A. LEGISLATION AND RULES
A.1 Legislation
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. Moreover, the presence of the consent of the authorized body applies only to those arbitration agreements that were concluded after the entry into force of the Arbitration Law.
- Content requirements for an arbitration agreement have been reduced. The parties themselves are free to establish aspects of the arbitration agreement, such as choosingad hocarbitration.
- 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 they consider 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 “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 New Arbitration Law 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, and the New York Convention.
Separately, we note that in November 2023, the long-term debates over whether the New York Convention can be considered binding in the Republic of Kazakhstan were put to an end. The Supreme Court issued the Normative Resolution On Certain Issues of the Application of Arbitration Law by Courts, which, among other things, confirmed that the New York Convention and the European Convention are international treaties that are binding for local courts and should prevail over Kazakhstani domestic laws.
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.
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 was pursuant to 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 to avoid 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.
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 acts 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 the AIFC. The 2017 AIFC Arbitration Regulations are based on the UNCITRAL Model Law and are 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 format 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 any case that is being considered by the Kazakhstani state courts to the IAC of AIFC. 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 by arbitration in accordance with the UNCITRAL Rules Kazakhstan administrated by International Arbitration Center of the Astana International Financial Center, or abroad.
B. CASES
B.1 The AIFC Court clarifies the issue relating to its jurisdiction on the enforcement of foreign judgments and arbitral awards
In the judgment issued in 2023, the AIFC Court considered and addressed the issue related to its jurisdiction on the recognition and enforcement of foreign judgments and arbitration awards for the first time.
Specifically, the AIFC Court stated that it may have such jurisdiction only if the court would be the default venue for the settlement of the dispute between parties in the absence of the relevant choice-of-court or arbitration agreement. The AIFC Court also mentioned that the issue of criteria for its jurisdiction on the recognition and enforcement of foreign judgments and/or arbitration awards should be addressed in the clarifications made by the chairperson of the AIFC Court.
This is the first case where the relevant issue has been addressed. However, further growth in the relevant practice can be expected due to the increasing number of AIFC companies and disputes among them.
B.2 The AIFC Court affirms that the provisions of Kazakhstani domestic arbitration law do not apply to arbitration proceedings under IAC AIFC Rules
In a 2022 case, the AIFC Court rejected arguments from the local Ministry of Health, including claims of invalidity of the arbitration agreement referring to IAC AIFC Rules due to the absence of consent from the ministry’s supervisory authority (as required by Article 8 (10) of the New Arbitration Law). The AIFC Court clarified that IAC AIFC Rules are governed solely by the AIFC Arbitration Regulations, which do not require consent from the ministry’s supervisory authorities to execute the arbitration agreement.
It is worth noting that the AIFC Court’s pro-arbitration stance has faced criticism from Kazakhstani state authorities who argue that Article 8 (10) of the New Arbitration Law applies to any arbitration agreements with Kazakhstani companies, irrespective of whether or not the proceedings are under IAC AIFC Rules. Regardless, the AIFC Court’s judgment can serve as a precedent for the AIFC Court and other common law courts when addressing the validity of arbitration agreements with Kazakhstani state authorities.
B.3 The AIFC Court confirms its jurisdiction to issue an anti-suit injunction to support arbitration proceedings under IAC AIFC Rules
In a 2023 case, the AIFC Court considered an anti-suit injunction application where one party in IAC AIFC arbitration sought an order to prevent the other party from initiating and sustaining a parallel legal action in Kazakhstani courts.
Although the application was rejected, the AIFC Court affirmed its jurisdiction when there was an arbitration agreement for dispute resolution under the IAC AIFC Rules, and it indicated an intent to apply the criteria for anti-suit injunctions developed by English courts.
This judgment represents a notable advancement in AIFC Court practice and may establish a precedent for future cases.
