The International Comparative Legal Guide to: Public Procurement 2017

In general, Kazakh public procurement legislation is based on the provisions of the Civil Code and the Budget Code of Kazakhstan, and the relevant legislation includes:  

1. The Law of the Republic of Kazakhstan “On Public Procurement” dated 4 December 2015, No. 434-V ЗРК (the “Public Procurement Law”). 

2. The “Rules of the Conduct of Public Procurement”, as approved by the Decree of the Minister of Finance of Kazakhstan No. 648, dated 11 December 2015 (the “Public Procurement Rules”). 

3. The Law of the Republic of Kazakhstan “On State Property” dated 1 March 2011, No. 413-IV ЗРК (the “State Property Law”). 

4. The Law of the Republic of Kazakhstan “On National Welfare Fund” dated 1 February 2012, No. 550-IV ЗРК (the “NWF Law”). 

5. The Decree of the Government of Kazakhstan dated 28 May 2009, No. 787 “On approval of the Template Rules of procurement of goods, works and services by national managing holding, national holding, national company and by organisations, 50 or more per cent of the shares (participatory interests) of which directly or indirectly belong to the national managing holding, national holding, national company” (the “Template Procurement Rules of the National Companies”). 

6. The “Procurement rules of goods, works and services by the JSC National Welfare Fund “Samruk-Kazyna” and by organisations 50 per cent or more of the voting shares (participatory interests) of which belong, directly or indirectly, to JSC National Welfare Fund “Samruk-Kazyna” on the right of ownership or trust management”, as approved by the Decision of the Board of Directors of the JSC National Welfare Fund “Samruk-Kazyna” No. 126, dated 28 January 2016 (the “NWF Procurement Rules”). 

7. The Decree of the Management Board of the National Bank of Kazakhstan No.237, dated 19 December 2015, “On approval of the Rules of procurement of goods, works and services by the National Bank, its departments, organisations, which are included in the structure of the National Bank and the legal entities, 50 or more per cent of the voting shares (participatory interests) of which belong to the National Bank or are in trust management of the National Bank, and legal entities affiliated with them” (the “NBK Procurement Rules”).

8. The Rules For Organising and Conducting Purchases of Pharmaceuticals, Preventive (Immunobiological, Diagnostic, Disinfecting) Preparations, Medical Devices and Equipment, Pharmaceutical Services for the Purposes of Providing Guaranteed Free Medical Care approved by Governmental Resolution No. 1729 dated 30 October 2009 (the “SKPharmacia Rules”). 

The range of entities (the “Affected Entities”) which fall within the scope of the Public Procurement Law and the Public Procurement Rules is wide (see section 27 of article 2 of the Public Procurement Law) and covers: 

1. state authorities (государственные органы) − e.g. Government of Kazakhstan or local executive authority (Akimat); 

2. state agencies (государственные учреждения) − e.g. the Ministry of Internal Affairs, in its capacity as a state agency; 

3. governmental enterprises (государственные предприятия); and 

4. legal entities, 50 or more per cent of the voting shares (participatory interests) of which belong to the state, and legal entities affiliated with them (e.g. municipal companies 100 per cent owned by regions or cities represented by respective Akimats) . 

To ensure the transparency, cost-efficiency and accessibility of procurement, the Public Procurement Law requires that suppliers of purchased goods, works and services (the “GWS”) (with limited exceptions stipulated in article 1 of the Public Procurement Law, e.g. GWS of military and double-purpose (usage) as part of the state defence order or making a contribution to the charter capital of a legal entity) to Affected Entities must be selected through a publicly disclosed procedure and only by way of a tender, auction or other selection method set out in the Public Procurement Law. 

Importantly, the Public Procurement Law and the Public Procurement Rules do not apply to procurement of the purchased GWS by the following entities (however, specific procurement rules applicable for the entities listed below are similar to the procurement rules under the Public Procurement Law in most respects): 

1. the JSC National Welfare Fund “Samruk-Kazyna” (the “SK”) and by organisations 50 or more per cent of the voting shares (participatory interests) of which belong, directly or indirectly, to SK on the right of ownership or trust management, as these entities are subject to specific NWF Law and NWF Procurement Rules regulations (e.g. JSC Kazmunaigaz, JSC AirAstana, etc.); 

2. National Bank (the “NBK”), its departments, organisations, which are included in the structure of the NBK and the legal entities 50 or more per cent of the voting shares (participatory interests) of which belong to the NBK or are in trust management of the NBK, and legal entities affiliated with them, as these entities are subject to specific NBK Procurement Rules; and 

3. so-called national managing holdings, national holdings, national companies (as defined in the State Property Law) and by organisations, 50 or more per cent of the shares (participatory interests) of which directly or indirectly belong to the respective national managing holding, national holding, national company, as these entities are subject to specific procurement rules to be adopted on the basis of the Template Procurement Rules of National Companies (e.g. the procurement rules of the JSC “Baiterek National Management Holding”, so-called “Social-Entrepreneurial Corporations”, etc.). 

