Investing in Kazakhstan: New in Dispute Resolution

In this update we would like to inform you on recent developments in Kazakhstan aiming to improve the Kazakhstan Investment Climate by increasing trust in the Kazakhstan court system. The Astana International Financial Centre (AIFC) was created in December 2015, in Kazakhstan’s capital city, followed by the opening of the AIFC Court and International Arbitration Court (IAC). To explore more, please scroll down where, for convenience, we have placed the content in a question-and-answer format.

What is the AIFC?

The AIFC is an international financial centre located in Kazakhstan, providing a platform for businesses and financial institutions to tap into the emerging markets of Central Asia, Eurasian Economic Union, Caucasus, West China, Mongolia and Eastern Europe. The AIFC independent regulation, legal regime based on common law principles, tax incentives and investment preferences make it the ideal hub to access the region’s rapidly growing demand for financial services. Guided by its core principles, such as efficiency, transparency, integrity, professionalism and good practice, the AIFC aims to become the leading international centre for providing financial services.

What is the AIFC Court?

The AIFC Court is the Judicial body of the AIFC, which acts based on common law principles and is separate from the judicial system of the Republic of Kazakhstan.

Where is it located?

Upon finishing the reconstruction works in the EXPO-2017, Astana, it will be permanent seat of the AIFC Court.

What cases can be considered there?

The AIFC Court has exclusive jurisdiction over the disputes arising between AIFC participants, AIFC bodies and their employees, and the disputes related to activities conducted in the AIFC and governed by AIFC laws. Moreover, parties to a dispute can transfer the dispute to the AIFC Court by mutual agreement even if they are not AIFC Participants and/or their activity does not relate to the AIFC.

The AIFC Court considers civil and commercial disputes arising from transactions, contracts, arrangements or incidences. The Court does not have jurisdiction to consider criminal and administrative cases.

AIFC Participants – legal entities registered or accredited with the AIFC.

AIFC Bodies – authorized bodies of the AIFC determining the organization and controlling procedure over the AIFC Participants’ activities.

What is the applicable law?

The Court exercises jurisdiction under AIFC Court Regulations – adopted by the AIFC Management Council on 5 December 2017, which is based on principles of English and Welsh laws.

Applicable law of the Court constitutes from the following acts:

• the AIFC Constitutional Statute, AIFC Regulations;

• laws agreed by the parties, if such laws do not contradict the public order or public policy of Kazakhstan;

• laws that the Court may decide appropriate;

• decisions of the Court and decisions made in other common law jurisdictions.

How to appeal the decisions?

The Court consists of two tiers:

• a Court of First Instance, which also includes the Small Claims Court (a specialist division in the Court for consideration of claims up to the value of USD 150,000);

• a Court of Appeal.

The decisions of the Court of First Instance can be appealed in the Appeal Court. The decisions of the Appeal Court are final and binding.

Who are the judges?

The judges of the AIFC consist of the Chief Justice of the Court and at least 4 Judges eligible to sit in the Court of First Instance and Court of Appeal. The Small Claims Court consists of at least 3 judges.

Currently, there are nine judges appointed, including the Chief Justice of the Court, and two Justices of the Small Claims Court. All of them are highly reputable, with solid experience as lawyers and judges in the common law system, and are members of the Bar of England and Wales.

What are the requirements for Judges?

The judges of the AIFC Court must not be younger than forty years of age, have significant knowledge of common law and have experience as a lawyer or judge in a common law system, be of good character and speak and write fluently in English.

For the judges of the Small Claims Court, the age qualification is thirty years.

How are the AIFC Court’s decisions enforced?

Decisions of the Court may be enforced within the AIFC in accordance with the execution order issued by the Court. Within the territory of Kazakhstan, the AIFC Court decisions enforcement procedure is similar to the enforcement procedure of other Kazakhstan court decisions.

INTERNATIONAL ARBITRATION CENTRE

What is the IAC?

The International Arbitration Centre (the IAC) is a permanent arbitral tribunal created within the AIFC to consider disputes transferred to it by parties.

What is the legal status of the IAC?

The IAC is independent from Kazakhstan arbitration laws. The AIFC Court does not intervene in IAC activities, unless authorized by the parties to a dispute to do so within the frameworks set by the AIFC Arbitration Regulations.

What is the procedure for consideration?

The parties to a dispute are entitled to choose the number of arbitrators, the procedure for their appointment, and the seat of arbitration. The AIFC Arbitration Regulation provides other regulations in case of the parties failing to determine these items.

How to enforce IAC awards?

The enforcement procedure of IAC awards within the territory of Kazakhstan is similar to the enforcement procedure of other Kazakhstan arbitration tribunal awards. In order to enforce the IAC awards within the AIFC, the AIFC Court must issue an order on recognition of the arbitral award. In addition, IAC awards can be enforced under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

Sample of the dispute resolution clause:

Court Clause:

“Any dispute arising out of or in connection with this contract, including any questions regarding its existence, validity, or termination, shall be subject to the exclusive jurisdiction of the AIFC Court. This contract is governed by the acting law of the AIFC [or any other laws upon agreement of the parties].”

Arbitration Clause:

“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the IAC Arbitration and Mediation Rules which are deemed to be incorporated by reference into this clause.

The number of arbitrators shall be [e.g. one/three].

The seat, or legal place, of arbitration shall be the AIFC in the Republic of Kazakhstan.

The language to be used in the arbitral proceedings shall be English [or any language upon agreement of the parties].

This contract is governed by the laws of the AIFC [or any other laws upon agreement of the parties].”

Multi-tiered dispute resolution clause:

“In case of any dispute or claim arising out of or in connection with or under this contract, including any question regarding its existence, validity or termination, the Parties shall, without prejudice to any other proceedings, first seek to resolve the dispute or claim by mediation at the International Arbitration Centre in the AIFC. If the dispute or claim is not resolved between the Parties through mediation, then the Parties shall refer the dispute to arbitration at the International Arbitration Centre in the AIFC or to litigation at the AIFC Court. If the Parties refer the dispute to arbitration, then the number of arbitrators shall be [e.g. one/three]. The seat, or legal place, of arbitration shall be the territory of the AIFC in the Republic of Kazakhstan. The language to be used in the arbitral proceedings shall be English [or any language upon agreement of the parties]. This contract is governed by the laws of the AIFC [or any other laws upon agreement of the parties].”

Source: https://www.aifc.kz/