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Section 12. Investment law
DOI: http://dx.doi.org/10.20534/EJLPS-17-2-79-82
Li Shan,
Master of Law, the first year doctoral student in the Higher School of Law "Adilet", Caspian Social University
E-mail:[email protected]
Judicial mechanisms for protecting the rights of investors in Kazakhstan
Abstract: This article is devoted to the role of national-legal regulation of foreign investments in the development of investment activities and investment relations in the Republic of Kazakhstan. The author studies the policy of realizing a favorable investment climate in the country, the prospects for the development of judicial protection of investors' rights in Kazakhstan, and the analysis of the current state of the investment legislation of the Republic of Kazakhstan is examined.
Keywords: investments, entrepreneurship, investment legislation, entrepreneurial legislation, direct investments.
In the conditions of the economic crisis, the predetermining factor of structural and investment transformations was the deformation of the economy and its reduction to the optimum of technical and technological possibilities for constructing an organizational and economic model for managing the investment process.
The intensification of structural and investment
reforms is a renewal of the industrial potential of
the industrial sector of the economy, which is based on the mechanism of economic growth and the construction of new economic relations with a given level and direction of development.
Proceeding from this, the problem of ensuring economic growth is predetermined by two levels - directly technological and determining -organizational and managerial, as a combination of two factorial levels. The economic component of the policy is designed to combine the system of
priorities into a single economic organism for the functioning and development of the investment process in relation to the specific conditions of the organizational and economic system of the Republic, which is provided by the peculiarities of the current period of transformations in the economic complex, that has lost its stability and certainty of development.
The mobilization of technical, technological and organizational-economic potential depends on the economic growth, its stability and efficiency. The essence of this approach is to support the state's priority fields to promote the development of new forms of investment process that ensures the sustainability of the development [1].
The attraction of foreign investors has such positive consequences as:
- import of capital and loans increase the accumulation of capital in the host country, accelerate its
economic development, and improve the balance of payments;
- foreign investment are accompanied by the transfer of technologies, organizational and managerial experience, the results of scientific and technical research and the development embodied in technology, patents, licenses, trademarks, etc.;
- increasing the level of employment and skills of local labor forces;
- manufacturing operations of foreign firms expand the range of products, promote more active development and more complete use oflocal resources;
- improving the living standards and purchasing capabilities of the population;
- foreign investments render a stimulating effect on the development of services, starting from banks and insurance up to transportation and advertising;
- foreign investments create an additional incentive for other investors, as they increase confidence in the country, maintaining capital inflows;
- foreign investments strengthen competition in the national economy and reduce the level of monopolization;
- foreign investments make a certain contribution to the development of social sphere [2].
As a result of the state investment policy in the Republic of Kazakhstan, which includes legal, organizational activities and measures for judicial and extrajudicial protection of investors' rights, about 20 billion dollars of foreign investments are attracted annually to Kazakhstan. Only for the first half of 2016 the economy of Kazakhstan received over 1.3 trillion tenge of foreign investments. The Republic of Kazakhstan in the rating ofcomfortable and favorable conditions for doing business by the evaluation of the World Bank "Doing Business", the past year had raised by 12 positions and occupied the 41st place out of 189 [3].
During 25 years of Kazakhstan's independence, the policy of implementing a favorable investment climate in the country, supporting foreign direct investment and protecting the rights of investors is a topical direction.
The state of investment activity is negatively affected by the lack of an effective mechanism for its legal regulation, as well as the management model of interaction of the participants of the investment process in the course of ensuring their security with the use of administrative legal and financial legal means of protection.
In 1998 the Council of Foreign Investors was established under the chairmanship of the President of the Republic of Kazakhstan in order to build a sound investment policy and ensure economic development of the country.
Achieving the goal of forming a solid legal basis for investment activities is complicated by the absence of a deliberately arranged system.
Governmental legal regulation of investment protection should meet the goals and objectives that oblige to implement such regulation with a view to ensure proper quantitative and qualitative growth of investments, interests of all participants in investment legal relations and the society.
Among various forms of protection of law, the leading role is permit by the judicial form of protection of investors' rights as a universal, historically developed norm regulated in details by the rules of civil procedural law [4], which provide a special procedure for considering investment disputes.
In order to implement the program "Ensuring the Supremacy of Law" according to the Strategy of the President of the Republic of Kazakhstan NA. Naz-arbayev - "100 steps" [5] separate legal proceedings on investment disputes were created and on its basis a specialized investment board was organized in the Supreme Court of the Republic of Kazakhstan. In accordance with subparagraph 2 ofArticle 28 of the new Civil Procedure Code of the Republic of Kazakhstan, on the jurisdiction of the Supreme Court in which a specialized judiciary board was established. The board is engaged in the consideration of investment disputes by the rules of the court of the first instance to which the major investor is a party. Consideration of civil cases on investment disputes, except
the cases that are subject to the Supreme Court, as well as other disputes between investors and state bodies related to the investor's investing activities are referred to the jurisdiction of the court of Astana. Revision of the judicial decisions on the investment disputes of the court ofAstana is also carried out by the specialized board of the Supreme Court of the Republic of Kazakhstan.
