(a) an adjustment proposed under point (b) of paragraph 2 is adequate to maintain a comparable level of mutually agreed coverage;
(b) the modification is negligible in its effect under point (a) of paragraph 3; or
(c) the modification covers an entity over which the Party has effectively eliminated its control or influence under point (b) of paragraph 3.
Rectifications
5. The following changes to Parts 1 to 3 of Annex III shall be considered a rectification, provided that they do not affect the mutually agreed coverage provided for in this Chapter:
(a) a change in the name of an entity;
(b) a merger of two or more entities listed within the same Part of Annex III; and
(c) the separation of an entity into two or more entities, provided that all new entities are added to the same Part of Annex III as the original entity.
6. The Party proposing a rectification shall notify the other Party every two years, following the date on which this Title starts to apply. (1)
7. A Party may notify the other Party of an objection to a proposed rectification within 45 days from having received the notification referred to in paragraph 6. Where a Party submits an objection, it shall set out the reasons why it believes the proposed rectification is not a change provided for in paragraph 5, and describe the effect of the proposed rectification on the mutually agreed coverage provided for in this Agreement. If no such objection is submitted in writing within 45 days after having received the notification, the Party shall be deemed to have agreed to the proposed rectification.
The Cooperation Committee
8. If no objection is submitted regarding a proposed modification or rectification within the period provided for in paragraphs 4 and 7, the Cooperation Committee shall amend Annex III to reflect any such modification or rectification. The modification or rectification shall be effective from the day following the date of expiry of the period referred to in paragraphs 4 and 7.
9. If an objection to a proposed modification or rectification has been submitted, the Cooperation Committee shall discuss the matter. The Cooperation Committee may decide to approve a modification or rectification and amend Annex III accordingly.
Article 137. Transitional Period
This Chapter shall start to apply five years after the date on which this Title starts to apply. For the goods listed in Part 4 of Annex III and for the services covered under Part 6 of Annex III, this Chapter shall start to apply eight years after the date on which this Title starts to apply.
Chapter 9. Raw Materials and Energy
Article 138. Definitions
For the purposes of this Chapter:
(a) ‘raw materials' means substances used in the manufacture of industrial products, excluding energy goods, processed fishery products or agricultural products, but including natural rubber, raw hides and skins, wood and wood pulp, silk, wool, cotton and other vegetable textile inputs;
(b) ‘energy goods' means, based on the Harmonised Commodity Description and Coding System of the World Customs Organisation (HS) and the Combined Nomenclature of the European Union, natural gas, liquefied natural gas, liquefied petroleum gas (LPG) (HS 27.11), electricity (HS 27.16), crude oil and oil products (HS 27.09-27.10 and 27.13-27.15) and coal and other solid fuels (HS 27.01-27.04);
(c) ‘partnership' means any legal entity which is a commercial organisation under the jurisdiction or control of either Party such as, and not limited to, a corporation, trust, partnership, joint venture or association;
(d) ‘service supplier' means a service supplier as defined in point (q) of Article 40;
(e) ‘measure' means a measure as defined in point (a) of Article 40;
(f) ‘transport' means transmission and distribution of energy goods through the transmission pipelines for oil and oil products and high-pressure natural gas, high-voltage electricity transmission grids and lines, railways, roadways and other facilities handling the transport of energy goods;
(g) ‘unauthorised taking' means any activity consisting of unlawful taking of energy goods from the transmission pipelines for oil and oil products and high-pressure natural gas, high-voltage electricity transmission grids and lines, railways, roadways and other facilities handling the transport of energy goods;
(h) ‘emergency situation' means a situation causing a significant disruption or a physical interruption of supply of natural gas, oil or electric energy between the European Union and the Republic of Kazakhstan, including supply transiting through third countries or a situation of an exceptionally high demand for energy goods within the European Union or the Republic of Kazakhstan in which market measures are not sufficient and non-market measures have to be additionally introduced;
(i) ‘local content requirement' means:
(i) with respect to goods, a requirement for an enterprise to purchase or use goods of domestic origin or from a domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production;
(ii) with respect to services, a requirement which restricts the choice of the service supplier or the service supplied to the detriment of services or service suppliers of the other Party;
(j) ‘state owned enterprise' means any enterprise involved in a commercial activity over which a Party at central or subcentral level directly or indirectly owns more than 50 % of the enterprise's subscribed capital or of the votes attached to the shares issued by the enterprise;
(k) ‘juridical person' means a juridical person as defined in point (d) of Article 40;
(l) ‘juridical person of a Party' means a juridical person of a Party as defined in point (e) of Article 40.
