International Arbitration 2019 Comparisons

Last Updated August 19, 2019

Law and Practice

Authors



Baker McKenzie - CIS, Limited is renowned for its significant expertise in complex litigation and arbitration proceedings involving disputes with state authorities, investment protection cases as well as administrative and criminal proceedings, and its ability to provide a wide range of services covering all stages of court/arbitration proceedings, including compulsory enforcement proceedings. The firm's Kazakhstan office is focused on international and local arbitration and litigation proceedings, and has significant experience and industry expertise in different areas, including oil & gas, energy, telecom, pharma, mining, infrastructure, agriculture and construction. It serves both foreign clients making investments in Kazakhstan and local companies acting inside or outside of the country. The firm's deep knowledge of local laws and practices – combined with experience of cross-border litigation/arbitration and its network of foreign offices (78 offices worldwide) – allow the practice to serve both international and local players.

In Kazakhstan, arbitration is still not a very popular means of dispute resolution.

Usually, local companies prefer national court litigation over arbitration due to the fact that the arbitration proceedings are much longer than local litigation and there are several restrictions for using arbitration to settle disputes with Kazakhstani state-owned companies; these restrictions are addressed in section 3 The Arbitration Agreement, below.

However, international arbitration is becoming the preferred option for cross-border commercial transactions as foreign counterparties are willing to arbitrate their disputes in a neutral venue.

For the past ten years, Kazakhstani courts and state authorities have become more pro–arbitration and, as a result, much more experienced and sophisticated in the application of arbitration laws and international treaties. However, relevant local court practice is still controversial. In addition, local courts still may be biased in favour of the state.

The Kazakhstani government has very ambitious plans to attract foreign investors by providing investors with new options for the settlement of disputes, including the establishment of new courts and arbitration institutions.

Specifically, a new international arbitration institution, the International Arbitration Center of Astana International Financial Center (IAC AIFC) was launched in 2017. The AIFC Arbitration Regulations are based on the UNCITRAL Model Law and are more liberal than domestic Kazakhstani rules. The IAC AIFC handles all types of commercial disputes between local and foreign companies. In addition, it 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 in Kazakhstan via the AIFC Court. Further, more detailed, information about the IAC AIFC is provided in 1.4 Arbitral Institutions, below.

Arbitration clauses are common in joint ventures and international commercial contracts involving foreign parties who seek use of international arbitration to resolve disputes arising out of contracts.

Also, in line with the recent trend, the Kazakhstani Government recommends local state-owned companies and state authorities to use the IAC AIFC as the venue for the settlement of disputes in their contracts with foreign and local investors, including subsoil-use contracts, state procurement contracts and others.

As of today, there are around 20 arbitration institutions in Kazakhstan. The most famous of these are the Kazakhstani International Arbitrage (KIA), the International Arbitration Court (IUS) and the Center of Arbitration of the National Chamber of Entrepreneurs of the Republic of Kazakhstan (CA of NCE). Please see below some additional information about these institutions.

CA of NCE

The CA of NCE was established in 2014 as a result of the reorganisation of International and Domestic Arbitration Courts at the Chamber of Commerce and Industry of the Republic of Kazakhstan. This reorganisation took place as a result of amendments to Kazakhstani law relating to 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, due to the fact that for most local companies membership of the NCE is mandatory, 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 which are non-arbitrable under Kazakhstani law (such as disputes relating to the registration of rights over immovable property, challenges to decisions of state authorities, etc).

The CA of NCE has been designated by the Kazakhstani Government to exercise the functions referred to in Article IV of the Geneva Convention.

IUS

The IUS was the first arbitration institution in Kazakhstan, established in 1993 shortly after the declaration of independence of the Republic of Kazakhstan. This institution was established by the famous local scholar, Professor Petr Greshnikov. Since 2002, the IUS also has a branch in St Petersburg (Russia). This branch was established, among other reasons, for the purpose of avoiding the application of Kazakhstani law, which was unfavourable towards arbitration proceedings.

The IUS also handles all types of commercial disputes between local and foreign companies, except disputes which are non-arbitrable under Kazakhstani 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.

KIA

The KIA was the first arbitration institution established after the adoption of the International Arbitration Law. This institution was established by the famous local scholar Professor Maidan Suleimenov.

Similar to the above two institutions, the KIA handles all types of commercial disputes between local and foreign companies.

IAC AIFC

In addition to the above arbitration institutions, the new international arbitration institution – the IAC AIFC – was launched in 2017. The AIFC Arbitration Regulations are based on the UNCITRAL Model Law and are more liberal than domestic Kazakhstani rules.

The IAC AIFC, along with the Astana International Financial Centre Court (AIFC Court), as judicial institutions of the Astana International Financial Centre (AIFC) were established pursuant to the Constitutional Statute on the Astana International Financial Centre 2015 and became operational from 1 January 2018.

It is independent and separate from the Republic of Kazakhstan judicial and legal system. Therefore, only AIFC Rules govern the procedure in the IAC AIFC and only the AIFC Court has jurisdiction over setting aside and enforcement of IAC AIFC awards.

