We often read about the large number of substantial disputes that are brought before the English courts involving parties with no connection to England. Cases considered by the English Commercial Court often involve foreign parties whose business interests are located outside the country and issues in dispute which have no connection with England. Why do so many wealthy businessmen strive to have their disputes resolved by the English courts?
There are many reasons for this phenomenon. One reason often cited is the independence and quality of the English judges (and legal practitioners). However, this cannot be the only reason. The courts and legal professionals of many EU member states and the United States can boast the same qualities. The additional ingredient that England is seen as being able to offer (more so than other jurisdictions) is a legal system that is best able to respond promptly, flexibly and effectively to the needs of businesses.
In this article, an English barrister and a practicing Kazakh lawyer will aim to explain the main differences between the legal regimes governing judicial process in England and Kazakhstan. Given the breadth of the subject matter, the focus of this article will be a comparative analysis of injunctive relief under English and Kazakhstan law, as the authors believe that this is one of the key elements of any judicial process (and a key attraction of the English legal system). If readers find this article interesting, its authors would be pleased to undertake a comparative analysis of other aspects of the judicial processes in England and Kazakhstan in future articles.
Injunctive Relief under Kazakhstan Law
Types of Available Injunctive Relief
The Republic of Kazakhstan Code of Civil Procedure (the "CPC") identifies the following types of injunctive relief that may be granted by the civil courts in Kazakhstan:
(i) freezing of respondent's assets ;
(ii) prohibiting the respondent from undertaking certain actions;
(iii) prohibiting other parties from transferring assets to the respondent or performing obligations to the respondent;
(iv) suspending the sale of assets;
(v) suspending the legal effect of an act of a state authority; and
(vi) suspending collection under a collection order.
In addition to the above, parties are free to request other types of relief, provided the relief meets the objective of Article 158 of the CPC, which provides that:
"[a] court may order injunctive relief at the request of either of the parties to dispute at any time in the course of the proceeding, if the failure to take such measure would make enforcement of the judgment impossible or difficult."
The CPC expressly allows for several types of injunctive relief to be granted simultaneously, although we have not encountered this in practice.
It is apparent from the wording of Article 158 that in order to obtain injunctive relief the applicant must be able to show that the failure to take such measures would make enforcement of the judgment "impossible or difficult".
The RoK Supreme Court has explained that "impossibility or difficulty" of enforcing a judgment should be understood as referring to situations where the respondent may "conceal or dispose of all or part of its property, or prepare to leave the Republic of Kazakhstan, etc."1
The CPC sets an additional condition to the granting of injunctive relief: the requested relief must be commensurate with the claim filed with court. An order of injunctive relief must not lead to the debtor's insolvency, interfere with the normal conduct of its business, violate the rights and legitimate interests of other parties, or facilitate the illegal appropriation of the respondent's property. In practice, unfortunately, this rule is observed rarely.
A party to a dispute may seek injunctive relief only if (and once) judicial or arbitral proceedings are initiated. Thus, before ordering injunctive relief the court has to be satisfied that the claim meets all formal requirements to a valid statement of claim, as set forth in Article 150 or 425 of the CPC (e.g. court has jurisdiction over the respondent; the claim has been properly drafted, etc.) or that there is an ongoing arbitration proceeding.
Security for Losses Caused by Injunctive Relief
According to the first sentence of Article 165 of the CPC, when ordering injunctive relief, a judge may require the applicant to provide security of losses which the respondent may incur as a result of the granting of the injunction. In practice this requirement is seldom imposed. The second sentence of Article 165 provides that, if the court rejects the claim, upon the entry of the judgment into effect, the respondent also has the statutory right to bring a claim against the claimant for compensation in relation to any damage caused by the injunctive relief granted.
Injunctive relief is not available against "financial organizations", as defined by Kazakh law. "Financial organizations" are defined as banks, insurance companies, securities brokers and dealers, pension funds, etc.
It is worth mentioning that the types of injunctive relief referred to above are not available in respect to all claims. For example, injunctive relief such as freezing of assets would only be possible if the claimant pursues a monetary claim. This measure would be unavailable, if the claimant pursues a non-monetary claim, for example, a claim seeking invalidity of a transaction or recognition of a right, etc.