Article 139. Price Regulation
1. The Parties aim for the price of the supply of raw materials or energy goods for industrial users, if regulated by the government of a Party, to recover costs and provide for reasonable profit.
2. If the price of raw materials or energy goods sold on the domestic market differs from the export price of the same product, the exporting Party shall, upon request of the other Party, provide information on such difference, excluding transportation costs and export taxes.
Article 140. Trading and Export Monopolies
The Parties shall not maintain or establish a trading or export monopoly for raw materials or energy goods except when a Party exercises its priority (pre-emption) right to purchase raw and dry gas and gold.
Article 141. Access and Rights to Prospect, Explore and Produce Hydrocarbons (crude Oil and Natural Gas)
1. Nothing in this Agreement shall affect the full sovereignty of the Parties in accordance with international law over hydrocarbon resources located in their territory and their inland, archipelagic and territorial waters, as well as sovereign rights for the purposes of exploring for and exploiting hydrocarbon resources located in their Exclusive Economic Zones and continental shelf.
2. The Parties retain the right to determine the areas within their territory, inland, archipelagic and territorial waters, Exclusive Economic Zones and continental shelf to be made available for the exercise of the activities of prospecting, exploring for and producing hydrocarbons.
3. Whenever a sovereign decision of a Party, as described in paragraph 2, is taken, each Party shall ensure that the enterprises of the other Party are not discriminated against as regards the access and exercise of the rights to prospect, explore for and produce hydrocarbons, provided the enterprise in question is established as a juridical person in the territory of the host Party granting the access.
4. Each Party may require an enterprise which has been granted an authorisation for the exercise of the activities of prospecting, exploring for and producing hydrocarbons, to pay a financial contribution or a contribution in hydrocarbons.
5. The Parties shall take the necessary measures to ensure that licences or other authorisations, through which an enterprise is entitled to exercise the rights to prospect, explore for and produce hydrocarbons, are granted following a published procedure or an invitation to potentially interested applicants of the Parties to submit applications by means of a notice. The notice shall specify the type of licence or other authorisation, the relevant geographical area and the proposed date or time limit for granting a licence or other forms of authorisation.
6. Paragraphs 3 to 5 are without prejudice to the right of a state-owned enterprise to obtain access and rights to prospect, explore for and produce hydrocarbons by means of direct negotiations with its Party. When such a state-owned enterprise decides to transfer fully or partially its right to prospect, explore for and produce hydrocarbons, the obligations provided for in paragraphs 3 and 5 shall apply.
7. Article 53 shall apply to the licensing conditions and the licensing authorisation procedure.
Article 142. Conditions for Investment In Raw Materials and Energy Goods
In order to foster investment in the activities of prospecting, exploring for, extracting and mining of raw materials and energy goods, neither Party shall:
(a) maintain or adopt measures providing for local content requirements affecting the other Party's products, service suppliers, investors or investments unless otherwise provided for in the Protocol on the Accession of the Republic of Kazakhstan to the WTO and the GATS schedules of specific commitments of the European Union and its Member States;
(b) maintain or adopt measures whereby an enterprise from the other Party is obliged to transfer or to share intellectual property rights in order to sell products or services or to invest on that Party's territory. The Parties are not precluded from negotiating contracts with investors seeking rights to prospect, explore for, extract and mine raw materials and energy goods for such transfers on a voluntary basis, provided that they are made under market conditions and at a market price.
Article 143. Transit
1. The Parties shall take all necessary measures to facilitate the transit of energy goods, consistent with the principle of freedom of transit, and in accordance with Article 7(1) and (3) of the Energy Charter Treaty.
