| ||||||||||||||||||||
|
|
|
Zh.S.Yelyubayev’s (Ж.С.Елюбаев) Speech at the Conference «International Commercial Arbitration» held under the aegis of the Supreme Court of the Republic of Kazakhstan, Stockholm International Arbitration and with the assistance of the Arbitration Commission of the ROK CCI, IUS, IAC, SALANS, Sida. (Almaty, September 17, 2004)
Commercial Arbitration and Investment Disputes
Of the range of issues discussed at the Conference, I would like to focus on the use of commercial arbitration for settlement of investment disputes. One should admit that the Republic of Kazakhstan currently enjoys a stable political system and an attractive investment climate. Kazakhstan is the leader of the CIS countries in the field of development of market relations. An appropriate legal basis is created in the country to regulate social relations, which maintains the balance of interests of the state and the subjects of the economic relations. Of course, there are also some drawbacks that slow down the progress in certain areas of country’s social and public life and prevent an even more efficient development of market relations. However, our today task is not to analyze those drawbacks, so let us revert to the topic of this presentation. The commercial arbitration investment dispute proceedings, based though on certain general principles, have some distinctive features of their own. These features are determined, first of all, by specials laws of the Republic of Kazakhstan and by international Conventions and Treaties. It is well known that, in the Republic of Kazakhstan, legal entities and individuals, including national and foreign investors, can refer property disputes to the court of arbitration, as explicitly provided by article 25 of the ROK Civil Procedure Code[1]. Article 9 (1) of the ROK Civil Code[2] gives the list of bodies authorized to exercise protection of rights of individuals and legal entities, including investors, viewed as special subjects of civil relations. These are the court of law (state court) and arbitration courts and tribunals. It means that legal entities and individuals can choose the forum where to seek the protection of their rights in disputes, including the investment disputes. Please note that the terms «court of arbitration», «arbitration tribunal» and «arbitration» are currently used in the Republic of Kazakhstan as synonyms and mean permanent arbitration institutions and the arbitrations called to settle a specific dispute, the ad hoc arbitrations. The foregoing provisions of the Kazakhstan law are a part of general principles that give the forum choice right to the subjects of civil relations, including both national and foreign investors. I have mentioned, however, that the Kazakhstan legislation provides for some procedural peculiarities when an investment dispute is examined by arbitration. Under article 1 of the ROK Law «On Investment» dated January 8, 2003, an investment dispute means «any dispute that arises between investors and state bodies out of contractual obligations and in connection to the investor’s investment activities». Parties to an investment dispute are therefore state bodies and the investor, no matter foreign or national. Pursuant to article 9 of the ROK Law «On Investment», «investment disputes can be settled either by negotiations, including the ones where external experts take part in, or in accordance with the dispute resolution procedure agreed on by the parties beforehand» (item 1). «When it is impossible to settle an investment dispute as provided for by item 1 above, the dispute shall be resolved in accordance with international treaties and legislative acts of the Republic of Kazakhstan in courts of the Republic of Kazakhstan, as well as in international arbitrations determined by the parties’ agreement» (item 2). So, the foregoing clause of the special law clearly lays down that a dispute between an investor and state bodies can be referred for settlement to: · State courts, which are a part of the Republic of Kazakhstan’s judicial system; and · International arbitrations determined by the parties’ agreement, which can be both permanent arbitrations regardless of their location and ad hoc arbitrations. It follows from the above that the parties to an investment dispute have the right of choice of the forum of dispute resolution, which goes in line with general provisions stipulated in other legal acts of the Republic of Kazakhstan, in particular, article 25 of the ROK CPC and article 9 (1) of the ROK CC. Please note that the judicial protection (in the state courts) is only one of the remedies that individuals and legal entities can resort to for protection of their infringed rights, because the Constitution of the Republic of Kazakhstan (article 13 (1)) explicitly provides that «everyone shall have the right to recognition of his legal personality and be entitled to defend his rights and freedoms by all means that do not contradict the law…». Based on the spirit and letter of article 25 of the ROK CPC and