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Knowledge Series by 7P and TKL
Seven Pillars Law Launches “Knowledge Series” with Tukulov and Kassigilov Litigation on the litigation procedures in Kazakhstan
Mark Beer OBE, Yan Tkachev, Seven Pillars Law
Ravil Kassilgov, Tukulov & Kassilgov Litigation
In May 2015, the president of Kazakhstan Republic, Nursultan Nazarbayev, announced a new development project within Astana – Nur-Sultan since 2019, capital of Kazakhstan – to parliament. On the 7th of December of 2015, Nursultan Nazarbayev approved the project which moved forward the launching and creation of Astana International Financial Centre (AIFC), which is part of a plan to achieve the country’s aim of joining the top 30 developed countries by 2050. The mission was to work towards establishing Nur-Sultan as a new global financial hub to contribute to the sustainable economic development of Kazakhstan and subsequently, the region of Central Asia; during the first official performance related to financial innovations and transformations of Nur-Sultan, Nursultan Nazarbayev claimed that doing so was the first step of the realisation of Kazakhstan’s 2050 goal.
Kazakhstan is one of the largest countries in Asia and neighbours nine countries, putting it in an advantageous and strategic position to become an ever-growing market with untapped potential as it is a gateway to Russia and the rest of Central Asia. Additionally, it is a young country where the economy is not too rigid to be transformed from a command economy into a genuine market economy (https://astanatimes.com/2018/07/kazakhstan-launches-aifc-seeks-to-become-regional-financial-hub/). Kazakhstan’s economic growth is largely due to gas and oil revenues, but the establishment of the Astana International Financial Centre provides an opportunity for a new stream of revenue by offering financial services including financial technologies, Islamic finance, green finance, capital market, and asset management, thus diversifying the economy and supporting the creation of efficient and liquid markets.
Located where the EXPO-2017 was, what the AIFC seeks to do is to bring developed market standards of financial intermediation to one of the largest and least capital served regions in the world through implementing the principles of English common law which other large-scale international financial centres (such as the Dubai International Financial Centre) have done, providing accessibility to an international standard practice within Central Asia.
The key stages of the formation of the AIFC took place from 2016 to 2018. The AIFC provides financial services through the AIFC Exchange, the AIFC Court and the International Arbitration Centre, which were launched in 2017. Thereafter, an international expert council of the financial centre for Islamic finance was created. The activities of all bodies of the AIFC were officially launched in 2018 and have since been in operation.
The AIFC has been efficient in establishing its institutions in a short period of time. The Court of the Astana International Financial Centre (AIFC Court) has been instrumental in dispute resolutions and represents the first judicial system in Kazakhstan based on the norms and principles of English common law. The AIFC Court does not deal with criminal and administrative proceedings and has exclusive jurisdiction over civil and commercial disputes arising between the AIFC divisions and their foreign employees. It consists of a Court of First Instance and a Court of Appeal. To ensure the quick resolution of disputes with a small claim, the First Instance Court has a special unit known as the Small Claims court, ensuring a high level of efficiency. The decisions of the AIFC Court of Appeal are final and not subject to further appeal.
While the AIFC Court stands to implement court verdicts, the International Arbitration Centre assists in the appointment of arbitrators and mediators to provide an alternative to court litigation to resolve commercial and civil disputes. Its world-leading panel of international arbitrators apply years of experience in the field of subsoil use, trade, oil and gas, energy, Islamic finance, banking, intellectual property law and other areas of commercial law with integrity and the unconditionality of the rule of law. The IAC’s arbitration awards are upheld by the AIFC Court as Court Orders and enforceable in the Republic of Kazakhstan due to the AIFC’s robust enforcement system.
The AIFC Court and IAC
The establishment of the various components of the AIFC indicates that the AIFC is well on its way to being reputable, and it is imperative for parties requiring arbitration or financial services to understand the way in which the AIFC Court operates. The International Arbitration Court at the AIFC, like other arbitration courts, is where parties’ disputes would be resolved by arbitrators which the parties may elect from a list of arbitrators approved by the AIFC Court. Any apprehension regarding the predictability and legal certainty of AIFC Court decisions, judgements and legislation are combated by the AIFC Court Regulations 2017 and AIFC Court Rules 2018 which have laid out guidelines that inform the way that the AIFC Court should operate and ensure that procedures are followed to the best standard, as relevant judicial practise evolves.
The AIFC Arbitration Rules are simple compared to the AIFC Court Rules, as litigation is a more complex route. The main advantage of arbitration at the AIFC is that it is exempt from the Republic of Kazakhstan’s Law “On Arbitration”. Thus, any limitations which stem from national law and uncertainties which have been discussed in the jurisprudence (for example, risks relating to the validity of arbitration clauses, the scope of the arbitrability of disputes, e.g., arbitrability of corporate disputes and many other issues) would not apply to the AIFC arbitration.
Arbitral awards, although binding once declared, cannot be enforced immediately when awarded by national courts. In order for them to be enforced, the state court must issue a ruling to recognise and enforce an arbitral award; to turn the arbitral award into a document which a bailiff may enforce the arbitral award, it must pass through Kazakh court where it must be decided whether or not to recognise and enforce the arbitral award. The AIFC Court has made it much simpler to award and enforce arbitral awards. There are cases set out by law where a Kazakh court may refuse to recognise and enforce an arbitral award. This is the key risk of the arbitration system in Kazakhstan. In practice, in large or political disputes Kazakh courts may refuse to recognise and enforce arbitral awards on questionable grounds. This is where the AIFC Court can be a gateway to recognise foreign arbitral awards.
The registration fee for filing a claim to the AIFC Court is set at $1000 USD. A fee of $150 USD per hour will additionally be charged for administering the dispute by the arbitration court at the AIFC. The hourly fee of an arbitrator will not exceed $635 USD, and this rate could be reduced by agreement with an arbitrator. It is debatable as to whether the cost of litigation at the AIFC Court will or will not be higher than litigation in Kazakh courts; the AIFC Court’s filing fee is significantly lower than the state duty payable to Kazakh courts in relation to large disputes, while the rest of the expenses are higher. Unless parties agree otherwise, the dispute will be resolved by a tribunal composed of three arbitrators. The losing party (or both parties, in certain cases) will have to reimburse arbitrators’ expenses (costs of travel, accommodation, etc.), as well as costs of arbitration (translators’ fees and other expenses).
Since Kazakhstan is a party to the 1958 New York Convention and the 1961 European Conventions, Kazakh courts can enforce foreign arbitral awards based on these treaties. The process is such:
● Judgment creditor should file an application to a Kazakh court at the place of the debtor’s registration or the location of its assets along with:
– The award (original or a certified copy) and its certified translation (Russian/Kazakh) + apostille.
– The arbitration agreement (original or certified copy) and its certified translation (Russian/Kazakh) + apostille.
– Proof of payment of the state duty.
● The national court reviews the application within 15 business days.
While parties are at liberty to acquire the services provided by national law or the AIFC Court, seeking the recognition and enforcement of dispute resolution and arbitral awards through the AIFC Court is more advantageous for both foreign and Kazakhstani parties, as compared to national courts. The AIFC Court will provide fairness and justice which meets the highest international standards and best international practice of law, which is imperative in Kazakhstan today.
We hope that the AIFC Court will become successful rapidly, and that it will be established to be on par with national courts of Kazakhstan.