Government may move toward
nationalization
Michael Lelyveld
A new investment law in Kazakhstan may give the government more power
to nationalize companies and make it harder for foreigners to take disputes to
international arbitrators. Our correspondent Michael Lelyveld says the changes seem to
follow a pattern of increasing pressure on foreign investors in recent months.
Boston, 1 May 2001 (RFE/RL) -- As tensions increase with foreign
investors, Kazakhstan has written a draft law that could make it easier to nationalize
their property.
The legislation appears to be the latest sign of friction between
Kazakhstan's government and foreign investment interests. Within the past month, Kazakh
officials have lodged a series of complaints against oil firms on issues ranging from
pollution to labor laws, taxes and local contracting.
Two weeks ago, the Interfax news agency reported that the government
was working on a new law to put "foreign and domestic investors on equal
footing," because of concerns that foreign companies have been granted better tax
breaks than Kazakh firms.
A copy of the draft law obtained by RFE/RL appears to deal with the
question by denying investment-tax preferences to ventures in natural resources, such as
oil. It is not clear whether the law would cancel the concessions on corporate and
property taxes that were granted in the past.
But a provision dealing with expropriation could be of greater concern
to foreign companies. The new law would give the government more power to nationalize
property and leave foreign investors with less legal recourse to fight such moves.
According to the draft dated 17 April, nationalization of an investor's
property "is allowed in the exclusive cases stipulated by the legislative acts of the
Republic of Kazakhstan, under conditions of equivalent compensation."
The previous investment law of 1994, has tougher wording in its
guarantees to investors. It states that "Foreign investments may not be
nationalized...except for instances when such expropriation is effectuated in social
interests in compliance with a legal order and is done without discrimination and with
payment of prompt, adequate, and effective contributory compensation."
Perhaps just as important, the new law does not appear to assure
investors that they will be permitted to settle disputes by appealing to international
arbitration.
The 1994 law gives foreigners the right to take a dispute to an
international arbitration body. The new law, which is to take effect in January 2002,
calls for such settlements "by the agreement of the investor and the state
body." In other words, the consent of the Kazakhstan government could be needed to
take a dispute beyond Kazakh courts.
It is unclear whether the new law reflects any intention to change the
treatment of foreign investors in Kazakhstan. But recent events suggest that a change may
already be under way.
Since last December, foreign oil companies have been resisting a
government order to channel all exports through KazTransOil, a monopoly headed by Timur
Kulibayev, President Nursultan Nazarbayev's son-in-law. Since early April, the companies
have been under pressure to increase local contracting following a series of labor
complaints.
Last week, the government ordered a halt to operations at the Kashagan
oil field in the Caspian Sea after a small spill of 210 liters of oil. A prosecutor also
cited the joint venture at the giant Tengiz field with violations related to dumping
wastes and burning gas.
In the past month, Hurricane Hydrocarbons of Canada has also faced a
takeover battle from Kazakh banking interests, which have been linked to Kulibayev.
While each problem may have separate causes, it seems that tensions
with foreign companies have increased since last year following reports that U.S. law
enforcement agencies have been investigating alleged payments to Nazarbayev and other
officials. Kazakhstan has also taken strong exception to an annual human rights report by
the U.S. government.
It is too soon to say whether the draft law is meant simply as a
refinement of current statutes or as a new tool to pressure foreign investors. But
companies may have to be prepared for further changes in Kazakhstan.
"The Times of Central Asia", 3 May 2001
http://www.times.kg/?D=article&aid=1018692
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