Geological Committee of the Russian Empire has been sending the mining expeditions headed by N.N. Tikhonovich, S.I.Mironov, A.N. Zamiatin and others to the Caspian Plain every year. As a result of their study the salt-dome nature of the Caspian structures was determined, the region oil bearing capacity conditions were studied in general outline, geological maps of several oil deposits were compiled, the Dossor (in 1911) and Makat (in 1915) oil deposits were brought into development in the territory of present Atyrau region. These operations on mining development were interrupted by the revolutionary events, civil war and recommenced only in 1923^[296].

Science was also developing at the same time. Thus, for example, Russian specialists, who were trained in the specialized educational institutions of Russia and abroad, have begun to work for the first time at 26 state and 169 «particular» plants in the reign of Catherine the Great and after establishment of training schools. Collection, systematization and publication of works in the area of geology, mineralogy, search and exploration of mineral deposits were activated within the school walls. Several dedicated and resumptive scientific works of the Russian and foreign authors, including «The Mining Dictionary» consisting of seven books, «On Turf», «Directions to the Subsurface Geometry and Others.», «Cobaltology», «About Gemmary», «Introduction Into the Mining Cognition of Earth», «About the Horn Ore», «About the Genesis and Birth of the Metals», «Report on the Saxon Mining Range», «Introduction to Physics», «Experience of the Ore-Spoken System», «Primary Base of the Mining and Salt Production Art» and others were prepared and published^[297].

While summarizing this stage of history and development of law on the subsurface resources and subsurface use at the Russian Empire territory it is necessary to mark several important and general regulations of the above mentioned statutory acts, which have given the basis for the development of this branch of law to the next stage of the development of Kazakhstan’s statehood during existence of the USSR.

The system analysis of the Imperial Orders and other regulatory acts of that time allows to conclude that subsurface facilities, minerals and production facilities could pertain both to the monarch and to other parties as well; for example, this fact is confirmed by some regulations of the Petrine Order, which has established the Berg-college. Thus, the Tsar has proclaimed in this act that «Only we, that is the monarch, are possessing the mining plants» and then he has declared that «Urbi et orbi can search, melt, weld and shine any metal in any place, at both their own and other plants, and shall spare gold, silver, copper, tin, lead, iron, and also various minerals such as saltpeter, sulphur, vitriol, alum and different paints needed by earth and stones». However, the same Order provided for the priority right of the monarch to purchase the mineral products recovered and this regulation was stated in the following way: «Moreover, we can purchase gold, silver, copper and saltpeter prior to other merchants, in such a way that no one could sell the less of the above published to someone besides the mining superiors, which are determined for this by the relevant province, or are authorized Berg-college members». Liability was provided for violation of the established rules of the «mining business» conduct, that is subsurface use; it is confirmed by the following Imperial Order: «Our fierce anger, an immediate corporal punishment and death penalty, and deprivation of all the property shall be declared against those, who conceal the recovered ores and do not inform about them…who prohibit and prevent others to establish and expand their plants, as refractory and scornful of our will»^[298].

An Order of Peter the First and acts of other monarchical people and dependent authorities have regulated not only administrative and civil law relations between the plants owners, but also labour, marital relations and housing. Thus, for example, an Order of Peter the First from June 26, 1724 «On the upkeep of workers at mining plants» prohibited marrying off the mining workers, especially, at the Siberian mines, which also included East Kazakhstan mines. In case of violation of this rule the worker had to be sent to the previous place of living together with his wife.

These acts have established the mining management system and structure for the first time, the rules of mining control; ore and minerals were prohibited to be transported abroad, special customs and tax regimes were established for the gemmary. In the reign of the Empress Anne of Russia it was ordered «not to establish loss-making mining enterprises», competition between the trades «on the same land», that is, the same location, was not allowed, the necessity to build plants with involvement of local population has been stated, the legal status of the lieges and foreigners at mining plants was described, judicial and administrative jurisdiction items and inheritance matters were being solved^[299].

An important part of the Russian Empire legal system belonged to the Mining Statute, which had a few editions during almost 80 years. It is worth to give important statements of this act because many relations, being regulated by it, remain relevant up to the present moment. In this connection it is necessary to appeal to the cooperative work of N.B.Mukhitdinov and S.P. Moroz, where they have well reflected several regulations of the Mining Statute of the Russian Empire in the system order through the perspective of interpretation of the landowners’ rights and mineral developers. Thus, they have noted that the main powers of a landowner «consisted, first of all, of independent ownership and use of the mineral resources; secondly, of the subsurface disposition both by way of selling the mineral resources in their natural state and in form of the recovered from the mine mineral as well». The named authors have also stated that the landowners «had absolute and unlimited right to choose the forms and methods for the mining development, except for the cases of the ownership right restriction on behalf of the neighborhood (servitude)»^[300].

Е.V. Novikova relates on a provisional basis the principle of free development to the general regulations of the Mining Statute with the specific limitations; in particular she notes that free development of mining resources was allowed for any interested person subject to compliance with the relevant restrictions and prohibitions established by the law in relation to such activities as high-grading, provision of the works safety etc. But according to her opinion such requirements, which are restricting the principle of free development, are more boldly revealed on free government lands, while refracting in volume in different provinces, lands of the Cossack Armies etc.^[301].

Therefore, the Mining Statute regulations provided that persons having the ownership right for land could develop the subsurface resources as well, but such provision was criticized by the progressive lawyers of that time, for example А.Е. Yanovskyi^[302]. The subsurface resources were recognized as an independent object covered by the ownership right only after the October Socialist Revolution along with adoption of the first Decrees by the new authority.

The second stage of development of law on the subsurface resources and subsurface resources use is the Soviet period (October 1917- December 1991), which has caused a great influence on Kazakhstan; classified legal base for the exploitation of subsurface resources and development of the subsurface use area emerged in the country during this very period.

All-Russian congress of Soviet workers’, soldiers’ and farm deputies and other supreme government institutions, such as the All-Russian Central Executive Committee and the Council of People\'s Commissars have approved several important Decrees and other acts immediately after the October Socialist Revolution, which provisions have directly regulated relations in the area of the land use and subsurface use, in particular:

«Decree on Land» of October 26, 1917, which has abolished the land property right and recognized the subsurface resources as an object of the «state exclusive property»^[303].

«Fundamental Law on Land Socialization» of January 27, 1918, which declared abrogation of «any property of land, subsurface resources, water, woods and natural living resources within the RSFSR boundaries» and stated that «land» should pass into the use of «all the workpeople without any (latent or patent) redemption». This legal act has established that «disposition of the subsurface resources, woods, water and natural living resources is granted to the district, province, regional and federal Soviet authority, depending on their importance, under control of the latter»^[304].

«Decree on the Peat Fuel Development» of April 20, 1918, which has determined that all the developed peat beds and the peat development equipment was not subject to «the prohibitions on the peat production or taxations by the local authorities». This act applied to all the RSFSR regions, but only till March 1, 1919^[305].

«Decree on the Oil Industry Nationalization» of June 20, 1928, which has nationalized «all the oil-producing, oil-processing, oil-trading, subsidiary drilling and transport (cisterns, oil pipelines, storages, docks, jetty constructions and others) enterprises with all the movable and immovable property, wherever it was situated and whatever it consisted of», and declared them «the state property».^[306]

«Decree on Subsurface» of April 30, 1920, which has reinforced the state property of the subsurface, mineral resources and mineral raw material^[307].

«Regulation on Subsurface and Subsurface Development» of July 7, 1923 which governed issues related to subsurface resources management, exploration and production, resources users’ (miners’, mineral developers’) rights and obligations, and compensation for use of subsurface resources^[308]. This Regulation was distributed in the territories of all the Union republics according to the special resolution of Central Executive Committee of the USSR of July 13, 1923.

Mining Enactment of the USSR of November 9, 1927 is an important USSR’s legal instrument of the beginning of the 20th century that facilitated further exploration of subsurface resources and mining law development. This enactment, which had been effective for about 50 years, specifically stipulated the procedure for development of mineral resources deposits and subsurface resources management. In particular, this regulation delegated to the competence of Supreme Council of National Economy such issues as free recording of the country’s mining resources, disposal of mineral resources deposits and performing USSR-wide geological work in all the territory of the USSR, establishment of mining supervision and other questions.^[309] The Mining Enactment also stipulated the «mining freedom\' concept which meant that all citizens and legal entities had the right to explore, survey and develop deposits of mineral resources. This enactment passed close upon the mid-thirties promoted the practice of deposits transfer to resources users’ concession including foreign users. Thus, N.B. Mukhitdinov and S.P. Moroz referring to specific sources state that «for the period from 1921 to 1927 twenty five concessionary plants had been registered. The first of them was a joint American company «Alamerica» which activities were related to the development of asbestos deposits in the Urals.» They also mention that «issues related to ensuring efficient deposits development by concessioners and beneficiation and transportation of ores they extract were specially provided for in the concession agreements made up within that period.»In this connection, the said authors offer an example of execution of an agreement with an English joint stock company named «Lena-Goldfields Limited» in 1927 which «provided for a possibility of early return of a part of Kisilevsk coal deposit situated in Kuzbass Basin, which had been transferred to concession to the state economic authorities’ administration, if the reserves explored there exceeded the limits of the concessioner’s needs established in the above agreement, with a view to that the returned plot complied with the requirements of its further efficient and independent development.»^[310]

Afterwards, the right to explore subsurface resources in the USSR was granted only to Soviet state plants that made a significant impact on economic advancement and contributed to the lawmaking stagnation. That was the very reason why the Mining Enactment of 1927 had regulated issues related to subsurface resources exploration for long 48 years until Supreme Council of the USSR passed a new all-union legal enactment on July 9, 1975 named Principles of Subsurface Resources Legislation of the USSR and Union Republics (hereinafter referred to as the Principles of Subsurface Resources Legislation).