The plan of the nation "100 steps" stipulated the establishment of the International Council on the basis of the model of the Council of Foreign Investors under the President of the country. As a consultative and advisory body to the Supreme Court, the Council out of12 authoritative foreign and Kazakh-stani lawyers and scientists, is established at present, which is focused on developing recommendations on the implementation of advanced international standards in the national justice system, giving conclusions on specific court cases related to the consideration of investment disputes.
This means that if earlier investors in their disputes with the state applied to the regional economic courts (SREC - a specialized inter-district economic court of a city or region), now a grand investor immediately appeals to the Supreme Court of the RK to protect his rights from illegal actions of state bodies.
What does this give investors and what is the difference from the old system?
First of all, it is necessary to understand that not every dispute involving an investor is an investment.
Investment dispute is a dispute only between the investor and the state (for example, in the sphere of subsoil use, taxation, environmental protection, competition protection, customs clearance, etc.) [6].
The direct consideration of the investment dispute in the Supreme Court is called upon to ensure prompt and qualitative consideration of the case, since the above areas of activities require the high qualification of judges and the availability of specialized knowledge not only in the field of jurisprudence but also in the relevant branch of economic activity.
According to the Investment Ombudsman, in recent years more than 30 transnational companies (TNCs) have come to Kazakhstan. This year, it is planned to reinvest 9 TNCs. The Ministry of Investment and Development of the Republic of Kazakhstan is actively working currently on more than 200 projects with the participation of small and medium-sized investors informed the head of the department [7].
As can be seen from the reports ofauthorized persons, the number of investment projects and the volume of foreign investments increase every year, while the number of investment disputes also steadily increases. Most often, investors face problematic issues on tax, customs, antimonopoly legislation, as well as in the sphere of land relations and licensing.
With this scale of participation of foreign capital on the part of the state, it was decided to adopt cardinal, even revolutionary measures to change the procedure for examining investment disputes, adopting the most advanced world experience in this field as the basis.
So on December 7, 2015, the Constitutional Law of the Republic of Kazakhstan "On the International Financial Center Astana" (hereinafter - the Law) was adopted.
The International Financial Center "Astana" (hereinafter referred to as the IFC "Astana") or in English - Astana International Financial Center (AIFC) is actually a tax and economic paradise for business entities, considering that:
- the participants of the Center until January 1, 2066 are exempted from corporate income tax on the income received from the provision in the IFC "Astana", as well as legal, audit, accounting, consulting services;
- foreigners working in the IFC "Astana", before January 1, 2066, are exempted from paying an individual income tax on the income from the activities in the Center for Labor Contracts;
- bodies and participants of the IFC "Astana" providing services undertaken by the Law are ex-
empted from payment of property tax and land tax on facilities located on the territory of the Center. Besides this, the legislation of the Republic of Kazakhstan is partially abolished on the territory of the IFC "Astana". The rules on the territory of the center shall be based on the principles of Law of England and Wales and the standards of the world financial centers (for example, Dubai International Financial Center - DIFC). The center management body is entitled to adopt normative acts that will regulate civil-legal, civil-procedural relations, financial relations and administrative procedures arising between the Center participants, the Center bodies and their employees (art. 4 of the Law).
Within the framework of this Law, it is also envisaged to create a separate court to review the cases of participants of the financial center. The Center court is declared independent in its activities and is not included in to the judicial system of the Republic of Kazakhstan.
The official language of the Center shall be English, used in all areas of public relations regulated by the Center throughout the Center. Legal proceedings and transactions in the IFC "Astana" are also planned to be conducted in English, upon the request of the parties, with translation into Kazakh or Russian (art. 19-20 of the Law).
The implementation of the proceedings in English is due to the necessity to create favorable conditions for foreign investors and to consolidate the international level of the AIFC.
Thus, it can be stated that the prospects for the development of judicial protection of investors 'rights in Kazakhstan present large-scale events affecting both the legal and economic components of these legal relations, since it is the judicial protection of investors' rights that provides the proper conditions for the development of the capital market and the attraction of new financial technologies in to the Country [8].
As it has already been stated in the article, such disclosure of clear concepts shall allow considering dispute decisions either in the Supreme Court or in the Court of the city of Astana. All other disputes with the participation of investors, but not related to investment activities, shall be attributed to the jurisdiction of district courts.
Increasing "number of lawsuits in the courts of the Republic of Kazakhstan testifies to increasing investor's confidence in justice, confidence in strict observance of the requirements oflegislation by courts and the terms of concluded investment contracts, which are the main indicators of a favorable investment climate".
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