The IAC AIFC provides an independent, economical and expeditious alternative to court litigation, operating to the highest international standards to resolve civil and commercial disputes in the AIFC. It has its own panel of outstanding international arbitrators and mediators who are greatly experienced, independent and impartial, and of the highest integrity. The IAC AIFC offers parties maximum choice and flexibility in choosing the rules and procedures they wish to use to resolve their disputes at the IAC. Parties may agree for the IAC to:

  • administer their arbitration according to the IAC Arbitration and Mediation Rules 2018;
  • administer their arbitration according to UNCITRAL Arbitration Rules or ad hoc arbitration rules;
  • administer mediations according to the IAC Arbitration and Mediation Rules 2018 or ad hoc mediation rules;
  • provide other forms of alternative dispute resolution.

The IAC AIFC provides fundholding for arbitrators' fees and the holding and disbursing of advances paid to cover the reasonable costs of the IAC's own services and facilities.

The IAC AIFC is an appointment authority, offering the appointment of arbitrators and mediators from its panel for arbitrations and mediations conducted at the IAC or elsewhere.

Arbitration awards of the IAC AIFC are enforceable in the Republic of Kazakhstan as Orders of the AIFC Court, supported by a robust enforcement system. They are also enforceable internationally under the New York Convention.

The IAC AIFC provides permanent state-of-the-art administrative facilities, including first-class IT, conference, meeting and hearing rooms at the IAC Chambers, which are located at the IAC EXPO-2017 Astana premises.

The procedures and standards at the IAC seek to follow international best practice and will be familiar to users of arbitration and mediation services around the world. The IAC Arbitration and Mediation Rules 2018 include procedures for expedited arbitrations (in case the amount in dispute does not exceed the aggregate equivalent of USD5 million, if the parties so agree or in cases of exceptional urgency), the appointment of emergency arbitrators, joinder of additional parties to, and consolidation of, arbitration proceedings. The IAC Arbitration and Mediation Rules 2018 are intended to be improved or expanded to continuously adapt to the needs and requirements of the parties. The IAC Arbitration and Mediation Rules 2018 offer parties maximum flexibility in relation to the choice of arbitrators, venue, language of the proceedings and the applicable law.

Under the IAC Arbitration and Mediation Rules 2018, the arbitral tribunal has extensive powers to grant interim relief, emergency relief, summary judgment (early determination), as part of which the tribunal can dismiss the action or grant a summary judgment at an early stage in cases where a case (or a defence) has no real prospect of success or is manifestly outside the jurisdiction of the tribunal. If parties have come to an agreement, the tribunal can issue a consent award.

The IAC is currently led by Chair Barbara Dohmann QC, who has been one of the UK's leading commercial barristers and an international arbitrator for many years. The Chair is supported by the Registrar and Chief Executive of the IAC and the Registry team, Christopher Campbell-Holt.

In Kazakhstan, arbitration proceedings are mainly governed by the Law On Arbitration dated 8 April 2016 (Arbitration Law). The Arbitration Law applies to both (i) disputes involving foreign parties; and (ii) disputes between residents of Kazakhstan, which are permitted to be resolved by arbitration courts in Kazakhstan.

These 'arbitration courts' are not state courts, but various private arbitration tribunals roughly analogous to private arbitration tribunals in Western countries.

Generally, this law is in line with the main principles of UNCITRAL Model Law and regulates every stage of the arbitration proceedings. The law also provides a mechanism for challenging and enforcing these awards in state courts. However, the Arbitration Law sets forth several restrictions for the arbitration settlement of arbitration disputes involving state authorities and state companies.

It also prohibits arbitration for: (i) disputes involving natural monopolists and their customers; (ii) disputes arising out of nonpecuniary relations connected with an individual's health or safety, the sanctity of personal and family secrets and a person's right to their name; and (iii) disputes relating to insolvency or bankruptcy. The law also prohibits state bodies, state enterprises, banks, companies holding dominant positions and natural monopolists from establishing arbitration courts.

Under the Arbitration Law, a new association of arbitration institutions and arbitrators – the Arbitration Chamber – was established. This Chamber is responsible for maintaining a Register of Arbitrators and represents local arbitration institutions to local state authorities and foreign organisations.

The grounds for setting aside arbitral awards issued in Kazakhstan and for refusal to enforce arbitral awards are similar to the relevant provisions of Article V of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

However, we should note that Kazakhstani law adds some new grounds for setting aside or refusing to enforce arbitral awards issued in Kazakhstan.

Additionally, under a 2009 resolution by the Supreme Court (which is binding on local courts), Kazakhstani courts can postpone enforcement of foreign and domestic arbitral awards.

On 21 January 2019 the Kazakhstani Parliament adopted amendments to the Arbitration Law which intended to simplify arbitration proceedings in Kazakhstan and cancelled some highly criticised statutory provisions. These amendments came into force in February 2019. The most important changes may be summarised as follows.