In respect of state institutions financed from the state budget and certain state corporations (under so-called "operative management") freezing of assets belonging to the respondent is not available, except in relation to money held in the accounts of these entities. This is because under Kazakh law, certain categories of state institutions and state corporations which hold assets on the basis of operative management do not 'own' the property they hold. This property belongs to the state. For example, a public library manages, but does not own, the building of the library.
Injunctive Relief in Aid of Arbitration
Parties to arbitration proceedings, including arbitration proceedings outside of the RoK, may also seek injunctive relief from RoK courts having jurisdiction over the respondent. In principle the courts of the RoK are able to order injunctive relief in aid of foreign arbitrations. However, complications may arise in practice when the relief is sought in remote regions of Kazakhstan where judges are less familiar (and comfortable) with the concept of injunctive relief in aid of arbitration.
If the injunctive relief is sought in aid of a foreign arbitration, courts of the area where respondent or his assets are located would have jurisdiction to grant appropriate relief. In domestic arbitrations, courts of the area where the arbitral tribunal is seated would have this jurisdiction .
In order to file an order seeking injunctive relief in aid of arbitration, the applicant must demonstrate that arbitral proceedings have been initiated. The CPC does not specify the documents required to prove existence of ongoing arbitration. In practice, judges require that the applicant provides a copy of the ruling issued by an arbitral institution that arbitral proceedings have been initiated. Sometimes, a copy of the request for arbitration and related documents may be requested.
Parties may seek injunctive relief simultaneously with the filing of a statement of claim, in judicial proceedings, or after the proceedings have been concluded, but before enforcement of the judgment.
Issuing an order for injunctive relief does not involve a court hearing when the request for injunctive relief is filed simultaneously with the statement of claim (before a court hearing on the merits) or before enforcement of the judgment (after the hearing on the merits is closed). In either of these cases, the judge would decide on the request upon receipt of the written petition without notifying and hearing oral arguments from the parties.2 In practice, it takes up to three to five days from the date of receipt of the application to determine the application and, if granted, issue an order. The order becomes enforceable and binding immediately after it is issued.
If a request for injunctive relief is submitted during the course of a court hearing on merits, the judge would read the request out loud to the parties and request the respondent to make any opposing arguments it wishes to. Generally, applicants request injunctive relief before the beginning of hearings on merits, to avoid objections of the respondent. However, if the order for injunctive relief has been issued without sufficient grounds, the respondent could always seek removal thereof in the course of the hearing.
If the request for injunctive relief is rejected, this does not prevent the applicant from filing another request, provided new grounds for the order of injunctive relief are indicated.
Under Kazakh law, the order for injunctive relief is not enforceable by itself. On the basis of the court's order, the judge issuing the order must issue a separate document named "enforcement writ" ('ispolnitel'nyi list'). The court must issue an enforcement writ simultaneously with the order or on the next day and send these documents to an enforcement officer or the applicant to transfer them to the enforcement officer. Then, the enforcement officer would initiate an enforcement proceeding and take relevant actions stated in the order.
The judge may later cancel his ruling, if the respondent demonstrates that the injunctive relief granted is no longer necessary or the order was excessive. Alternatively, the respondent may appeal the order granting injunctive relief to the Appellate Court. Apart from the respondent, third parties affected by the injunctive relief may also appeal the order.3
The Appellate Court will then review the appeal over the course of one or two hearings and issue a resolution to reject the appeal, to revise the ruling, to cancel the ruling and issue a new ruling, or to cancel the ruling and terminate the proceedings or leave the claim without consideration. Submitting an appeal against the granting of injunctive relief does not have the effect of suspending the operation of that relief while the appeal proceeds. However, submitting an appeal against the order cancelling injunctive relief suspends enforcement of the cancellation order.
Sanctions for breach of a court injunction
Kazakh law provides for monetary and criminal liability for the failure to enforce an injunction order. According to Article 524 of the Republic of Kazakhstan Code On Administrative Violations, the size of the fine varies between approximately USD 123 and USD 246. As an alternative to the fine, the respondent may be imprisoned for up to 10 days.
