1. 1 Avoiding Subsoil Disputes in Kazakhstan Yerzhan Yessimkhanov GRATA Law Firm London, 2011

2. Subsoil Disputes Subsoil vs. state; Parties in a subsoil M&A transaction. 2

3. Subsoil User vs. State Non-compliance / alleged non-compliance of subsoil user with conditions of subsoil contracts / legislative provisions; Majority of disputes – environmental. Also non compliance with subsoil work program, labour, procurement. Legislative (and contractual) requirements are often vague, changes are regularly introduced; Potential consequences – termination of a subsoil contract. 3

4. Measures to Avoid Monitoring of subsoil user’s activity; Strict compliance with requirements of contracts / legislation; Timely reporting; Implementation of internal programs: environmental protection, social responsibility, procurement. 4

5. Parties in Subsoil M&A Bad structuring of M&A deal; Non-compliance with mandatory approval procedures; Quality of assets; Potential consequences – invalidity / termination of transaction, termination of subsoil contract. 5

6. Measures to Avoid Thorough due diligence with a focus on potential non- compliance with contractual / legislative provisions; Observance of mandatory approval procedures during the structuring stage. 6

7. Due Diligence Main asset – right to extract minerals (subsoil use right), based on contract with the state; Contract might be terminated by the state in case of any material violation by subsoil user; Due diligence shall confirm absence of any material violations / compliance with obligations. 7

8. Due Diligence (cont.) Obligations of Subsoil User: Execution of work program (program of exploration / production activities and investments); Environmental; Social; Historical costs; Procurement procedures; Reporting; Other. 8

9. Regulatory Approvals - waiver of state pre-emptive right; - anti-monopoly approval. 9

10. Regulatory Approvals (cont.) STATE PRE-EMPTIVE RIGHT applicable to subsoil use right transfer, ALL share transfers and “connected objects” transfers. Exceptions are very limited; Ministry of Oil and Gas (MOG) or Ministry of Industry and New Technologies (MINT); consequences: invalidity of transaction / termination of subsoil contract; time: 70 business days; effectiveness: 6 months. 10

11. Regulatory Approvals (cont.) ANTI-MONOPOLY APPROVAL applicable to transactions with aggregate assets of vendor and purchaser exceed approx. US$ 20 million; Agency on Protection of Competition (Anti-Monopoly Agency); Time – 1-2 months. 11

12. ANY QUESTIONS? Yerzhan Yessimkhanov Counsel GRATA Law Firm yyessimkhanov@gratanet.com 12