2. Each Party shall prohibit the unauthorized taking of raw materials and energy goods transited or transported through its territory by any entity subject to its control or jurisdiction and shall take all appropriate measures to address such unauthorised taking.
Article 144. Interruption
1. Each Party shall take all possible measures to ensure that operators of main-line energy transit or transport pipelines and grids:
(a) minimise the risk of accidental interruption, reduction or stoppage of transit and/or transport;
(b) expeditiously restore the normal operation of such transit or transport, which has been accidentally interrupted, reduced or stopped.
2. A Party through the territory of which the energy goods are in transit or transport, or in the territory of which they are in receipt and storage as part of the transport/transit route, shall not, in the event of a dispute over any matter involving the Parties or one or more entities subject to the control or the jurisdiction of a Party, interrupt or reduce, or permit any entity subject to its control or jurisdiction to interrupt or reduce, the existing transit, transport, receipt and storage as part of the transport/transit route of energy goods, except where this is specifically provided for in a contract or other agreement governing such transit, transport, receipt and storage as part of the transport/transit route, prior to the conclusion of a dispute resolution procedure under the relevant contract or the dispute settlement procedure set out in Chapter 14 (Dispute Settlement) of this Title concerning emergency situations as defined in point (h) of Article 138.
3. A Party shall not be held liable for an interruption or reduction pursuant to this Article in force majeure situations or where that Party is unable to supply energy goods or ensure their transit as a result of actions attributable to a third country or an entity under the control or the jurisdiction of a third country.
Article 145. Access to High-voltage Electric Energy Transmission Grids and Lines
1. Each Party shall provide the enterprises of the other Party, established as juridical persons in the territory of the Party granting the access, with non-discriminatory access to high-voltage electric energy transmission grids and lines, which are partly or fully owned and regulated by the Party granting the access within the available capacities of such grids and lines. The access shall be allocated in a fair and equitable manner.
2. When applying measures relating to such transmission grids and lines, the Party shall ensure that the following principles are respected:
(a) all legal and regulatory measures on access and the transportation tariffs are fully transparent;
(b) the measures do not discriminate with respect to the origin of the electricity production within its territory and with respect to the destination of the electricity; and
(c) non-discriminatory transportation tariffs with respect to enterprises of the European Union and the Republic of Kazakhstan are applied.
Article 146. Regulatory Authorities for Electricity and Gas
1. Each Party shall designate and empower regulatory authorities to regulate the markets for electricity and gas on its territory. Those regulatory authorities shall be legally distinct and functionally independent from any other public authorities or market participants.
2. The decisions of and the procedures used by a regulatory authority shall be impartial with respect to all market participants.
3. A market participant affected by any decision of a regulatory authority shall have the right to appeal against that decision to an appeal body. If the appeal body is not independent of the parties involved or is not judicial in character, the decisions of the appeal body shall be subject to a review by an impartial and independent judicial authority. The decisions of the appeal body and the judicial authority shall set out the reasons therefor and shall be in writing. The Parties shall ensure that the final decision of the appeal body or the judicial authority, whichever is the final instance, is enforced effectively.
Article 147. Renewable Energy Sector
1. This Article shall apply to measures which may affect trade and investment between the Parties related to the generation of energy from renewable non-fossil sources, inter alia, wind, solar power and hydropower, but not to the products from which such energy is generated.
2. Each Party shall:
(a) refrain from maintaining or adopting measures requiring the formation of partnerships with local companies, unless such partnerships are deemed necessary for technical reasons and the Party maintaining or adopting such measures can demonstrate such technical reasons upon request by the other Party;
(b) ensure that any rules concerning authorisation, certification and licensing procedures, if applicable, in particular with regard to equipment, plants and associated transmission network infrastructures, are objective, transparent and non-arbitrary and do not discriminate against applicants from the other Party;
(c) ensure that administrative charges in renewable energy sector, such as those paid by consumers, planners, architects, builders, equipment installers and suppliers, are transparent and limited in amount to the approximate cost of services rendered;
(d) ensure that the importation and the use of goods originating in the other Party, or the provision of goods by the other Party's suppliers, are subject to the provisions of Chapter 1 (Trade in Goods) of this Title;
(e) ensure that provision of services by the suppliers of the other Party are subject to Article 53;
(f) ensure that the terms, conditions and procedures for the connection and access to electric energy transmission grids are transparent and do not discriminate against suppliers of the other Party or against electric energy from renewable sources. The Parties shall ensure that appropriate grid and market-related measures are taken to minimise the curtailment (limitations) of electric energy produced from renewable energy sources;
(g) refrain from imposing or maintaining a requirement for:
(i) an enterprise of the other Party to purchase or use products of domestic origin or from any domestic source of the Party imposing the requirement, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production; or
(ii) the enterprise's purchases or use of imported products to be limited to the amount related to the volume or value of local products that it exports.
