After being hung up in Parliament for a year, a law on close-out netting in Kazakhstan looks to be on the verge of becoming a reality. 

The draft law—prepared by Dentons, in cooperation with the Agency for Regulation and Development of the Financial Market (the Agency) and EBRD—has been under consideration in the Mazhilis, the lower chamber of the Kazakhstan Parliament, since April 2021.

The delay in adopting close-out netting legislation is due to it being a part of a major draft law that proposes significant amendments to the Kazakhstan Insurance Law and Kazakhstan Securities Market Law. Debate in the Mazhilis over this draft law has been mostly limited to the insurance and securities market amendments and are unrelated to the close-out netting provisions.

The good news is that we expect the major draft law (together with its close-out netting provisions) to be passed by the Mazhilis to the Senate, the upper chamber of the Kazakhstan Parliament, by the end of April or in early May 2022. If so, the Senate would then have 60 days to send the draft law back to the Mazhilis with comments or to approve it. Should the Senate approve the draft law, it would then go to the President for signing. Assuming the draft law is adopted in its current form, it would enter into force 60 calendar days after the date of its first official publication.

Following adoption of the draft law, the Agency would need to approve a list of professional organizations, whose documentation would be considered a “permitted master agreement” for close-out netting purposes. It is expected that the Agency’s list will include the ISDA, ICMA, ISLA and SIFMA.

We are monitoring the situation and will keep you posted on key developments. Please feel free to contact us if you have questions or need additional information.