The Principles of Subsurface Resources Legislation consisted of 11 sections comprising 51 articles. That was a substantial legal instrument governing wide range of questions related to subsurface resources exploration which was reflected by the sections’ titles such as «General Provisions» establishing the fundamental principles of state ownership of subsurface resources; «Geological Examination of Subsurface Resources» stipulating the main requirements to that type of subsurface resources exploration activities; «Engineering, Construction and Commissioning of Mining Plants and Underground Structures not Related to Mining Operations» providing for specific characteristics and main requirements to the said types of effective activities related to subsurface resources exploration; «Use of Subsurface Resources for Mineral Resources Deposits Development and for the Non-Mining Purposes» establishing the procedure and the main requirements to deposits development, liquidation and conservation of mining plants and also the procedure for use of subsurface resources for non-mining purposes; «Safety of Works Related to Subsurface Resources Use»; «Subsurface Resources Protection»; «Government Accounting of Mineral Resources Reserves and Deposits, and Parts of Subsurface Resources Fields Granted for Use not Involving Mining Operations; «Control and Supervision of Subsurface Resources Use, Protection and Geological Examination»; «Settlement of Disputes Related to Subsurface Resources Use Issues» ruling out judicial or arbitral means of subsurface resources disputes settlement; «Responsibility for Violation of Subsurface Resources Legislation» specifying a list of violations involving responsibility of a guilty party (person); and «International Treaties and Agreements» legalizing direct effect of such acts.

As subsurface resources were exclusively owned by the state and could only be granted for use, the majority of law regulations governed issues specifically related to use of subsurface resources. This legal instrument was based on the principle of purported use, therefore, one or another legal regulations were applied depending on the purpose that the subsurface resources were granted for. Thus, article 9 of the Principles of Subsurface Resources Legislation stipulated the following types of subsurface resources use^[311]:

geological examination;

mineral resources extraction;

construction and operation of underground structures not connected with mineral resources extraction including structures purported for underground storage of oil, gas and other substances, burial of hazardous substances and industrial waste, sewage disposal;

satisfaction of other state or public needs.

The above regulation contained, among others, a provision that «subsurface resources are to be used free of charge save for the cases stipulated by the legislation of the USSR». That involved a reservation stating that «procedure of payment for use of subsurface resources is established by the Council of Ministers of the USSR.»

This all-union legal instrument also specified a subject structure of legal relationship in the field of subsurface resources development. Thus, the right for use of subsurface resources could be granted to state, cooperative, public entities and agencies and to the USSR citizens. However, it was stated that in cases directly stipulated by the USSR legislation subsurface resources could be granted for use to other entities and persons.

The Principles of Subsurface Resources Legislation also specified a list of questions falling into the USSR’s exclusive competence such as disposal of the consolidated state subsurface resources reserve within the limits necessary for exercise of the USSR’s powers in accordance with the Constitution of the USSR; establishment of the main rules and the uniform technical policy in the field of subsurface resources use and protection; establishment of all-union plans for subsurface resources protection and efficient use of mineral resources; state control and supervision of subsurface resources use and protection, geological examination, and determination of the procedure for control and supervision. The competence of the union republics covered such questions as disposition of consolidated state subsurface resources reserve within the territory of a union republic; establishment of the procedure for subsurface resources protection and use; establishment of plans for subsurface resources protection and efficient use; state control and supervision of subsurface resources use and geological examination; other issues not covered by the USSR’s competence (article 6 of the Principles of Subsurface Resources Legislation).

This all-union legal act really facilitated the development of the subsurface resources legislation in the union republics, particularly, in the Kazakh SSR, after the forty-eight-year stagnation. Subsurface Resources Codes had been passed in all the union republics during the period from 1975 to 1977. Subsurface Resources Code of the Kazakh SSR was passed on August 4, 1976 and enacted from January 1, 1977. Meanwhile, the republic’s competence in the field of governing subsurface resources use relationship was determined just generally and covered only those insignificant questions that did not fall into the the USSR’s competence.

Subsurface Resources Code of the Kazakh SSR of 1976 was the last legal act of the second stage (the Soviet period) of development of Kazakh subsurface resources law regulating relationship in this important sector of the country\'s economy. This specific legal instrument contained some very important provisions regulating relationship in the field of subsurface resources use.

The third stage of development of Kazakh subsurface resources law relates to Kazakhstan’s modern history period starting from October 25, 1990 when «Declaration on State Sovereignty of the Kazakh Soviet Socialist Republic» was passed and approved by the Resolution of Supreme Council of the Kazakh SSR. It was declared in the Declaration that «the territory of the Kazakh SSR within its effective boundaries is indivisible and inviolable and may not be used without its consent.» (article 3). Further, it was stated that «the land, subsurface resources, water, air, flora and fauna and other natural resources, cultural and historical values as well as the whole economical, scientific and engineering potential of the republic and the whole national wealth located in its territory are exclusively owned by the Republic being the ground for its sovereignty.» (article 9). That was the beginning of a new dawn in formation of sovereign statehood, political, legal and economic systems^[312]. On December 16, 1991, Supreme Council of the Kazakh SSR passed the Constitutional Law «On State Independency of the Republic of Kazakhstan» which also declared (article 11) that «the land, subsurface resources, water, air, flora and fauna and other natural resources, economic, scientific and engineering potential of the republic are exclusively owned by the Republic being the ground for its state independency.»^[313]

As the Republic of Kazakhstan obtained its sovereignty and independency and its market relations started to form, a need for development of a landmark policy of use of the mineral and raw complex has arisen. In the result of political and legal reforms implementation and new financial and political institutions formation there was created a more advanced system of use of the mineral and raw base and high-technology industry development on its ground. Furthermore, certain political stability, availability of educated manpower, huge volume of accumulated and validated geological information as well as liberal legislative base - those were the factors that made it possible to create a favourable investment conditions in the country. By the first years of independency, all these matters helped to attract international investments to the country and conclude important agreements for use of subsurface resources at the sites rich on oil, gas, coal and other mineral resources.

This stage is also characterized by an active lawmaking process. A number of important legal acts were passed which promoted settlement of relationships in the area of subsurface resources use. Thus, on May 30, 1992 Code of the Republic of Kazakhstan «On Subsurface Resources and Mineral Raw Materials Processing» No.1367а-XII was passed stipulating a possibility of granting the right of use of subsurface resources not only to Kazakh business entities but also to the businesses with foreign ownership as well as to foreign legal entities and individuals on contractual or concessionary conditions (article 10). Subsurface resources were provided to the above subjects under the agreement on use of subsurface resources specifying, in particular, terms and conditions for use of subsurface resources, environmental requirements, quotas for annual volume of used mineral resources, payment terms and conditions for use of subsurface resources, measures for subsurface resources protection, special requirements to the applied technologies, and preferences provided (article 14 of the Code) etc.

Later, a number of by-laws were approved and passed by resolutions of the Cabinet of Ministers of the Republic of Kazakhstan within several years, such as Regulation «On State Control of Protection and Use of Subsurface Resources of the Republic of Kazakhstan» No. 811 of July 29, 1992; Regulation «On Procedure of Distribution (Transfer, Exchange, Sale) of Information on Subsurface Resources of the Republic of Kazakhstan» No.1034 of December 8, 1992; Regulation «On Specific Features of Management of State-Owned Facilities Used for Exploration of Mineral Resources Deposits (Subsurface Resources) and Industrial Deposits» No.269 of March 14, 1994; Regulation «On Procedure of Providing Subsurface Resources for Geological Examination, Mineral Resources Extraction and Other Purposes» No.377 of April 13, 1994.

On April 5, 1994, the President of the Kazakh SSR enacted Decree No.1637 «On Additional Measures Aimed at Normalization of Use of Subsurface Resources for the Purposes of Geological Examination and Extraction of Mineral Resources».

It is crucially important that the first Constitution of the Republic of Kazakhstan of January 28, 1993^[314], and, afterwards, the effective Constitution of the Republic of Kazakhstan of August 30, 1995 legalized a provision that «the land, its subsurface resources, water, flora and fauna, other natural resources are exclusively owned by the state.»

These legal acts have given a push to development of the legislation on use of subsurface resources and favored creation of beneficial climate for investors who put money into exploration of Kazakhstan’s rich subsurface resources.

Later, in accordance with the Regulation «On Procedure of Licensing of Use of Subsurface Resources of the Republic of Kazakhstan» approved by the Resolution of the Cabinet of Ministers of the Republic of Kazakhstan No.886 of August 8, 1994, and, afterwards, in accordance with the equivalent Regulation approved by the Resolution of the Cabinet of Ministers of the Republic of Kazakhstan No.1017 of August 16, 1996, the right for use of subsurface resources was granted by licence and contract basis. However, such mixed form of granting the right for use of subsurface resources complicated forming relationships between the state and users of subsurface resources, which finally led to cancellation of the license system.

In 1995-1996 being the period of the parliamentary and government crisis, when not only the country’s economy but overall political destiny had been put under the threat, N.A. Nazarbayev, the President of the Republic of Kazakhstan, being aware of importance of the field of subsurface resources use for the country and the people and being guided by the emergency powers granted to him, issued a number of Decrees having the effect of a law which formed the foundation for creation of the legislative framework governing relationship in the field of use of subsurface resources under new market conditions. Those were the following Decrees: «On Licensing» No.2200 of April 17, 1995, «On Oil» No.2350 of June 28, 1995, «On Subsurface Resources and Use of Subsurface Resources» No.2828 of January 27, 1996, «On Taxes and Other Compulsory Budget Payments» No.2235 of April 24, 1995, and others. Later, the above Decrees were supplemented and obtained the status of the country’s law. A number of other statutes, legislative, governmental and departmental legal enactments regulating complicated issues related to use of subsurface resources was also passed.

Special legislative acts governing the subsurface resources use issues except for such important provisions as the ones about tasks and principles of the subsurface resources legislation; the competence of authorized agencies; the procedure and conditions for granting the right to use subsurface resources; types of subsurface resources use, some legislative innovations previously unknown to the Soviet mining law were legalized. Thus, the above legal acts legalized such issues as the contract procedure for granting the right to use subsurface resources; the preemptive (priority) right of the state to acquire mineral resources; guarantees for the right to use subsurface resources in the form of ensuring protection of contract provisions from introduction of amendments and additions aggravating their status; rules for settlement of disputes by means of negotiations or judicially (in state courts or international arbitration courts), in accordance with the procedures specified in a contract. Later these legislative innovations were also legalized in the Law of the Republic of Kazakhstan «On Agreements (Contracts) on Production Sharing when Performing On-Sea Petroleum Operations» of July 8, 2005.