  • Disputes arising out of consumer loan arrangements may be settled in arbitration only if the relevant arbitration agreement is executed after grounds for the relevant claim have arisen. This amendment intended to address the issue of the abuse of right to settle claims in arbitration where local banks and financial institutions made consumers agree to settle disputes in arbitration when providing consumer loans.
  • Under the initial version of the Arbitration Law, local arbitral tribunals might settle disputes with state-owned companies applying Kazakhstani law only. However, since February 2019, foreign law may be applied for the settlement of disputes between foreign companies and Kazakhstani state-owned companies.

Before the January 2019 amendments, the Arbitration Law provided that the enforcement of foreign arbitral awards may be refused if the relevant arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under Kazakhstani law. This provision of the Arbitration Law was highly criticised by local scholars and professionals as it contradicted Article V (1) (a) which provides for lex arbitri as a default law governing invalidity of the arbitration agreement. It was therefore amended in line with the New York Convention.

To be valid and enforceable, an arbitration agreement must be in writing. The agreement is considered to be written if:

  • it is in the form of an arbitration clause in a document signed by the parties;
  • it is contained in an exchange of letters, telex, telegrams or other means of telecommunication between the parties;
  • it arises from an exchange of submissions or statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other;
  • there is a reference in a contract to a document containing an arbitration clause, provided that the contract is in writing and the reference is such as to make that clause part of the contract;
  • if the parties agree otherwise than in writing by reference to terms which are in writing.

When one of the parties to the agreement is a state body or a legal entity controlled by the state, an arbitration agreement must contain consent of the relevant supervising state authority.

Disputes are arbitrable under Kazakhstani law if they are arising out of civil law relations.

However, the Arbitration Law sets forth several restrictions for the arbitration settlement of arbitration disputes involving state authorities and state companies. It also prohibits arbitration for: (i) disputes involving natural monopolists and their customers; (ii) disputes arising out of nonpecuniary relations connected with an individual's health or safety, the sanctity of personal and family secrets, and a person's right to their name; and (iii) disputes relating to insolvency or bankruptcy.

In addition to this, some restrictions may be set in other laws. In particular, under Kazakhstani trade mark law, disputes arising out of licence agreements cannot be settled in arbitration.

Kazakhstani courts are increasingly adopting a pro-arbitration approach and enforcing valid arbitration agreements. The relevant approach is supported by the Supreme Court as well.

In particular, in March 2019 the Supreme Court published an overview of relevant court practice where it criticised several attempts of lower courts to extend the list of non-arbitral disputes provided in the law.

While this issue was disputable in Kazakhstani court practice, the Arbitration Law (Article 5.7) clearly recognises the concept of separability. Therefore, the invalidity of the main contract does not extend to the arbitration clause contained therein.

The parties are free to determine the number of arbitrators. However, the number of arbitrators should be odd.

Depending on the parties' agreement, nationals of the Republic of Kazakhstan, foreigners, or stateless persons may be elected to serve as arbitrators if they meet the following requirements set forth in the Arbitration Law (Article 13):

  • arbitrators should be at least 30 years old, with five or more years of work experience;
  • they should have a graduate degree – a sole arbitrator or a president of the arbitral tribunal should have a graduate degree in law;
  • acting judges, state officials, military servants, members of the Parliament and regional councils, disabled persons and persons who have criminal records cannot be appointed as arbitrators.

Parties may agree additional requirements for arbitrators.

Arbitral tribunals should be formed in the manner prescribed by such arbitral tribunal's rules. An ad hoc arbitral tribunal should be formed in the manner agreed upon by the parties.

Unless the parties agree otherwise, an ad hoc arbitral tribunal shall be formed in the following manner: in an arbitral tribunal with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator.

Unless parties agree otherwise, arbitral tribunals should be formed in line with the applicable arbitration rules.

Unless the parties agree otherwise, anad hoc arbitral tribunal shall be formed in the following manner: in an arbitral tribunal with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators thus appointed shall appoint the third arbitrator who will act as the president of the tribunal.

Under the default rules, if any of the parties fails to appoint a 'wing arbitrator' (a sole arbitrator) or both wing arbitrators fail to agree on the president within a 30-day period, the head of the relevant arbitration institution or the Arbitration Chamber (for ad hoc arbitration) can act as an appointment authority. In this case, the relevant arbitrator is selected from either the list of arbitrators maintained by the arbitration institution or the Register of Arbitrators maintained by the Arbitration Chamber (cf Article 14.6).

Under the Arbitration Law,state courts cannot interfere in the selection of arbitrators and relevant decisions of the arbitration institutions or the Arbitration Chamber cannot be appealed.

Parties can challenge the appointment of an arbitrator under grounds set out in the Arbitration Law (Article 17).

Specifically, among other things, an arbitrator can be challenged if there are concerns as to the arbitrator's independence and qualification or an arbitrator fails to consider the case without unreasonable delay.

Unless otherwise agreed by parties, any of the parties is eligible to file a reasoned statement in writing to the tribunal about challenging an arbitrator within 30 days from the day when the circumstances which may be a reason for a challenge have become known or arisen.

If the arbitrator being challenged rejects it or one of the parties does not agree to the challenge of the arbitrator, the decision on the challenge shall be made by the arbitrators who are members of the tribunal within ten calendar days of receipt of the reasoned written statement of the party. The issue on challenge of a sole arbitrator shall be resolved by the same arbitrator.

