Problems of Enforcement of the Requirements on Local Content

Dina Pak

Law Firm GRATA

Almaty, March 27, 2009 г.

Content

1. Policy of the State on increase of the local content in the activity of the subsoil users.

2. Work of MEMR on changing of the subsoil use contracts in part of determination of the local content.

3. Possible actions of the subsoil users during negotiations with MEMR on changing of the subsoil use contracts in part of the local content.

1. Policy of the State on increase of the local content in the activity of the subsoil users

• Problems preventing to increase of the local content.

• Aims of the Government on working out of the normative base related to the issues of the local content:

Development of unified method for estimation of the local content;

Draft Law on Subsoil and Subsurface Use;Development of draft law on the local content issues.

2. MEMR’s efforts aimed to change subsoil use contracts in part of the local content

Two MEMR’S approaches for changing the existing subsoil use contracts in part of the local content:

applying by subsoil users to MEMR for asking any questions concerning the issues on changing certain amendments into the subsoil use contracts;

sending by MEMR notifications to the subsoil users on changing of subsoil use contracts in part of the local content.

3. Possible actions of the subsoil users during negotiations with MEMR on changing of the

subsoil use contracts in part of the local content

3.1. Deficiency of legal basis for introduction of the local content provisions in existing subsoil use contracts.

3.2. Deficiency of MEMR’s rights to terminate of the subsoil use contracts in accordance with Article 45-2 of Subsoil Law in case of non execution of instructions of MEMR by subsoil users.

3. Possible actions of the subsoil users during negotiations with MEMR on changing of the

subsoil use contracts in part of the local content.

3.3.Negotiation positions recommended for subsoil users in respect of determination of the local content in the subsoil use contracts:

to take into consideration a specific of subsoil use operations conducted under particular subsoil use contract, stage of the conducting operations and planning procurements;

to introduce specific methods determining basic principles for estimation of the local content in each particular subsoil use contract;

procedure of reporting, enabling reflect objective causes of non execution of the provisions on local content;

development of stepwise plan of achievement of high rates of local content in each contract;

grounding upon the inclusion of local content in respect to Kazakhstani personnel;

consequences, potential risks of non execution of obligations on local content;

procedure of determination of the objectiveness of causes, leaded to such non execution;

possibility of subsoil user to appeal an acknowledgement of non execution of obligations in part of local content.

THANK YOU!

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Dina PakPartner, Law Firm GRATA

Mobile: +7-701-7615042Email: Dpak@gratanet.com