The threshold for criminal liability for the failure to enforce an injunction order is somewhat high. According to Article 362 of the Republic of Kazakhstan Criminal Code, there is criminal liability for a deliberate contempt or obstruction of enforcement of court's order. Deliberate contempt includes the respondent's concealment of income or other property which may be subject to the court's order, respondent's failure to provide information to an enforcement officer on the sources of income, respondent's entry into transactions to transfer property with an aim to avoid enforcement of the court's order, etc. Obstruction of enforcement of the court's order refers to any action of the respondent aimed to avoid enforcement of the court's order, for example, respondent's refusal to provide access to property. 4
The criminal liability for deliberate contempt of court's order or obstruction of enforcement of a court's order includes a fine up to approximately USD 2,470, community service for a term ranging from 120 to 180 hours, or restriction of freedom for a term of one year (not to be mixed with imprisonment).5 Similar actions committed by state officials and employees of commercial organizations would be subject to higher sanctions, such as a fine ranging from approximately USD 2,470 to 4,940, restriction to engage in certain types of activities or to hold certain positions for a term of up to five years, community service for a term ranging from 180 to 240 hours, restriction of freedom for a term of up to two years, or an imprisonment of up to two years.
Injunctive Relief under English Law
Types of Available Injunctive Relief
Section 37 of the Senior Courts Act 1981 provides that:
(1)The High Court may by order (whether interlocutory or final) grant an injunction ..in all cases in which it appears to the court to be just and convenient to do so.
(2)Any such order may be made either unconditionally or on such terms and conditions as the court thinks just.
(3)The power of the High Court under subsection (1) to grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the High Court, or otherwise dealing with, assets located within that jurisdiction shall be exercisable in cases where that party is, as well as in cases where he is not, domiciled, resident or present within that jurisdiction.
The power that the English High Court has under s.37(1) to grant an injunction whenever it considers it just and convenient to do so is, self-evidently, wide and flexible. Part 25 of the English Civil Procedure Rules identifies specific examples of the injunctive relief that it may grant. These include:
(i) An order requiring the detention, custody or preservation of relevant property (rule 25.1(c)(i)).
(ii) An order requiring the delivery up of goods (rule 25.1(e)).
(iii) An order restraining a party from removing from the jurisdiction assets located there from dealing with any assets whether located within the jurisdiction or not (commonly referred to as 'a freezing injunction) (rule 25.1(f))6.
(iv) An order directing a party to provide information about the location of relevant property or assets (rule 25.1(g))7.
(v) An order (referred to as a 'search order') requiring a party to admit another party to premises for the purpose of preserving evidence (rule 25.1(h))8.
(vi) An order for a specified fund to be paid into court or otherwise secured, where there is a dispute over a party's right to the fund (rule 25.1(l)).
The issues that an applicant must establish in order to obtain injunctive relief depend on the nature of the relief being claimed. For 'an ordinary injunction' it will be necessary to establish that:
(i) the substantive claim is one that involves a serious issue to be tried'9;
(ii) the balance of convenience justifies granting the injunction (ie. the applicant is likely to suffer more harm if the injunction was not granted than the respondent would if it was) (American Cyanamid Co v Ethicon Ltd  AC 396).
For a freezing injunction it will be necessary to establish that:
(i) the applicant has a good arguable case10;
(ii) there are assets belonging to the respondent; and
(iii) there a real risk that the respondent of dispose or hide those assets in order to avoid satisfaction of a judgment in the applicant's favour (Derby & Co v Weldon  Ch 48).
For a search order it will be necessary to:
(i) establish a strong prima facie case against the respondent11;
(ii) establish a serious risk that damage will be caused to the applicant's interests if the injunction is not granted; and
(iii) provide clear evidence that the respondent has incriminating evidence in his possession which there is a serious possibility it will destroy if it becomes aware of the claimant's claim (Anton Piller KG v Manufacturing Processes Ltd  Ch 55)
An undertaking to compensate the respondent
As a condition of granting injunctive relief the court will almost always require that the applicant provide 'an undertaking in damages'. This is 'a promise' to the court that the applicant will compensate the respondent for any losses caused to the latter by the injunction if it turns out that it should not have been granted (ie. if the applicant's claim is unsuccessful). The provision of an undertaking in damages is not a statutory or procedural requirement but, rather, a matter of established case law (see e.g. American Cyanamid Co v Ethicon Ltd  AC 396). An applicant will be expected to provide evidence that it has the financial means to satisfy a future compensation claim by the defendant12.