If the sole arbitrator refuses to approve the application of one or both parties on challenge or one of the parties does not agree with the arbitrator challenge, the parties may agree to terminate the arbitration proceedings.

The powers of arbitrators may be terminated upon parties' agreement or in case of non-fulfillment of his/her powers within the established time limit for considering the dispute or persistent incapability to perform his/her duties due to illness, death or abdication of his/her power to consider the dispute, challenge (or self-rejection of his/her power) of an arbitrator.

In case of disagreement regarding any of the grounds referred above, any party may apply for a decision on the termination of powers of the arbitrator to the head of relevant arbitration institution, whose decisions cannot be cancelled.

The general rule is that arbitrators must be independent and impartial. Specifically, among other things:

  • an arbitrator should not be a party to the dispute or be connected to a party to the dispute;
  • an arbitrator should not be a head of a legal entity, its branch or representative office which is a party to the dispute, or either way represent a party to the dispute;
  • an arbitrator should not act as an expert or in another way assist a party to a dispute in preparation for a dispute.

Most local arbitration rules set forth additional requirements of impartiality of arbitrators and require arbitrators to sign the relevant declarations before acceptance of their appointments.

As we stated above, under the Arbitration Law (articles 8.8 and 8.9), the following matters are non-arbitrable:

  • disputes involving natural monopolists and their customers;
  • disputes between state authorities and state-owned companies;
  • disputes involving minors or incapable persons;
  • disputes arising out of nonpecuniary relations connected with an individual's health or safety, the sanctity of personal and family secrets, and a person's right to their name;
  • disputes relating to insolvency or bankruptcy.

Also, under the Kazakhstani Trademarks Law (Article 42.1), disputes arising out of licence agreements are not arbitrable either.

In addition, disputes between local companies and state authorities or state-owned companies may be settled in arbitration only if the relevant state authority or state-owned company has obtained prior approval from the supervisory state body (cf Article 8.10).

Finally, lower court practice also suggested that arbitrability of disputes with individuals relating to the enforcement of pledge arrangements over real estate assets may be questioned as well.

However, the Supreme Court recently took the position that any private disputes may be settled through arbitration unless clearly prohibited by law.

At the same time, the Supreme Court stated that local courts should draw attention to the status of individuals (consumers) in their arrangements with companies and/or banks as parties which usually have much less experience and market powers and consider whether they are fully aware of the consequences of the execution of the arbitration agreement.

The Arbitration Law does provide the concept of 'competence-competence' and states that the arbitral tribunal has a right to rule on its jurisdiction either upon the request of a party or at its own initiative (cf Article 20.1). Also, as we stated above, the law provides the concept of separability of the arbitration agreement, and invalidity of the main agreement does not lead to the invalidity of the arbitration clause in this agreement.

A party must submit the relevant application before it makes its first submission on the merits of the claim or after it becomes aware that the other party has raised issues that are out of the scope of the tribunal's jurisdiction.

The tribunal should take the relevant decision within ten days after receipt of the relevant application from a party unless otherwise agreed by the parties (cf Article 20.4). In practice, such a short deadline causes significant difficulties for arbitrators who may not have enough time for proper consideration of this issue.

The decision of the arbitral tribunal on its jurisdiction cannot be challenged to the state court. At the same time, a party has a right to raise arguments against the tribunal's jurisdiction during the challenge of the final award or the court procedure on the enforcement of the arbitral award.

There has been at least one case where the state court considered the issue of the tribunal's jurisdiction and issued an anti-arbitration injunction order, which prohibited the continuance of the parallel arbitration proceedings upon the interim measures application of a party. This court decision was confirmed by higher courts as well. Therefore, technically, the state court may consider the issue of the tribunal's jurisdiction within the framework of the interim measures procedure as well.

While local court practice is still developing, usually Kazakhstani courts have a pro-arbitral approach and confirm jurisdiction of arbitral tribunals unless there are gross issues with the validity or enforceability of arbitration agreements.

A party has a right to raise arguments against the tribunal's jurisdiction during the challenge of the final award or the court procedure on the enforcement of the arbitral award.

Technically, local courts should consider the issue of the tribunal's jurisdiction using de novo standard of review, and the parties can provide new arguments and new evidence.

At the same time, in practice, local courts usually take into account arbitrators' findings and are reluctant to reconsider them unless arbitrators make clear mistakes in the interpretation of the scope of the arbitration agreement and/or statutory provisions on arbitrability of disputes.

Technically, under the Kazakhstani Civil Procedure Code, the court should not commence court proceedings (cf Article 152.1.7 of the Civil Procedure Code of the Republic of Kazakhstan No 377-V dated 31 October 2015) or dismiss a claim without consideration on the merits if the court proceedings have been commenced and there is a valid and enforceable arbitration agreement between the parties (cf Article 279.5 of the Civil Procedure Code of the Republic of Kazakhstan No 377-V dated 31 October 2015).