For the purposes of development of provisions of the said laws, the Government of the Republic of Kazakhstan passed a number of acts aimed at more effective and system-based regulation of subsurface use issues, in particular, «Uniform Rules for Oil and Gas Deposits Exploration in the Republic of Kazakhstan» No.745 of June 18, 1996; «Uniform Rules for Protection of Subsurface Resources in the Course of Solid Minerals, Oil, Gas and Underground Water Exploration in the Republic of Kazakhstan» No.1019 of July 21, 1999; «Rules for Granting the Right to Use Subsurface Resources in the Republic of Kazakhstan» No.108 of January 21, 2000; «Rules for Carrying Out Tax Due Diligence of Subsurface Use Agreements» No.1705 of December 26, 2001 and others.

As can be seen from the above, a reliable basement for further system development of subsurface resources law had been essentially created within ten years that made possible to take public relations established in the field of subsurface resources exploration and investments to a higher level.

At the present time, issues related to subsurface resources use are governed by the special Law of the Republic of Kazakhstan «On Subsurface Resources and Use of Subsurface Resources» No.291-IV of June 24, 2010 and other legal regulations passed for its development during the last half-year.

In the meantime, today there are some objective preconditions for a jump to the following stage of development of law on subsurface resources use that would comply with the new realia of development of a stable state and market economy. Transition to the new forth stage of development of law on subsurface resources use is also connected with the need for implementation of provisions of international legal regulations and international treaties joined by the Republic of Kazakhstan into the national legislation.

Strict Construction of Statutory and Contractual Provisions

as a Condition Precedent to Uniform Law Enforcement

In our perspective, given the intensive lawmaking process in the Republic of Kazakhstan and establishing of law enforcement practice in the conditions of market economy and democratization of political institutes, the proposed subject for discussion is very essential. The extent of law enforcement, order and justice in the country depends on how the parties to legal relations understand statutory and contractual provisions.

A proper construction^[315] of statutory and contractual provisions is a key process in the sphere of subsoil use which helps maximally mitigate conflicts and negative consequences for the parties to legal relations in this important branch of economy.

General Approaches to the Construction of Statutory Provisions

Construction of law (English - «statutory construction») is the activity of a subject of law in establishing the content of statutory provisions during the lawmaking process, the exercise of the right or systematization of the legislation. Statutory construction can be carried out by the government authorities, organizations, official persons and citizens in different ways. The result of statutory construction shall be unambiguous and clear meaning of the statutory provision in question, its proper and uniform application, elimination of all obscurities and possible errors in its application.

A specific statutory construction is determined by its connection with the final result of explaining and understanding the meaning of statutory provisions, which is a condition precedent to the practical effect thereof. In theory and practice there are differentiated: literal (adequate), broad (extended) and restrictive statutory construction.

Literal construction is the most typical and common type of construction where the «spirit» and the «letter» of the law coincide, i.e. the wording of a statutory provision and its actual meaning are identical.

However, due to objective or subjective reasons the wording of the legislator’s intent and the actual meaning of this intent embedded in a statutory provision do not coincide; then broad or restrictive construction is applied.

In case of broad construction the actual meaning and content of the statutory provisions is broader than its wording. For example, a legislator stipulates an obligation of a subsoil user to «perform subsoil operations in accordance with the contract and legislation of the Republic of Kazakhstan»[316]. In this provision the real meaning of the word «legislation» is that it includes all regulatory legal acts, but not only the acts of the superior authorities that regulate the activity of a subsoil user.

Restrictive construction applies in the cases where the real meaning of a statutory provision is narrower than its wording. For example, the special law stipulates that «all concerned parties shall have the right to get familiar … with the conditions of holding a competitive tender for granting subsoil use title and the content of the decisions with its results».^[317] However, not every person, physical or legal, can have such right, only «concerned», who can be other tender participants, representatives of competent and law-enforcement authorities, in some cases special public organizations (e.g. environmental). In such case the number of the persons subject to this provision becomes narrower.

In the cases of broad and restrictive construction there is established a real intent of the legislator, and therefore such construction does not introduce any changes to the real meaning of the statutory provision.

According to the subjects of statutory construction, it is divided into two types:

Official construction, to be given by the competent government authorities, officials, organizations, included in a special act and binding on the subjects of law enforcement; and

Unofficial construction, to be given by subjects who are not authorized while performing their functions to construe laws, but who have profound special knowledge or perform their activities in a special sphere (academic and practicing lawyers, research organizations etc.), in the form of consultations, advice, recommendations and opinions.

Construction Methods and Types

Construction methods are special techniques, rules and means of understanding of the meaning of statutory provisions applied consciously or intuitively by the subject to get a clear picture of legal phenomena. Given the target, statutory construction methods can be divided into:

O linguistic - philological, grammatical consisting in determining the meaning of words and establishing lexical bonds between them;

O historical consists in defining the meaning of a statutory provision by reference to the history of its adoption and the purpose and motives that determined its introduction into the system of legal regulation;

O systematic consists in clarifying the meaning of a statutory provision by comparing it to other provisions, by identifying its bonds within the framework of legal regulation and its specific role in the regulatory act, branch or system of law.

In addition, the linguistic method relates to the textual analysis of a legal act, while all other methods relate to the understanding of its background. The issues of the existence of logical and teleological (target) construction of the law as separate construction methods remain disputable.

Construction Methods and Rules

Methods of construction of law are divided into general scientific methods of cognition (analysis^[318] and synthesis^[319], induction^[320] and deduction^[321], abstraction^[322], analogy^[323] etc.) and special scientific methods, i.e. legal methods per se (dogmatic analysis_[324], legal comparative method^[325], legislative history method etc.); and given the purpose of specific construction, methods of other sciences are also applied (sociology, linguistics, formal and modal logic, psychology, economics etc.).

The science of law and law enforcement practice elaborated a number of rules for construction of statutory provisions, the most important of which are the following:

O «golden rule», when the terms and other words contained in the text of a legislative act are ascribed the meaning they have in the respective literary language unless there reasons to ascribe a different meaning to them;

O Scientific, technical and other special terms used in the text of a legislative act are ascribed the meaning which they have in a respective area of knowledge unless the law stipulates a different meaning of a specific term;

O In case of absence of authentic (ascribed by the legislator) or legal (i.e. ascribed by the competent authority) explanation of a term used in the text of a law, the interpreter shall follow this explanation;

O If a provision is unclear or ambiguous, when constructing the content of the text, preference is to be given to the most just, from the perspective of the specific legal system and social relations;

O In the construction there should be taken into account similar constitutional principles, international treaties, highest state judicial agencies’ expertise, and common doctrinal assumptions of the experts in this branch of law;

O In specific cases construction should establish the objectives that regulate a legislator who drafted the constructed statutory provision.

In addition, construction of statutory provisions should take into account fundamental international legal doctrinal principles, directly or indirectly, contained in the legislation, such as: «Lex specialis derogat generali« (Specific law prevails over general law), «Lex superior derogat legi interior» (a law higher in the hierarchy repeals the lower one), «Lex posterior derogat lex prior» (A later statute takes away the effect of aprioe one) etc.

Results of Construction

In most cases the results of construction are embodied in a statutory construction act. It can be a regulatory act (e.g. a resolution of the RoK Constitutional Council, a regulatory resolution of the RoK Supreme Court), a law-enforcement act of the competent authority (e.g. court injunction), another legal document (e.g. a statement of claim, amicable agreements, a protocol on dispute settlement) or a text, which does not contain legal specifics (e.g. a scientific article, an expert opinion etc.).

It should be noted that an interpreter of a statutory provision acts both as a critic of the provision, i.e. establishes whether the constructed provision of the Constitution is consistent with other superior legislative acts and whether it contradicts (is in conflict with) the statutory acts of similar legal force. In addition, successful construction depends on many factors, including the perfection of textual properties of the constructed act, qualification of interpreters etc.

Construction Regulation

Though the process of statutory construction is intellectual and subjective, separate issues of construction can be regulated within the legal framework. Currently there is a special law in Kazakhstan designed to regulate the processes of planning, drafting, adopting, publication and construction of regulatory legal acts.^[326] In particular, this law establishes the following general rules for official construction of the regulatory legal acts:

In the cases of identifying of unclear points and different understanding of regulatory legal acts, contradictions in the practice of their application, an official interpretation of provisions contained in a given regulatory act may be issued;

In the course of the official interpretation of regulatory legal acts, the introduction of amendments and additions to them shall not be allowed;

Provisions of legislative ^[327] must be interpreted in full compliance with the provisions of the Constitution of the Republic of Kazakhstan;

The meaning of regulatory legal acts implementing laws, when such acts are interpreted must be disclosed in full compliance with the legislative acts.

The official interpretation of regulatory legal acts shall have obligatory nature when the legal provisions contained in them are implemented, in particular, when they are applied.^[328]

It should be noted that pursuant to the said law, only government authorities are entitled to provide official construction of regulatory legal acts. Thus, the Constitutional Council of the Republic of Kazakhstan gives an official construction of the provisions of the Constitution^[329], and official construction of subordinate acts^[330] shall be provided by the bodies of official persons who adopted (issued) them.^[331]

Unfortunately, in the commented legal act the body entitled to provide official construction of the provisions of «legislative acts» is not specified. This is a serious gap in the applicable law. Though in 1997 at the Session of the RoK Parliament during the discussions of the draft Law «On Regulatory Legal Acts», the Speaker of the Majilis (the lower chamber of the Parliament) filed an official inquiry with the RoK Constitutional Council regarding the RoK Parliament’s authority to provide official construction of the laws in accordance with the provisions contained in Articles 53-57 of the RoK Constitution. The RoK Constitutional Council, in its turn, by way of official construction of the said articles of the Constitution issued a resolution stating that Articles 53, 54, 55, 56 and 57 of the RoK Constitution establish an exhaustive list of the powers of the Parliament and its chambers, therefore the expansion of the scope of the Parliament’s authority, including the right of official construction of the law, is possible only by making changes to the RoK Constitution.^[332]

Thus, pursuant to the applicable law there is no competent authority in Kazakhstan entitled to provide official construction of «legislative acts», hence there is an issue of ensuring uniform application of the Kazakhstani legislation.