article 9 (1) of the ROK CC, arbitration is one of the explicitly provided by the law means of protection of property rights of individuals and legal entities, including investors. In light of this, it is not out of place to discuss once again Resolution of the ROK Constitutional Council #1 of February 15, 2002 «On Official Interpretation of Item 2 of Article 13 and Item 1 of Clause 75 of the Constitution of the Republic of Kazakhstan», which resolves that «the arbitration court (meaning commercial arbitration institutions of any kind) shall not be deemed as the instrument of exercising individual and legal entities’ constitutional right to judicial protection of their rights and freedoms; settlement of disputes by arbitration shall not fall under the concept of «administration of justice», which is only exercised in the Republic by the state court of law; parties’ civil agreement on submission of a dispute to arbitration does not preclude a subsequent examination of the same dispute by the courts within the Republic’s judicial system in the procedure established by the law». In our opinion, the last part of the foregoing provision is highly questionable from the point of view of the existing ROK laws, international conventions and treaties; it contains a destructive, for the science of law, position that the (commercial) arbitral awards may be revised and the investment dispute may be tried anew. Our opinion is based on the following: 1. Pursuant to Article 13 (1) of the Constitution of the Republic of Kazakhstan, everyone «shall be entitled to defend his rights and freedoms by all means that do not contradict the law». 2. Article 25 of the ROK CPC explicitly provides that a property dispute within the jurisdiction of the state court of law can be referred to the commercial arbitration by the parties’ agreement. 3. Article 249 of the ROK CPC provides for a possibility of leaving the statement of claim without consideration, if an agreement on referral of this dispute to commercial arbitration is made between the parties to the dispute in accordance with the law, and the defendant submitted, prior to examination of the merits of the case, an objection to settlement of this dispute by the state court. 4. Article 9 (1) of the ROK CC says that protection of civil rights shall be exercised not only by the state court, but also by arbitration. 5. General provisions of New York Convention dated June 10, 1958 «On Recognition and Enforcement of Foreign Arbitral Awards», general provisions of the European Convention on Foreign Trade Arbitrations» dated April 21, 1961, general provisions of the Energy Charter Treaty dated December 17, 1991, which are ratified by the Republic of Kazakhstan[3] (these international acts provide for a possibility of submission of investment disputes to commercial arbitration and restrict the right of the member states not to recognize and not to enforce the commercial arbitration awards by a clear-cut list of conditions not subject to a broad interpretation). So, the commercial arbitration is the remedy for protection of property rights of individuals and legal entities explicitly provided by the existing legislation of the Republic of Kazakhstan and international legal acts ratified by the Republic. And it is the right of the individual or the entity itself to choose the means of protection of its infringed interests. In view of this, the above-mentioned provision of the Resolution of the ROK Constitutional Council, contradicts, in our opinion, the constitutional provision (article 13 (1) of the ROK Constitution), which is not admissible, because pursuant to article 4 (6) of the ROK Law dated March 24, 1998 «On Laws and Regulations», statutory resolutions of the ROK Constitutional Council must be based on the Constitution, not contradict it. Besides, it should be noted that the criticized Resolution of the ROK Constitutional Council was adopted when the ROK Law «On Foreign Investment» dated December 27, 1994[4], was in force, which provided for the right of choice of forum of resolution of the investment dispute (article 27), which could be: · Judicial bodies of the Republic of Kazakhstan (state courts); · International Center for Settlement of Investment Disputes, if the investor’s state is the member of the Washington Convention on Settlement of Investment Disputes (ICSID); · Additional Center for Settlement of Investment Disputes, if the investor’s state is not the member of the ICSID; · Arbitration bodies established in accordance with the Rules of Arbitration of the UN Commission on International Trade Law (UNCITRAL); · Arbitration Institution of the Chamber of Commerce in Stockholm; and · Arbitration Commission of the Chamber of Commerce and Industry of the Republic of Kazakhstan. This ROK law stipulated that any arbitral award issued in accordance with the above-mentioned article shall be final and binding on the parties to the investment dispute. Such a decision should be as enforceable in the Republic of Kazakhstan as an award issued by judicial bodies of