Kazakhstan

The Kazakhstani legal system provides for a “Entrepreneurial Code” which came into force on October 29, 2015, the rules of which appear to be intended not only to encourage economic and business freedom, but also to increase the interest of international investors.

Although it is not possible to discern a codified definition of the various types of international contracts, in order to facilitate trade, the main legal elements of negotiation have been borrowed from other legal systems (è the case, for example, of the transnational contract, the characteristics of which have been made explicit by the Kazakh National Bank).

In the period immediately following the declaration of Kazakhstan’s independence from the USSR, doubts had arisen as to the applicability of the 1980 Vienna Convention, as accession to that convention was officially signed by the USSR. However, nowadays these doubts have been dispelled by the transitional provisions contained in the Kazakh Constitution and the prevailing domestic legal doctrine, with the result that the Vienna Convention can be considered validly applicable to transnational contracts in which one of the parties is of Kazakh origin. However, for the sake of completeness of argument, it should be noted that in the official UNCITRAL document, Kazakhstan is not è mentioned among the signatory states.

The law firm Studio Legale de Capoa & Partners, thanks to its more than 30 years of experience in the field of international law as well as its close working relationships with qualified local professionals and native-speaking in-house associates, can offer interested entrepreneurs quick, efficient and fully aware of the complexity of Kazakhstan's legal-economic reality.

With a view to favoring transnational business relations, one of the most popular instruments in Kazakhstan è is the agency contract, which, however, is not regulated by the Kazakh Legal Order.

A proper definition of the agency contract è first emerged in letter no. NK-UM-08-3-22/8813 dated November 5, 2003, from the Kazakh Ministry of Finance, where it is specified that, in accordance with the definition provided by the legal dictionary, the agency contract è considered as an agreement whereby one party (“the’agent”) undertakes, for a fee, to promote one or more legal activities and not on behalf of the’other (“the principal”) but in its own name, or in the name and on behalf of the principal. The contract in question è falls within the group of contracts governed by the Kazakhstan Civil Code (d’henceforth c.c.k.). As a general rule, the principle of contractual autonomy of the parties applies in the Kazakhstani Order.

For the purposes of the discussion, it is worth recalling that, by virtue of Art. 381 of the c.c.k., the parties may enter into so-called mixed contracts, i.e. agreements containing elements of several typical contracts, which are precisely borrowed from time to time to give rise to a new form of contractual bond. It follows that the mixed contact è governed in conjunction with all those rules or parts thereof applicable to each specific clause or legal institution used in the text of the agreement.

Furthermore, Kazakh legal doctrine has affirmed that the agency contract subtends typical aspects of the commission and agency contracts and that, therefore, the rules governing these two distinct types of contracts apply to it. The same orientation also emerges from the aforementioned letter No. NK-UM-08-3-22/8813 of November 5, 2003 from the Kazakh Ministry of Finance, in the mind of which, in drafting the agency contract, it is necessary to refer to Chapter 41 of the Civil Code, governing the institution of representation, as well as Chapter 43 applicable to commission contracts.

It should be recalled, however, that, according to the most widespread Kazakh doctrinal current, the rules aimed at regulating representation, rather than those pertaining to commission, are more suitable to regulate the agency contract.

By virtue of the distribution contract, the manufacturer authorizes the distributor, i.e., an economic operator, to promote the sale of products supplied by the former, circumscribed to a certain territory and usually against a fee. The distribution contract does not find express legislative regulation in the Kazakh legal system.

However, it should be noted that recently the Kazakh legislature introduced a law regulating the distribution of pharmaceutical products. In this specific area è a single distributor figure has been introduced in order to regulate and monitor prices especially of mutuable drugs.

Article 896 c.1 of the c.c.k, inserted in Chapter 45 of the c.c.k. - headed “license of’set of business activities (franchising)” -, defines franchising as the contract by which one party (franchisor) undertakes to allow the other party (franchesee), in return for payment, the’use of the entire set of its “exclusive”rights;exclusive”, including è that of industrial or intellectual property, rights to trademarks, trade names, insignia, utility models, designs, copyrights, “know -how”, patents, technical and commercial assistance or advice. In addition, c. 2 of the same provision also lists the franchisor's reputation among the exclusive rights that may be the subject of the contract.

In regard to the’object of the franchise contract, the discipline è supplemented by a number of special regulations, including the “Law on the Licensing of Business Activities as a Whole or Franchising” of June 24, 2002” and the “Law on the Registration of Trademarks, Other Distinctive Signs and Designation of Origin of Products” of July 26, 1999.

It should be pointed out that the letter of the above-mentioned Civil Code provision has been the subject of strong criticism by Kazakh legal doctrine, since it refers “to the trade name as a whole” encompassing the form of organization and regulatory regulation of the franchisor’s business. In the opinion of legal scholars, such a locution è misleading, as it should be limited only to that name which has become a distinguished trademark and, as such, has acquired a specific economic value.

An additional critical aspect è represented by the reference to the trademark as the object of the franchise agreement: on this point it is pointed out, in fact, that the franchisee should be informed whether that given trademark è has been registered and enjoys adequate protection.

Requirements characterizing the franchise contract

With specific reference to the content of the franchise contract, it is pointed out that Art. 899 places a number of obligations on the “franchisee” among which, however, is not mentioned that of ensuring other services that might be connected with the product of poor quality or sold or provided by the “franchisee” to its customers. This gap, albeit not satisfactorily, è has been filled by the “Law on the Licensing of Business Activities as a Whole or Franchising” of June 24, 2002” which provides that, upon express agreement of the parties to this effect, the “franchisee” must provide a guarantee of quality of the products made by him, the work performed by him or the services rendered in comparison with similar products of the “franchisor”.

According to ’Art. 897 c.c.k., a franchise contract è requires written form ad substantiam. In addition, if the contract relates to intangible assets governed by intellectual property protection regulations, it must necessarily be registered. The contract in question may also set conditions limiting the franchisee’s activity or recognize the franchisee’s right to exclusivity.

In the case of indefinite franchise è early termination is allowed, provided that the withdrawing party gives the other party at least 6 months' notice, unless the parties have agreed otherwise. It is necessary to emphasize the negligible diffusion of the franchise contract in Kazakhstan (not more than 20% of the commercial contracts concluded), mainly due to the lack of awareness of this contractual instrument.

The Kazakh state pays much attention to the issue of traceability of goods and food in order to assure consumers about the quality and safety of products placed on the market. This awareness with respect to the qualityà and safety of products originates from the “issuance of the “Consumer Protection Code” in 1991, Art 13 of which expressly states that control and certification activities are entrusted to state bodies specifically designated to carry out these functions. In the following years, there has been a proliferation of specific standards and technical regulations in the sector, most notably the Standard of the Republic of Kazakhstan No. 1010-99.

Regarding, specifically, the labeling of products made in Kazakhstan, the matter è regulated by the Amending Law of January 21, 2013, which stipulates the obligation to transcribe information, ingredients, brand name and instructions for use in Kazakh and Russian languages. The same applies to imported products regarding which è it is necessary to provide specific information in Kazakh and Russian languages; costs related to translation are borne by the importer.

The legislature has indicated the order in which product information must be indicated: on the left or top should be placed the translation in Kazakh language, on the right or bottom in Russian language. Both labels should have the same font size. If requested, the information may also be translated into other languages: under these circumstances the size of the font used must be uniform to others already on the package. Failure to comply with the above rules shall be punished with an administrative fine, the amount of which shall be commensurate with the type of company and the average turnover achieved by a company of the same size.