The court may take such decision at its own initiative even if none of the parties ask the court to dismiss the claim.

In practice, local courts usually like to use this power because they are overloaded with cases. Therefore, if there is an arbitration agreement between the parties, the chances of attempts to commence proceedings in state courts being unsuccessful are good.

The Arbitration Law does not allow arbitral tribunals to assume jurisdiction over persons who are not parties to the arbitration agreement. Even if the arbitration rules of local arbitration institutions allow third parties to participate in the arbitration proceedings, such participation is subject to written consent of both parties to arbitration proceedings and any relevant third party.

We know of cases where local courts interpreted the above provisions of the Arbitration Law very broadly and considered that the arbitration agreement does not apply to claims submitted by a third party (like a state prosecutor or a state authority) on behalf of a party to the arbitration agreement.

In particular, such approach was used for proving the jurisdiction of local courts over claims submitted by state authorities on behalf of state-owned companies against foreign investors. However, such practice was highly criticised and viewed as a breach of Kazakhstan's commitments under the New York Convention.

Under the Arbitration Law, an arbitral tribunal can order any interim measures it deems necessary for the purposes of a pending dispute (Article 152.1.7 of the Civil Procedure Code of the Republic of Kazakhstan No 377-V dated 31 October 2015). No guidance is given as to the extent that such measures should apply and what test the tribunal should use to determine whether to grant such interim measures. However, parties are able to agree in their arbitration agreement to restrict the tribunal from ordering interim measures.

In practice, local arbitrators usually apply interim measures, which are listed in the Kazakhstani Civil Procedure Code.

Interim measures ordered by local arbitral tribunals cannot be directly enforced through the state courts. Instead, parties have to file a separate motion with the state court, seeking interim measures to support the claim that is currently under consideration by the tribunal. At the same time, there is positive local court practice on the recognition and enforcement of interim measures decisions of foreign arbitral tribunals issued in the form of arbitral awards.

It should be noted that the parties have a right to seek interim measures in court even if they do not raise this issue in front of the tribunal. It is not possible for the parties to refer to state courts for interim measures before the commencement of arbitral proceedings, and the parties have to provide the state court with confirmation of this fact.

Local law does not prohibit the application of interim measures by an emergency arbitrator if parties agree to use this option. However, in practice, arbitration rules of major local arbitration institutions do not have relevant provisions because it is more efficient for parties to seek interim measures from state courts rather than from emergency arbitrators.

The interim measures that the state court (and, by probable extension, arbitral tribunals) can order include, but are not limited to:

  • seizure of the defendant's property;
  • seizure of the defendant's bank accounts;
  • prohibiting the defendant from taking certain actions;
  • prohibiting third parties from transferring any property to the defendant or performing any obligations due to the defendant.

Where necessary, the court may order other interim measures, provided that they correspond to the scope of the substantive claims and will restrain the defendant from taking any actions that may encumber the enforcement of the arbitral award or make itde facto unenforceable. State courts are not allowed to issue interim measures in relation to financial organisations, non-financial organisations that are part of a bank conglomerate in the capacity of a parent company, or their property when they undergo the process of restructuring.

There is no provision in Kazakhstani law permitting the state court to compel arbitration by means of an anti-suit injunction directed at the parties to the dispute, for example, in cases where either side files a claim in a foreign court. The state court can compel arbitration by declaring the arbitration agreement valid and operative, and accordingly, terminate its own consideration of a claim. This may occur when one of the parties to the dispute files a claim in a state court in an attempt either to commence parallel court proceedings or to avoid arbitration in general.

An application for interim measures will be considered by the state court on the same day the application is filed, without notifying the defendant or any other parties participating in the dispute. An order (opredeleniye) granting interim measures will be issued by the court. Interim orders issued by the courts are enforceable in the same way court judgments are via the court marshal service. Interim orders can be enforced immediately upon being granted.

The Arbitration Law (Article 43.1) provides the right of the arbitral tribunal to order parties to provide security for arbitrators' costs. If one party refuses to provide the relevant security, the other party can contribute that share as well. If parties fail to provide the security, the tribunal can close the arbitration proceedings without issuance of the award.

At the same time, in theory, a party's claim relating to the reimbursement of costs may be secured by imposing interim measures against the other party in the manner set forth for the security of claims on the merits (ie, via local Kazakhstani courts). However, we are not aware of any relevant court practice.

The Arbitration Law (Chapter 4) contains general rules regulating the arbitration proceedings. Most of these provisions are not mandatory and can be changed by the arbitration rules of arbitration institutions or parties' agreement. These rules are usually in line with international practice. However, following local court procedural tradition, the Arbitration Law provides some features which may look unusual from an international perspective:

Following local court procedural tradition, the Arbitration Law (Article 35) provides for a very short term for the consideration of cases. Under the general provisions of the Law, it is only two-and-a-half months. Arbitration rules of local arbitration institutions may provide for even shorter terms; for example, see Article 10 of Rules of Arbitration of Kazakhstan International Arbitrage. While these terms may be extended by parties' agreement or the tribunal, it should be expected that local arbitrators may try to follow these short terms.

