On 20 April 2016 the Law of the Republic of Kazakhstan “On arbitration” came into force. This law constitutes the public relations arising in the process of arbitration activity in territory of the Republic of Kazakhstan as well as the order and conditions of recognition and reinforcement of arbitration decisions in Kazakhstan.
The concept of arbitration itself is not new one for the legislation of the Republic of Kazakhstan. Само понятие арбитража не является новым для законодательства Республики Казахстан. Before the adoption of the Law of RK “On arbitration” there were two special laws operated in Kazakhstan that constituted the activity of arbitration courts and established legal foundations for operation of international arbitration – Laws of RK “On arbitration” and “On international arbitration” (ceased to be in force and effect). The adopted Law of RK “On arbitration” consolidated the provisions of those laws with the purpose of establishment of the unified approach to the activity of non-judicial bodies of settlement of disputes.
In these days the government pays great attention to the procedure of resolving the dispute out of court and the settlement of disputes by non-judicial bodies or using reconciliation procedure. It is sufficient to note the active introduction of mediative or participative procedures in courts, settlement of disputes by conclusion of amicable agreement. From our point of view, the purpose of that approach on the part of the government is not only the reduction of load on state courts but also the development of the system of alternative dispute regulation when the parties independently elaborate their own “rules of the game” without the use of strict constraints established in the process of civil legal proceeding.
The law of RK “On arbitration” determines and establishes:
- concept, principles and types of arbitration;
- reason for waiver of right to object, submission of a dispute for arbitration resolution;
- form and content of arbitration agreement;
- grounds for an action on the merits of a dispute in court of competent jurisdiction;
- arbitral tribunal, register of arbitrators and requirements for arbitrators;
- grounds for disqualification, replacement of arbitrator and termination of his powers;
- procedure of creating the arbitration Association and Arbitration chamber of Kazakhstan;
- procedure for arbitration proceedings;
- recognition and enforcement of arbitral awards.
The law makes the following interpretation of the term “arbitration”: arbitration constituted specifically for certain adjudication or institutional arbitration. The term “arbitration court” is not available in the law and that contrasts with commonly used world practice where with the meaning of “arbitration court” is also used together with the meaning “arbitration”.
Arbitrations may be established both in the form of permanent body and for settlement of the particular dispute.
The law plainly determines the list of entities that may establish arbitrations. Thus, arbitrations may be established by physical and/or legal persons excluding the governmental bodies, governmental enterprises as well natural monopoly entities and entities occupying a dominant position on the market of goods and services, legal persons whose fifty and more per cent of voting shares (shares of participation in authorized capital) directly or indirectly belong to the government, their subsidiary or paternalized organizations as well as by regulated banks and organizations providing the specific banking operations.
There is no doubt that in practice the arbitrational settlement of disputes will be used mainly by legal entities whereas individual persons more often apply the conciliation procedures as provided for by civil procedural legislation.
The disputes resulted from the civil law relations between physical and (or) legal persons are related by law to the subject matter jurisdiction of arbitration. The restrictions on the residence principle are not provided for by law whereas the disputes between residents were previously adjudicated by third party arbitration courts and disputes with participation of non-resident were adjudicated by international arbitration.
The law determines the categories of cases that may not be adjudicated by arbitration:
- disputes affecting the interests of underage persons and persons recognized as incapacitated or partially incapacitated according to the procedure provided for by the legislation;
- disputes on rehabilitation and bankruptcy, between natural monopoly entities and their consumers, between governmental bodies, entities of quasi-public sector;
- disputes arising from personal non-property relations not associated with property relations;
- disputes between individuals and (or) legal persons of the Republic of Kazakhstan, on the one part, and governmental bodies, governmental enterprises as well as legal persons whose fifty and more per cent of voting shares (shares of participation in authorized capital) directly or indirectly belong to the government, on the other part - in the absence of the consent of authorized body of relevant branch.
The obligatory condition for submission of a dispute to arbitration is the availability of arbitration agreement between the parties. The arbitration agreement is concluded in written form. The agreement shall contain the intent to submit a dispute to arbitration, indication of subject matter by arbitration, indication of specific arbitration. The remarkable thing is that the arbitration agreement may be concluded by the parties and in relation to disputes that are under considerations by court but prior to making a decision on the merits of the dispute.
The possibility of unilateral repudiation of obligations of concluded pre-dispute arbitration agreement is provided for by law for the first time by the notification of the other party within the reasonable time period.
The arbitration proceedings shall be provided in compliance with the principles of party autonomy, legality, independence, adversarial proceedings and equality of arms, equity, confidentiality and severability of arbitration agreement.
The procedure of implementation of the principle of proceeding confidentiality is not insignificant. The confidentiality means that arbitrators and participants of arbitration proceedings do not have the right to disclose information became known in the course of arbitration proceeding, without the consent of the parties or their legal successors, and may not be questioned as a witness about information became known in the course of arbitration proceeding, except as otherwise provided for by laws of the Republic of Kazakhstan. The previous legislation applied the principle of confidentiality only to arbitrators but not to participants of the process.
As is well known, the introduction of electronic judicial proceedings, creation of judicial cabinet with the possibility of searching judicial cases, on one hand, gave massive opportunities for population in realization of their procedural rights, but on the other hand, practically excluded the concept of confidentiality of proceedings. Today any person in the judicial cabinet may receive information on court decisions, criminal sentences of any physical or legal person, at that it is necessary know only IIN or BIN of that person. Correspondingly, you may get access to information relating to commercial secret stated, for example, in court decision. This one of the reasons that may stimulate the disputing parties to use arbitration provided that the principle of confidentiality is complied with requirements.
From our point of view, except this principle, other provisions promoting the opting for arbitral way of settling disputes are also provided for by law. The parties’ choice of particular arbitrators or tribunal, choice of place, date and language of proceedings, simplified procedure pf proceedings, consideration of dispute in one authority and other provisions may be related to them.
It is to be hoped that the adoption of the new Law of RK “On arbitration” will promote the image growth of alternative court proceedings in the Republic of Kazakhstan and will positively affect the entrepreneurial development in the country.
Lawyer of "Kaz Legal & Accounting Service (KLAS)" LLP