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

1.    Overview

Kazakhstan is undergoing significant political and economic reforms in de-facto transit of power from the former President Nazarbayev and the 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.

To return assets to the state Kazakhstan introduced 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 3-5 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 (comprised of retired English judges) has been a success. It ensures fair and impartial justice in disputes not only between foreign/local businesses on the one hand and the state/powerful local players on the other, it is increasingly popular among foreigners.

2.   Judicial System 

2.1.   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 (e.g. 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/Cassation Court have panels that focus on relevant categories of cases.

2.2.   Administrative Courts 

Administrative disputes such as tax, antitrust, environmental, etc. relating to acts of state bodies 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 more level playing field to businesses in disputes with the state. In fact, as the statistics suggests, on average claimants win against the state in more than 50% of the cases.

2.3.  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.

2.3.1. 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.

2.3.2. Injunctive Relief 

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

2.3.3. Fees  

The court fee for filing a claim is 3% of the claimed amount for legal entities, 1% for individuals. The fee is capped at approx. USD 73,000 and USD 146,000, 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.

2.3.4. 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. Proceedings are conducted online with the exception of the Supreme Court or where a party requests a hearing offline.

2.3.5. 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.

2.3.6. Foreign Litigation 

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

2.3.7. 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.

2.3.8. Private Enforcement 

A judgment creditor (except in respect to recovery from the state) may select from many private enforcement officers (“PEOs”) on the market. Private enforcement has proved very effective. PEOs' fees recoverable from the judgment debtor vary between 3-25% of the collected amount (capped at approx. USD 80,000).

2.4.   Systemic Issues 

2.4.1. Corruption/Lack of Independence  

Corruption and administrative influence 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 slowly improving.

2.4.2. 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.

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

3.   AIFC

3.1.   Court

The Court of Astana International Financial Centre (“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 English judges;

(iii)   The language of legal proceedings is English;

(iv)   Procedural rules of AIFC Court are broadly 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).

3.2.  Jurisdiction of the Court

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.
3.3   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.

4.   Arbitration 

4.1.   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 seriously improved in the past 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.

Arbitration Law does not apply to arbitrations conducted at the AIFC International Arbitration Centre.

4.2.  Arbitrability 

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

4.3.   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.

4.4.   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. It is increasingly rare, but not uncommon.

5. Enforcement of Foreign Arbitral Awards/Judgments

5.1.   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 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.

5.2.   Enforcement of Foreign Judgments

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