Under the Arbitration Law (Article 36), there should be written minutes of the arbitration hearing prepared by the secretary of the arbitral tribunal unless otherwise agreed by parties.

Under the Law, the tribunal should announce its award (or, at least, its operative part) in the hearing unless otherwise provided in the applicable rules of arbitration.

Under the Arbitration Law (Article 32), to commence arbitration proceedings, a claimant should file a statement of claim, which should comply with a number of formal requirements. In particular, the statement of claim must identify the parties (stating their name and residence or, if either of the parties is a legal entity, its legal address and bank details).The statement of claim must also contain the particulars of the matter in dispute and refer to the grounds on which the claimant bases its claims. In addition, unless the claim is not for a monetary amount, the statement of claim must state the amount claimed by the claimant. Where the claimant's representative files the statement of claim, a power of attorney or other document certifying the powers of the claimant's representative must be presented.

Unless otherwise agreed by parties, the arbitration institution has ten days to decide whether to accept the claim and initiate proceedings. Proceedings are deemed to commence when the institution so rules. For ad hoc arbitration, the arbitration proceedings are deemed to be commenced from the date the respondent receives the statement of claim.

The statement of claim may be returned without the commencement of the arbitration proceedings if it does not meet formal requirements, including cases where there is no arbitration agreement between parties or the power of attorney confirming the power of claimant's representative is not attached.

After the commencement of the arbitration proceedings, the defendant should provide the tribunal and the claimant with the statement of defence at least ten days before the date of the first hearing. The tribunal may decide to proceed with the review of the case based only on documents provided by parties without holding the hearing if none of the parties demand to have an oral hearing. The tribunal has broad discretion on the rules on procedural issues, which are not regulated in the Arbitration Law or in the applicable arbitration rules and/or parties agreement.

It should be noted that following local court procedure traditions, the rules of local arbitration institutions usually do not recommend arbitrators to discuss the procedural schedule with parties. Therefore, it is not unusual for local arbitrators to schedule hearings without previous consultations with the parties.

The Arbitration Law provides for the following main procedural powers of arbitrators, which are in line with international practice:

  • arbitrators have broad powers in assessment of evidence provided by parties;
  • arbitrators have a right to rule on their own jurisdiction;
  • arbitrators have a right to apply interim measures;
  • arbitrators may rule on security of their costs of arbitration.

The main duty of arbitrators is to consider the case impartially and without unreasonable delay. If an arbitrator does not comply with this duty, he or she may be challenged.

Persons who professionally provide legal services, including representation during arbitration proceedings, are divided into two main categories: barristers (advokat) and attorneys.

The main difference between these categories is that barristers need to obtain a special permit (licence) from the state and may enjoy special protection provided by Kazakhstani legislation. Attorneys do not need to obtain any licences, but they need to be employed by a law firm or be registered as individual entrepreneurs.  In addition, attorneys who represent clients in local courts need to have a graduate degree in law. Since 6 July 2019, to be allowed to represent clients in Kazakhstani courts, attorneys also need to be a member of one of the local chambers of attorneys.

However, the above requirements do not apply to attorneys representing parties in arbitration proceedings. Foreign attorneys may act as counsels in arbitration proceedings as well.

To participate in the arbitration proceedings, a counsel has to submit the power of attorney. Following local court procedural tradition, local arbitrators may require a power of attorney issued abroad to be notarised and apostilled.

Under the Arbitration Law, evidence presented to the arbitral tribunal during the trial includes oral testimonies of witnesses, written evidence, physical evidence and expert findings.

Under general provisions of the Law, the burden of proof is borne by the parties who must prove the circumstances on which they are relying as grounds for their demands and objections.

There is, however, no objective test that arbitrators will apply to evaluate evidence and decide proof.

In practice, arbitration rules of local arbitration institutions and local arbitrators usually both follow procedural traditions of local courts and do not apply such concepts as discovery, disclosure and witness cross-examination in meaning, which is used in modern international arbitrations.

For example, local arbitrators prefer to rely on documents rather than witness statements and interrogateing witnesses themselves, like local judges usually do. Also, local arbitrators may demand parties to provide originals of documents even if none of the parties challenge the correctness of submitted copies.

Also like judges, and unless the parties agree otherwise, the tribunal has a right to order an expert analysis where circumstances of significance to the case may be established as a result of a study of the case materials by an expert with special scientific knowledge. The tribunal may order an expert analysis upon a party's request or at its own initiative and order the parties to cover costs relating to the expert's engagements along with costs relating to the arbitration proceedings. The parties may recommend experts, but it is the tribunal that appoints them. The tribunal and parties may also interrogate experts during the hearing.

While the Law does not provide any rules on the assessment of evidence, usually local arbitral tribunals follow the rules applied by local judges and evaluate each piece of evidence in terms of its pertinence, admissibility and authenticity. All available evidence is evaluated in aggregate, in terms of its sufficiency to decide the case. Arbitrators should evaluate evidence personally using their own judgement, based on an impartial,thorough and complete examination of the aggregate evidence in the case file.

