International Arbitration in Kazakhstan is governed by the Law on Arbitration (Law No. 488-V) dated 8 April 2016 (the “Law on Arbitration”). The Law on Arbitration was amended twice since its entrance into force on 19 April 2016, the first time in March 2017 (Article 9.5) and the second time in January 2019, when significant amendments were made as part of wider efforts to make Kazakhstan a more international and arbitration-friendly jurisdiction and to increase foreign direct investment to the country.
Law on Arbitration in Kazakhstan
The Law on Arbitration No. 488-V is composed of eight chapters in total:
- Chapter 1: General Provisions (Articles 1-10)
- Chapter 2: The Arbitration Chamber of Kazakhstan (Articles 11-12)
- Chapter 3: Conduct of Arbitration Proceedings (Articles 20-40)
- Chapter 5: Costs of Arbitrating a Dispute (Articles 41-43)
- Chapter 6: Rendering an Arbitral Award and Termination of Proceedings. Annulment of Arbitral Award (Articles 44-53)
- Chapter 7: Recognition and Enforcement of Arbitral Awards (Articles 54-57)
- Chapter 8: Final and Transitional Provisions (Articles 59-60).
Although the Law on Arbitration is based on the UNCITRAL Model Law on International Commercial Arbitration (the “UNCITRAL Model Law“) there are, nevertheless, differences as the Law on Arbitration contains more stringent requirements regarding certain aspects of the arbitration procedure. One example is requirements for an arbitrator, since the Law on Arbitration provides that an arbitrator may only be a person who has reached the age of 30, with higher education and work experience of at least five years in his/her profession (Article 13(1)). Moreover, unlike the UNCITRAL Model Law, the Law on Arbitration provides for a two-month period during which a dispute must be considered and resolved by arbitration, unless another time period is established by the rules or agreement of the Parties (Article 35(2)), which is relatively short. The Law on Arbitration also provides for certain additional requirements as to the content of the Arbitration Award and a wider list of grounds for setting it aside (Article 57), as explained below.
Form of the Arbitration Agreement
Article 9 of the Law on Arbitration (Form and Consent of an Arbitration Award) provides that an arbitration agreement shall be concluded in writing. The requirement of the written form of an arbitration agreement has been complied with if an arbitration clause is present in a document signed by the parties, or in the exchange of letters, telegrams, phone and fax messages, or electronic documents, or other documents that determine the actors and the content of their expression of will (Article 9.1). Moreover, an arbitration agreement shall also be deemed to be concluded in writing if it is concluded by exchanging a statement of claim and statement of defence, in which one party confirms the existence of an agreement, and the other does not object to it (Article 9(2)). The Law on Arbitration also provides for an option to conclude an arbitration agreement via reference in a contract to a document containing a provision allowing disputes to be referred to arbitration, provided that the contract is concluded in writing and the reference makes the arbitration agreement a part of the contract (Article 9.3).
Arbitrability of Disputes in Kazakhstan
Article 8.2 of the Law on Arbitration provides that only disputes arising out of civil relations may be submitted to arbitration. The following disputes are considered as non-arbitrable matters under the laws of Kazakhstan:
- disputes affecting the interests of minors;
- disputes affecting the interests of persons recognized as incompetent or incapacitated;
- disputes concerning rehabilitation and bankruptcy;
- disputes between natural monopoly entities and their consumers;
- disputes between governmental authorities;
- disputes between legal entities where 50% of voting shares (participatory interest in the charter capital) or more are directly or indirectly owned by the State; and
- disputes arising out of personal non-property relations, which are not associated with property relations (disputes over protection of honour, dignity and business reputation, right to name, privacy protection, personal image, etc.).
Arbitral Tribunals
Article 13 of the Law on Arbitration sets out criteria who may be appointed as an arbitrator:
An individual, who is directly or indirectly not interested in the outcome of a case, who is independent of the parties and consents to perform duties of an arbitrator, who has reached the age of thirty, has a higher education and no less than five years’ work experience in his/her profession, is selected (appointed) an arbitrator.
