On 1 July 2021, Kazakhstan introduced a new Administrative Procedural Code (APC), and in this article we will look at how it resolves administrative disputes between businesses and the authorities. Essentially, the new code replaces two conflicting documents and incorporates elements of the current Civil Procedural Code (CPC). Why were the changes made? What do companies need to know when appealing against the authorities’ actions or taking them to court, and what can businesses expect from the new code? Deloitte Tax and Legal Department Director Olessya Kirilovskaya explains.
Olessya, who is the new code aimed at and what’s in it?
The new APC was introduced in July to control how the authorities interact with businesses and individuals and perform administrative procedures, as well as how cases are heard in administrative courts.
It is also used to settle disputes between businesses and the authorities, such as during tax audits, while replacing Laws on Administrative Procedures and on the Consideration of Declarations from Legal Entities and Individuals. The CPC section outlines the procedure for disputing the authorities’ actions.
So, were the previous laws ineffective? Why did they have to be replaced?
Not really. They were covering the same ground, but the delineation between them was not always clear and it wasn’t always clear which one had to be used. If businesses wanted to appeal against something the authorities had done, they had to know about and understand three different laws, but that number’s been reduced to one. The APC is easier to use, but still contains ambiguities, which, we hope, should work themselves out over time and with application.
Let’s take a closer look at the new code. What’s changed since its publication?
The new code was introduced to improve interaction between the authorities and the business community, and it incorporates a number of basic principles, such as a ban on the abuse of formal requirements and adherence to the concept of the presumption of the authorities’ guilt. Courts now actively participate in resolving disputes. And, last but not least, any ambiguity issues are resolved in favour of the taxpayer.
In other words, all business disputes will now be resolved according to the new code?
Not quite. Disputes are resolved in Kazakhstan according to two procedures. The first covers contractual disputes, including investment issues, which are settled according to the CPC. The second involves non-investment disputes between the authorities and legal entities, including investors, which are settled according to the APC.
Importantly, any claims against the authorities accepted for consideration before 1 July 2021 are heard according to the CPC.
Can you let us know what the differences are between the CPC and APC?
Initially, the difference is in the “claim” being made. The CPC normally covers appeals against rulings of the authorities and appeals against their actions/inaction.
The APC covers claims disputing administrative acts, enforcement claims (to adopt or not adopt an administrative act), claim to conclude an action or recognise specific legal relations or vice versa.
Even though it has always been possible to file the above claims under the CPC because they are not regulated or restricted, the APC also stipulates procedures for doing so.
To begin with, the APC allows a range of claim rulings. For example, when disputing an administrative act, companies can demand the act be cancelled, and for a claim of enforcement – demand a favourable administrative act be adopted or abstain from adopting the unfavourable act.
The APC also establishes different statutes of limitation. For example, claims disputing an administrative act and enforcement may be filed within one month of the disputed act being issued, while recognition claims may be filed within five years from the date relations arise.
Are there any other differences at other dispute resolution stages?
The next stages are claim acceptance and preparing a case to be heard. Under the CPC, claims are considered accepted for consideration within five business days of their receipt. Under the APC, claims are considered as accepted for consideration when they are filed. However, in practice they are still considered within five business days of being filed, after which a resolution to prepare the case for consideration is issued.
Under the CPC, cases are prepared for court within 20 business days of their acceptance for consideration. Under the APC, the period for preparing a case to be heard is not defined, except that it should be done within a reasonable period allowing the court to take all necessary actions to resolve the case, preferably in a single hearing.
How about the actual case hearing?
The APC case consideration period is three months compared to two months in the CPC. The APC envisages an active court role in case consideration, meaning that, as opposed to the CPC procedure, courts are not limited to the explanations, declarations and petitions of administrative process participants, their conclusions, evidence and other case materials; and research all circumstances that are key for the correct resolution of an administrative case unilaterally, objectively and in full. Courts are entitled to demand additional materials and evidence, study all case materials and take all necessary actions to consider a case in full and achieve the goals of administrative proceedings.
The fact that under the APC courts are entitled to issue preliminary opinions on the legal grounds provided by the parties to support their claims is extremely significant.
To prevent inappropriate court behaviour or the abuse of procedural rights under the APC, a court can also impose a fine for violating procedural requirements of 10-100 times the MCI.
So, when we end up with a court ruling, how will they be different?
Under the CPC, court rulings enter into force from the moment a court of appeal ruling is received (or the appeal period ends).
Under the APC, a court of first instance ruling enters into force once the appeal period ends, unless an appeal is filed. If an appeal is filed, then a ruling enters into force once the cassation appeal period ends, unless a cassation appeal is filed. If so, a court ruling enters into force from the day a court of cassation ruling is announced.
The change is significant for businesses as having to execute disputed administrative acts can often cause a number of questions and issues. This means that, for example, if violations are found in a desktop audit, notice to correct them, for which 20 business days are given, is suspended until a court ruling enters into force. According to the CPC, this moment arises once an appeal court ruling is issued, i.e., roughly three-four months after an appeal, while under the APC this is after the cassation stage, i.e., roughly 12 months later. But in conclusion it is still worth remembering that the procedure is still very new. and we still need to work out how efficiently it works.Related Topics