the Republic of Kazakhstan (article 27 (6)). Unfortunately, this act by the ROK Constitutional Council, contradicting though a specific provision of the ROK Constitution (article 13 (1)) and the laws of Kazakhstan, is a part of the existing law of the Republic of Kazakhstan and can only be revised by the body that issued it in the procedure set forth in article 36 of the ROK Presidential Decree of December 29, 1995, «On Constitutional Council of the Republic of Kazakhstan», though this article does not provide plenty of grounds for such an revision. Meanwhile, taking into account that the ROK Constitution has the supreme legal force and a direct effect on the whole territory of the Republic of Kazakhstan[5], in case of a dispute concerning individuals and legal entities’ right to choose the forum for resolution of a dispute, including the investment one, one should be guided directly by the provisions of article 13 (1) of the Constitution, above-mentioned laws and international Conventions and Treaties. In this connection, if the Republic of Kazakhstan aspires to the enhancement of law and democracy in the country, if it supports the development of market economy, if it is interested in improvement of the investment climate, if it wishes to become a full and active participant of external economic relations, it should be interested in a stable legislative regulation of the issues relating to the activities of arbitration courts and commercial arbitration institutions of any kind. To the maximum extent possible the principle of non-interference of anybody, including the state, into private business should be observed. In relations of a purely private nature individuals and legal entities are entitled to take the decisions of their own whether to seek the protection of their infringed rights in the state court or to select another dispute resolution forum, for example, commercial arbitration[6]. Mazhilis of the Republic of Kazakhstan (one of the Houses of the ROK Parliament) has considered two draft laws so far - «On International Commercial Arbitration» and «On Court of Arbitration», which are almost identical by their structure and provisions. The first law will regulate the relations that emerge in the process of the international commercial arbitration activities in the territory of the Republic of Kazakhstan, as well as the procedure for and conditions of recognition and enforcement of the international commercial arbitration awards in Kazakhstan. The second law will regulate the issues of formation, activities and enforcement of awards of the Kazakhstan arbitration institutions. The basic features of international commercial arbitration and the arbitration court stipulated in the draft laws are also identical[7]. Given this, it would be quite logical to combine these draft laws into a single bill titled «On Courts of Arbitration and International Commercial Arbitration» to exclude the difference in interpretation of the terms «court of arbitration» and «commercial arbitration» existing in the Russian language, because these bodies are neither state courts nor a part of the judicial system of the Republic of Kazakhstan; they both are designed to settle disputes between the subjects of civil relations. According to the «Comprehensive Law Dictionary»[8] the Russian term «treteisky sud» (court of arbitration) means arbitration - «non-government body which considers economic (civil) disputes by the parties’ agreement to refer the dispute to its examination». Putting the terminology related to the arbitration institutions to a good order would not only exclude a different interpretation of the terms, but also improve the country’s lawmaking. A single law on arbitration would also help to normalize the judicial and arbitration practices. We believe that if this way is followed, the discussion on interpretation of these terms would be eliminated, legislative provisions would become clearer not only for the national subject of civil relations but also for foreign investors. Existence of clear-cut legal provisions determining the formation of commercial arbitration, legislative determination of the scope of their competence, civil subjects’ right of choice of the dispute resolution forum, would help to make the country’s investment climate even more attractive. I would like to note with satisfaction that there is currently a good basis for development of commercial arbitration in the country, because the bodies like Arbitration Commission of the ROK Chamber of Commerce and Industry, International Arbitration Court, International Arbitration Court of IUS Legal Center do already work in the Republic of Kazakhstan. These commercial arbitration institutions have gathered certain practical experience, including the one of settlement of investment disputes. That is why we say that Kazakhstan provides good opportunities for the commercial arbitration. The only remaining thing is to bring the national legislation into accord with the international acts ratified by the Republic of Kazakhstan, ensure