An arbitrator resolving a dispute solely must have a higher legal education. In the event of a collegial resolution of a dispute, the chairman of the arbitration tribunal must have a higher legal education.
By agreement of the parties, a citizen of the Republic of Kazakhstan, a foreigner or a person without nationality may be selected an arbitrator.
Article 13(2) provides for additional requirements for prospective arbitrators, which may be agreed by the parties directly or determined by rules of a permanent arbitration tribunal.
The arbitral tribunal may be composed of either a single member tribunal (sole arbitrator) or several members (“collegial”), as provided in Article 14 of the Law on Arbitration. The parties are free to determine the number of arbitrators, which must be uneven. Unless the parties otherwise agree, the Law on Arbitration provides for a default number of three arbitrators (Article 14(2)).
Article 17 of the Law on Arbitration sets out the procedure and grounds for challenging an arbitrator. First, the parties may challenge an arbitrator in case of his/her non-compliance with the requirements of Article 13 of the Law. Other grounds for challenging an arbitrator include the following circumstances, which cast doubt on the arbitrator’s impartiality or competence:
1) a person closely related to the arbitrator is a party to the dispute or the arbitrator can otherwise expect a significant benefit or damage for himself/herself depending on the outcome of the dispute;
2) the arbitrator or a person closely related to him/her is the head of a legal entity, its branch or representative office that is a party to the dispute or otherwise represents a party or any other person who can expect significant benefit or damage depending on the outcome of the dispute;
3) the arbitrator has either acted as an expert or in any other way identified his/her position in the dispute in advance or has assisted a party to the dispute in the preparation or presentation of his/her position;
4) the arbitrator received or demanded remuneration in connection with the consideration of this case, which is not provided for by this Law;
5) the arbitrator unreasonably fails to meet time limits for arbitration proceedings.
The arbitral tribunal has the inherent power to issue a decision on its competence and to order provisional measures, as provided in Article 20 of the Law on Arbitration. The Parties are further free to determine the place of arbitration. If they fail to do so, the place of arbitration shall be determined by the tribunal taking due account of all the circumstances of the case, including its convenience to the parties (Article 22).
Arbitral Institutions in Kazakhstan
One interesting feature of the Law on Arbitration is its Chapter 2, which provides for the establishment, organization and role of the Arbitration Chamber of Kazakhstan. The Arbitration Chamber of Kazakhstan is a non-profit organization formed as an association of permanent arbitration tribunals and arbitrators, established to ensure favourable conditions for implementation, promotion and support of arbitration activity in the Republic of Kazakhstan. It combines all “permanent arbitrages” of the Republic of Kazakhstan through collective membership. The powers of the Arbitration Chamber are set out in Article 12 of the Law on Arbitration and include, inter alia, representation and protection of the interests of arbitrators and permanent arbitration tribunals in State bodies of the Republic of Kazakhstan and in foreign and international organizations; monitoring of the situation with the arbitration activity in the Republic of Kazakhstan; maintaining the register of arbitrators of permanent arbitration tribunals, as well as arbitrators, who are members of the Arbitration Chamber; training and professional development of arbitrators, etc.
Other prominent arbitration institutions in Kazakhstan include:
- International Arbitration Court (IAC)
- The Arbitration Center of the National Chamber of Entrepreneurs “Atameken”; and
- International Arbitration IUS
The International Arbitration Court is one of the founders of the Arbitration Chamber in the Republic of Kazakhstan. Established in 2001 (under the name International Arbitration (Trial) Court of the Republic of Kazakhstan), it was renamed in 2008 to the “International Arbitration Centre”. However, due to changes in legislation in 2016, the International Arbitration Centre was abolished and its functions for the consideration of disputes between residents of Kazakhstan were transferred to the International Arbitration Court.
Recognition and Enforcement of Foreign Arbitral Awards in Kazakhstan
Kazakhstan acceded to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“) by Presidential Decree dated 4 October 1995. In the same year, Kazakhstan also ratified the European Convention on International Commercial Arbitration.
