An Important Step in the Development of Arbitration in Kazakhstan
Aigoul Kenjebayeva
Partner, international law firm Dentons,
Member of the Stockholm Arbitration Institute’s Arbitrators’ Council
Recently, a significant event occurred for the advancement of arbitration as an alternative means of dispute resolution in Kazakhstan. On September 13, 2024, the Constitutional Court of the Republic of Kazakhstan adopted Normative Resolution No. 51-НП «On the Compliance of Paragraph 3 of Article 52 of the Law of the Republic of Kazakhstan on Arbitration dated April 8, 2016, with the Constitution of the Republic of Kazakhstan.»The Court established that «the definition in the law of the legal boundaries beyond which the courts of the Republic of Kazakhstan are not entitled to review arbitration decisions, as stipulated in Paragraph 3 of Article 52 of the Arbitration Law, does not contradict Paragraph 2 of Article 13 of the Constitution.»Furthermore, «the Constitutional Court does not see any signs of violation of the equality of rights and freedoms of individuals in equal conditions and legal situations, and therefore considers that Paragraph 3 of Article 52 of the Arbitration Law complies with Paragraph 1 of Article 14 of the Constitution.»Thus, the Constitutional Court has clearly established that arbitration decisions must be enforced by the courts of the Republic of Kazakhstan and cannot be substantively reviewed beyond the legal boundaries set by law.
The Constitutional Court also expressed the view that the grounds for annulment of arbitration decisions and refusal of enforcement based on «contradiction to public order» do not meet the requirements of clarity and certainty in legislative norms, as «public order» is equated in the law with «foundations of law and order,»which could be interpreted to include any elements of law and order. Therefore, the Constitutional Court recommended that the Government consider further improving legislation to establish clear criteria that «allow for the unequivocal distinction between lawful and unlawful behavior, excluding the possibility of arbitrary interpretation of legal provisions.»
Consequently, this Resolution by the Constitutional Court not only legitimizes arbitration and its main principles in Kazakhstan but also initiates the process of closing one of the main loopholes that could undermine the finality of arbitration decisions—namely, the overly broad interpretation of the grounds for annulment of arbitration decisions as «contradiction to public order.»We await amendments to the law from the Government and Parliament in precise accordance with the Constitutional Court's recommendations, which will put a definitive end to the question of the applicability of arbitration as one of the preferred means of dispute resolution in Kazakhstan.
We express our gratitude to academician Professor Suleimenov M.K. and Professor Duyssenova A. for serving as experts in this review, and for their many years of work in promoting arbitration in Kazakhstan, as well as to the judges of the Constitutional Court for their high professionalism and commitment to the principles of the rule of law in adopting this Resolution.
It is important to note that the question of the legitimacy of arbitration in our country has undergone a difficult journey. The first arbitration agreements were made by the Republic of Kazakhstan at the dawn of its independence. In the late 1990s, with the worsening economic situation, there was a constant threat of international arbitration regarding large investment contracts signed by the Republic of Kazakhstan and some of its enterprises. Additionally, some domestic arbitration bodies began issuing decisions that were not favorable to state structures. This prompted certain government and law enforcement agencies (the Government, the General Prosecutor's Office, the Ministry of Justice) to consider ways to avoid the applicability of arbitration decisions for resolving disputes in the country. On July 1, 1999, a new Civil Procedure Code was adopted, which omitted provisions for the enforcement of arbitration decisions. As a result, courts began a practice of refusing to enforce arbitration decisions. To rectify the situation, the Supreme Court of the Republic of Kazakhstan issued a Normative Resolution clarifying that arbitration decisions are enforceable. However, this met with serious resistance from the Government and other state bodies. Under such pressure, the Supreme Court suspended the operation of its normative resolution.
In 2002, the Prime Minister of Kazakhstan requested the Constitutional Council to provide an official interpretation of Part 2 of Article 13 and Part 1 of Article 75 of the Constitution of Kazakhstan. This section of the Constitution proclaims: «Everyone has the right to judicial protection of their rights and freedoms.»The question was whether the right to conclude an arbitration clause is consistent with the right to judicial protection, or, in other words, whether the right to enforce arbitration awards is constitutional. In response to this request, Resolution No. 1 of February 15, 2002, «On the Official Interpretation of Part 2 of Article 13 and Part 1 of Article 75 of the Constitution of the Republic of Kazakhstan,»was adopted. This decree raised serious concerns in the legal community in Kazakhstan and abroad. A few months later, with the assistance of the Arbitration Institute of the Stockholm Chamber of Commerce, an international conference was organized in Almaty, attended by over 500 participants. Many Kazakhstani and foreign lawyers criticized the Resolution. The main conclusion of the conference was as follows: since an arbitration agreement is a contract, when rights under that agreement are violated, the party has the right to seek judicial protection of their rights. The essence of the arbitration agreement is that the parties agree that in the event of a dispute, they will submit the matter for decision not to the court, but to arbitration, and they voluntarily agree to comply with the arbitration court's decision once it is rendered. If one party fails to comply with the decision, the rights of the other party under the agreement are violated and are subject to judicial protection. This means that in such cases, judicial protection is provided through the enforcement of the arbitration decision by the courts. Thus, the right to judicial protection is realized when, in the event of a violation of the arbitration agreement by one party (for example, by not complying with the arbitration decision), the other parties have the right to seek judicial protection.
Since in court the arbitration agreement does not serve as the basis for a substantive dispute but rather as the basis for a procedural dispute regarding its consideration and the enforcement of the arbitration decision, it follows logically that when approaching the court, the arbitration decision is not reviewed on its merits. Enforcement may only be denied if the court finds the arbitration agreement invalid or proves that the proceedings had significant flaws. Consequently, the enforcement of arbitration decisions is, in fact, a form of judicial protection for the rights of the disputing parties. The constitutional provision that everyone has the right to judicial protection is not violated; rather, it is supported when courts enforce arbitration decisions. Under pressure from the legal community and investors, the aforementioned Resolution of the Constitutional Council was overturned six years after its adoption by Resolution No. 1 of February 7, 2008.
We hope that with the adoption of the Normative Resolution of the Constitutional Court on September 13, 2024, and once the relative law is amended as recommended by the Resolution, the question of the future of arbitration in Kazakhstan would be considered positively and definitively resolved.