Certainly, every mid-sized entrepreneur has encountered the procurement processes of companies within the "Samruk-Kazyna" (SK) group (for reference: as of today, the SK group includes 279 companies). Often, these procurements follow a template due to being regulated by government rules. Accordingly, the question arises: where and how should disputes be resolved if something goes wrong?
Since the adoption of the Administrative Procedural and Process Code (APPC), disputes in the field of public procurement, arising during the selection of a supplier and the conclusion of a public procurement contract, have been categorized as cases subject to the jurisdiction of the Administrative Court.
However, the situation is not so straightforward when it comes to procurement in the quasi-state sector. For example, analyzing court decisions, we conclude that a decisive factor was the adoption of the Law "On Procurement by Certain Subjects of the Quasi-State Sector," which came into force on January 1, 2022 (the Law).
For instance, in case No. 6001-21-00-6ap/480, dated June 30, 2022, the Judicial Board of the Supreme Court of the Republic of Kazakhstan (SCAD) recognized that the Order of "Samruk-Kazyna Contract" LLP (SKC) to include a potential supplier in the list of unreliable suppliers of the Holding is not an administrative act, as SKC is not an administrative body. Moreover, the relationship between the customer and the potential supplier is of a private law nature. It is important to note that the lawsuit was filed before the Law came into force.
Two years later, in case 6001-23-00-6ap/3262, the SCAD of the Supreme Court on June 28, 2024, upheld court rulings where the courts concluded that the customer - a national company, being a subject of the quasi-state sector, exercises administrative authority over the tender participants. In this regard, the procurement results protocol of the national company is considered an administrative act.
Thus, in the absence of a specific normative resolution of the Supreme Court of the Republic of Kazakhstan (NPSK) or special provisions for procurement in the quasi-state sector in NPSK No. 4, it is assumed that the jurisdiction of disputes over quasi-state procurement is resolved according to NPSK No. 4 as follows:
Negative consequences of such disputes include being listed as an unreliable supplier for up to 2 years, which automatically prohibits participation in Samruk-Kazyna procurements, as well as the imposition of penalties, fines, and damages.
Therefore, we recommend the following to supplier companies:
Since the adoption of the Administrative Procedural and Process Code (APPC), disputes in the field of public procurement, arising during the selection of a supplier and the conclusion of a public procurement contract, have been categorized as cases subject to the jurisdiction of the Administrative Court.
However, the situation is not so straightforward when it comes to procurement in the quasi-state sector. For example, analyzing court decisions, we conclude that a decisive factor was the adoption of the Law "On Procurement by Certain Subjects of the Quasi-State Sector," which came into force on January 1, 2022 (the Law).
For instance, in case No. 6001-21-00-6ap/480, dated June 30, 2022, the Judicial Board of the Supreme Court of the Republic of Kazakhstan (SCAD) recognized that the Order of "Samruk-Kazyna Contract" LLP (SKC) to include a potential supplier in the list of unreliable suppliers of the Holding is not an administrative act, as SKC is not an administrative body. Moreover, the relationship between the customer and the potential supplier is of a private law nature. It is important to note that the lawsuit was filed before the Law came into force.
Two years later, in case 6001-23-00-6ap/3262, the SCAD of the Supreme Court on June 28, 2024, upheld court rulings where the courts concluded that the customer - a national company, being a subject of the quasi-state sector, exercises administrative authority over the tender participants. In this regard, the procurement results protocol of the national company is considered an administrative act.
Thus, in the absence of a specific normative resolution of the Supreme Court of the Republic of Kazakhstan (NPSK) or special provisions for procurement in the quasi-state sector in NPSK No. 4, it is assumed that the jurisdiction of disputes over quasi-state procurement is resolved according to NPSK No. 4 as follows:
- Disputes regarding the selection of a supplier and the conclusion of a procurement contract are considered within the framework of the APPC;
- Disputes arising from the procurement contract are considered in civil proceedings.
Negative consequences of such disputes include being listed as an unreliable supplier for up to 2 years, which automatically prohibits participation in Samruk-Kazyna procurements, as well as the imposition of penalties, fines, and damages.
Therefore, we recommend the following to supplier companies:
- Adhere to the deadlines established by legislation, namely: when contesting the procurement procedure, a potential supplier has the right to appeal the actions (inaction) of the customer before the opening of bids/price proposals, or appeal the procurement results protocol within 2 working days after its publication.
- At the stage of fulfilling contractual obligations, it is important to be guided by the concluded contract and, in the event of a dispute, appeal within the framework of the Civil Procedure Code, relying on the provisions of the Civil Code of the Republic of Kazakhstan. Most often, in such cases, customers initiate a lawsuit in a civil court due to missed delivery deadlines or the provision of services/work, as well as due to non-compliance of goods/services/works (TRU) with technical specifications. This is because the Law obliges the customer to file a lawsuit within 30 days from the moment the customer became aware of the supplier's violation. If you disagree with the lawsuit, we recommend filing a counterclaim, as in subsequent appeals (appellate and cassation) instances, the absence of a counterclaim is considered by the court as a procedural omission by the supplier themselves.