Under the licensing regime, the right to subsoil use arises based on a license issued by the relevant competent authority. Currently in Kazakhstan, there are six types of licenses for subsoil use: for geological exploration of subsoil, for exploration of solid minerals, for extraction of solid minerals, for extraction of common minerals, for the use of subsoil space, and for prospecting.

The contractual regime of subsoil use involves the establishment of the right to subsoil use based on a contract concluded between the competent authority in the field of subsoil use for hydrocarbons (Ministry of Energy of the Republic of Kazakhstan) and the subsoil user. Currently, the following types of contracts are concluded: for exploration and production of hydrocarbons, for production of hydrocarbons, and for extraction of uranium.

Regulation of contracts and licenses for subsoil use occurs in accordance with the Code. In this brief overview, we have examined a list of grounds, violations that may lead to early revocation of a license or termination of a subsoil use contract.

Among the main breaches of obligations under contracts and licenses, notable violations include failure to pay taxes, threats to national security and the environment, as well as failure to comply with obligations regarding the remediation of subsoil use consequences.

Below, we have provided a more detailed description of the grounds, procedures for license revocation, and appeal procedures, as prescribed by the legislation of the Republic of Kazakhstan. The list of grounds, license revocation procedures, and appeal procedures vary depending on the type of minerals being extracted or explored by the subsoil user, as well as depending on the specific stage of such exploration or extraction. Additionally, grounds, procedures for termination, and appeal procedures for subsoil use contracts have been considered.

Geological Exploration of Subsoil

Grounds for license revocation[1]

• Violations of the provisions of paragraph 4 of article 89 of the Code: "within the area of geological exploration, the subsoil user is not entitled to erect capital structures, permanently store explosive substances, create pits, trenches, and other types of mining operations, or conduct excavation work. The subsoil user is only entitled to drill wells within the area of geological exploration for purposes related to geophysical research and exploration for groundwater";
• on-payment of the signature bonus for the issuance of a license for geological exploration of subsoil in the amount and within the deadlines set by the tax legislation[2] of the Republic of Kazakhstan.

Procedure for license revocation in accordance with article 92 of the Code[3]
1. Upon identification of a violation, the authorised body for subsoil exploration notifies the subsoil user in writing.
2. The subsoil user is obliged to rectify the identified violation within twenty working days from the date of receipt of the notification from the authorised body for subsoil exploration.
3. Within the specified period, the subsoil user notifies the authorised body for subsoil exploration in writing of the rectification of the violation, attaching documents confirming such rectification.
4. In case the violation is not rectified within the specified period, the authorised body for subsoil exploration revokes the license.
5. License revocation is carried out by the authorised body for subsoil exploration by sending a written notification to the subsoil user of the license revocation. The license ceases to be valid ten calendar days from the date the subsoil user receives the notification of license revocation.
6. The subsoil user is obliged to immediately cease operations under the revoked license from the date of receipt of the notification of license revocation and remove from the territory of the geological exploration site all structures, materials, and equipment located within that territory

Appeal procedure:
The subsoil user has the right to challenge the revocation of the license in court from the date of receipt of the notification of license revocation. During this challenge period, the deadline specified in paragraph 5 of the License Revocation Procedure may be extended until the court's decision takes effect.

Exploration of Solid Minerals and Its Procedure

Grounds for license revocation[4]

• threat to national security paragraph 1 of article 44;[5]
• non-payment of the signing bonus[6] and fees for the use of land plots[7] (rental payments) in the amount and manner prescribed by the tax legislation of the Republic of Kazakhstan;

Procedure for license revocation
Upon identification of a violation, the competent authority notifies the subsoil user in writing.

1. In case of a threat to national security, the violation must be rectified within a period not exceeding one year by restoring the condition that existed before the violation, and if restoration is not possible, by conducting other transactions related to the transfer of objects related to the right of subsoil use with the permission of the competent authority.
2. In case of violation due to non-payment, the subsoil user must rectify the violation within three months from the date of receipt of the notification from the competent authority. The subsoil user notifies the competent authority in writing of the rectification of violations within the specified period, attaching documents confirming such rectification. In case the violation is not rectified within the specified period, the competent authority revokes the license.
3. License revocation is carried out by the competent authority by sending a written notification to the subsoil user of the license revocation.
The license ceases to be effective three months from the date the subsoil user receives the notification of license revocation.