Further, it should be noted that the procedure and regulations for the construction of statutory provisions are also contained in other legislative acts, e.g. the RoK Civil Code (hereinafter the RoK CC) stipulates that the norms of civil legislation should be interpreted in accordance with the direct meaning of their wording. If words used in the text of legislative provisions may be understood in various ways, preference shall be given to the understanding which meets the provisions of the Constitution of the Republic of Kazakhstan and the main principles of civil legislation.^[333] When applying foreign law, a court shall establish the content of its standards in accordance with their official interpretation, the practice of application and doctrines in the relevant foreign state.^[334]

The applicable legislation of Kazakhstan provides for other forms of construction of statutory provisions. Thus e.g., a prosecutor has the right «to explain the content of a law» to physical and legal persons, as well as to the government authorities and official persons.^[335]

Construction of Contractual Provisions

Construction of a contract (agreement) is the understanding of its actual meaning and content.

The need in construction arises because not infrequently contractual provisions have a very broad meaning and are not enough clear. It makes it difficult to apply them in a specific situation. Construction is also used in cases where there exists uncertainty and ambiguity (polysemy) of words, terms and expressions or where certain provisions do not correspond to or are inconsistent with other provisions.

In the construction of contractual provisions there should be observed general legal principles. Any interpreter should take into account literal meaning of the words and expressions contained therein. In case of ambiguity of a contract, the literal meaning of contractual provisions should be interpreted in good faith, and the terms should be ascribed an ordinary contextual meaning, given the subject and purpose of a contract.

In addition, a contract contains the text of agreement with the preamble and attachments as well as any agreement and documents related to the contract. Subsequent agreements and documents should be taken into account with respect to the construction and application of the contract. It is possible to apply materials prepared prior to the execution of the contract. Sometimes there is a necessity to get familiarized with the previous or concurrent background of the execution of the contract.

Construction exercised by the parties to the contract by agreement between them is called «authentic». It is executed in the form of a binding agreement. Disputes between the participating states with respect to the construction of the contract are to be resolved by negotiations or on the basis of another stipulated procedure, and in case of failure disputes are referred to the international courts of justice (in certain situations are subject to arbitration).

It should be noted that one of the subjects of legal construction is an «individual legal contract»[336] - an agreement of two or more persons based on statutory provisions and aimed at establishing individual specific types and measures of behavior. The construction of individual legal contracts, to which a subsoil use contract should be referred, as a specific type of legal construction by subject, first of all possesses features which characterize any type of legal construction (general features), secondly, specific features determined by the specifics of the subject of construction - an individual legal contract.

To prove that the construction of a contract relates to a specific type of construction, the specific features of an «individual legal contract» that differentiate it from other legal phenomena are analyzed (specific features):

A contract is a key regulator of relations between the parties; it is binding only on the parties thereto;

It is an act of individual regulation;

A contract is a legal deal, a type of juridical facts in the form of legal acts of the subjects of law; being a type of legal relations it causes their appearance, change and termination;

It is an act of volition characterized by bilateral or multilateral nature, because a contract is a deal and is deemed to be an act of volition of all parties thereto, given that a conditio sine qua non is the unity of will;

It is an agreement, therefore as noted above, there should be the unity of will of all parties to these contractual relations on all material terms of the contract;

A contract contains is secured by legal sanction;

It is an act of free expression of the will;

A contract has a specific content embodying its terms, i.e. conditions that the parties agreed to;

A contract is of a subordinate nature;

It has specific formalities of its execution;

It performs specific functions;

It is executed in the established procedure by two or more persons under their mutual consent and expresses their actual joint will unlike the sole «political will», expressed in regulatory legal acts;

It is executed under a specific procedure stipulated both by the law and the parties thereto.

Summarization of the available materials on the theory of law allowed concluding that the above features of «individual legal contracts», in their turn, can be described as general for all types of individual legal contracts, because specific case-to-case content depends on the branch of industry individual legal contracts relate to and the type of an individual legal contract within the specified branch of industry.

I would like to substantiate a necessity of legal construction of individual legal contracts, including subsoil use contracts. Such necessity arises due to both general and specific reasons:

Existence of specifics of the subjects eligible to act as parties to a contract (e.g. one party to subsoil use contracts is the Authority representing the state interests);

Specifics of the activities of certain subjects of law;

A potential opportunity of non-compliance with the requirements to the style and structure of the text of legal acts;

Existence of subjective volitional, bilateral (or multilateral) nature;

Intent to use for individual regulation of public relations;

Based on the dispositive method of legal regulation;

Absence of universal obligation (a contract is not universally binding as, for instance, the regulatory acts of a legislator, it is simply binding only on the parties thereto);

Existence of specific forms of a contract: on the one hand, the terms of a contract are fixed at the parties’ discretion, on the other hand, they should not violate the established requirements to its form, and therefore there is a necessity to resort to the acts on official construction and regulatory legal acts;

Existence of different types of individual legal contracts, each having its specifics to be taken into account in their construction;

A possibility to challenge the existence of contractual relations, a contract of specific type, certain conditions (to dispute the meaning of a contract);

Legitimacy of protest or appeal of a law-enforcement act containing the results of construction of the said contract;

A possibility to construct a draft contract;

A necessity to construe a contract subject to changing conditions.

Thus, «construction of individual legal acts» is a specific type of legal construction constituting a specific legal activity of the parties to a contract, their representatives, judicial agencies and other subjects of law aimed at understanding of the meaning of the terms of individual legal contracts for the purpose of direct or indirect implementation of the contracts and based on the standard techniques of legal construction and techniques subject to the specifics of individual legal contracts.

Further, it is important to identify different aspects of construction of individual legal contracts, including subsoil use contracts. Thus, construction of contracts can be considered:

First, as a specific legal activity - an activity of the parties to the contract prior to the execution of the contract (construction of the draft contract); activities of the parties prior to the exercise of their legal rights and obligations arising from the contract; a type of legal activity of the persons representing the parties (i.e. so-called legal practice).

Secondly, as a type of intellectual thought process of understanding the meaning of the terms of the contracts and its result.

Thirdly, a method of sharing legal information, legal knowledge and expertise by the parties to the contract among themselves and other persons.

Specifics of Interpretation of the Provisions of Subsoil Use Contracts

It is known that in the Republic of Kazakhstan since early 90’s of the last century the right to use subsoil has been granted on the basis of a contract. It is a specific type of a civil contract, one of the parties to which if the Competent Authority. In some earlier executed subsoil use contracts, the Republic of Kazakhstan per se as an independent subject of civil relations was a party to the contracts. Currently there exist different opinion concerning the role and place of the state in subsoil use contracts, scientific debates regarding this issue are going on between the representatives of the Kazakh civil school and political scientists. Regardless details of this scientific discussion, with respect of I repeatedly stated my own position, I would like to enlarge on the specifics of construction of the provisions of subsoil use contracts. Most contracts contain the principles and ways of the construction of their provisions, rules for resolving differences connected with the construction. These provisions are based on the generally recognized international practice. Thus, e.g., one of the contracts executed during the first years of the modern history of Kazakhstan contain the following principles of construction:

The agreement of the parties is subject to compliance (pacta sunt servanda);

Words used in the contract shall be construed in their general grammar meaning unless modification is required to avoid nonsense, inconsistency or contradiction;

Terms and conditions of a contract can be implied so as to implement the alleged intent of the parties, but any such term or condition should be reasonable, necessary to ensure commercial activity under the contract; obvious and clear and should not contradict expressly stated terms and provisions.

This subsoil use contract stipulated the principles for arbitrators to resolve a dispute arising between the parties to the contract in the course of its implementation; they read as follows:

A contract and all documents associated with it shall be construed as the whole;

If certain objects are expressly specified in the contract, a conclusion can be made that other unspecified objects of the same category were not included by the parties intentionally;

The legal principle eiusdem generis is applied;

Arbitrators should prefer the construction confirming the contract rather than invalidating it;

In case of evident ambiguity, arbitrators should apply the general rules of construction, in case of latent ambiguity, arbitrators can apply any principles of obviousness related to the matter, including direct reference to the obvious intent of the parties;

Erratic expressions can be corrected through construction; and the wrong results should not be reinterpreted, they should be corrected.

It should be noted that strict compliance with these principles in the construction of contractual provisions to greater extent prevents disputes between the parties to a contract.

The Issue of Construction of the Provisions of Subsoil Use Contracts

Regardless the existence of unambiguous theoretical findings with respect of the construction of the provisions of individual legal contracts, there exist generally recognized principles and techniques of their construction, in reality there exist a number of issues causing disputes between the subjects of such legal relations. The main reason for such disputes between the parties on the construction of contractual provisions is disregard by the parties of the key principles of this process - good faith,^[337] rationality^[338] and equity^[339].

A good example of disregard of the above principles of construction can be the extending to some subsoil users in Kazakhstan of the legislative requirement to pay «export customs duty» on crude oil, though the provisions of the contracts executed by them and warranties granted by the state, give them the right to a free export of this type of hydrocarbon crude outside the country without paying customs duty. E.g. let us consider the provision of the Karachaganak Project Production Sharing Agreement with regard to this situation.^[340]

Thus, pursuant to Section 3.1(с) of Article III of the FPSA, Karachaganak Petroleum Operating B.V. (hereinafter KPO) was granted «the right in its sole discretion to transport within and freely export from Kazakhstan» the Contractor’s share of Petroleum. KPO, subject to the provisions stipulated in Article XIX of the FPSA, shall pay only those «taxes and other obligatory payments», including customs duties, which were effective on the date of execution of the FPSA (November 18, 1997).