3. Where international or regional standards exist with respect to equipment and systems for the generation of energy from renewable and non-fossil sources, the Parties shall use those standards, or their relevant parts, as a basis for their technical regulations except when such international standards or relevant parts would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued. For the purposes of applying this paragraph, the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC) shall be considered relevant international standard-setting bodies.
4. Where appropriate, the Parties shall specify technical regulations based on product requirements in terms of performance, including environmental performance, rather than on product design or description.
5. Nothing in this Article shall be construed as preventing the adoption or enforcement by either Party of measures necessary for the safe operation of the energy networks concerned, or the safety of energy supply, subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the products, service suppliers or investors of the Parties where the same conditions prevail, or a disguised restriction on trade and investment between the Parties.
Article 148. Cooperation In Raw Materials and Energy Goods
1. Without prejudice to Articles 204 to 208, the Parties agree to strengthen cooperation and the promotion of mutual understanding between them in the field of trade in raw materials and energy goods.
2. The Parties recognise that respecting the principles of transparency and non-discrimination and ensuring that rules are not trade distortive is the best way to create an environment favourable to foreign direct investment in the production and trade of raw materials and energy goods. More generally, such an environment fosters the efficient allocation and efficient use of raw materials and energy goods.
3. Cooperation and the promotion of mutual understanding cover bilateral trade issues as well as issues of common interest stemming from international trade. Such issues include trade distortions impacting global markets, environment and development issues specifically linked to trade in raw materials and energy goods as well as corporate social responsibility in accordance with internationally recognized standards such as the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Cooperation and the promotion of mutual understanding include exchange of data and information on the regulatory framework of the raw materials and energy sectors. This shall not be construed as requiring the Parties to furnish any information, the disclosure of which they consider contrary to their respective security interests.
4. Either Party may request the organisation of an ad hoc meeting related to raw materials and energy goods or an ad hoc session on raw materials and energy goods during the Cooperation Committee meetings. The bilateral cooperation could additionally, if appropriate, be extended to the relevant plurilateral or multilateral fora in which both Parties participate.
Article 149. Early Warning Mechanism
1. The Parties establish an early warning mechanism to adopt practical measures aimed at preventing and rapidly reacting to an emergency situation or to a threat thereof.
2. The Parties shall jointly undertake actions for:
(a) an early evaluation of potential risks and problems related to the supply and demand of natural gas, oil or electric energy; and
(b) the prevention or rapid reaction in case of an emergency situation or a threat thereof.
3. If either Party becomes aware of an emergency situation or of a situation which in its opinion could lead to an emergency situation, that Party shall notify the other Party within the shortest possible time.
4. For the purposes of this Article, the Parties agree that the responsible bodies are the Member of the European Commission in charge of energy and the Minister of the Republic of Kazakhstan in charge of the respective energy matters.
5. Upon notification, the Parties shall provide each other with an assessment of the situation.
6. Either Party may request consultations within three calendar days of the notification to:
(a) elaborate a common evaluation of the situation;
(b) develop recommendations to eliminate the emergency situation and to minimise the impact of the emergency situation;
(c) create a Special Monitoring Group to, inter alia, monitor energy flows at the relevant points of the concerned infrastructure.
7. The Parties shall, if appropriate, cooperate with third countries to eliminate the threat of an emergency situation or to overcome the emergency situation.