The recognition and enforcement of foreign arbitral awards are governed by the Law on Arbitration (Articles 54-57), but also by the Civil Procedure Code of Republic of Kazakhstan dated 31 October 2015 (Law No. 377-V ZRK). The Civil Procedure Code, Article 255, provides for a greater number of grounds for a refusal to recognize an award than stipulated in the New York Convention.[1] In addition to the grounds provided in Article V of the New York Convention, the courts of the Republic of Kazakhstan may refuse to recognize and enforce an arbitral award if a party against which the arbitral award was rendered submits evidence that there is an effective court judgment or arbitral award rendered in a dispute between the same parties, with respect to the same subject and on the same grounds, or a court or arbitration ruling on termination of proceedings in connection with the claimant’s abandonment of the claim.[2]
The grounds for rejecting the recognition and enforcement of foreign arbitral awards are accordingly concurrently provided in four different legislative acts: the Civil Code of Procedure, the Law on Arbitration, the New York Convention and the European Convention on International Commercial Arbitration. This poses practical difficulties, considering that the grounds set out in international conventions do not entirely coincide with the grounds set out in the Civil Code of Procedure and the Law on Arbitration. As a general rule, the approach of Kazakh courts has been, based on Article 255 of the Civil Code of Procedure and Article 57 of the Law on Arbitration, to reject the recognition and/or enforcement of an arbitral award, irrespective of the country in which it has been rendered, on the following grounds:[3]
1) If the party against whom the arbitral award has been invoked furnishes in court proof that:
(i) the arbitration agreement is not valid under the law of the state to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made;
(ii) the award deals with a dispute not contemplated by the arbitration agreement or not falling within its terms, or contains resolutions on matters beyond the scope of arbitration agreement, or the arbitration lacks jurisdiction over the dispute. If the decisions on matters covered by an arbitration agreement can be separated from the decisions on matters not so covered, the issuance of writ of execution for the part of arbitral award covered by the arbitration agreement cannot be refused;
(iii) a party to the arbitration agreement was found incapable or having limited capacity by a court;
(iv) the party against whom the arbitral award is invoked was not properly notified of the appointment of an arbitrator or of the arbitration proceedings, or was unable to present its case to the arbitration for other reasons recognized as valid by the court;
(v) there is an effective court judgment or arbitral award rendered in a dispute between the same parties, on the same subject matter, and on the same grounds, or a court ruling or arbitral determination to terminate the case proceedings due to the claimant’s abandonment of claim;
(vi) the composition of the arbitral tribunal or the arbitration procedure in the proceedings was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the laws of the country where the arbitration took place;
(vii) the award has not yet become binding on the parties or has been set aside, or its execution has been suspended by the court of the country under the law of which it was rendered.
Or, the Kazakh court establishes that:
(1) the recognition and/or enforcement of the arbitral award is contrary to RK public policy; or
(2) the dispute in which the arbitral award has been rendered cannot be the subject of arbitration proceedings.
The burden of proof of the above circumstances rests with the party against which an arbitral award has been rendered. In practice, however, Kazakh courts do not always observe this requirement to distribute the burden of proof.
[1] V. Zharaskanovich Shaikenov & A. Turekhanovna Idayatova, “4.6 Kazakhstan: Recognition and Enforcement of Foreign Arbitral Awards”, in Roman Zykov (ed), Recognition and Enforcement of Foreign Arbitral Awards in Russia and Former USSR States (Kluwer Law International, 2021) pp. 379 – 416, footnote no. 7.
[2] International Arbitration 2021, Kazakhstan, Chambers & Partners Practice Guides, available at: https://practiceguides.chambers.com/practice-guides/international-arbitration-2021/kazakhstan
[3] V. Zharaskanovich Shaikenov & A. Turekhanovna Idayatova, “4.6 Kazakhstan: Recognition and Enforcement of Foreign Arbitral Awards”, in Roman Zykov (ed), Recognition and Enforcement of Foreign Arbitral Awards in Russia and Former USSR States (Kluwer Law International, 2021), pp. 398-399.