A. LEGISLATION AND RULES
In April 2016, as a result of the reform of the judicial system, the Law on Arbitration (“New Arbitration Law”) was adopted. This law is based on the UNCITRAL Model Law and governs both international and domestic arbitration proceedings.
In addition to unifying procedural rules for international and domestic arbitration proceedings, the New Arbitration Law, last amended in January 2023, implemented the following changes to the previous rules:
- State-owned companies may only execute arbitration agreements with Kazakhstani companies after obtaining consent from the superior state authority. Starting from 2019, this consent is irrevocable.
- The number of requirements for the content of an arbitration agreement has been reduced. The parties are free to establish aspects of the arbitration agreement themselves, for example, choosing ad hoc arbitration.
- Arbitration agreements to resolve a dispute under an agreement, the terms of which are determined by one of the parties in its templates of agreements and could be accepted by the other party only by joining the proposed agreement as a whole (agreement of accession), as well as arbitration agreements relating to disputes arising out of consumer loans, are valid if such an agreement is concluded after the appearance of the grounds for filing a lawsuit.
- Starting from 2019, the legislation of the Republic of Kazakhstan is only mandatory for application when considering a dispute between individuals and legal entities of the Republic of Kazakhstan.
- In the absence of an agreement by the parties on the applicable law, the arbitrators shall determine the applicable law in accordance with the conflict of laws rules, which it considers applicable in this case. This provision was brought into line with paragraph 1 of Article VII of the European Convention on International Commercial Arbitration, which provides for a similar rule, and no longer binds the issue of determining the applicable law to the legislation of the Republic of Kazakhstan.
- Parties have the right to seek the reconsideration of arbitral awards based on so-called “newly opened circumstances” (i.e., facts that are material to the case but were not previously known to an applicant). This provision has been copied from the Civil Procedure Code, and it is not entirely clear how arbitrators will apply it.
- In addition to the existing grounds for challenging an arbitral award, the New Arbitration Law will allow parties to challenge the award if there is a judgment or an award that has a res judicata effect on the subject matter of the challenged award.
The unification of procedural rules for domestic and international arbitration proceedings is a positive change.
However, the Law on Arbitration and the Civil Procedural Code of the Republic of Kazakhstan expands the list of grounds for cancellation and denial of recognition and (or) enforcement of an arbitral award.
In particular, the enforcement of an arbitral award may now be rejected if there is a judgment or an arbitral award issued on the same dispute between the same parties and based on the same grounds (i.e., a judgment or award that has a res judicata effect).
Such an extension of the grounds is contrary to the provisions of the UNCITRAL Model Law, article IX of the European Convention on International Commercial Arbitration, as well as the New York Convention.
However, some of the ground for refusal that was inconsistent with the New York Convention was excluded, such as the fact that the issuance of an arbitral award became possible as a result of the commission of a criminal offense established by a court judgment that entered into legal force.
Kazakhstan is a party to a number of bilateral and multilateral agreements that grant investors the right to arbitrate disputes over their investments in Kazakhstan. These treaties include the ICSID Convention, the Treaty on Partnership and Co-operation Agreement between the European Union and the Republic of Kazakhstan dated 23 January 1995, and the ECT dated 17 December 1994.
In November 2022, the Constitutional Court was established in Kazakhstan. This is a legal institution whose function is to ensure that all laws and regulatory legal acts do not contradict the Constitution. Of course, there are courts and prosecutors endowed with such function, but they cannot check the law and have no right to challenge and cancel it. This is an important difference and irreplaceable role of the Constitutional Court. In addition, the Constitutional Court will be able to receive complaints from citizens. To this end, the Constitution was amended accordingly.
A.2 Institutions, rules and infrastructure
At present, there are around 20 arbitration institutions in Kazakhstan. The most famous of these are the Kazakhstani International Arbitrage (KIA), the International Arbitration Court IUS (IUS), the Center of Arbitration of the National Chamber of Entrepreneurs of the Republic of Kazakhstan (“CA of NCE”), and the International Arbitration Center of Astana International Financial Center (“IAC of AIFC”).
A.2.1 The CA of NCE
The CA of NCE was established in 2014 as a result of the reorganization of the International and Domestic Arbitration Courts at the Chamber of Commerce and Industry of the Republic of Kazakhstan. This reorganization took place as a result of amendments to Kazakhstani law relating to the liquidation of the Chamber of Commerce and Industry and the establishment of the National Chamber of Entrepreneurs (NCE). While the CA of NCE signed assignment agreements with the International and Domestic Arbitration Courts at the Chamber of Commerce and Industry of the Republic of Kazakhstan, technically, it is not a successor of these arbitration institutions. However, as membership in the NCE is mandatory for most local companies, and given that the CA of NCE has opened branches in all Kazakhstani regions, this institution will be the biggest in Kazakhstan.
The CA of NCE handles all types of commercial disputes between local and foreign companies, except disputes that are non-arbitrable under Kazakh law (such as disputes relating to the registration of rights over immovable property and challenges to decisions of state authorities).