Section 19.9(g) Article of the FPSA specifies that «the tax regime provided by Article XIX is stable for the entire effective period» of the FPSA. In addition, pursuant to Section 1.1 of Article I of the FPSA «taxes» mean «any taxes, national or local, imposed by any governmental authority empowered to levy taxes within the Republic, including, but not limited to, income tax (profit tax), any excess profit tax, any withholding tax, VAT, capital gains tax, duty, including all customs duties and fees and all import and export taxes and duties»

The construction of this contractual provision should not have caused differences in its understanding because its meaning and sense expressly allow concluding that the state warranted to KPO the right for the stable tax regime and other withholding to the state budget, including customs duties. However the government authorities in violation of the principles of good faith, rationality and equity construed this provision so that KPO was compelled to pay under the protest the export customs on crude oil. As the result of wrong construction or willful misinterpretation of this contractual provision by the representatives of the state financial authorities, the subsoil user is compelled to make monthly payments of export customs duty assessed in tens of millions of US dollars. To date this dispute has not been resolved and it might become the subject of international arbitration, which fact could have a negative impact on the reputation of the Republic of Kazakhstan and the investment climate in the country.

It is worth to recall the dispute of the subsoil user and the environmental authority with respect of Tengiz sulphur, which is has been and is considered regardless the statutory and contractual provisions, international legal acts and standards as a type of industrial wastes subject to all consequences. Meanwhile sulphur is an important mineral; and sulphur produced by Tengizchevroil (its purity is 999.9) is one of the most demanded product in the market. Though currently the dispute between the authority and the company has been resolved, nevertheless this issue remains open. The reason for this dispute was the improper construction of the provisions of the legislative acts and contractual provisions.

Another example: one of the subsoil users was granted under the executed subsoil use contract the right to produce hydrocarbon crude within the limits of the block and «from any depths below Post-Salt Sediments». Any geologist or oilman, moreover the representatives of the environmental authorities, know and understand that «Post-Salt Sediments» are subsoil depth intervals above the «salt-bearing» layer, and «Sub-Salt Sediments» are subsoil depth intervals below the «salt-bearing» layer, which begin, e.g., in West Kazakhstan at the depths 2700-3600 meters (Zhanazhol Field) and continue to the depths up to 3800-5500 and lower (Tengiz, Korolyov and Karachaganak fields).

However, in spite of an express contractual provision on the depth of block development, the government authorities filed a claim against that subsoil user concerning illegal production of oil from the specific depth of hydrocarbon crude deposition regardless the fact that the disputed production depth is lower than the «Post-Salt Sediments». In addition, the main argument of the government authority was that «Mining Allotment»[^341], granted to the subsoil user limited the depth of mineral production. Meanwhile this document contained a special provision for its revocation and replacement upon occurrence of certain conditions. Prior to the dispute and currently, such conditions have not occurred.

The above example evidences that the representatives of the authority in their construction of this contractual provision did not take into account one of the main principles of construction to be applied if the terms and conditions of a contract are implied so as to implement the initial intent of the parties ensuring the activity of the subsoil user. Currently, nobody, including the representatives of the regulating government authorities in the sphere of subsoil use and other regulating government authorities have doubts that the subsoil user was granted the right under the contract for production of hydrocarbon crude within the specified block and from «any depths below Post-Salt Sediments», and it means the dispute is based on the wrong construction of the contractual provision.

Examples of wrong construction or willful misinterpretation of statutory and contractual provisions are numerous. But this is not the main target. The main purpose is to note that all parties to any legal relations should act in strict compliance with the rules of the applicable law. The parties to a civil contract, including a subsoil use contract should fulfill the terms of a contract and in case of a dispute it should be resolved by correct construction of its provisions based on the existing principles, including the principles of good faith, rationality and equity, as well as by means maintaining law and order.

Unity of Straight and Exterritorial Action of Environmental Norms

on Baikonur

Baikonur Launch Site Background^[342]

Under the Resolution of the CPSU Central Committee and the USSSR Council of Ministers of May 20, 1954, design and research organizations were committed to design a multi-stage ballistic missile with an intercontinental range of 7000-8000 kilometers and a thermonuclear warhead with a mass of up to 5.5 tons, which could be able to destroy strategic targets in any conditions whatsoever and military theatres.

The Resolution of the USSR Government dated February 12, 1955 on the construction of the site for testing intercontinental ballistic missiles (hereinafter IBM) was the beginning of a new ambitious space age. The construction of the administration center of the Baikonur launch site, Baikonur, commenced simultaneously with the construction of the special facilities in 1955, as a test engineers village.

Baikonur Launch Site is the most «launching» site in the whole world. On May 15, 1957, the first IBM designed under S.P. Korolyov was launched from Baikonur launch site. As of January 1, 2012 over 1.5 thousand rockets with different spacecrafts were launched from Baikonur, including those piloted by astronauts, and over one thousand of test launches of IBM’s were made.

There is no secret that with the high-tech trends in the world economy, one of the key criteria of development and advance of the state is deemed to be the establishing of the advanced aerospace industry, possession of the state-of-the-art space and missile technologies an opportunity for their ultimate use in all spheres of state-building, including the military aspect. The international space launch site Baikonur.

However, the reliable operation of this complex obliges the parties to space activities to ensure environmental safety both within the area of the space launch-site and trans-border territories, and far outside. Given that environmental safety is deemed to be the status of protection of vital interests and rights of the citizens, the community and the state from any exposures arising as the result of anthropogenic and natural impact on the environment, it should be noted that Russia and Kazakhstan, which are the key parties to the relations arising in connection with the operation of Baikonur, should ensure strict compliance with environmental requirements stipulated by the national legislation of the Republic of Kazakhstan and international legal acts, as well as to provide the unity of direct and exterritorial effect of the environmental rules of the said acts.

The basic legal acts regulating environmental safety relations pertaining to the operation of Baikonur launch-site are the following:

1. The Constitution of the Republic of Kazakhstan adopted by the national referendum on August 30, 1995 (provisions of Articles 31 and 38);

2. The RoK Environmental Code dated January 9, 2007 (hereinafter RoK EC);

3. The RoK Law «On National Security» dated January 6, 2012 No. 527-IV (provisions related to ensuring environmental safety, Articles 4-6, 24);

4. The Convention on International Liability for Damage Caused by Space Objects signed by the member states on March 29, 1972 (hereinafter 1972 Convention)^[343];

5. Baikonur Lease Agreement (hereinafter the Lease Agreement) between the Government of the Republic of Kazakhstan and the Government of the Russian Federation executed on December 10, 1994 (provisions of Clause 8.4 of Article 8);

6. Agreement between the Government of the Russian Federation and the Government of the Republic of Kazakhstan on the Environment and Use of Natural Resources in the Area of Baikonur Launch Facilities under Lease by the Russian Federation dated October 4, 1997 (hereinafter the Environmental Agreement).

As we see the above legal acts containing specific environmental standards^[344] have different statuses and relate to the legal acts of different levels, i.e. hierarchical force. The rules of these acts apply directly to the relations pertaining to the operation of the Baikonur facilities. Such conclusion can be drawn based on the assumption that the direct effect if legal rules is actual immediate application of the rules of legal acts to regulate specific and definite public relations which do not require additional legal guidelines.

Thus, e.g. the constitutional provision (Article 31) states that one of the goals of the Republic of Kazakhstan is «protection of the environment favorable for human health and life», therefore the concealment by officials of facts and circumstances that threat people’s life and health is subject to legal liability». This constitutional rule has a direct effect and it constitutes a certain basis for ensuring environmental safety in the country and application of the environmental rules of other legal acts.

It should be noted that the rules of the environmental legislation of Kazakhstan also directly apply to the relations pertaining to the space activities at Baikonur. Specifically, the RoK EC contains a list if environmental requirements, the most important of which are: requirements to: the design of production and technological facilities; construction and operation of industrial facilities; land use; different types of emissions (special use of natural resources); transportation and use of radioactive materials; maintaining radiation control; production and use of potentially dangerous chemical and biological substances etc. The full scope of all these types of anthropogenic activities is conducted at Baikonur, therefore ensuring the direct effect of environmental rules is the one of the main goals of the authorized state bodies of the Republic of Kazakhstan and the Baikonur Administration, i.e. the Russian representatives.

The direct environmental rules are also contained in bilateral contracts and agreements signed by the RoK and the RF with respect to the Baikonur space facilities. Thus the Lease Agreement as an instrument securing safety of Baikonur facilities stipulate the establishing of the sanitary protection zone (hereinafter SPZ), which is obligatory under the RoK legislation.

The Environmental Agreement contains the rule (Article 2) which obliges enterprises and organizations, military units, other legal entities and individuals, carrying out their activities at Baikonur facilities, to comply with the environmental rules of the RoK legislation applicable at the time of entering into the Lease Agreement. However, there is an issue whether the new environmental legislation applies to the relations arising at Baikonur with respect to environmental protections and use of natural resources? Based on the above provision, it should not apply, as under the legislation of Kazakhstan the regulatory legal act does not apply to the relations that have arisen before its introduction[345]. This part of the provision of the Environmental Agreement is not likely to be perfect because as of the signing of this international legal act (1997) in Kazakhstan and in Russia many public relations in the area of environmental protection and use of natural resources were regulated under the environmental legislation based on the Soviet legal concept which did not stipulate many key environmental principles specific for market economy. In my perspective the current Kazakh environmental legislation is more advanced and market oriented and contains such key principles as maintaining the sustainable development of the country^[346], ecosystematic approach to the regulation of environmental relations, payments for using natural resources, access to environmental information, presumption of scheduled business environmental impact etc. In addition, the current environmental legislation of Kazakhstan integrated many rules of international environmental law, rules and standards which could effectively regulate environmental relations and rehabilitation.

However this so-called gap adds up another provision of the Environmental Agreement, specifically the provision contained in paragraph two of Article 2 stating that the issues not covered by the requirements of the RoK legislation are subject to the environmental legislation of the Russian Federation upon agreement with the RoK Ministry of Ecology and Biological Resources^[347]. This provision stipulates exterritorial effect of the rules of the RF environmental legislation to regulate environmental relations, if these relations are not regulated by the Kazakhstani legislation. In this case we note the unity of direct and extraterritorial^[348] effect of the environmental rules of two countries in connection with the operation of the Baikonur facilities

The Environmental Agreement puts on the Russian side a number of obligations most important of which are: use of natural resources in compliance with the environmental safety standards, interdepartmental environmental monitoring and control over Baikonur facilities, cleaning of booster impact areas from metal parts, ecological certification of the launch-site facilities, radiation emergency response, environmental; audit. Fulfillment of these and other commitments, as stated above, is provided for by the legislation of Kazakhstan and Russia in compliance the principle of unity of direct and exterritorial effect of environmental rules.