8. In case the emergency situation persists, either Party may start an emergency dispute settlement procedure, in accordance with the special mechanism provided for in Chapter 14 (Dispute Settlement) of this Title.
9. The Parties shall refrain from any actions that may deepen or reinforce the emergency situation, as appropriate in a given situation, from the moment of the notification.
10. A Party shall not rely on, or introduce as evidence in dispute settlement procedures under this Agreement, the following:
(a) positions taken or proposals made by the other Party in the course of a procedure under this Article; or
(b) any indication from the other Party of its willingness to accept a solution to the emergency situation referred to in this Article.
11. The Cooperation Committee may develop, as necessary, detailed implementing provisions for the application of this Article.
Article 150. Exceptions
1. This Chapter is without prejudice to any exceptions, reservations or restrictions provided for in this Agreement.
2. This Chapter shall not apply to research and development projects or to demonstration projects carried out on a non-commercial scale.
3. Nothing in this Chapter shall be construed as preventing the adoption or enforcement by either Party of measures necessary for the safe operation of the energy infrastructure, including energy transport and the production facilities concerned, in the interest of national security or public safety, including the prevention of and reaction to an emergency situation, subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the products, service suppliers or investors of the Parties where the same conditions prevail, or a disguised restriction on trade and investment between the Parties.
Chapter 10. Trade and Sustainable Development
Article 151. Context and Objectives
1. The Parties recall the Agenda 21 of the United Nations Conference on Environment and Development of 1992, the International Labour Organisation's (ILO) Declaration on Fundamental Principles and Rights at Work of 1998, the Johannesburg Plan of Implementation on Sustainable Development of 2002, the Ministerial Declaration of the UN Economic and Social Council on Generating Full and Productive Employment and Decent Work for All of 2006, the ILO Declaration on Social Justice for a Fair Globalisation of 2008 and the Outcome Document of the UN Conference on Sustainable Development of 2012, incorporated in Resolution 66/288 adopted by the UN General Assembly on 27 July 2012, entitled ‘The Future We Want'.
2. The Parties reaffirm their commitment to promote the development of international trade in such a way as to contribute to the objective of sustainable development, for the welfare of present and future generations. The Parties shall strive to ensure that this objective is integrated and reflected at every level of their trade relationship.
Article 152. Multilateral Environmental and Labour Standards and Agreements
1. The Parties recognise the value of international environmental governance and agreements as a response of the international community to global or regional environmental problems.
2. The Parties recognise that full and productive employment and decent work for all are key elements of sustainable development for all countries and a priority objective of international cooperation.
3. In that context, the Parties reaffirm their commitment to effectively implement in their law and practice the multilateral environmental agreements they are a party to and the ILO conventions ratified by the Member States of the European Union and the Republic of Kazakhstan, respectively.
Article 153. Right to Regulate and Levels of Protection
1. The Parties recognise the right of each Party to establish its own levels of domestic environmental and labour protection, and to adopt or modify its relevant law and policy accordingly, consistently with the internationally recognised standards and agreements referred to in Article 152. The Parties shall aim at high levels of environmental and labour protection.
2. The Parties recognise that it is inappropriate to encourage trade or investment by weakening or reducing the levels of protection afforded in domestic environmental or labour law.
3. A Party shall not derogate from or, through a sustained or recurring course of action or inaction, fail to effectively enforce its environmental and labour law, in order to encourage trade or investment.
Article 154. Trade and Investment Promoting Sustainable Development
1. The Parties reaffirm their commitment to enhance the contribution of trade to the goal of sustainable development in its economic, social and environmental dimensions. Accordingly, they agree to promote:
(a) trade and investment in environmental goods and services and in climate-friendly products and technologies;
(b) the use of sustainability assurance schemes, such as fair and ethical trade or eco-labelling; and
(c) corporate social responsibility practices.
2. The Parties shall exchange information on, and share experience in, their actions to promote coherence and mutual supportiveness between trade, social and environmental objectives. Furthermore, the Parties shall enhance their cooperation and dialogue on sustainable development issues that may arise in the context of their trade relations including on relevant aspects set out in Title IV (Cooperation in the Area of Economic and Sustainable Development).