The CA of NCE has been appointed by the Kazakhstani government to exercise the functions referred to in article IV of the Geneva Convention.
A.2.2 The IUS
The IUS was the first arbitration institution in Kazakhstan, established in 1993 shortly after the declaration of independence of the Republic of Kazakhstan. The famous local scholar Professor Petr Greshnikov established this institution. In 2002, the IUS opened a branch in St. Petersburg for avoiding the application of Kazakhstani law, which was unfavorable toward arbitration proceedings.
The IUS also handles all types of commercial disputes between local and foreign companies, except disputes that are non-arbitrable under Kazakh law.
Under the Rules of Arbitration of the IUS, in exceptional cases, the Council of the IUS may dismiss an award issued under the Rules of Arbitration of the IUS.
A.2.3 The KIA
The KIA was the first arbitration institution established after the adoption of the International Arbitration Law. The famous local scholar Professor Maidan Suleimenov established this institution.
Similar to the other two institutions, the KIA handles all types of commercial disputes between local and foreign companies. However, it considers disputes not only in accordance with the laws of the Republic of Kazakhstan but also in accordance with the rules of law chosen by the parties participating in the proceedings.
A.2.4 IAC of AIFC
In addition to the above arbitration institutions, a new international arbitration institution was launched on 1 January 2017.
The IAC is acting in line with the AIFC Constitutional Statute No. 438-V ZRK of 7 December 2015, the AIFC Arbitration Regulations approved on 5 December 2017, and the IAC Arbitration and Mediation Rules approved in 2018.
The above rules provide that the New Arbitration Law does not apply to the arbitration proceedings in AIFC. The 2017 AIFC Arbitration Regulations is based on the UNCITRAL Model Law and is more liberal than the Kazakhstani domestic rules.
The IAC of AIFC handles all types of commercial disputes between local and foreign companies. In addition, the IAC of AIFC provides services related to the administration of ad hoc arbitration proceedings.
Arbitral awards issued under the 2018 IAC Arbitration and Mediation Rules may be enforced via the AIFC Court.
In February 2019, the AIFC Court and the IAC officially launched the new e-justice system, which is the first for the Central Asian region and allows parties to file claims with the AIFC and the IAC in electronic form from anywhere in the world.
In June 2019, the AIFC Court and the IAC imposed a moratorium on fees and charges. All parties to a contract signed before 31 December 2021 with the reservation of the IAC to resolve disputes, will be entitled to receive services for the administration of the dispute resolution process in the IAC arising under this contract, free of charge before and after 31 December 2021. Coming soon this year, the AIFC Court and the IAC plan to introduce fees that will apply to those who have not signed a contract by the date of introduction.
As a result of recent amendments to the Civil Procedure Code, parties are allowed to transfer to the IAC of AIFC any case which is being considered by the Kazakhstani state courts. This amendment was made to attract parties to settle their disputes in the IAC.
Finally, in December 2022, amendments were introduced to the Subsoil Code, providing for subsoil users’ choice of the venue for the settlement of disputes arising from a contract for the exploration and production, or production, of hydrocarbons for complex projects. The disputes can be settled either by the courts of the Republic of Kazakhstan or arbitration in accordance with the UNCITRAL Rules Kazakhstan, including the Astana International Financial Center, or abroad.
B.1 Kazakhstani court refuses to recognize and enforce a foreign arbitration award based on article VI of the New York Convention
A consortium of foreign and Kazakhstani companies has submitted an application to a court in Kazakhstan for the recognition and enforcement of an arbitration award issued by a sole arbitrator under the UNCITRAL Rules against one of the Kazakhstani state authorities.
The debtor has raised objections to the enforcement of the award, arguing, among other things, that they had applied to the arbitrator for correction of alleged typos in the award. As such, the debtor contends that the award should not be enforced until the arbitrator has reviewed the application for correction.
The lower court accepted the debtor’s argument and rejected the application for the recognition and enforcement of the award, citing article VI of the New York Convention. While the decision of the lower court was subsequently overturned by the court of appeal, this case serves to illustrate that the Kazakhstani court practice regarding the enforcement of awards against state authorities may be a source of controversy.
B.2 AIFC Court confirms jurisdiction for consideration of anti-suit injunction application against Kazakhstani court
In January 2023, the claimant submitted an application for an anti-suit injunction to the AIFC Court, seeking to restrain or prohibit one of the respondents in the pending IAC of AIFC arbitration proceedings from continuing with parallel proceedings in a Kazakhstani court.
This was the first time that the AIFC Court had considered such an application, and while the application was ultimately rejected, the AIFC Court confirmed its jurisdiction in the matter. The AIFC Court relied on two UK court decisions for guidance, namely the 1994 Court of Appeal decision in “Angelic Grace” and the 2013 UK Supreme Court decision in Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant.
The above case serves to confirm the AIFC Court’s practice of following the principles of English procedural law and UK court precedents in arbitration matters falling within its jurisdiction.