New rules may affect business activities conducted with state entities.
On 18 January, the president of the Republic of Kazakhstan signed the law “On amendments to some legislative acts of the Republic of Kazakhstan on public procurement” (the Law). The Law came into force on 30 January 2014. This LawFlash provides a brief discussion of the important provisions that may affect business activities with state authorities, agencies, and/or organizations of the Republic of Kazakhstan.
Public procurements in the Republic of Kazakhstan are governed mainly by the Law of the Republic of Kazakhstan “On Public Procurement” (the PPL) as well as several other acts. The Law introduces amendments to the following legislative acts only: the Civil Procedure Code of the Republic of Kazakhstan; the Administrative Offence Code of the Republic of Kazakhstan; the Budget Code of the Republic of Kazakhstan; the Law of the Republic of Kazakhstan “On Architectural, Urban Planning and Constructional Activities in the Republic of Kazakhstan”; and the PPL.
Amendments to the PPL
Introduction of the National Regime
The Law introduces a concept of “national regime”, which means a regime that allows goods, works, and services of foreign origin to participate in public procurements in Kazakhstan on equal grounds with goods, works, and services of domestic origin, provided that the requirement to grant such a regime is set by the international treaties ratified by the Republic of Kazakhstan and pursuant to the terms and conditions set forth in such treaties. To date, the national regime for the purposes of participation in public procurements is provided only for Belarus and Russia under the Agreement on State (Municipal) Procurements entered into within the framework of the Common Economic Space.
The Law sets out the procedure for national regime implementation and empowers the government of the Republic of Kazakhstan to do the following:
Summarising the above, it appears that foreign suppliers from countries other than Belarus and the Russian Federation may participate in public procurements in Kazakhstan either under the national regime—provided that there is a relevant international treaty ratified by Kazakhstan and the country of origin of the foreign supplier—or under conditions of access to be determined by the government. This interpretation is based solely on the wording currently contained in the Law, however, and does not rely upon any supporting materials.
Centralization of Public Procurements
Electronic Format of Public Procurements
The Law further enhances the transition of public procurements to an electronic format by way of eliminating from the PPL provisions implying a paper format for tender and auction. Under the Law, the download of tender documentation, the submission of tender bids (applications), the opening of bids, the automatic rejection of bids, and the preparation of minutes on tender results will be done electronically through the Portal. Additionally, public procurement contracts may now be executed in electronic digital format and signed using an electronic digital signature on the Portal.
A number of other less significant changes were introduced by the Law and are described below.
In addition to the changes described above, the enactment of the Law will necessitate amendments to and/or the adoption of various rules and regulations.
Amendments to the Administrative Code
Customers’ administrative responsibilities were extended to include, among other things, liability for violations relating to auction documentation as well as liability for failure to file or the untimely filing of claims to recognize a supplier (potential supplier) as a bad-faith supplier. In view of the changes set by the Law, customers may be even more inclined to make suppliers (potential suppliers) responsible for improper performance in the course of public procurement via the filing of relevant claims with the court.
Amendments to the Budget Code
The Law states that, when considering the budgetary requests of administrators of budget programs, the database of prevailing prices for goods, works, and services that is required during planning and conducting public procurements shall be used as a reference.
Amendments to the Civil Procedure Code
The Law states that cases against the decisions and the actions (or inaction) of the commissions in state procurement will be considered and resolved within one month.
Amendments to the Law “On Architectural, Urban Planning and Constructional Activity in the Republic of Kazakhstan”
The Law excludes the requirement of passing state expertise for tender documentation relating to procurements of works on construction of large or complex facilities.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the authors, Aset A. Shyngyssov (+7 727 250 7575; email@example.com), Asem B. Bakenova (+7 727 250 7575; firstname.lastname@example.org), and Daniyar Zhumakhanov (+7 727 250 7575; email@example.com).
. Agreement on State (Municipal) Procurement signed on 9 December 2010.
. Under the agreement, starting from 1 January 2014, all potential suppliers from the three countries of the Customs Union will be able to participate in joint public procurement in Russia, Belarus, and Kazakhstan. The Agreement on State (Municipal) Procurements states that, in exceptional cases and for a period not exceeding two years, there can be exemptions from the national regime set by the resolution of the government of the Republic of Kazakhstan according to the decision or order of the president of the Republic of Kazakhstan.
. The National Bank is entitled to act as the single organizer for entities where the National Bank is a founder or a shareholder.
. State entities are entities where the state owns 50% and more of shares (participatory interest).
. The best technical specification will be the technical specification of goods and services that have better characteristics than those declared by the customer.