Franchising Contract in Kazakhstan

Art. 896 c.1 of the c.c.k, inserted in chapter 45 of the c.c.k. - entitled "license for all entrepreneurial activities (franchising)" -, defines franchising as the contract by which one party (franchisor) undertakes to allow the other (franchesee), upon payment of a payment, to use of the entire complex of its "exclusive" rights, including industrial or intellectual property rights, rights relating to trademarks, commercial names, signs, utility models, designs, copyrights, "know-how", patents , technical and commercial assistance or advice. Furthermore, the c. 2 of the same rule, also includes the franchisor's reputation among the exclusive rights that can be the subject of the contract.

With regard to the subject of the franchising agreement, the discipline is supplemented by some special rules, including the "Law on the licensing of all business or franchising activities" of June 24, 2002 "and the" Law on trademark registration, of other distinctive signs and the designation of origin of the products” of 26 July 1999.

It should be noted that the comma of the aforementioned law of the civil code has been the subject of strong criticism by the Kazakh legal doctrine, since it refers to "the commercial name as a whole" including the form of organization and regulatory discipline of the franchisor's activity. In the opinion of legal scholars, this term is misleading, as it should be limited only to that denomination which has become a distinguished trademark and, as such, has acquired a specific economic value.

A further critical aspect is represented by the reference to the trademark as the subject of the franchising agreement: on this point it is highlighted, in fact, that the franchisee should be informed if that particular trademark has been registered and enjoys adequate protection.

With specific reference to the content of the franchise agreement, it is specified that Art. 899 imposes a series of obligations on the "franchisee", among which, however, it is not mentioned that of ensuring other services that could relate to the poor-quality product or sold or provided by the "franchisee" to its customers. This gap, albeit not satisfactorily, was filled by the "Law on the licensing of all business or franchising activities" of June 24, 2002 ", which provides that, with the express agreement of the parties to that effect, the" franchisee " must provide a guarantee of quality of the products made by him, of the works carried out by him or of the services provided compared to similar ones of the "franchisor".

Pursuant to Art. 897 of the Civil Code, a written form ad substantiam is required for the franchise agreement. Furthermore, if the contract relates to intangible assets governed by the rules for the protection of intellectual property, it must necessarily be registered. The contract in question may also place conditions limiting the franchisee's activity or recognize the franchisee's right of exclusivity. In the case of an indefinite-term franchise, early withdrawal is allowed, provided that the withdrawing party gives the counterpart a minimum notice of 6 months, unless the parties have agreed otherwise.

It is important to underline the negligible diffusion of the franchising contract in Kazakhstan (not exceeding 20% ​​of the commercial contracts stipulated), mainly due to the lack of knowledge of this contractual instrument.