Harking back to the Lease Agreement reveals that it contains a material rule that regulates indemnity relations, in connection with the damage caused by space activities. As per this issue both sides (Kazakhstan and Russia) agreed on the applicability to these relations of the Convention on International Liability for Damage Caused by Space Objects signed by the member states on March 29, 1972. Given that the 1972 Convention was ratified by both states, its provisions directly apply to indemnity relations, including adverse environmental impact. However if we take into account that other states which have the status of law-makers are also parties to this Convention with respect to this international legal act, then it is possible to recognize the principle of exterritorial effect of the rules of the 1972 Convention with respect to indemnity for damages caused by the operation of the Baikonur facilities.

In this connection it should be noted that the doctrines of direct and exterritorial effect if the legal rules are differently interpreted by lawyers. The existing monistic and dualistic concepts in the international law consider the relationship of areas and methods of international and national law differently. Further, a number of advocates of the monistic concept insists on the unity of legal systems and treats the international law as a part of the national law, which is attainable, for example, subject to compliance with certain procedures of ratification by the specific state of an international legal act. The Kazakhstani legal scholars to a greater extent stick to this position, and therefore, based on such position on the relationship of the international and national law, one can speak about the unity of direct and exterritorial effect of environmental provisions on the relations arising in connection with the operation of Baikonur launch site. The advocates of the monistic concept are based on the supremacy of the national law or the supremacy of the international law. Such position makes it difficult to identify the process of interrelation of the rules of the international legal acts and the national law in the regulation of specific public relations.

From the dualistic perspectives, the international and national law differs from each other only by the scope of regulated relations. In their opinion, the national law applies only on the territory of one state, and it is indisputable, while the international law regulates relations arising only between/among the states. The last conclusion is not indisputable because in practice international legal acts regulate not only relations among/between the states but also the relations arising between the entities of these states. Thus, for example, within the context of the issue in question as per Baikonur facilities, such entities can be both Russian and Kazakhstani: the Russian Aviation and Space Agency, Baikonur Administration, the National Aerospace Agency of the Republic of Kazakhstan etc. Therefore the dualistic position on the interrelation of the international and national law practically includes the principle of unity of direct and exterritorial effect of legal rules, and it is difficult to agree.

In conclusion I would like to note that the necessity of international cooperation in environmental protection is determined by increasing interdependence of the countries. The destruction of the ozone layer, atmospheric air and sea pollution, nuclear test consequences, space and military activities cover not only the states where adverse environmental activities become possible, but the whole world community. Therefore currently the states arrange interrelations whether under UNO auspices or on a bilateral basis in order to protect the environment of human beings, vegetation and wildlife. The basis for such interrelation is a number of international principles of human activity in the area of the use of natural resources recognized by the international community. Partially they are contained in the international agreements and acts, regulatory documents of the international organizations and are summarized in the resolutions of the most significant international forums fully or partially devoted to environmental protection and regulation of cooperation of states and nations in this area. Therefore the principle of unity of direct and exterritorial effect of the legal rules should be recognized as one of the principles providing environmental safety.

Environmental Risks in the Sphere of Subsoil Use: Law and Enforcement

ENVIRONMENTAL RISKS: GENERAL

The issues of ensuring environmental safety^[349] are most important in any country of the world, because its level determines the well-being of the state and the society. With respect to the Republic of Kazakhstan, environmental safety is an element of the national security^[350], and therefore the state and citizens as well as users of natural resources should have a special attitude to the issues of environmental safety. Such approach is based on the constitutional rules determining the provision that the state’s objective is protecting environment healthy for people’s life. The RoK Constitution stipulates an obligation of the citizens to protect the nature and to take good care of natural resources^[351]. These rules of the RoK Constitution and the applicable environmental legislation are the legal basis for implementing the environmental policy in Kazakhstan.

It should be noted that following independence, Kazakhstan would confirm its adherence to the ideas of environmental safety and sustained development of the state and society^[352], having signed the final documents of the UN Conference on the environment and development (RIO-92)^[353], and having become an active participant of the process «Environment for Europe», having adhered to key international conventions on climate change, desertification control, conservation of biodiversity, and having ratified other international legal acts on the issues of environmental protection.

The necessary element of the process ensuring environmental safety in the country is identifying and managing environmental risks. This will be the subject of my following thoughts. I would like to note that the science of risk^[354] has formed in the last quarter of the last century, and, undoubtedly, it will be one of the leading sciences in this century. The reason for it is that the world community faces a great number of problems in the sphere of environmental protection_[355], caused by a large-scale industrial development, excessive impact of man’s activity upon natural objects, significant degradation of the quality of our natural environment.

The Environmental Code of the Republic of Kazakhstan (hereinafter RoK EC) contains a correct legislative interpretation of the term environmental risk, as «the likelihood of adverse changes of the environment^[356] and/or nature objects due to influence of certain factors». Moreover environmental risk may be caused not only by man’s activity but also by emergence situations of natural character. Therefore it is critical to have an accurate assessment of environmental risk by identifying and analyzing a probability of events which might cause adverse impact on the environment, people’s health, the economy of the entire country, a separate region or an enterprise. Hence it is necessary to know the rules for classifying environmental risks to work out appropriate recommendations on how to minimize or prevent risks.

Risks may be classified under different criteria, e.g. according to the extent of exposure risks may be global and local. Global risks which must be controlled by the state and society shall include such risks as:

Global climate change;

Depletion of the ozone layer;

Death of populations and losses of biologic diversity;

Pollution of atmospheric air;

Contamination of nature objects (water bodies, forests, soil within large areas, depletion of top soil etc.);

Floods, earthquakes and other natural disasters;

Desertification.

Local risks may relate to:

The operation of industrial enterprises generating large volumes of environmental emissions[357];

Industrial accidents and disasters;

Willful or negligent misconduct of individuals.

Environmental risks may be classified by the extent of perception and impact thereof, e.g.:

Population health risks;

Risks for flora and fauna;

Risks for subsoil, land, water bodies, forests and other nature objects;

Risks for natural resources (e.g. for minerals);

Risks that might cause material and financial losses (for the state, individuals and legal entities).

Based on the classification of environmental risks there can be identified entities which activity is the source of environmental hazard, and efforts made to prevent risks or minimize their impact, as well as to protect objects against environmental risk factors. As a rule, the consequence of environmental risks is incurred harm. In this connection, let us consider factors and forms of indication of harm.

Environmental factors and forms of indication of harm:

O Degradation, loss of specific properties and qualities of nature objects^[358] (objects of nature use);

Degradation of conditions of use of natural resources^[359] и пользования природными объектами;

Loss of natural resources and nature objects, their withdrawal from use;

Violation of environmental equilibrium (ecosystem equilibrium);

Environmental disasters with irreversible effects, degradation of biological diversity^[360].

Economic factors and forms of indication of harm:

Losses of the users of natural resources in the use of natural resources and nature objects;

Withdrawal of the sources of raw materials from economic turnover and their loss;

Losses in the system of labor division;

Violation of the conditions of economic reproduction.

Social factors and forms of indication of harm:

Dissatisfaction of people (employees) by the standard of living;

Migration of population, including workforce;

Breakdown;

Increase of disability rate, including congenital disability;

Increase of morbidity rate;

Multiple fatalities массовая гибель людей;

Genetic anomalies etc.

Technical and technological factors of indication of harm:

Premature wear of equipment, instrumentation, units; breaks and accidents;

Process flow disruptions;

Loss of material valuables (equipment, structures, etc);

Decrease of return of production facilities, their efficiency.

As it is impossible to stop man’s activity and if natural disasters are disregarded though sometimes they are the result of man’s activity, environmental risks can be divided by regulatory levels. Such classification helps timely identification and assessment of risks, and hence minimizes harm caused by any environmental disasters. First of all, the classification of environmental risks by regulatory levels should be the focus of the governmental environmental authorities, e.g. the RoK Ministry of Environmental Protection, its territorial subdivisions, non-government environmental institutions carrying out environmental researches.

The following environmental risks can be identified based on this criterion^[361]:

Acceptable environmental risk, when the level of risk is feasible from environmental, social and other perspectives, in the specific location (region) and at the specific time. A necessity to develop a concept of acceptable (permissible) environmental risk is determined by the impossibility to provide conditions for absolutely safe activity and technological process. Acceptable risk combines technical, economic, financial, social and political aspects and is a certain compromise between the level of environmental safety and opportunities to achieve it.

Maximally permissible environmental risk is a maximal level of acceptable environmental risk. It is determined by the whole scope of adverse environmental aspects and should not be exceeded regardless of political, economic, social, financial interests.

Neglected environmental risk is a minimal level of acceptable environmental risk when it is at the level of background or maximally acceptable environmental risk. In its turn, background risk is a risk determined by the existing natural effects and social environment.

Thus, proper understanding of the term «environmental risk», an ability to correctly identify and classify risks, and to assess consequences, will necessarily provide for environmental safety in the country, effective economic activities of all parties to economic relations, ensuring sustainable development of the state and the society. However, environmental risks should be managed on the basis of perfect and stable environmental legislation, efficient and uniform law enforcement.

SUBSOIL USE AND ENVIRONMENTAL RISKS

The sphere of subsoil use is one of the branches of economy where there exists a high level of environmental risks, specifically during the development of hydrocarbon fields in the shelf of the Caspian Sea. Special environmental requirements apply to subsoil users, as practically all subsoil use operations^[362] constitute environmentally hazardous economic activity.

As for companies/investors who currently intend to enter Kazakhstan with the purpose of subsoil development by obtaining subsoil use rights from the state or acquiring a participatory interest from another subsoil user, first of all they should conduct Environmental Due Diligence to minimize costs relating to environmental payments - obligatory and so-called «punitive». The purpose of Environmental Due Diligence is to identify: obligatory environmental requirements to specific subsoil use operations; environmental violations by the former subsoil users; volume of generated environmental emissions; amount of payments for the use of natural resources; the environmental «status» of the region/area, where subsoil use operations are planned to be carried out. It is worth giving a Russian-based example here.