Due to the above-mentioned practice of the collection and assessment of evidence, local arbitration institutions usually do not use IBA Rules on the Taking of Evidence in International Arbitration and have recently adopted Rules on the Efficient Conduct of Proceedings in International Arbitration (Prague Rules), which provide for a more inquisitorial approach to conducting arbitration proceedings. In particular, the Arbitration Centre (Atameken) was one of the first arbitration institutions to officially support these rules. Therefore, the Prague Rules are expected to be widely used in the near future.

Technically, under the Arbitration Law (Article 39.5), an arbitral tribunal or a party upon consent of the arbitral tribunal has the right to seek the assistance of local courts in collecting and/or securing evidence, which are maintained by either parties of the arbitration proceedings or other persons.

If the court grants such a request, a person holding relevant evidence must produce it to the arbitral tribunal. If it fails to comply with the court order, it may lead to administrative or criminal liability.

At the same time, it should be noted that we are not aware about any cases where the above provisions were tested in practice. Therefore, it is difficult to estimate whether they work effectively or not.

Under the Arbitration Law, one of the principles of arbitration proceedings is confidentiality. The parties and arbitrators may not disclose any of the facts learned in the course of arbitration other than upon consent from the parties or the latter's successors, and may not be interrogated as witnesses about any such facts other than in those cases where individuals are expressly obliged under law to report relevant information to an appropriate authority.

An arbitral award shall be made in writing and signed by the arbitrators constituting the arbitral tribunal. In any arbitration with more than one arbitrator, the signatures of the majority of the arbitrators serving on the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated.

An arbitral award shall state the date and place of the arbitration, composition of the arbitration tribunal and its competence, claims, substance of a dispute, the reasons underlying the arbitral award, and arbitration costs.

The Arbitration Law does not specify what types of remedies an arbitral tribunal can award. It usually depends on the remedies asked by the parties and allowed under applicable law.

It should be noted that Kazakhstan is a civil law country and, therefore, many remedies which are widely used in common law jurisdictions may not be accepted by local arbitrators (eg, liquidation damages, interest on damages, etc).

The costs of arbitration shall include:

  • fees payable to arbitrators;
  • costs incurred by arbitrators in connection with their service on the arbitral tribunal, including travel fares to get to the arbitration venue and expenses for accommodation and board;
  • compensation due to experts, translators and interpreters;
  • costs incurred by arbitrators for the inspection and evaluation of written and physical evidence at places where such evidence is found;
  • costs incurred by witnesses;
  • legal fees due to the representative of the party favoured by the arbitral award;
  • organisational and logistical costs of the arbitration.

The costs of arbitration shall be allocated between the parties by the arbitral tribunal in accordance with the parties' agreement or, in the absence of such agreement, in proportion to the claims granted and rejected.

An arbitral award can be appealed to the court only if the party making the application may prove that:

  • the arbitral award applies to a dispute falling outside the scope of the arbitration agreement or contains a resolution on any matters going beyond the scope of the arbitration agreement, or the arbitral tribunal has not had the jurisdiction to hear the dispute;
  • either party to the arbitration agreement has been adjudicated incapable by a competent court or said arbitration agreement is invalid under the law to which the parties have subjected it or, failing any indication thereon, under the applicable legislation of the Republic of Kazakhstan;
  • the composition of the arbitral tribunal or the arbitral procedure has been inconsistent with the parties' agreement or the arbitral tribunal's rules;
  • there is a court decision in relation to the same dispute between the same parties.

The court may also cancel an award if it finds that either (i) the subject matter of the difference is not capable of settlement by arbitration under the laws of Kazakhstan, or (ii) the recognition or enforcement of the award would be contrary to the public policy of Kazakhstan.

The grounds for appeal of an award cannot legally be extended.

The review of the appeal by the court is limited to the legal grounds set out above and does involve a review of the award on the merits.

Kazakhstan has been a party to the New York Convention since 1995.

Kazakhstan has entered into treaties on mutual recognition and enforcement of court judgments with several non-Western countries (eg, United Arab Emirates, Iran, China, Turkey, Pakistan), some of which also cover arbitral awards.

Kazakhstan has also been a party of the European Convention of 1961 since 1995.

Any arbitral award shall be recognised as binding and, upon an appropriate application in writing being filed with the competent court, shall be enforced in accordance with the Civil Procedure Code of the Republic of Kazakhstan.

The current Civil Procedure Code distinguishes between the enforcement procedure for arbitral awards granted by arbitration established and operating in Kazakhstan and the enforcement procedure for arbitral awards granted by foreign arbitration.

To commence enforcement of a foreign arbitral award in Kazakhstan, the interested party must apply with an application to the competent court within three years from the date the award took effect.

The list of documents to be submitted together with the application for the recognition and enforcement of a foreign arbitration award includes the original or certified copy of the arbitration award and an original or certified copy of the arbitration agreement.

The grounds for refusal of the enforcement of the arbitral award generally correspond to those for the cancellation of an arbitral award and is as provided in the New York Convention.

