International arbitration is a method of resolving disputes in
which parties agree to have their disputes settled by one or more
private individuals, known as arbitrators, rather than a court.
Arbitration can be commercial or investment-related, depending on
the subject matter and the parties involved. In commercial
arbitration, disputes arise from contractual or non-contractual
relationships. In investment arbitration, the focus is on the
violation of a state's obligations to protect investments, with
the parties to the dispute being the investor and the state. This
requires the consent of the parties, which is usually given through
an arbitration clause, a provision in a contract or agreement. In
the case of investment arbitration, the state's consent may
also be expressed in national investment protection laws or
international investment treaties. The decision of the
arbitrator(s) is final and binding on the parties based on their
initial agreement to arbitrate.
The Unicase team (Republic of Kazakhstan) and Kalikova & Associates (Kyrgyz Republic) specialise not only in litigation conducted in accordance with national legislation but also provide legal services in the field of international arbitration. Kazakhstan has been involved in numerous disputes in which our team members have been directly involved. We believe that certain aspects require illumination and description as they have distinct features.
First and foremost, it is important to note that Kazakhstan has established a legal framework, which regulates the institution of arbitration and international commercial arbitration, as well as the recognition and enforcement of corresponding decisions. In accordance with the Law on International Commercial Arbitration and the Civil Procedure Code, a foreign arbitral award is recognized as binding and, upon submission of a written application to the competent court, is enforced in accordance with the legislation of the Republic of Kazakhstan.
Kazakhstan has acceded to and ratified practically all relevant major international and regional conventions and agreements, demonstrating its commitment to recognizing the validity of arbitration agreements and clauses, as well as recognizing and enforcing decisions of both Kazakhstani and foreign international arbitral tribunals. The following are some of the significant cases that have gone through international arbitration involving the Republic of Kazakhstan:
- TOO "Gold Pool" v. Republic of Kazakhstan (PSA Case No. 2016-23)
- World Wide Minerals and Paul A. Carroll v. Republic of Kazakhstan
- Ascom Group S.A., Anatolie Stati, Gabriel Stati, and Terra Raf Trans Trading LLC v. Republic of Kazakhstan (SCC Case No. 116/2010)
- GEM Equity Management AG v. Republic of Kazakhstan
- CCL Oil v. Republic of Kazakhstan (SCC Case No. 122/2001)
- Biedermann International Corporation v. Republic of Kazakhstan and Association for Socio-Economic Development of Western Kazakhstan "Intercaspian" (SCC Case No. 97/1996)
The International Centre for Settlement of Investment Disputes
(ICSID) is an international arbitration institution created in 1966
to resolve legal disputes between foreign investors and states. The
ICSID Convention, which was formulated between 1961 and 1965, came
into force in 1966. Currently, there are 165 state members (158
contracting states and 7 signatory states).
Since its establishment in 1966, the ICSID Convention has become an indispensable tool for resolving disputes between investors and states. According to the ICSID Rules, a significant portion of disputes between states and foreign investors are considered. As shown by the research conducted by BIICL and Allen & Overy as of May 2020, out of 433 investment disputes, 66% were resolved in accordance with the ICSID Rules (2021 Empirical Study: Costs, Damages, and Duration in Investor-State Arbitration).
The ICSID Arbitration Rules and the Additional Facility Rules provide a straightforward and comprehensive framework for initiating and administering dispute resolution processes.
The Republic of Kazakhstan became an official member of the ICSID on October 21, 2000, and as of May 2023, it has been a respondent in 14 disputes, some of the most significant of which include:
- Corporation AES and Tau Power B.V. v. Republic of Kazakhstan (ICSID Case No. ARB/10/16)
- TOO "Caratube International Oil Company" and Devincci Salah Hourani v. Republic of Kazakhstan (ICSID Case No. ARB/13/13)
- Aktau Petrol Ticaret A.S. v. Republic of Kazakhstan (ICSID Case No. ARB/15/8)
- Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan (ICSID Case No. ARB/05/16)
- KT Asia Investment Group B.V. v. Republic of Kazakhstan (ICSID Case No. ARB/09/8)
- AS Windoor v. Republic of Kazakhstan (ICSID Case No. ARB/18/32)
- Liman Caspian Oil B.V. and NCL Dutch Investment B.V. v. Republic of Kazakhstan (ICSID Case No. ARB/07/14)
- Corporation AIG Capital Partners and CJSC Tema Real Estate Agency v. Republic of Kazakhstan (ICSID Case No. ARB/01/6)
ICSID is an attractive dispute resolution mechanism due to the following factors:
1) The opportunity to participate in the selection of arbitrators.
2) The possibility of applying Kazakhstani legislation, at least regarding the existence and extent of the rights of foreign investors in the Republic of Kazakhstan receiving investments.
3) Clear timeline for the resolution of disputes.
4) The ability to call witnesses and experts.
5) The possibility of annulment of an arbitral award in the presence of exhaustive grounds (the arbitration was improperly constituted, the tribunal exceeded its powers, there was a corruption of one of the arbitrators, there was a substantial departure from the rules of procedure, or if the award was not properly reasoned).
6) The ability to enforce an arbitral award in the territories of ICSID member states, just like a final decision of a domestic court of that state.
ICSID arbitration encompasses a wide range of complex issues and requires the provision of qualified legal assistance to investors throughout the process. In light of this, the team of Unicase (Republic of Kazakhstan) and Kalikova & Associates (Kyrgyz Republic) intends to dedicate a series of publications to investment arbitration proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.