The court may also require the applicant to 'fortify' that undertaking by making a payment into court or providing a bank guarantee in an amount that reflects a reasonable assessment of the loss that may be caused to the respondent by the injunction. The requirement to fortify an undertaking in damages is most commonly required of a foreign applicant with no substantial assets in the jurisdiction. The purpose is to ensure that the respondent will have a quick and easy method enforcing a compensation claim against the applicant in the event that the latter's claim fails (see immediately below).
If the applicant's claim is unsuccessful the respondent will be entitled to apply for 'an inquiry' into the damages caused to it by the injunction and claim compensation for such damage. This 'inquiry' will take the form of a separate hearing involving oral and documentary evidence produced by both parties at which the court will determine what (if any) loss the respondent suffered as a result of the injunction.
An injunction may not be granted against the crown13 or against a sovereign state (unless written consent is provided or the injunction relates to property used for commercial purposes)14. Apart from that, there is no restriction on the types of parties against whom an injunction may be granted. Specifically (any by contrast to the position in Kazakhstan), an injunction may be granted against financial institutions such as banks, insurance company, security brokers and dealers and pension funds. This is another example of the scope of flexibility of the English court's injunctive relief powers.
Injunctive Relief in Aid of Arbitration
S.44 of the Arbitration Act 1996 provides the English High Court with the power to grant a range of interim relief in support of arbitral proceedings. This includes the power to make orders: relating to the preservation, custody or detention of property; authorising any person to enter any premises in the possession or control of a party to the arbitration (e.g. for the purpose of seizing and preserving evidence); and (if the case is one of urgency) make such orders as it thinks necessary for the purpose of preserving evidence or assets (e.g. a freezing order). However, the court is only able to grant such relief where the arbitral tribunal does not have the power to do so or is unable to do so effectively15. The English High Court is frequently asked to make such orders16and is comfortable about doing so where the relevant pre-conditions are met.
S.2 of the Arbitration Act also entitles the English High Court to grant the interim relief specified in s.44 in support of foreign arbitral proceedings. However, the court may refuse to do so"if ...the fact that the seat of the arbitration is outside England ... makes it inappropriate to do so." In practical terms, the court will need be satisfied that the court of the seat of the arbitration cannot make the appropriate order (or at least an effective one) (Tate& Lyle v Cia Usina Bulhoes and Cargill Inc 1 Lloyd's Rep 355). A situation where this might be the case is if the respondent is resident, and/or (in the case of a freezing injunction) has significant assets, in the jurisdiction of the English court.
An applicant may seek injunctive relief at the same time as (or in cases of extreme emergency even before) it commences court or arbitral proceedings17. Applications for injunctive relief are considered at an oral hearing and must be supported by an application, affidavit(s), documentary evidence, skeleton argument18 and draft order explaining the evidential and legal bases for (and terms of) the relief sought.
In the case of 'an ordinary injunction' the hearing will usually be attended by both parties. The judge will normally have had time to read the papers filed by the parties (including any affidavit(s), documentary evidence and skeleton argument in opposition to the application). At the hearing the judge will hear oral arguments from both parties and will make his decision (usually immediately after those arguments) based on those documents and arguments. In a complex case this might take a full day or more.
However, in applications involving freezing injunctions or search orders the basis of the applications is usually a fear that the respondent will take immediate action (dissipating or hiding assets or destroying relevant evidence) if it is notified of the application. Therefore, to make these orders as effective as possible, such applications may in the first instance be made at an oral hearing without the respondent being notified19. There are two safeguards employed to protect the position of the unrepresented respondent in such situations. Firstly, the applicant is under a strict duty20 to bring to the court's attention any legal or factual matters that it is aware of which the respondent might have relied on in opposition to the application had it been in attendance21. Secondly, if the injunction is granted, it will only last for a short period until the application can be relisted for a second hearing22 (usually up to 14 days later) of which the respondent will be notified. At that second hearing, the court will consider whether to extend the operation of the injunction, taking into account the written evidence and oral arguments presented by both parties.