Concerning the enforcement of the award which was set aside by the court at the seat of arbitration, please note that there is no developed local court practice in this regard. To date, we are aware of only one case where the court granted the enforcement of the award which was set aside – however, in that case, the court used exemptions provided by Article IX of the European Convention. Also, we are not aware of cases where Kazakhstani courts applied sovereign immunity protection, while the relevant powers are provided to local courts in the Kazakhstani Civil Procedure Code (articles 477-500).

Until recently, the ability of a foreign company to have a foreign arbitral award enforced in Kazakhstan has remained questionable. Although Kazakhstan has been a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1995, Kazakhstani courts were generally reluctant to fully enforce an award in favour of a foreign party against the government of Kazakhstan or an influential Kazakhstani company.

However, in a number of recent judgments, local courts demonstrated the general pro-arbitration approach and granted several applications seeking the enforcement of foreign arbitral awards.

The concept of public policy is generally applied based on the court's discretion as no clear standards are established by the law.

However, in several recent cases the Supreme Court of the Republic of Kazakhstan applied a very narrow interpretation of public policy and stated that this defence may be used in very limited circumstances when the enforcement of the award breaches the main fundamental principles of the Kazakhstani legal system.

Generally, the Arbitration Law does not prohibit multiparty arbitration, assuming that all parties executed the relevant arbitration agreement.

At the same time, local law (as well as most local arbitration rules) is not tailored for multiparty arbitration (eg, rules on the constitution of the arbitral tribunal or allocation of costs). Therefore, in practice, parties should either include relevant provisions in the arbitration agreement or use the international arbitration rules, which provide for multiparty arbitration.

As in most former USSR countries, regulation of counsel and arbitrator conduct in international arbitration in Kazakhstan is not well developed.

The Arbitration Law is silent on the point of ethical rules for either arbitrators or counsels. Relevant international guidelines (such as the IBA Guidelines on Party Representation) are only rarely used in domestic arbitrations, as some of them contradict local procedural traditions. The IBA Guidelines, for example, impose obligations on counsel relating to document production that are not at all familiar in Kazakhstan. The Guidelines also allow counsel to assist with the preparation of witnesses and experts, which Kazakhstani procedural rules strictly prohibit.

Usually, ethical issues are addressed either in law firms' internal attorney manuals or in the arbitration rules of domestic arbitration institutions.

In addition, local counsels should comply with the ethical policies/rules of their bars or chambers of attorneys. These policies contain general ethical rules, with which counsels/barristers must comply, such as the following:

  • to be diligent and industrious and not to avoid taking necessary actions irrespective of the time and effort involved;
  • to conduct himself or herself with decorum before agencies and officials when dealing with legal matters;
  • not to allow a case to be needlessly prolonged nor use unlawful means of providing legal assistance or deception, and to discharge his or her professional duties in accordance with his or her client's rights and lawful interests;
  • to represent faithfully his or her client's interests and not to take any actions contrary to his or her interests.

However, usually these policies do not specifically address issues relating to counsel's behaviour in arbitration proceedings or in relation to arbitrators.

Kazakhstani law does not regulate the use of third-party funding in arbitration. We are also not aware of any cases where parties have used such funding in local arbitration or court proceedings.

To our knowledge, there is at least one case where local courts analysed the issues relating to a funding arrangement executed in the framework of foreign court proceedings and it seems that the concept of this arrangement is not entirely clear to local courts.

At the same time, we expect that funding arrangements will become increasingly popular in Kazakhstan, especially in court and/or arbitration proceedings commenced in the Astana International Financial Centre.

General provisions of the Arbitration Law do not provide for the possibility to consolidate separate arbitration proceedings. However, we are aware of cases where local arbitral tribunals did consolidate separate arbitration proceedings between same parties and related to similar issues upon the parties' agreement. Such an approach was also supported by Kazakhstani courts.

Generally, arbitration agreements bind only the parties that have agreed to arbitrate. While the Arbitration Law does not contain special provisions on third parties, some local arbitration rules allow third parties to join the arbitration subject to the consent of all other parties of the arbitration agreement. If so, third parties will be bound by the arbitration agreement and the award.

Baker McKenzie - CIS, Limited

Samal Towers, 8th Floor
97 Zholdasbekov Street
Almaty, A25C9X9
Kazakhstan

+7 727 330 05 00

+7 727 258 40 00

almaty@bakermckenzie.com www.Bakermckenzie.com
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Law and Practice in Kazakhstan

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Baker McKenzie - CIS, Limited is renowned for its significant expertise in complex litigation and arbitration proceedings involving disputes with state authorities, investment protection cases as well as administrative and criminal proceedings, and its ability to provide a wide range of services covering all stages of court/arbitration proceedings, including compulsory enforcement proceedings. The firm's Kazakhstan office is focused on international and local arbitration and litigation proceedings, and has significant experience and industry expertise in different areas, including oil & gas, energy, telecom, pharma, mining, infrastructure, agriculture and construction. It serves both foreign clients making investments in Kazakhstan and local companies acting inside or outside of the country. The firm's deep knowledge of local laws and practices – combined with experience of cross-border litigation/arbitration and its network of foreign offices (78 offices worldwide) – allow the practice to serve both international and local players.