A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in the Kyrgyz Republic continues to be governed by the Law on Arbitration Courts (“Law“), as enacted on 30 July 2002. The Law is mostly based on the UNCITRAL Model Law. Provisions of the Law were challenged several times based on arguments that the Law and the main principles of arbitration proceedings contradicted the Kyrgyz Constitution. However, the Constitutional Court and the Constitutional Chamber of the Supreme Court consistently rejected such claims and showed their pro-arbitration position.
In addition, international commercial arbitration matters are also governed by the following:
- The Code of Civil Procedure of the Kyrgyz Republic dated 25 January 2017, which, among other things, deals with the recognition and enforcement of arbitral awards
- The Law of the Kyrgyz Republic on Investments into the Kyrgyz Republic dated 27 March 2003, which confirms the right of investors to bring their disputes with the Kyrgyz Republic (and its state agencies) to international arbitration
It should be noted that at the time of drafting the new Civil Procedural Code, the government proposed to include special rules for challenging arbitral decisions issued in Kyrgyz Republic. This government proposal was based on concerns that even if local arbitral awards contradict public policy, they still cannot be set aside by local courts. The fact that the government raised such concerns shows that arbitration is being used in Kyrgyz Republic more frequently, and the government would like to have additional rights to defend public interests. However, this proposal was rejected. Also, in July 2017, the Kyrgyz Parliament adopted the new Mediation Law, under which parties have a right to execute a mediation agreement at any time prior to or after the initiation of legal proceedings. If the parties execute a mediation agreement during civil court proceedings, the court shall stay those proceedings until the mediation has been concluded.
Notwithstanding the above, in 2024 the Government prepared a new bill introducing a mechanism for setting aside arbitral awards issued in the Kyrgyz Republic. This bill is currently under consideration by the Kyrgyz Parliament.
Where the parties resolve the dispute through mediation, they may execute a settlement agreement that needs to be approved by the court, and court proceedings will be terminated. If one of the parties refuses to comply with the terms of the settlement agreement approved by the court, the other party may seek to enforce the agreement in a state court.
In January 2022, the Law was amended to introduce the possibility for taxpayers (both individuals and legal entities) to choose between referring their tax cases to state courts or to arbitration (only to those arbitration institutions that have been functioning for not less than 60 months). However, the relevant amendments suggest that the national tax authorities’ consent is required to bring tax disputes to arbitration, and this requirement may make it difficult for taxpayers to use the new option.
Kyrgyz Republic is a party to a number of bilateral and multilateral agreements that grant investors the right to arbitrate disputes over their investments in Kyrgyz Republic. These treaties include the Energy Charter Treaty dated 17 December 1994, as well as bilateral investment treaties and multilateral treaties executed with CIS jurisdictions and members of the Eurasian Economic Union.
It should be noted that while the Kyrgyz Parliament ratified the ICSID Convention in 1997, it was only in April 2022 that the Kyrgyz government submitted the relevant documents to the ICSID and the Kyrgyz Republic became a party to the ICSID Convention.
A.2 Institutions, rules and infrastructure
After the adoption of the Law in 2002 and of relevant sub-laws regulating the procedure of establishment and registration of arbitration institutions, the local Chamber of Commerce and Industry decided to establish the International Arbitration Court (IAC) to handle both domestic and international commercial disputes.
The IAC handles all types of commercial disputes between local and foreign companies, except disputes that are non-arbitrable under Kyrgyz law (e.g., disputes relating to the registration of rights over immovable property, challenges to decisions of state authorities).
Expedited procedures are available under the IAC Rules of Expedited Arbitration if parties agree to use these rules.
The IAC Rules of Arbitration contain special rules for joinder of third parties. Specifically, under these rules, third parties can join the arbitration proceedings only if both the following criteria apply:
- All parties to the arbitration proceedings agree that third parties can join the arbitration.
- The third party is a party to the arbitration agreement used to commence the arbitration proceedings.
An application to involve a third party can be filed only before the statement of defense is filed.
B. CASES
B.1 Investment Arbitration Cases
In January 2024, the Kyrgyz Republic prevailed in an arbitration proceedings initiated in 2020 by QazaqGaz (formerly KazTransGas) under the UNCITRAL Arbitration Rules. QazaqGaz initially sought USD 35 million in compensation but later reduced the claim to USD 15 million after dropping claims for lost profits. The dispute involved alleged violations of QazaqGaz’s rights as an investor in the joint venture KyrKazGas, which was involved in modernizing and exploiting the Kyrgyz segment of the Bukhara – Tashkent – Bishkek – Almaty gas pipeline. Kyrgyzgas had transferred pipeline assets to the joint venture based on a trust management agreement, which was later terminated by mutual agreement.
The complainant’s claims were based on three documents: Kazakhstan-Kyrgyzstan BIT, the Energy Charter, and the 2003 Kyrgyz Law on Investments. The arbitration panel agreed with the counsels of the Kyrgyz Republic that the statute of limitations for claims based on the investment law had expired. Additionally, the court ruled that the Kyrgyz Republic could not be held responsible for actions by Kyrgyzgas. The court also determined that the trust management agreement was properly terminated with the consent of all involved parties and found no legal basis for QazaqGaz to expect reimbursement for its investments in the joint venture. Furthermore, the arbitration panel ordered QazaqGaz to reimburse the Kyrgyz Republic for 60% of the arbitration costs, with compound interest to be accrued annually.
In April 2024, the Kyrgyz Republic succeeded in arbitration proceedings initiated by the Turkish company Tumas concerning the termination of a service agreement with the Kyrgyz Ministry for Emergency Situations. Notably, this marked the first instance where the Kyrgyz Republic was exclusively represented by Kyrgyz lawyers.