Unless stated to the contrary by the court, any injunctive relief granted will come into effect as soon as the court order is served on the parties against which it is made.
In the case of an injunction granted at a without notice hearing, the court may, as mentioned, decide not to renew it (effectively cancel it) at the return date hearing on the bases on representations made by the respondent.
The court may also terminate the injunction subsequently if: it is no longer necessary or of practical benefit to the applicant (e.g. in the case of a freezing injunction, if the respondent provides security to cover the entirety of the sum claimed by the applicant in the relevant proceedings); or the respondent discovers that the applicant failed to discharge its duty of full and frank disclosure at a without notice application.
Alternatively, the respondent is entitled to apply for permission to appeal the order granting injunctive relief23and, if granted such permission, may appeal to the Court of Appeal (Civil Division). The Court of Appeal will consider an appeal at an oral hearing having considered written arguments of both parties. The Court of Appeal has the power to uphold, overturn or vary the decision of the English High Court in relation to injunction relief.
Unless stated to the contrary by the judge who granted the injunction or the Court of Appeal itself, submitting an appeal against the granting of injunctive relief does not have the effect of suspending the operation of that injunction while the appeal proceeds.
Sanctions for breach of a court injunction
A commonly recognised advantage of an English court injunction are the robust sanctions that may be imposed on a respondent which breaches it. These include:
- imprisonment of up to 2 years; and/or
- an unlimited fine; and/or
- sequestration of a company's assets; and/or
- debarring a respondent from defending the claim in respect of which the injunction was granted24.
All of these sanctions may be imposed by the English High Court which granted the injunction in question. It is not necessary, for example, for separate criminal proceedings to be commenced in order that a term of imprisonment to be imposed. The most recent example of the High Court imposing a substantial term of imprisonment (22 months) on a defendant (and an order debarring him from defending the claimant's claim) as sanctions for refusal to disclose his assets in the context of a freezing injunction is, in fact, a Kazakhstan case – the high profile case of JSC BTA Bank v Ablyazov ( EWHC 237 (Comm)).
On brief consideration, it may appear that the injunctive relief powers available to the Kazakh and English courts are broadly similar. Still, significant differences exist in: (i) geographical reach of injunctive relief powers (extra-territorial application of injunctive relief under the English legal system to foreign assets); (ii) the duration of injunctive relief (limited duration under the English system which allows the respondent greater opportunities to remove the order and prevent applicant's abuses); (iii) security required of the applicant (this is rarely applied by Kazakh courts, although introducing this practice widely would substantially decrease the number of injunctive relief applications in Kazakh courts and prevent abuse of this procedural tool); (iv) significant penalties for the failure to enforce the court's order; (v) the procedural standards that give rise to injunctive relief applications.
That is something that can be said when comparing the interim relief powers of the English court against those of many other countries as well. This should not be a surprise, if one takes into account the extended period of stability in which the English legal system has had to adapt to the needs of businesses and business people (particularly in relation to its procedural rules).
Judicial systems are evolving institutions. It is to be hoped (indeed expected) that over time the Kazakhstan legal system will also develop greater flexibility – particularly in the context of injunctive relief – as the courts gain increasing exposure to international disputes. For the moment, however, the experience of the English legal system may prove more advantageous for an applicant seeking urgent, robust and flexible injunctive relief.
1 Normative Resolution of the Supreme Court of Kazakhstan No. 2 dated January 1, 2009 "On the Taking of Injunctive Relief in Civil Cases", section 9.
2 Normative Resolution of the Supreme Court of Kazakhstan No. 2 dated January 1, 2009 "On the Taking of Injunctive Relief in Civil Cases", section 6.
