Kazakhstan laws which govern enforcement of judicial acts were considerably amended in January of this year. These amendments effectively represent policy change towards enforcement of judicial acts in Kazakhstan, making it easier to enforce acts of courts and hold debtors liable for the failure to enforce. The new law may potentially affect everyone doing business in Kazakhstan, especially businesses. In this article, we would like to briefly describe the latest amendments into the law and compare the amended law with the previous regime.
1. From now on, a debtor can be held criminally liable for the failure to enforce a judicial acts during more than six months
Probably the most significant change concerns with Article 362 of the Republic of Kazakhstan Criminal Code (the "Criminal Code") - titled: Failure to enforce judgment of court or other judicial act or enforcement document. New language of Article 362(1) of the Criminal Code establishes criminal liability in the form of, among other things, restriction of liberty or imprisonment for up to three years, if one fails to enforce judgment of court, other judicial act, or enforcement document which entered into effect during more than six months. Article 362(1), prior to being amended, did not specify the time frame during which judicial acts must be enforced making it difficult to hold debtors criminally liable.
Article 362(2) establishes an increased criminal liability in the form of, among other things, restriction of liberty or imprisonment for up to five years, if the actions described above in Article 362(1) were committed by a representative of state authority, civil servant, an employee of local municipality, state, commercial,or other organization.
2. Enforcement writs (ispolnitel'nyi list) were abolished with respect to injunctive relief
Article 161 of the Republic of Kazakhstan Code of Civil Procedure Code (the "Civil Procedure Code") has been revised such that, from now on, enforcement of court's ruling (opredelenie) granting injunctive relief no longer requires court to issue an enforcement writ, and the party seeking injunctive relief is not required to initiate enforcement proceeding. Now, court's ruling ordering injunctive relief can be enforced directly, it could be sent to relevant parties obligated to enforce court's injunction, for example, the Department of Justice. In our view, this makes it faster to enforce injunctions of court.
If the party seeking injunctive relief is unaware of the specific pieces of counter party's property on which the injunction must be placed, he (she) may still approach relevant enforcement officer (public or private) to initiate enforcement proceeding to search for relevant assets.
3. The legal status of private enforcement officers has been subjected to greater scrutiny: their competence, geographical capabilities and liability have increased, the fee structure became more flexible
Private enforcement officers are now prohibited from rejecting enforcement writs
Earlier, there were numerous situations where certain private enforcement officers (the "PEO") would refuse to accept and initiate enforcement proceedings with respect to judicial acts which seemed less attractive, for example, if enforcement prospects were unclear. The amended law aims to address this situation by explicitly prohibiting PEOs to refuse to accept and initiate enforcement proceedings for no valid reason. Otherwise, ungrounded refusal may lead to relevant PEO's licence being revoked.
PEOs have been granted exclusive authority to enforce certain judicial acts
Probably, one of the most important changes brought by the law is that from January 1, 2016 PEOs will be granted exclusive authority to enforce judicial acts when legal entity is a beneficiary. This means, from the date indicated above, state enforcement officers (relevant Departments for Enforcement of Judicial Acts) will stop enforcing judicial acts where the beneficiary of such act is a legal entity. This is going to be a significant change in the enforcement regime.
The fee structure of PEOs has become more flexible
The revised fee structure of PEOs provides greater flexibility. Instead of fixed 10 per cent flat fee applicable to all judicial acts enforced by PEOs, now, the PEO's fee would vary between 3-25 per cent of the collected amount or of the value of collected assets. In our view, this newly introduced fee flexibility is reasonable, considering that the volume of collected amounts may be extremely large and a flat 10 per cent fee for multimillion enforcement proceedings may not always be appropriate.
Geographical reach of PEOs was extended
Earlier, PEO could accept and enforce judicial acts only in an administrative region where debtor or its corporate body was registered (if the debtor is a legal entity), provided the PEO was himself (herself) registered in such region. Basically, PEOs were limited to act across different administrative regions. In order to enforce judicial acts outside of the region of his (her) registration, PEO would return enforcement writ to the client and then the client would hire another PEO in the relevant region.
This restriction has been abolished. Now, enforcement proceeding can be initiated in the area where debtor has corporate body, place of registration, or location of its founder, and the enforcement could be carried out at the debtor's place of registration or location of its property. In other words, enforcement proceeding still needs to be initiated in the area where debtor has been registered or where it has corporate body, however, if the debtor has any property outside of this administrative region, the PEO could collect such assets outside of the region, provided the assets are within Kazakhstan.
Increased restrictions on certain categories of enforcement proceedings were introduced
PEOs can no longer accept and initiate enforcement proceedings with respect to judicial acts aimed at collection of amounts from legal entities where fifty or more per cent of voting shares (shares in equity capital) in such entities belong to the state and entities affiliated with the state. This restriction applies on top of the earlier restriction upon PEOs to enforce judicial acts against the state.
4. Procedures governing voluntary enforcement of judicial acts have been revised
The earlier existed notion of a time frame allowed to debtor to voluntarily enforce judicial act upon the offer of enforcement officer has effectively been abolished. Now, the amended law sets a five day time frame following entry of judicial act into effect. A judicial act could be sent for enforcement upon expiration of this five-day time frame. During this five-day term debtor has the opportunity to voluntarily enforce judicial act to avoid payment of state enforcement officer's sanction or PEO's fee. Thus, now, in order to avoid payment of sanction (fees of PEO), during five days following entry of judgment into force (even if you disagree with the judgment and intend to appeal it), the debtor should enforce the act without waiting for the enforcement officer's proposal to voluntarily enforce the judgment.
Accordingly, enforcement sanction, enforcement costs, interest and fees of PEO could be collected from debtor not only after full or partial enforcement of judicial act, but even in the case where the creditor refused to enforce judicial act, parties entered into settlement agreement or a mediation agreement. As you may see, the law has introduced a presumed obligation of debtor to enforce a judicial act prior to initiation of enforcement proceeding, and the mere fact of initiation of enforcement proceeding serves as a ground for the collection of enforcement sanction (PEO's fees) from the debtor.
5. Procedures governing notification of parties to enforcement proceeding have been modified
According to the amended law, parties to enforcement proceeding must notify enforcement officer of change of address, debtor must notify of changes of his (her) place of work and existence of additional sources of income. Notice must be served in writing, and it must be made within three business days. Otherwise, notices would be served to address of the relevant party last known to enforcement officer, and such notice will be deemed properly served, even if the recipient no longer resides at the relevant address.
The law also obligates debtor to visit enforcement officer on monthly basis and where so requested by the enforcement officer.
The amended law also provides that, in situations where legal entity does not operate or it does not have employees within its management, the notice could be served to the chief executive, his (her) deputy or, in the absence of such, to chief accountant of the debtor. Otherwise, the notice could be served to founder of the debtor.
6. Procedure governing sale of collected property has been modified
Auction sale procedure has been substantially revised. The amendments introduced new types of sale of collected property. For example, until January 1, 2015 debtor's assets with a value below 300 Monthly Indexes (approx. USD 3,000) will be subject to commission sale. Assets with a value ranging between 300-1,000 Monthly Indexes (between approx. USD 3,000-10,000) will be subject to electronic sale. As we understand, assets with value in excess of approx. USD 10,000 will be sold through auction. As mentioned above, this procedure will apply until January 1, 2015. By this date, as we understand, relevant state authority would issue relevant procedure governing sale of collected assets and the relevant criteria applicable to use of appropriate types of sale.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.