Legal Digest - New Arbitration Law in Kazakhstan

On 8 April 2016, the President of Kazakhstan has signed a new Law On Arbitration (the “Law”) which introduces a number of novelties in the field of arbitration in Kazakhstan.

The Law came into force on 20 April 2016.

Below we highlight the key developments envisages by the Law with respect to arbitration activity in the Republic of Kazakhstan:

                                 i.        The Law supersedes the Laws of Kazakhstan On Arbitration Tribunals and On International Arbitration.  The Law unifies the term “arbitration” which now combines two earlier definitions “arbitration tribunal” and “international arbitration”.  Hence, from now on a court of arbitration shall resolve any dispute arising from civil relations between individuals and/or legal entities irrespective of their location within or outside Kazakhstan.

                                ii.        In Kazakhstan arbitration may be set up as a permanent institution or as a temporary (ad hoc) tribunal for settling a certain dispute.

                               iii.        The following disputes are not subject to arbitration: which affect the interests of underage individuals or individuals with full or partial legal disability, arising from rehabilitation or bankruptcy, between natural monopolies or customers thereof, between government agencies or between quasi-government entities, and arising from personal non-property relations.  The Law allows government agencies, public enterprises and those entities in which at least fifty percent of voting shares (interests in the authorized capital) are directly or indirectly held by the government to enter into arbitration agreements with Kazakhstan citizens and entities, subject to consent of the relevant government authority (if a dispute relates to the central government’s assets) or the relevant local authority (if a dispute relates to municipal assets).

                               iv.        An arbitration agreement shall be executed in writing.  The Law provides, however, that  pursuant to Article 404 of the Kazakhstan Civil Code, either party may withdraw its consent to arbitration before a dispute arises, with a reasonably timed advance notice to another party.

                                v.        When a state court receives a statement of claim for a dispute which is subject to arbitration, it may refuse to refer such case to arbitration if it finds out that the relevant arbitration agreement is invalid, void or unenforceable.  However, the Law does not specify the court procedure and/or document which formalizes such refusal.

                               vi.        The Law provides for the establishment of the Kazakhstan Arbitration Chamber, a non-profit organisation which shall unite permanent arbitration institutions and arbitrators and ensure favourable environment for the performance, development and support of arbitration activity in Kazakhstan as prescribed by Kazakhstani legislation.  The Law, however, does not stipulate whether all arbitration institutions and/or arbitrators must join the Chamber.

                              vii.        The Law determines that arbitrator may be any individual who does not have any direct or indirect interest in a particular case outcome, who is independent from the parties involved, who agrees to act as an arbitrator, who has reached the age of thirty and who has a university degree and at least five-year experience in the relevant area of practice.  When a dispute is heard by one arbitrator, she/he must have a law degree.  When a dispute is settled by an arbitration panel, the chairman of such panel must have a law degree.  If an arbitrator does not meet the aforementioned criteria, any  party to dispute may reject such arbitrator.

                             viii.        The Law introduces the “register of arbitrators”, which is essentially  a database with the details of all arbitrators acting in Kazakhstan.  Such register shall be kept by the Arbitration Chamber, although the Law does not determine the legal importance of the register; therefore, it is still unclear whether all arbitrators must be entered into the register and whether the person not entered into the register may act as an arbitrator.  The guidelines for the maintenance and use of the register shall be approved by the Arbitration Chamber.

                              ix.        Same as before, an arbitration award may be overturned by a court on the ground of the public order provision, although the Law has changed the definition of “Kazakhstan public order” which now means the fundamentals of law and order entrenched in Kazakhstani legislation.  Hence, the new definition is much broader than before.

Should you have any questions regarding litigation and/or arbitration, please feel free to contact the following arbitration lawyers of Sayat Zholshy & Partners:

- Managing Partner and the head of the practice of "Litigation and Arbitration" Vitaliy Vodolazkin;

- Counsel Assel Sandybayeva.