3 Id., section 10.
4 Normative Resolution of the Supreme Court of Kazakhstan No. 12 dated December 12, 2003 "On the Liability for Contempt of Judicial Acts", section 12.
5 Restriction of freedom refers to a type of sanction which envisages restrictions on the ability of the criminal to travel outside of the area where the criminal resides. Restriction of freedom includes supervision of the criminal by law enforcement agencies.
6 A freezing injunction may apply to assets of the respondent located outside the jurisdiction and to assets held in the names of nominees of the respondent (for example, holding companies, agents and trustees) - as well as to assets that are registered in the respondent's name. In these respects an English freezing order has wider scope than freezing orders available in many other countries (including Kazakhstan). It will apply to the respondent's assets only to the extent of the amount being claimed by the applicant. Therefore, a freezing injunction will allow the respondent to deal with particular assets as it wishes if the value of its'remaining assets are in excess of a particular amount stated in the court order (being the sum claimed by the applicant).
A freezing injunction may be granted against a foreign defendant with no assets within the jurisdiction. In this regard the scope of an English freezing order is wider than that of a Kazakh court.
There are few jurisdictions outside the European Union where an English worldwide freezing order is directly enforceable. Therefore, it may be necessary (or prudent) to obtain 'a parallel order' in the jurisdiction(s) where the respondent or its assets are located to increase the effectiveness of the freezing order.
7 It is standard practice to include such an order in a freezing injunction. Disclosure by the respondent of his assets is recognised as essential to the effective 'policing'of a freezing injunction (ie. monitoring that the respondent is complying with its terms).
8 This is most commonly granted where there is a real risk that the respondent may destroy important evidence.
9 The applicant need only demonstrate that its claim has a real prospect of success, which is a low threshold and in reality means that the claim is not frivolous .
10 The applicant is required to demonstrate that its claim is more than barely arguable but, nevertheless, it does not have to demonstrate that it has more than a 50% chance of success. Therefore, the threshold is higher than that which applies to ordinary injunction, but still relatively low.
11 The available evidence indicates that the applicant is likely to succeed at trial.
12 For example, details of its assets and their values and/or copies of its latest financial accounts
13 S.21(1)(a) of the Crown Proceedings Act 1947
14 Ss.13(2)(a), 13(3) and 13(4) of the State Immunity Act 1978
15 See s.44(5) of the Arbitration Act 1996. Common examples of the tribunal being unable to act effectively are: where the injunction is required to prevent some imminent harm that would be caused by a proposed action of the respondent and the tribunal has not yet been constituted; or if the order needs to be obtained without the knowledge of the respondent to be effective (e.g. a freezing injunction or search, where, respectively, it is feared that the respondent would take immediate steps to dissipate or hide its assets if given notice of the application to freeze them or to destroy important evidence (see the section below on Procedure for further discussion of this).
16 particularly freezing injunction and search orders, where it is easier to demonstrate that the tribunal is not able to grant an effective order
17 Although where relief is sought prior to the commencement of a claim, the court will almost invariably require an undertaking that such proceedings will be commenced within a short (and specified) period of time.
18 A document prepared by a party's advocate summarising the factual and legal bases of that party's case.
19 Known as 'a without notice application'. A without notice applicationmay be made on very short notice (e.g. within one or two days of notifying the court and in cases of extreme urgency even the same day. The availability of a without notice hearing is another example of the flexibility within the English procedural rules that attracts many businesses and businessmen,
20 Commonly referred to as the duty of full and frank disclosure
21 If the applicant breaches this duty the court can (and often will) discharge the injunction as a punishment, even if the injunction was justified on the standard grounds,
22 Known as 'the return date hearing'. Between the dates of the without notice and return date hearings the injunction will be in force and, therefore, the applicant will (in theory and to the extent that the injunction is not breached by the respondent) be protected against the risk that the injunction was designed to avert.
23 The application for permission to appeal should be made in the first instance to the judge who made the order being appealed. If that application is refused the respondent may apply to the Court of Appeal itself for permission to appeal.
24 It is settled case law that such a court may debar a defendant from defending court proceedings. However, there remains doubt as to whether it may do the same in support of arbitral 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.