Further, procurement of pharmaceuticals within the guaranteed free medical care conducted by SK-Pharmacia LLP and public healthcare institutions is governed by the separate pharmaceutical procurement rules and the provisions of the Public Procurement Law shall not be applicable to it (see the SK-Pharmacia Rules). 

Please also note that in Kazakhstan there is separate legislation for public-private partnerships, including concessions, as discussed below. 

Unless otherwise expressly stipulated in the questions below, answers will be based on the Public Procurement Law.  

It is well-known that public procurement carries a high risk of corruption for business investing in Kazakhstan. Bribes and irregular payments used to be widespread in the process of awarding public procurement contracts. The main components of Kazakhstan’s anticorruption legislation are the anti-bribery provisions of the Law of the Republic of Kazakhstan “On Fighting Corruption” dated 18 November 2015, No.410-V ЗРК, the Criminal Code of the Republic of Kazakhstan dated 3 July 2014, No.226-V, and the Code of the Republic of Kazakhstan on Administrative Offences dated 5 July 2014, No.235-V. Kazakhstan’s anti-corruption legislation identifies several crimes of corruption, among the most serious of which are the provision and receipt of bribes to government officials. These crimes are interrelated, and usually cannot be committed without one another.  

As of today, neither the EU procurement directives (unlikely ever to be applicable) nor the GPA apply in Kazakhstan. As a recent WTO member, however, Kazakhstan has undertaken a commitment, in its WTO accession protocols, to initiate accession to the GPA, and from 19 October 2016, Kazakhstan has observer status on the GPA Committee. 

It also worth mentioning that Kazakhstan is a party to the Treaty on the Eurasian Economic Union dated 29 May 2014 (the “Treaty”), which establishes provision of the so-called “national regime” in the sphere of public procurement for the states-parties to the Treaty on Eurasian Economic Union (see Chapter XXII of the Treaty). 

In accordance with article 2(31) of the Public Procurement Law, the concept “national regime” means a regime that allows procurement of GWS of foreign origin and respective suppliers (i.e. that can be local or foreign suppliers) to participate in public procurements in Kazakhstan on equal grounds with GWS 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. 

The Treaty aims to provide free access, for example, to Kazakhstan suppliers for a government procurement carried out in Russia, and vice versa. We note that exclusion from national treatment for companies from member states of the Treaty is possible only for a term not exceeding two years (see article 14.2 of the Public Procurement Law). The Treaty does not apply to procurement where information is a state secret and procurement is carried out by the national (central) banks of member states.  

Article 4 of the Public Procurement Law stipulates that public procurement shall be based on the following eight fundamental principles: 

1) spending of money used for public procurement in the most optimal and efficient manner; 

2) provision of equal opportunities to potential suppliers to participate in the public procurement procedure, except cases specifically provided by the Public Procurement Law; 

3) fair competition among potential suppliers; 

4) openness and transparency of the public procurement process; 

5) provision of support to domestic producers of goods, as well as domestic suppliers of works and services, to the extent it does not conflict with provisions of the international treaties ratified by Kazakhstan; 

6) the responsibility of participants of the public procurement; 

7) prevention of corruption; and 

8) procurement of innovative and hi-tech goods, works and services. 

Whether or not the action of an Affected Entity or other participants of the public procurement is in line with the principles of the Public Procurement Law may depend on how these principles are interpreted by the Kazakh courts and the authorised body for state procurement (currently the Ministry of Finance (the “Authorised Body”)).  

Article 50 of the Public Procurement Law provides a so-called “special procedure” for public procurement of the following GWS by the Affected Entities: 

1. Goods, works and services for the needs of public order and national security, information of which constitutes state secrecy, in accordance with the legislation of Kazakhstan on state secrecy, and (or) contains proprietary information of limited distribution, as defined by the

The procedure of carrying out public procurement with the use of the so-called “special procedure” is defined by the relevant Decree of the Government of Kazakhstan dated 31 December 2015, No.1200.