Thus, e.g. a couple years ago the Russian ecologists and the World Wildlife Fund (WWF) strongly opposed the plans of British Petroleum and Rosneft to extract oil in the Karsk Sea, because in their perspectives such activity of oil companies threats the specially protected natural areas^[363] of the region, in particular the Russian Arctic National Park. The Russian competent authority of environmental issues issued to these companies licenses regardless the specific status of this region. Such situation arose because the above oil companies had not carried out Environmental Due Diligence.

A similar situation took place on the Kashagan Field where participating companies which entered into a contract for production oil from this field, did not take into account a number of environmental conditions which are to be complied with and which cause increase of financial costs.

Each year environmental concerns and risks become more challenging both to the society in general and to subsoil users who are the objects of environmental control by the governmental authorities. The parties of these relations can be divided into two main groups. The first group includes different governmental authorities at the republic and local levels. The second group includes subsoil users and contractors/subcontractors. All entities included into the first and second groups directly relate to environmental risks. Moreover the entities of the first group to a greater extent act as regulating, permitting and restricting authorities, while the entities of the second group - as potential sources of environmental danger and threat. Nevertheless, for both groups rational management of environmental risks they face in their activity is critical.

If environmental risk is considered as loss expectation, then it can be defined at least by six important constituents:

A fact of emissions of hazardous substances into the environment or unscheduled depletion of natural resources;

Volume of hazardous substances discharged into the environment;

Type of pollutant;

Duration of contamination exposure;

Time of the year;

Extent of environmental pollutant hazard.

Having identified environmental risks, a subsoil user shall first of all undertake certain activities subject to:

Accurate forecast of environmental consequences of the scheduled subsoil use operations and other economic activities;

Design and implementation of environmentally friendly and resource-saving technologies;

Operational monitoring of types of activities;

Maintaining accurate account of emissions;

Timely repair of the process equipment etc.

Understanding by a subsoil user that risk is a measure of danger is an important step towards solution of the issues of management of situations where potential factors of adverse impact on population and environment exist. Modeling of possible environmental situations and associated risks is an important method of getting information. Any subsoil user is a very complex structure entity with multiple properties. Thus, e.g. an oil company has such properties as ability to gain profit, release products, create jobs and pay wages, implement social programs, make tax and other obligatory payments and, unfortunately, pollute the environment. However, environmental authorities, when modeling a subsoil user’s activities, are focused on the last property of those listed, simplifying the object and treating it as a source of adverse environmental effects and as a «money sack» to replenish the state budget. Such simplified understanding of the activities of companies developing subsoil often is the cause for conflicts with subsoil users, the solution to which are currently based in the wrong law enforcement practice, excluding such important principles of legal relations as legal order, justice, objectivity, presumption of innocence of a subsoil user.

The existing situation in the sphere of environmental relations in this sector of economy can be resolved only by reforming the environmental legislation, excluding bureaucratic procedures for obtaining different environmental permits, reduction of corruptogenicity of these relations.

LAW AND ENVIRONMENTAL RISKS

The Republic of Kazakhstan has a systematic codified environmental legislation which, given its somewhat imperfection, is capable of ensuring environmental safety in the country and development of production in all spheres of economy. Legal regulation of environmental relations allows the parties to these relations timely identify environmental risks and manage them to prevent adverse environmental effect.

Thus, e.g. the RoK EC contains rules establishing general principles of state regulation in the sphere of environmental protection and use of natural resources. The environmental legislation stipulates a system of public control over subsoil users’ operations and provides access of the population to environmental information.

Such legal institutes as: licensing activities in the sphere of environmental protection; environmental regulation; technical regulation of use of natural resources; environmental impact assessment; environmental due diligence; environmental audit; public environmental control, availability of state cadastres of environmental objects, are capable to fully ensure early identification and assessment of environmental risks for the purpose of minimizing their adverse effect.

The RoK EC contains specific environmental requirements to practically all types of economic activities, including special use of natural resources (emissions of hazardous substances into the environment). There are obligatory tax payments for use of natural resources. Therefore compliance by the users of natural resources with the applicable environmental requirement, existence of the stable model of production and consumption,^[364] effectiveness of the state supervision and public control over economic activity of legal entities and individuals, availability of real workforce and facilities to respond to man-caused and natural emergency situations, to the extent of managing risks and preventing adverse consequences for the environment and nature objects.

However, in the sphere of regulation of environmental relations there exist a great number of issues caused by the absence of simple rules for interaction between governmental authorities and users of natural resources to ensure a stable model of production and consumption, contradictory provisions of the regulatory legal acts, absence of a uniform, objective and equitable law enforcement, including litigation.

It should be noted that a number of existing problems impede the process of identifying and assessing environmental risks, removal of adverse impacts without substantial financial costs, formation of clear and equitable mutual relations between the users of natural resources and governmental authorities. These problems are as follows:

«threefold» liability imposed on a subsoil user for one violation of environmental requirements;

Absence of uniform terminology in environmental, tax and administrative legislation, e.g. absence of clear legislative differentiation of the terms «limits» and «standards»;

Absence of systematized methods of calculation of forming hazardous substances, technical specifications, sanitary standards and rules, environmental standards and other necessary technical documents;

Over administering of the process of issuance of Environmental Permits, absence of flexible rules in this process;

Imperfect rules for suspension of Environmental Permits;

Excessively high role of non-qualified, practically «street» public in adopting decisions on key environmental issues;

Absence of the rules for recognition of compelled environmental emissions in emergency situations as grounded;

Absence of equitable rules for calculating environmental damages;

Absence of economic mechanisms to stimulate the activities of the users of natural resources;

Absence of a clear system of control and supervision over the activities of the users of natural resources, taking into account market conditions and specifics of the activities of natural resources.

Therefore regardless of all progressive ideas contained in the applicable environmental legislation, its enforcement revealed certain deficiencies and contradictions. The existing system of regulation of the issues of environmental protection is justly criticized by specialists and foreign observers, who note that the aim of the law of Kazakhstan and its enforcement is to punish the users of natural resources, and not to reclaim and conserve the environment. In fact, certain rules of the applicable environmental legislation do not perform useful public objectives, create unreasonably high administrative barriers entrepreneurship and have a high corruptionogenic potential.

Given the above, the existence of clear, equitable and rational system of the environmental legislation is an important step in the implementation of the state environmental policy based on the Constitution. It is the effective state regulation that must ensure allocating funds to remediation and improvement of the environment in the country.

LAW ENFORCEMENT AND ENVIRONMENTAL RISKS

It is not a secret that proper, i.e. valid and equitable, law enforcement, including litigation, is an important source for identifying and assessing environmental risks. Unfortunately, currently in the Republic of Kazakhstan the situation is so that law enforcement practice in general «provides» for illegal exaction of money from major users of natural resources, for alleged violation of environmental requirements or terms of Environmental Permits. Such survey of law enforcement practice is another big topic, however it is worth noting key problems which make the identification and assessment of environmental risks complicated.

In particular, there are not infrequent cases when users of natural resources are charged with a liability for violating emission rates specified in the draft emission standards, though there was no violation of emission limits established in the legally significant document - the Environmental Permit. It is known that the document confirming the right of a user of natural resources to make emissions and establishing approved volumes of emissions is Environmental Permit but not the draft emission standards.^[365]

The issue of emissions as the normal operational risk has not been resolved. Thus e.g. the legislation does not provide a legal basis for obtaining Environmental permit for emissions caused by the emergency technical malfunctions (deviation) to the extent of normal operational risk without any fault of the user of natural resources, hence the enterprise becomes a regular environmental offender, though such case is the result of extreme necessity. However the applicable legislation refers all above cases to environmental offences subject to liability of the users of natural resources.

There exists unreasonably high liability of the users of natural resources for pollution resulting from excessive and unauthorized emissions under administrative, tax and environmental legislation. In fact, a subsoil user is charged with threefold liability for excessive and unauthorized emissions, namely: under tax legislation (10-fold rates of payment for emissions); under legislation on administrative offences (1000% of the rate of payment for emissions); under environmental legislation (recover of damages with the application, as a rule, of the indirect method with the increasing coefficient 10).

Charging with liability for incurring environmental damage due to invalid pollution without proving the existence of such damage is the violation of civil principles of bringing a charge against a person for incurring harm. However, pursuant to the provision contained in the RoK EC, damage is defined as means «environmental pollution or extraction of natural resources in excess of the established limits, which causes or may cause degradation and depletion of natural resources or death of living organisms».^[366] Given this legislative provision, it is clear that assessment of the amount of damage should be based on material not elements, i.e. when charging with liability for incurring such damage there should be proven both the fact of offence (environmental emission causing pollution) and the fact of hazardous consequences (in the form degradation and depletion of natural resources or death of living organisms).

However litigation based on the administrative practice of governmental authorities for environmental protection evidences that currently these requirements are not observed, and courts exact form the users of natural resources so-called «environmental damage» in multimillion amounts without proving the fact of such offence. Thus, the governmental authorities and courts do not set the objective to ensure recovery of in-kind environmental damages, and initiate claims seeking exaction of money from the users of natural resources to the state budget using the indirect method. Hence the dominating monetary form of recovery does not provide for fulfilling the task of environmental reclamation. Payments made by the users of natural resources become the state budget item, but he condition of the environment does not improve.

It should be noted that the system of issuance of Environmental Permits is not efficient and flexible enough. The applicable rules for administering this process do not allow the users of natural resources to promptly develop production facilities and implement new technologies. The total time of designing draft emission standards, state environmental expert review, public hearings (in individual cases) and issuance of Environmental Permits is up to 12-16 months. Evidently, such long terms place the enterprises in a difficult situation.

The practice of environmental legislation enforcement is not limited to the above issues and concerns, there exits other disputable issues, e.g. disputable issues of identification of a period of time for which the environmental damage is assessed and recovered, disputable issues of the regime of wastes to be subsequently processed and used in production or commercial activities of the users of natural resources etc.