3. The cooperation and dialogue referred to in paragraph 2 of this Article shall involve relevant stakeholders, in particular social partners, as well as other civil society organisations, through the civil society cooperation established under Article 251.
4. The Cooperation Committee may adopt rules for such cooperation and dialogue.
Article 155. Dispute Settlement
Subsection 2 of Section 3 of Chapter 14 (Dispute Settlement) of this Title does not apply to disputes under this Chapter. For any such dispute, after the arbitration panel has delivered its final report pursuant to Articles 180 and 182, the Parties, taking the report into account, shall discuss suitable measures to be implemented. The Cooperation Committee shall monitor the implementation of any such measures and shall keep the matter under review, including through the mechanism referred to in Article 154(3).
Chapter 11. Competition
Article 156. Principles
The Parties recognise the importance of free and undistorted competition in their trade relations. The Parties acknowledge that anti-competitive business practices and state interventions, including subsidies, have the potential to distort the proper functioning of markets and undermine the benefits of trade liberalisation.
Article 157. Antitrust and Mergers Legislation and Its Implementation
1. Each Party shall maintain in its territory comprehensive competition law which effectively addresses anticompetitive agreements, concerted practices and anti-competitive unilateral conduct of enterprises with dominant market power, and which provides effective control of concentrations.
2. Each Party shall maintain operationally independent authorities responsible and appropriately equipped for the effective enforcement of competition law as referred to in paragraph 1.
3. The Parties recognise the importance of applying their respective competition law in a transparent and non-dis-criminatory manner, respecting the principles of procedural fairness and rights of defence of the enterprises concerned.
Article 158. State Monopolies, State Enterprises and Enterprises Entrusted with Special or Exclusive Rights or Privileges
1. Nothing in this Chapter prevents a Party from designating or maintaining state monopolies or state enterprises, or from entrusting enterprises with special or exclusive rights or privileges according to its law.
2. With regard to state monopolies, state enterprises and enterprises entrusted with special or exclusive rights or privileges involved in economic activities, each Party shall ensure that such enterprises are subject to competition law as referred to in Article 157. For the purposes of this Chapter, an economic activity consists in offering goods and services on a market. It does not include activities performed in the exercise of governmental authority, namely activities carried out neither on a commercial basis nor in competition with one or more economic operators.
3. The application of competition law as referred to in Article 157 should not obstruct the performance, in law or in fact, of the particular tasks of public interest assigned to the enterprises in question. Exceptions should be limited and transparent. Trade and investment should not be affected to such an extent that would undermine the objective of this Agreement.
Article 159. Subsidies
1. For the purposes of this Article, a ‘subsidy' is a measure which fulfils the conditions of Article 1 of the SCM Agreement, irrespective of whether it is granted to an enterprise for the production of goods or for the supply of services, and which is specific within the meaning of Article 2 of that Agreement.
2. Each Party shall ensure transparency in the area of subsidies. To that end, each Party shall report every two years from the date of application of this Title to the other Party on the legal basis, including the policy objective or the purpose of the subsidy, the duration or any other time limits, the form and, where possible, the amount or the budget and the recipient of the subsidy granted by its government or a public body. Such report is deemed to have been provided if the relevant information is made available on a publicly accessible website or through the WTO notification mechanism.
3. If a Party considers that a subsidy granted by the other Party is negatively affecting the first Party's interests, the first Party may request consultations on the matter. The requested Party shall accord due consideration to such a request. The consultations should, in particular, aim at specifying the policy objective of the subsidy, whether the subsidy has an incentive effect and is proportionate, and any measures taken to limit the potential distortive effect on trade and investment of the requesting Party. (1)
4. In order to facilitate the consultations, the requested Party shall provide information on the subsidy in question within a period no longer than 90 days from the date of receipt of the request. If the requesting Party, after receiving information on the subsidy in question, considers that the subsidy in question negatively affects or may negatively affect the requesting Party's trade or investment interests in a disproportionate manner, the requested Party shall use its best endeavours to address the negative effects on the requesting Party's trade or investment interests caused by the subsidy in question.