a strict enforcement of arbitral awards, establish business cooperation with well-known arbitration bodies like the Arbitration Institution of the Stockholm Chamber of Commerce, International Court of Arbitration of the International Chamber of Commerce, International Arbitration of the Swiss Chamber of Commerce, International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, London Court of International Arbitration, International Arbitration Court of the American Arbitration Association, etc.. To have a more attractive investment climate in the country and to consolidate the reputation of the courts and commercial arbitration established in the Republic of Kazakhstan, it is very important to form a positive judicial (state courts) and arbitration practice. Of course, there are many examples when state courts and commercial arbitrations justly decided on procedural and other issues during trials directly or indirectly relating to the investment disputes. However, there are also other instances, we afraid, which undermine the reputation of the state courts and impede the development of arbitration practice in the country. Finally, I would like to cite one example illustrating, in our opinion, the existing problems in the field of development of judicial and arbitration practices in the Republic of Kazakhstan, which further aggravates the situation around the development of commercial arbitration. In 2002, Atyrau Oblast Territorial Department of Environmental Protection («ADEP») and Atyrau Oblast Prosecutor filed a claim against Tengizchevroil Limited Liability Partnership («TCO») in Atyrau Oblast Court seeking KZT 10,889,752,000 (over 72 million U.S. Dollars) in environmental damages alleged to have been caused by unauthorized storage of block sulfur at TCO's production facilities. At first sight, it might seem that the dispute was indeed connected with the Company’s failing to comply with environmental protection regulations and thus causing damage to the environment. The nature of the dispute was a more complex one, however, even though there were some technical points that may have been seen as evidence of the Company’s failure to meet some environmental regulation provisions. This is exactly what happened, with the authorized government nature use and environmental protection agencies and the ROK law courts concerned identifying the claim as an ecological dispute and ruling in favor of the claimants who acted on behalf of government and public interests. The Company, on the other hand, regarded the dispute as an investment dispute and insisted that, in accordance with the arbitration clause in the investment agreement, the matter should be referred to international commercial arbitration, and more specifically, to the Arbitration Institute of the Stockholm International Chamber of Commerce. Here then is what the dispute was essentially about. In 1993, the Republic of Kazakhstan, TCO and its Shareholders signed an investment agreement (known as the Project Agreement), on the basis of which further contracts and agreements were concluded giving the Company subsoil use rights to hydrocarbon exploration and production. Based on the hydrocarbon field development and production techniques developed by ROK research institutions and approved by the authorized Kazakh government agencies, the Company was granted the right to produce crude oil and all its accompanying products including gas and sulfur. In the relevant provisions of the investment agreement and in subsequent government acts granting Company its subsoil use rights, crude oil, gas and sulfur were identified as principal products of the Company to be sold on international markets. Again, on the basis of the approved production techniques and in accordance with the established standards, most of the sulfur produced there was placed in purpose-built sulfur pads designed for long-term sulfur storage. Those sulfur pads had been approved and commissioned by authorized ROK government agencies. The said investment agreement provided that, where the parties failed an amicable resolution, all disputes regarding the interpretation of the agreement’s provisions were to be referred to international commercial arbitration under the UNCITRAL Rules at the Stockholm International Chamber of Commerce (Sweden). In other words, there was a specific arbitration clause in the investment agreement, which was ignored by the ROK state courts examining the case, despite numerous written requests, applications and complaints made by the Company. That dispute, qualified by the Company as an investment dispute, came about as a result of the implementation of the ROK Government Resolution 1154[9] establishing new regulations whereby sulfur was treated as material similar to industrial waste materials, where it was stored in the open air for longer than three months. Without delving deep into the facts of the matter and deviating from the topic being discussed, I would still like to mention a few facts that provide vivid proof of the unlawful nature