CONCLUSION AND RECOMMENDATIONS

In conclusion it should be noted that the process of identification, analysis and assessment of environmental risks to a greater extent depends upon the existing system of environmental regulation, monitoring and supervision. As stated above, the applicable environmental legislation contains certain environmental requirements to the types of economic activity, including subsoil use, and also contains rules for use of natural resources, specifically for generating emissions of hazardous substances into the environment. However the above issues of imperfect environmental legislation and absence of uniform law enforcement require finding new approaches to identification and assessment of environmental risks. I think that instead of inventing own Kazakhstani «bicycle» we need to use positive foreign experience in revealing, identifying, assessing and managing environmental risks. A good example here can be British Standard 7750: Environmental Management Systems (BS 7750), effective since 1992, which became the basis for designing a similar system of European standards (EMAS). Pursuant to this document, the basis for identification and assessment of environmental risks is establishing and continuous updating the information database, including: Environmental Effects Register; Environmental Risk Source Register; Environmental Risk Hazard Identification; Environmental Risk Rank Identification.

Information compiled regarding sources of environmental risks, plans for reduction or complete elimination thereof is systematized in the Geographic Information System as a database for a model allowing objective assessing real environmental hazard and a possibility to manage it. In addition, environmental risk index can be defined as integral risk per a certain period of time assessed with regard to its reduction, increase and management. Based on its values, conclusion is made on the environmental situation in the region (at the enterprise) and possible ways of its development. It is known that management decisions can be different, but in any case they should be based on the reliable information database, and should not be focused only on «punishing» a user of natural resources without the objective of improvement of the environmental situation.

Of course, it is one of the proposals. Options for solution of these issues to ensure environmental safety in the country may be different, but they should be objective, equitable, based on the law and not only on the subjective opinion of a governmental official concerned with the state budget deficit.

On Reforming Environmental Legislation of the Republic of Kazakhstan

We are living in a very tough time when environmental issues ceased to be the subject of discussion of a very small team of experts. Many inhabitants of Earth are concerned with the present and future conditions of the environment. Do we want to live in a healthy and comfortable environment? Do we want to leave healthy air, water and fertile land to our descendants? Do we want to see our country and national economy competitive? The answer is vivid - Yes!

Unfortunately, modern production cannot operate without adverse impact upon the environment. People constantly use natural resources, process them and pollute the environment in the course of operations. But natural resources are not unlimited and they will be depleted soon. Every citizen of the country should understand it, speak about it and undertake proactive efforts to preserve and improve the environment. Otherwise irreversible changes might occur and have an adverse impact on the future generations.

The Constitution of the Republic of Kazakhstan states that the state shall set an objective to protect the environment favorable for the life and health of the person. In the legal language it means that all of us have the right to favorable environment and may require that the state commits to ensure the same. Does the state maintain such environment? Alas, not to the full extent. The applicable environmental legislation of the Republic of Kazakhstan, given its progressive rules, has one serious deficiency - rehabilitation and improvement of the polluted environment is not its principle target. Law enforcement practice turned the environmental legislation into a means of replenishing the state budget, and the exacted amounts are not aimed to be spent on environmental protection and rehabilitation. It’s time not only to receive environmental payments but also to spend money on the environment.

Insufficient regulation of certain environmental law institutes, excessive administrative barriers, declarative melioration and a number of other deficiencies yield a result that the current environmental regulation instead of serving the interests of environmental protection and improvement becomes a serious barrier for developing industry and improving competitiveness of the national economy.

Legal analysis of the environmental legislation reveals inconsistency of its rules both with the general legal principles and the principles of a specific branch of law. Specifically, a so-called «triple liability» of the users of natural resources for exceeding standards and limits, imposing liability with regard to circumstances that have no legal definition; application of administrative punishment which is not stipulated by the General Part of the Code of Administrative Offences; violation of the constitutional principle of equality of all before the law (equal protection of the law). E.g. the existing possibility for local authorities to increase the amount of payment for environmental emissions twentyfold results in that one and the same action can be interpreted in one oblast as administrative offence, and in the other oblast as a criminal offence. Evidently, it is not acceptable for the state claiming to be called the state governed by the rule of law.

Thus, the applicable environmental legislation does not fully fulfill its main functions and hence impedes improvement of competiveness and in a number of instances is not consistent with the accepted legal principles. It is high time to revise the existing order which looks more like «disorder» causing harm to the community, environment and economy.

In November 2012 Chevron Corporation initiated drafting proposals to amend the applicable environmental legislation of the Republic of Kazakhstan. Later this initiative was adhered and supported by such entities as Tengizchevroil, Karachaganak Petroleum Operating, KazEnergy Association, KANUS Association, the American Chamber of Commerce in Kazakhstan and a number of other organizations and persons. In the course of implementing this initiative great work has been done and scientists and experts from various spheres have been engaged - lawyers, ecologists, technologists, including doctors and candidates of sciences, persons without scientific degrees but highly qualified in their specialty.

We tried to retain most competent resources for this project. The entire work was performed in 4 stages.

At the first stage the current environmental legislation of the Republic of Kazakhstan and the laws of the most environmentally safe foreign countries such as Norway, Canada and Saudi Arabia, were reviewed. In addition the general laws of the Russian Federation, the European Union and some countries constituting the European Union (France, Germany, Austria, Sweden, Poland, Finland and Switzerland) were reviewed to the extent of specific applicable issues. Available findings of Kazakhstani litigation practice in resolving environmental disputes were also studied. At this stage meetings with the representatives of major Kazakhstani users of natural resources were conducted with regard to compiling a list of key concerns arising in practice.

At the second stage there were developed possible alternatives to the solution of identified concerns and issues; available existing proposals to improve legislation were reviewed; optimal solutions were selected and legal definition of identified solutions were formulated and presented in the format of draft law amending the current environmental; legislation. Also there were drafted respective documents (the concept, the explanatory note, the comparative matrix).

At the third stage the drafted documents were presented to the major users of natural resources and different industry associations. At this stage there was formed the work group consisting of the representatives of the most interested users of natural resources, which continued to improve the language of proposed provisions and to select most appropriate solutions and to develop proposals to resolve additional concerns and issues. The work group included the representatives of Tengizchevroil, Karachaganak Petroleum Operating, and NCOC. The members of KazEnergy Association, KANUS Association and the American Chamber of Commerce submitted their comments and proposals. It should be noted that a great number of proposals on reforming legislation were submitted, all of them have been considered, reviewed, but for different reasons not all of them were included in the Comparative Matrix. A part of the proposals turned up late, and the work group had not time to process them and include into the comparative matrix; a part of proposals did not match the formulated and developed concept; a number of proposals were not accepted because there are already alternative solutions to the above challenges. We compiled a List of Challenges the solution of which is not envisaged by the draft law.

At the fourth stage work to improve the language of the draft law continued; there was conducted search and engagement of experts to carry out a number of (legal, tax, administrative and environmental) expert assessment of the draft law. Great work was conducted to arrange the conduct of the Environmental Forum which was successfully held in Astana on May 30 this year.

Although the proposed amendments to the environmental legislation were prepared with the participation of a wide range of interested persons and independent experts and constitute the most compromise option of the solution, we do not exclude a possibility of certain further updates. When drafting these proposals we tried to be based on the rights of citizens to favorable environment, interests of the state and users of natural resources. It is worth to note that in the course of work we also got proposals from the representatives of the environmental authority regarding a necessity to reform environmental legislation, which to a certain extent coincide with the concept proposed by us.

Proposed amendments to the environmental legislation relate to the following issues.

First, a comprehensive revision of the terms and definitions used in the environmental legislation was made to update them and better define their legal status, especially those substitutes which might cause legal consequences.

Secondly, there were proposed changes to reduce administrative barriers for issuance environmental emission permits. Specifically, it is proposed to introduce a «one window» principle; environmental permit issuance presumption, reduction of the term of their issuance, exclusion of a number of documents to be submitted with an application for environmental permit, and maintenance of consideration, concurrence and approval of these documents as separate processes.

Thirdly, there is introduced legal regulation of a number of processes, such as reconsideration of an application for environmental emission permit, public hearings, and establishing terms for nature use. The existing deficiencies are removed and the obligations of the environmental authorities are specified.

Fourthly, the issues of liability of the users of natural resources for environmental damage have been aligned. The institute of liability was significantly revised and redrafted. Specifically, it is proposed to cancel triple liability for environmental offence and measures to bring environmental legislation in consistence with the principles of the general law and its branches. It is proposed to introduce a real priority of compensation for environmental damage. Hence the grounds for violation of the principle of equality of all before the law will be removed in the entire territory of the Republic of Kazakhstan. There is a proposal to establish a special national environmental fund which will accumulate environmental payments by the users of natural resources made in connection with environmental damage, and to spend these funds directly on environmental protection and rehabilitation.

Fifthly, the role of the community and non-government structures in resolving environmental issues increases. E.g. it is proposed to introduce the legal institute of environmental ombudsman, who could carry out mediation and resolution of environmental disputes, and to increase the role and meaning of environmental audit.

Sixthly, specific efforts are proposed to regulate such issues as gas flaring and emergency emissions.

I note with satisfaction that during 15 years of my work in the sphere of subsoil use, as far as I remember this is the first case when major oil companies act jointly and do not have any significant differences in points of view. Together with oil and gas companies this environmental initiative was unanimously supported by the representatives of different associations from key industries of Kazakhstan - energy sector, mining and metallurgical sector, and, which is most important, the initiative was supported by the association of the users of natural resources, which combines different enterprises. It gives the ground to hope that we will be able to attract the attention of the governmental authorities to serious and actual issues raised, urgency of amendments to the current regulations and necessity to establish clear and understandable rules in environmental legislation.

As you can see huge work has been performed; significant resources have been retained and spent; the community of the users of natural resources and key players in the Kazakhstani economy came out with a single consolidated position. It should be noted that public and business at large have serious concerns regarding the current environmental regulation; the proof is that the issues raised are vital and require immediate interference by the governmental structures. We want to hope that we have made the first step by having come out with this initiative within the framework of social partnership and responsibility. We would be grateful if our efforts have been supported by the Government.