KAZAKHSTAN: An Introduction

Briefly Detailing How Dispute Resolution Works in Kazakhstan

Kazakhstan is undergoing significant political and economic reforms in de facto transit of power from the former President Nazarbayev to President Tokayev. The transit was triggered by the civil unrest in January 2022 and already generated a large volume of commercial and criminal proceedings concerning the transfer and redistribution of wealth.

In line with this power struggle, Kazakhstan introduced the Unexplained Wealth Law, which entered into effect in September 2023. The law may generate a large volume of asset recovery claims in Kazakhstan and abroad. Regulatory reforms and changes in enforcement policies (tightened supervision over the performance of mining licences and oil concessions) are likely to generate investment treaty disputes. Hence, Kazakhstan is likely to stay very busy in terms of dispute resolution work in the next three to five years.

The reform of the Administrative Courts system has largely been successful. There are rumours of further serious reforms in the judicial sector. The Court of the Astana International Financial Centre (consisting of retired English judges) has been a success. It ensures fair and impartial justice not only between foreign/local businesses on the one hand and the state/powerful local players on the other, but it is also increasingly popular among foreigners.

Judicial system 

Overview 

Kazakhstan’s judicial system comprises three tiers of courts:

1. special district/general district courts;
2. appellate courts; and
3. the cassation court (the Supreme Court).

Special district courts review specific categories of cases, such as administrative, commercial, and criminal. The vast majority of commercial disputes are tried in special commercial district courts (SCDCs). General district courts review all civil cases that do not fall within the jurisdiction of SCDCs (eg, family disputes).

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 and the cassation court have panels that focus on relevant categories of cases.

Administrative courts 

Administrative disputes such as tax, antitrust, and environmental relating to acts of state were previously within the jurisdiction of SCDCs. 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 level playing field to businesses in disputes with the state. In fact, as the statistics suggests, on average claimants win in more than 50% of the cases.

Conduct of proceedings: key aspects 

Civil proceedings in Kazakh courts are said to be adversarial and open to the public. However, in fact the courts are inquisitorial, and this trend has become stronger in the past few 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 available.

Evidence

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

Injunctive relief

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

Fees

The court fee for filing a claim is 3% of the claimed amount for legal entities, and 1% for individuals. The fee is capped at approximately USD146,000 and USD73,000, respectively. The costs are recoverable from the respondent if the claim is granted/settled. In monetary claims, costs are capped at 10% of the claim, but courts frequently decrease such fees, sometimes arbitrarily.

Electronic systems

Courts are reasonably equipped. One can file submissions electronically, track the status of the case, search and download procedural documents, and retrieve information on other cases. Proceedings are conducted online with the exception of the Supreme Court or where a party requests a hearing offline.

Timing

The judicial process is relatively quick. It takes four to six months following filing a claim to have a binding judgment, which is rarely sufficient in complex cross-border litigations.

Foreign litigation

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

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, and judges may be overloaded. Sometimes the qualifications of judges may be insufficient in complex disputes.

Private enforcement

A judgment creditor (except where the state is the judgment debtor) may select from many private enforcement officers (PEOs) on the market to enforce a judgment. Private enforcement has proved very effective. PEOs’ fees recoverable from the judgment debtor vary between 3–25% of the collected amount (capped at approximately USD80,000).

Systemic issues 

Corruption/lack of independence

Corruption and administrative influence is 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 slowly improving.

Irregularities in application of the law

Judicial practice is controversial on many, even basic, issues. The Supreme Court has not been able to properly streamline judicial practice and guide lower courts, although it is slowly trying to improve the situation.

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). Statistically, this option is successful in 1% of the appeals.

AIFC 

Court 

The Court of Astana International Financial Centre (“AIFC Court”) operates separately from the court system of Kazakhstan. The main features of AIFC Court are that:

1. the court considers mainly contractual disputes;
2. the language of legal proceedings is English;
3. procedural rules of AIFC Court are broadly similar to those of the courts in England and Wales; and
4. judgments of AIFC Court have the force of a domestic Kazakh judgment (no need to recognise and enforce through the state court).

Jurisdiction of the court 

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

1. If the parties submit to AIFC Court by written agreement (no requirement for the parties to have connection to AIFC).
2. If a contract is governed by AIFC law.
3. The dispute arises from a transaction made on the territory of AIFC.
4. The dispute is between companies registered within the AIFC.

Arbitration Centre 

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

Arbitration 

Overview 

Arbitration is a popular option for resolving domestic and international disputes. Arbitration Law is generally based on the UNCITRAL Model Law with specific features. The law has been improved in the past few years. Still, the law has certain serious restrictions which must be kept 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. Arbitration Law does not apply to arbitrations conducted at the AIFC International Arbitration Centre.

Arbitrability 

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

Arbitration agreement 

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

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. It is increasingly rare, but not uncommon.

Enforcement of foreign arbitral awards/judgments

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 law (on the basis of reciprocity). Although our research shows that Kazakh courts have recognised and enforced approximately 89% of awards, the likelihood of refusal to recognise an arbitral award may increase in proportion to the amount of the claim.

Enforcement of foreign judgments 

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