Franchising in Kazakhstan - a progressive change to the registration process
Kazakhstan is establishing itself as the most attractive country in Central Asia for foreign franchisors looking to grow their brands in this region. A recent change to Kazakhstan's IP registration
Kazakhstan is establishing itself as the most attractive country in Central Asia for foreign franchisors looking to grow their brands in this region. A recent change to Kazakhstan's IP registration laws sends out a clear signal to the international business community that Kazakhstan welcomes inward investment and supports the growth of consumer brands using the franchise model.
Market Developments
Following a recent consumer boom, there is growing demand for brands and quality products and services, particularly in the retail and casual dining sectors. It is estimated that the number of brands operating in Kazakhstan under a franchise will grow to 500 by 2016, making Kazakhstan the largest franchise market in Central Asia. International brands that are currently represented include Mothercare, Debenhams, Gap, Pizza Hut, Mango, Marks & Spencer and Burger King. Domestic brands are also successfully expanding and some – like Happylon and Zibroo – are operating concepts at home and abroad.
Legal Requirements
From a legal perspective, Kazakhstan has its own specific franchise law, which includes a requirement to register franchise agreements which contain a trademark licence with the IP Committee. Failure to register can result in the franchise agreement being unenforceable, a franchisee might be prevented from being able to make royalty payments abroad to its franchisor and both the franchisor and the franchisee may be prevented from benefiting from tax relief under applicable double tax treaties.
Until recently, franchisors had to submit the full franchise agreement to the IP Committee as part of the registration process. These agreements contain sensitive commercial information which should ideally remain confidential between the parties and not be subjected to the scrutiny of government officials and potentially appear on the public record.
What's new?
On 20 April 2015, new regulations came into effect which remove the requirement to submit the full franchise agreement for examination by the IP Committee. Instead, a summary of the main terms of the franchise agreement will be sufficient. These new regulations only apply if at least one party to the franchise agreement is based in one of the 38 countries contracted to the Singapore Treaty on the Law of Trademarks 2006. If both parties to the agreement on the transfer of rights are based in Kazakhstan, the new regulations do not apply.
Conclusion
It remains to be seen how successfully the regulations will be put into practice, but this recent change is a progressive step towards simplifying the registration requirements in Kazakhstan and encouraging more foreign brands to enter this exciting market.
Market Developments
Following a recent consumer boom, there is growing demand for brands and quality products and services, particularly in the retail and casual dining sectors. It is estimated that the number of brands operating in Kazakhstan under a franchise will grow to 500 by 2016, making Kazakhstan the largest franchise market in Central Asia. International brands that are currently represented include Mothercare, Debenhams, Gap, Pizza Hut, Mango, Marks & Spencer and Burger King. Domestic brands are also successfully expanding and some – like Happylon and Zibroo – are operating concepts at home and abroad.
Legal Requirements
From a legal perspective, Kazakhstan has its own specific franchise law, which includes a requirement to register franchise agreements which contain a trademark licence with the IP Committee. Failure to register can result in the franchise agreement being unenforceable, a franchisee might be prevented from being able to make royalty payments abroad to its franchisor and both the franchisor and the franchisee may be prevented from benefiting from tax relief under applicable double tax treaties.
Until recently, franchisors had to submit the full franchise agreement to the IP Committee as part of the registration process. These agreements contain sensitive commercial information which should ideally remain confidential between the parties and not be subjected to the scrutiny of government officials and potentially appear on the public record.
What's new?
On 20 April 2015, new regulations came into effect which remove the requirement to submit the full franchise agreement for examination by the IP Committee. Instead, a summary of the main terms of the franchise agreement will be sufficient. These new regulations only apply if at least one party to the franchise agreement is based in one of the 38 countries contracted to the Singapore Treaty on the Law of Trademarks 2006. If both parties to the agreement on the transfer of rights are based in Kazakhstan, the new regulations do not apply.
Conclusion
It remains to be seen how successfully the regulations will be put into practice, but this recent change is a progressive step towards simplifying the registration requirements in Kazakhstan and encouraging more foreign brands to enter this exciting market.