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Legal aspects of Franchising in Kazakhstan.

The franchise agreement is called an agreement of a complex license under Kazakhstani law. The franchise agreement shall be in written form and includes the dates of its duration. It is an interesting fact that Kazakhstani legislation does not require registration of franchise agreements. However, if the franchisor transposes intellectual rights including the use of trademarks, inventions, patents, copyrights or other intellectual rights to a franchisee, the franchise agreement has to be registered. In practice, every franchising agreement involves the use of trademarks or other intellectual rights. Therefore, all forms of the franchising agreements across the territory of Kazakhstan have to be registered by the authorized government body.   

 

The provisions for confidentiality are significant and are regulated by Kazakhstani law.  Article 17th of the Franchising Law of RK (Republic of Kazakhstan) governs limitations of franchisees to cooperate with the franchisor’s competitors. Related to confidentiality the following obligations are imposed on franchisor’s, franchisee’s and third parties’:

-          To notify the franchisee about the confidentiality of proposed information before and after the franchising agreement be signed;

-          No disclosure of information by a franchisee;

-          During the proceedings of registration the possibility to not disclose provisions related to commercial secrets to authorized government bodies and their officials, the latter do not  have the rights to require access to commercial secrets or information on the franchise agreement, except data needed for registration, statistic and control functions of authorized bodies;

For the issues regarding trademarks concessions the Law provides a mechanism for applicants to apply for registration without providing the franchise agreement due to the confidentiality.

 

          According to Kazakhstani Law a franchisor has the priority rights to purchase the shares of franchises. Relevantly, that stipulation has to be taken into consideration in the context of a franchisee’s foundation documents.   

          

          Kazakhstani legislator distinguishes the following types of franchising (a complex license), although the  selection is nominal and the structure of the franchising agreement might be modified by parties within the legal framework:

-          A complex entrepreneurial license (franchising) of a Company or workplace;

-          A conversion complex license (transformation of Company's subdivisions into separate entety);

-          A multipiple complex license (franchisee incorporates a range of companies);

-          An industrial complex license;

-          A commodity complex license (the sell by /fixed technologies of marketing);

-          Other types of franchising systems.

 

The franchising agreement shall be registered by the rulls legitimae for the registering license agreement. The public authority is the National Institute of Intellectual Property on Intellectual Property Rights Committee of the Ministry of Justice of Republic of Kazakhstan (NIIP).

           Also, before franchising agreement registration, the question of transferring by the agreement intellectual rights has to be considered. Therefore, the intellectual rights transfer by agreement shall be registered before the franchising agreement as well as the transfer of internationally registered rights and objects (by Madrid Convention 1891), including  trademarks. For the same reasons the issue of franchising agreements is closely related to the field of trademarks and other intellectual rights.

 

          The study of franchising and license agreements in Kazakhstani law reiterates similar provisions among Kazakhstani Civil Code and other specialised laws. In fact, the franchising agreement is legitimate when all substantial provisions of the agreement constituted by Civil Code and other laws are written in.      

 

           An important aspect of a franchising agreement with the participants of different countries is the choise of jurisdiction and the law for potential disputes and lawsuits. For instance, the nation-members of Custom Union Russia, Belorussia, Kazakhstan, Armenia Eurasian developed the comission project «About the concept of Custom Union arbitration court» 16/05/2013. However, untill today the Custom Union arbitration court has not started its work.

 

Kazakhstan recognizes international trademark registration regulated by the Madrid Agreement Concerning the International Registration of Marks (Madrid, April 14, 1891) and the Paris Convention for the protection of industrial property. At the same time Kazakhstani law requires naming the countries especially Kazakhstan, among other counrties on the International certificate of the owner.

 

          Related to franchising, Kazakhstani intellectual law defines the term related to the field of intellectual rights which is a licensed broker. A licensed broker on the ground of Civil Code conducts on behalf and the resposibility  of a franchisor, a franchisee and in its own name. Here, the relations between brokers and other parties are regulated by the provisions for standart service agreements of the Civil Code.

  

The rules of license agreement (the franchising agreement) registration:

  1. The issues of the public registration certificate and license agreement registration are conducted on the grounds of an application made to the director of the Copyright Agency in the Energy, Industry and Trade Ministry of Kazakhstan,  together with the stated payment (31 815tenge for 2016) and compliance with other legal requirements. For the registration the original of a franchising agreement and a copy have to be provided by applicants. Also, due to confidentiality not the whole agreement but the data of an agreement can be provided.
  2. The duration of registration is 3 working days from the applied day. The term of issue might be prolonged in case of the absence of necessary documents or data.
  3. The registration is recorded into the Magazine-Catalogue of license agreements.  Applicants recieve the public registration Certificate. Each certificate has its own individual number.

 

It should be noted that the rights of franchisers are defended to a good level by Kazakhstani Law.

- Art.14 of Kazakhstani Franchising Law states, «A franchiser has further rights according to Kazakhstani legislation.», which means the possibility to extend a franchiser's rights directly inside the agreement. Also, the law defines as illegal franchiser's actions on limitation of prices and its higher/lower thresholds to franchisees, including the limitation on the specification of an exact range of buyers/clients, residenting on the specified teritorry.

     

The following international documents have been ratified by Kazakhstan:

 

Convention Establishing the World Intellectual Property Organization (WIPO Convention). Stokholm 14th July, 1967, 

was ratified by Kazakhstan 16th of February 1993.

 

The agreement of the EuroAsianEconomic Union/ Custom Union Astana, 29th March of 2014. The nation-participants agreed to unite in their activity on the protection of intellectual rights and recognize the following related main international documents:

Berne Convention for the protection of literary and Artistic Works of September 9, 1886;

The Budapest Traty on the international recognition of the deposit of microorganisms for the porposes of Patent procedures (1977); 

The WIPO CopyrightTreaty (WCT 1996);

The Wipo performances and phonograms treaty (WPPT 1996);

The Patent Law treaty (PLT 2000);

The Patent cooperation Treaty (PCT 1970);

The Geneva Convention for the protections of producers of phonograms against unauthorizied duplication of their phonograms (1971);

The Madrid Agreement Concerning the international registration of marks (1891) and the protocol relating to that agreement (1989);    

The Rome Convention fr the protection of performers, producers of phonograms and broadcasting Organizations (1961);

The Paris Convention of the protection of Industrial property (1883);

The Singapore Treaty on the Law of Trademarks (2006).

 

 

 The partner of ZAN Company

Danara Kassenkhan. 

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