A number of significant amendments1 have been introduced to the Law on Arbitration2; including, inter alia, amendments to the following provisions:

(a) rules on the law applicable to the merits of a dispute: foreign law can now apply to a dispute involving the state;

(b) grounds for refusal to recognize and enforce an arbitral award: the grounds have been brought in line with the New York Convention3;

(c) grounds for annulment of an arbitral award: among other things, a provision has been added that the court is not entitled to look into the substance of an award;

(d) content of the arbitration agreement: a number of of requirements as to the content of an arbitration agreement have been removed;

(e) consent of the authorized body to conclude an arbitration agreement: a clarification was introduced on irrevocability of the consent.

In our view, the amendments, in general, are positive; some key provisions of the Law on Arbitration have been harmonized with the international conventions and a number of defects in the legal regulation of the arbitration sector have been rectified.

Below is our brief analysis of the main amendments.

Law applicable to the merits of a dispute

1) Law applicable to a dispute involving the state

Previous version of Article 44.1 of the Law on Arbitration provided for the mandatory application of Kazakh law in a dispute with participation of state bodies, enterprises and legal entities in which the state owns 50 % or more (the State Person). This provision contradicted Civil Code4 which allows for the possibility to choose foreign law.

Under the current version of Article 44.1 of the Law on Arbitration, Kazakh law is now mandatory only in a dispute between natural persons and legal entities of Kazakhstan. Accordingly, the parties are entitled to choose to apply foreign law to civil law relations between State Persons and foreign persons.

2) Establishing the applicable law in the absence of agreement between the parties

The current version of Article 44.1 of the Law on Arbitration now establishes that, in the absence of agreement between the parties, the applicable law will be established in accordance with the conflict of laws rules which the arbitral tribunal will deem applicable. Thus, this provision was brought in line with paragraph 1 of Article 7 of the European Convention on International Commercial Arbitration5 which provides for a similar rule and no longer ties the question of establishing the applicable law to Kazakh law.

Grounds for refusal to recognize and enforce an arbitral award

The grounds for refusal to recognize and enforce an arbitral award listed in Article 57 of the Law on Arbitration have been brought in line with the New York Convention.

First, previously the Law on Arbitration provided that if issuance of an award was made possible as a result of a criminal offense (the occurrence of which is established by a final and binding court verdict) this was a ground for refusal to recognize and enforce an arbitral award. There is no such basis in the New York Convention. This ground has now been excluded from the Law on Arbitration.

Secondly, the Law on Arbitration provided that in the absence of reference to the law of the state to which the parties subjected the arbitration agreement, the arbitration agreement could be invalidated under Kazakh law. This rule violated the rights of the party applying for the enforcement of a foreign arbitral award in Kazakhstan. According to the current version, the arbitration agreement can now be invalidated only under the laws of the country where the decision was made.

Thirdly, the previous version of the Law on Arbitration established that an arbitral award was unenforceable if the arbitral tribunal or the arbitration process did not comply with the requirements of the law (it did not specify which law, the law of which country). Now the Law on Arbitration provides that compliance of the arbitral tribunal or the arbitration process, in the absence of agreement between the parties, will be determined under the laws of the country where the arbitration proceedings were held.

Consent of the authorized body

A clarification was introduced to Article 8.10 of the Law on Arbitration that the consent of the authorized body to referring a dispute between Kazakhstan natural persons / legal entities and the State Person to arbitration is irrevocable, i.e. the authorized body may not withdraw its consent.

Grounds for annulment of an arbitral award

Firstly, the ground for annulment of an arbitral award in the event of non-compliance of the arbitral award with the requirements of the Law on Arbitration as to the written form and signature has been excluded.

Secondly, the Law on Arbitration now contains a norm to the effect that upon consideration of a petition for annulment of an arbitral award or refusal to issue a writ of execution, the court is not entitled to look into the substance of the arbitral award. This change is aligned with Article 503.8 of the CPC6 which prevents the courts to look into the merits an arbitral award upon consideration of an application for the writ of execution.

Thirdly, a clarification has been introduced to the following ground for the annulment of an arbitral award: if the arbitral tribunal or arbitration process do not comply with the agreement of the parties. This provision is extended to state that such agreement of the parties cannot contradict any mandatory provisions of the Law on Arbitration, or in the absence of such agreement, non-compliance of the arbitral tribunal or arbitration process with the Law on Arbitration will be the basis for annulment of the award. A similar provision is contained in the UNCITRAL Model Law on International Commercial Arbitration7

Requirements as to the content of the arbitration agreement

According to the previous version of Article 9.4 of the Law on Arbitration, the arbitration agreement had to contain: 1) the intention of the parties to refer a dispute to arbitration; 2) indication of the subject matter to be considered in the arbitration; 3) indication of a specific arbitration; 4) consent of the authorized body of the relevant industry or a local executive body in cases where a State Person is party to a dispute.

In the current version of Article 9.4 of the Law on Arbitration, these requirements are excluded, except for the requirement of the consent of the authorized body. The parties are free to establish other aspects of the arbitration agreement themselves, for example, to choose an ad hoc arbitration.

Footnotes

1 Law of the Republic of Kazakhstan No. 217-VI "On Amendments to Certain Legislative Acts of the Republic of Kazakhstan Concerning Strengthening the Protection of Property Rights, Arbitration,Optimizing the Judicial Caseload, and Further Humanizing the Criminal Law" dated January 21, 2019

2 Law of the Republic of Kazakhstan No. 488-V "On Arbitration" dated April 8, 2016 ( the Law on Arbitration)

3 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, June 10, 1958)

4 Civil Code of the republic of Kazakhstan adopted by the Supreme Council on 27 December 1994 (the Civil Code)

5 European Convention on International Commercial Arbitration (Geneva, 21 April 1961)

6 Civil Procedure Code of the Republic of Kazakhstan No. 377-V dated 31 October 2015 (the CPC)

7 UNCITRAL Model Law on International Commercial Arbitration (1985), as amended in 2006.

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