Appeal procedure
The subsoil user has the right to challenge the license revocation in accordance with the legislation of the Republic of Kazakhstan within fifteen working days from the date of receiving the notification of license revocation. During this challenge period, the deadline specified in paragraph 4 of the License Revocation Procedure may be extended until the court's decision takes effect.

The license revocation is not permitted if the failure to fulfill or improper fulfillment of obligations, which served as the basis for the license revocation, occurred due to force majeure, i.e., extraordinary and unavoidable circumstances (natural disasters, military actions, etc.). Such circumstances do not include the absence of technical and/or financial means for the subsoil user, absence of necessary goods, works, or services on the market, as well as imposition of administrative penalty.

A person deprived of the license for exploration is obliged to immediately cease operations related to subsoil use and commence work on the site remediation within the timeframe prescribed by the Code.

Revocation of the license for exploration of solid minerals is the basis for entering information about the respective subsoil area into the unified state cadaster of subsoil.

Use of Subsoil Space

Grounds for license revocation[8]

• Failure to pay the signature bonus for the issuance of a license for geological exploration of subsoil in the amount and within the deadlines established by tax legislation[9] of Republic of Kazakhstan;
• use of subsoil space that does not correspond to the intended purpose.

Procedure for License Revocation
1. Upon identification of a violation of license terms, the authorised body for subsoil exploration notifies the subsoil user in writing. The subsoil user is obliged to eliminate the violation and notify the authorised body for subsoil exploration in writing with accompanying documents confirming the elimination of the violation within three months from the date of receiving notification of the violation. In case the violation is not rectified within the specified period, the authorised body for subsoil exploration revokes the license.
2. License revocation is carried out by the authorised body for subsoil exploration by sending a written notification to the subsoil user. The license ceases to be effective within three months from the date of receiving notification of license revocation by the subsoil user.

Appeal procedure
However, in accordance with paragraph 7 of article 221, the subsoil user has the right to challenge the revocation of the license in the manner prescribed by the legislation of the Republic of Kazakhstan within fifteen working days from the date of receiving the notification of license revocation. During the appeal period, the term specified in clause 2 of the License Revocation Procedure is extended until the decision of the appeal is enforced.

License revocation is not allowed if the non-performance or improper performance of obligations, which served as the basis for license revocation, occurred due to force majeure, i.e., extraordinary and unavoidable circumstances (natural disasters, military actions, etc.). Circumstances such as lack of technical and/or financial resources by the subsoil user, absence of necessary goods, works, or services in the market, as well as imposition of administrative penalties, are not considered force majeure.

The entity whose license has been revoked is obliged to immediately cease subsoil utilisation operations and commence work to maintain the subsoil area in a safe condition.
Revocation of the license for subsoil utilisation is the basis for entering information on the corresponding subsoil area into the unified cadastre of the state subsoil fund.

Grounds for Declaring a License Invalid:

• when establishing the fact of providing deliberately inaccurate information to the state body that issued the license, which influenced its decision to issue the license;
• violation of the established procedure for issuing the license, which led to an unjustified decision of the state body to issue the license, due to the established fact of collusion between the official of the state body and the applicant;
• issuance of a license to a person recognised as legally incompetent and who was such on the day of issuance;
• if the issuance of the license is not provided for or is prohibited by the Code.

Grounds Termination of Subsoil Use Contracts[10]

• conducting operations on hydrocarbon subsoil use without the corresponding approved project documents endorsed by the subsoil user and obtaining positive conclusions provided by the Code and other laws of the Republic of Kazakhstan;
• violation of the requirements of paragraph 1 of article 44[11] Code, which poses a threat to national security.

Procedure for Contract Termination
Early termination of subsoil use contracts unilaterally is carried out by the competent authority by sending a written notification to the subsoil user about the termination of such contract.

1. The contract terminates within two months from the date of receiving such notification by the subsoil user.

Appeal procedure
The subsoil user has the right to challenge the legality of the early termination of the subsoil use contract by the competent authority in court within two months from the date of receiving the notification. In case the subsoil user appeals to the court, the deadline mentioned in paragraph 2 is suspended until the court decision becomes legally binding.