of some of the provisions of the said government act. First, even before the said Regulations were published, the term «production and consumption wastes»[10] had been defined by the ROK Law «On Environmental Protection», legislation superior to any departmental regulation or executive government decree. Second, law-making does not allow the use of analogies typically used for the purposes of enabling legislation. Third, pursuant to the definition given by the said Law, the industrial waste’s principal characteristic is its uselessness for any further practical application. As far as the TCO-generated sulfur is concerned, the said investment agreement defines it as one of the Company’s principal products and much sought after on both domestic and world markets, particularly because it meets highest quality standards as a chemical element (its purity degree being 9999). Because, contrary to the law-given definitions, the government-approved regulations qualified sulfur as a product similar to industrial waste, the Company had to perform several actions such as getting a special sulfur-storage permit to keep block sulfur as a «waste»; making mandatory payments to the Treasury in connection with block-sulfur storage and other. Moreover, qualifying sulfur as an industrial waste contradicted the investment agreement provisions where sulfur was listed as an industrial product to be sold for profit, and not as waste material requiring substantial financial outlays to store it. Because the Republic of Kazakhstan, as represented by its authorized government agencies, offered an interpretation of the term «sulfur « different from that given in the investment agreement (and different from its definition given by the law), an investment dispute arose that could not be resolved amicably. However, given that the parties to the dispute did have, in their investment agreement, an international commercial arbitration clause regarding any such disputes, the Company suggested that the Stockholm International Chamber of Commerce would be the appropriate body to resolve that investment dispute. Tengizchevroil, whose principal assets are owned by several U.S. based companies acting as foreign investors in the Republic of Kazakhstan, identified the dispute as an investment dispute also on the basis of the Treaty between the United States and Kazakhstan «Concerning the Reciprocal Encouragement and Protection of Investments» made on 19 May 1992. Unfortunately, however, despite all our arguments, the ROK state courts ruled against the Company in that case. They ignored all our pleas to stop litigation proceedings and submit the dispute to commercial arbitration. Fortunately enough, such disputes and legal mistakes are quite rare in the Republic of Kazakhstan as a whole and make no significant impact on the established overall favorable investment climate in the Republic. It would be good to have such disputes as no more than isolated cases that, even if they do arise, would be resolved through the ROK Government ratified international conventions and treaties and on the basis of existing legislative provisions and contracts between parties under civil law. That would serve as a solid guarantee of this country’s development within the framework of civilized legal relations.
[1] Article 25 of the ROK CPC: «Jurisdictional property disputes can be referred to an arbitration by parties’ agreement, when it is not prohibited by legislative acts and in accordance with article 170 (4) and article 192 of the ROK CPC». [2] Article 9 (1) of the ROK CC: «Protection of civil rights shall be exercised by the court of law, court of arbitration, or court of referees...». [3] See Decrees of the President of the Republic of Kazakhstan #2484 and 2485 of October 4, 1995, and #2537 of October 18, 1995. [4] ROK Law «On Foreign Investment» dated December 27, 1994 was invalidated when the ROK Law «On Investment» was enacted on January 8, 2003. [5] See article 4 (2) of the ROK Constitution and article 4 (1) of the ROK Law «On Laws and Regulations of the Republic of Kazakhstan». [6] See article 2 and article 8 (1) of the ROK Civil Code. [7] See the mentioned draft laws: Arbitration (Арбитраж) - international commercial arbitration, which was either formed specially to consider a specific dispute or functions as a permanent institution, as well as the arbitrator considering the dispute individually. Court of Arbitration (Третейский суд) - a permanent court of arbitration or an arbitration tribunal founded by the parties to settle a specific dispute. [8] «Comprehensive Law Dictionary» edited by A.Ya. Sukharev and B.E. Krutskikh, Moscow, 2000, INFRA-M. [9] See Resolution of the ROK Government #1154 dated September 6, 2001. [10] Pursuant to article 1 of the ROK Law «On Environmental Protection» the «production and consumption wastes» mean «the substances and materials in any state of aggregation formed as a result of anthropogenic activities, which are not subject to further use».
Доступ к документам и консультации
от ведущих специалистов |