Comments: " Arbitration Court: Is there equitable justice in Kazakhstan?"

Arbitration Court: Is there equitable justice in Kazakhstan?

Published in kursiv.kz
Nurzhan Stamkulov, Partner

Kazakhstan intends to increase the investment attractiveness of various sectors of the economy. This has been repeatedly mentioned from various sites, including government meetings. However, any investor is always interested in the issue of safety of investments and fair resolution of disputes. In this regard, the work of arbitration courts in Kazakhstan is becoming more relevant. According to experts, competition between private and state courts increases the confidence of foreign investors.

The partner of the "Synergy Partners" law firm, Nurzhan Stamkulov, who consults foreign companies, including the World Bank, on the investment attractiveness of Kazakhstan and arbitration, told more about it in an interview with "Kъ".

- Nurzhan, could you tell us what competition are we talking about?
- It is a question of competition between courts, meaning the arbitration courts and the state courts.

- Do we even have private courts, and is not it harmful for the society or the state?
- Absolutely not harmful, on the contrary, it is useful. If you take bailiffs from 5 years ago, they were all state. For years people could not influence the bailiffs, wrote complaints, filed suits, everything was done long and ineffectively. But now private bailiffs perform their work several times more efficiently. The same with arbitration courts, this is a private court, where the parties themselves choose arbitrators and settle the dispute once and for all. The existence of arbitration courts and their work in Kazakhstan is an indicator of how far we are moving towards the world, not retreating. Arbitration courts exist in all countries, and it is normal.

- You say that arbitration is a private court, where the parties themselves choose arbitrators. Is not there a risk of corruption, an unfair and subjective trial?
- As a rule, three arbitrators consider the dispute. Arbitrators are the most authoritative practicing lawyers, scientists who consider the dispute, taking care of their reputation. Secondly, private companies choose arbitration just in order to eliminate the element of corruption and go to where there is more confidence. For example, you can choose an arbitrator, a respected professor from Germany, Rolf Knieper, who visited us for an annual conference on private law, or lawyers from the United States, Holland, Switzerland, who have a long experience of dispute resolution, high reputation.

- How many private courts exist in Kazakhstan today?
- Unfortunately, I do not know the exact statistics, but I believe that there are no more than 10 in the entire Republic. I can highlight two authoritative arbitration courts with which we work – Kazakhstan International Arbitration and Arbitration at the National Chamber of Entrepreneurs “Atameken”.

- What disputes are most preferable, in your opinion, to be resolved in a private court?
- Of course, disputes between commercial legal entities. Sometimes disputes about share participation. Disputes on licenses, franchising, know-how, disputes over joint activities, profit sharing, etc.

- Can private courts challenge decisions of state courts? How often does this happen in Kazakhstan?
- No, they cannot. Private courts are prohibited from interfering in public policy.

- Could you explain why arbitration courts in countries like Germany, the United States, or England is necessary? To our knowledge, the judicial system there works very efficiently and copes with the tasks set?
- Yes, it is true, in the above-mentioned countries the judicial system has existed for a long time and is built quite effectively. But there are cases when the dispute is very specific, requires special knowledge of the arbitrator in corporate law, or knowledge of the features and mechanism of options, or complex transactions for the sale of companies. For example, two foreign companies buy and sell a LLP in Kazakhstan, the purchase and sale transaction is very complex, and an arbitrator who knows the practice of mergers and acquisitions in order to resolve the dispute is required for the dispute.
Second – the arbitration courts allow you to maintain confidentiality between the parties, and the dispute is resolved in closed mode, without publicity in the public space.
The third advantage is that arbitration courts thanks to resolving disputes in one stage look attractive to corporations, rather than the dispute of the company will be considered for years in different jurisdictions, and the costs of such a dispute can be enormous. In some cases, the fee for arbitration may be lower than the fee in state courts. Therefore, arbitration court for business is a very necessary institution in the state.

- In your opinion, why does competition increase the investment attractiveness?
- For example, you want to invest your investments in Malaysia and do business with Malaysian partners, with you having 51% and them having 49%. You do not know the judicial system of this country, and there is local legislation, which states that all issues are resolved through a contract. It will be easier and more convenient for you if any dispute will be considered by special arbitration court in the same Malaysia, or arbitration court of the International Chamber of Commerce in Paris. If you are sure that arbitration awards are being executed in Malaysia and the arbitration courts operate there on a par with state courts, then, of course, it will be more comfortable for you to protect your investments, and the preference will fall on the country where your investments will be protected.
Similarly, foreign investors are constantly monitoring our situation with private courts, as far as the state is moving in this direction. Recognition and 100% execution of private court decisions on the territory of Kazakhstan is the main indicator of the protection of investments. Investors want to know how they can protect their investments.

- In your opinion, how is the situation of competition between private courts and state courts in Kazakhstan now?
- In my opinion, there is competition between them, but in a good sense of this word. Kazakhstan has become a full participant in the international global system for the recognition of arbitration. Kazakhstan signed the New York Convention of 1958. In 1958, representatives of developed countries gathered and said that they should recognize the decision of arbitration courts in the territory of the country that is a party to this convention. And many agreed, saying they should be accepting the decision of arbitration. Kazakhstan acceded to this convention.
Competition is considered ideal if the competitive field is equalized, and the same conditions are created for all participants. The Arbitration Law of 2016 has already been adopted. The Law is great, but it is necessary to continue working in the direction of excellence, and work out a mechanism for issuing writ of execution and enforcement of the arbitral award.