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KAZAKHSTAN: An Introduction

Contributors:

Ravil Kassilgov

Tukulov Kassilgov Shaikenov Disputes LLP Logo
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Kazakhstan: Dispute Resolution 

Authors: Bakhyt Tukulov, Ravil Kassilgov, Tukulov & Kassilgov Litigation

1. Judicial System 

1.1. Overview 

Kazakhstan’s judicial system is comprised of three tiers of courts: (i) special district/general district courts; (ii) appellate courts; and (iii) the cassation court (the Supreme Court).

Special district courts review specific categories of cases, such as administrative, commercial, criminal, etc. The vast majority of commercial disputes are tried in Special Commercial District Courts (“SCDC”). General District Courts review all civil cases that do not fall within the jurisdiction of SCDCs.

Courts are distributed by subject matter only at a district level (first instance). There is no such distribution at the appellate or cassation levels. Appellate Courts/Cassation Court have panels that focus on relevant categories of cases.

1.2. Administrative Courts 

Public disputes such as tax, antitrust, environmental, etc. relating to acts of state bodies were previously within the jurisdiction of SCDCs. In response to increasing complaints from businesses that SCDCs were too pro-state (which made it very difficult to win a case against the state), in July 2021 the New Administrative Procedure Code was adopted and new Special Administrative District Courts (“SADCs”) were established to review such disputes. The New Code and SADCs aim to provide a more level playing field to businesses in disputes with the state.

1.3. Conduct of Proceedings: Key Aspects 

Civil proceedings in Kazakh courts are adversarial and open to the public. However, courts have always been inquisitorial, and this trend has become stronger in the past two years. There is no jury trial in civil cases. Class actions are not allowed, although there is a possibility to join several claims. Punitive damages are not allowed.

1.3.1. Evidence 

Courts are generally driven by form rather than substance (a general feature of most post-Soviet courts). Court heavily relies on documentary evidence. Status of electronic evidence is vague. Discovery is not available. A motion to produce evidence must provide sufficient detail of the evidence sought.

1.3.2. Injunctive Relief 

Courts generally issue injunctive relief orders, and do not require the claimant to advance a deposit or security.

1.3.3. Fees  

The court fee for filing a claim is 3% of the claimed amount for legal entities, 1% for individuals. The fee has no upper limit. All fees (including attorney fees) are recoverable from the respondent if the claim is granted/settled. In monetary claims recoverable attorney’s fees are capped at 10% of the claim, but courts frequently decrease such fees sometimes arbitrarily.

1.3.4. Electronic Systems 

Courts are reasonably equipped. One can file submissions electronically, track the status of the case, search and download procedural documents, and information on other cases.

All proceedings are now conducted remotely in light of the COVID-19 situation.

1.3.5. Timing 

Judicial process is relatively quick. It takes 4-6 months following filing a claim to have a binding judgment, which is rarely sufficient in complex cross-border litigations.

1.3.6. Foreign Litigation 

Kazakh courts view foreign litigations as having the effect of lis pendens or otherwise recognise foreign litigation only to the extent there is an international treaty with a relevant foreign state.

1.3.7. Administration of Justice 

The quality and style of legal proceedings may vary greatly from judge to judge even in the same court. Issues with proper notice may arise, judges may be overloaded. Sometimes qualification of judges may be insufficient in complex disputes.

1.3.8. Private Enforcement 

A judgment creditor may select between private and state enforcement officers (except in respect to recovery from the state). Private enforcement officers (“PEOs”) operate in a competitive market, which usually allows effective enforcement. PEOs' fees payable on top of the debt vary between 3-25% of the collected amount (capped at approx. USD80,000).

1.4. Systemic Issues 

1.4.1. Corruption/Lack of Independence  

Corruption is becoming increasingly rare, but still not uncommon. Difficulties may arise in cases against the state/companies affiliated with the state. Judges are usually reluctant to issue judgments against the state, but the situation is improving.

1.4.2. Irregularities in Application of the Law 

Judicial practice is controversial on many commercial issues. The Supreme Court has not been able to properly streamline judicial practice and guide lower courts, although it is trying to improve the situation (amendments introduced into the Civil Procedure Code in January 2022 demonstrate this).

1.4.3. Issues with Accessing the Supreme Court 

The Supreme Court commences proceedings only if it finds “significant violations of substantive or procedural law”. The criteria are not transparent, which makes it difficult to predict whether or not an appeal option is available in any given case. It is believed that the Supreme Court reviews less than 10% of appeals.

There is an option to appeal further to the Chairman of the Supreme Court. But the threshold for appeal is even higher (grounds affecting public interest or failure of a judgment to follow judicial practice).

2. AIFC Court 

2.1. Overview  

The Court of Astana International Financial Center (“AIFC Court”) operates separately from the court system of Kazakhstan. The main feature of AIFC Court is that:

(i) the court considers mainly contractual disputes;

(ii) cases are heard by retired judges from England, USA, Singapore, and other common law jurisdictions;

(iii) the language of legal proceedings is English;

(iv) procedural rules of AIFC Court are similar to those of the courts in England and Wales; and

(v) judgments of AIFC Court have the force of a domestic Kazakh judgment (no need to recognise and enforce through the state court).

2.2. Jurisdiction 

AIFC Court has jurisdiction to review the following categories of disputes:

(i) if the parties submit to AIFC Court by written agreement (no requirement for the parties to have connection to AIFC);

(ii) if a contract is governed by AIFC law;

(iii) the dispute arises from a transaction made on the territory of AIFC; and

(iv) the dispute is between companies registered within the AIFC.

3. Arbitration 

3.1. Overview 

Arbitration is a popular option for resolving domestic and international disputes. Arbitration Law is based on the UNCITRAL Model Law with certain specific features. The law was seriously improved in the past two years which made it more liberal.

Still, the law has certain serious restrictions which must be borne in mind. For example, the law provides that state entities and companies in which the state directly/indirectly holds more than 50% of capital cannot submit to arbitration without the consent of the relevant state authority.

3.2. Arbitrability 

The scope of arbitrability is relatively broad and extends to “civil law relations”.

3.3. Arbitration Agreement 

Kazakh courts require an agreement “in writing”, and restrictively approach arbitration agreements executed electronically. They require that exchange of electronic documents is certified by digital signatures issued according to relevant local procedures.

3.4. Rare risk of setting aside 

One of the key obstacles to further expansion of arbitration in Kazakhstan is the risk that courts may set aside/refuse to recognise and enforce an award.

3.5. AIFC Arbitration 

One of the key benefits of arbitrating at AIFC is that awards issued by AIFC International Arbitration Court must be recognised and enforced exclusively through AIFC Court (not through Kazakh courts). This ensures very high survivability of awards.

4. Enforcement of Foreign Arbitral Awards/Judgments

4.1. Foreign Awards 

Foreign arbitral awards are usually recognised and enforced by Kazakh courts in accordance with the 1958 New York Convention, 1961 European Convention, and domestic civil procedure law (on the basis of reciprocity).

Although our research shows that Kazakh courts have recognised and enforced approx. 89% of awards, the likelihood of refusal to recognise an arbitral award may increase in proportion to the amount of the claim.

4.2. Enforcement of Foreign Court 

Judgments Kazakh courts recognise and enforce foreign judgments based on an international treaty, or the absence of one – based on reciprocity.