25 10 2021
The Arbitration Clause in the Republic of Kazakhstan. Determination of Jurisdiction. Law Enforcement Problems
Arbitration is an alternative to the judicial settlement of commercial disputes and always starts with the mutual expression of the will of the parties to refer their dispute to a special non-governmental body. Thus, a potential or already arising dispute from a civil law contract is removed from the jurisdiction of a state court.
Arbitrations are not included in the system of courts of the Republic of Kazakhstan, determined by the Constitution of the Republic of Kazakhstan, and can be established in the form of a permanent institution or to resolve a specific dispute.
There is a section in the agreement that provides for the procedure for resolving the dispute, the so-called arbitration clause. The arbitration clause is part of the contract but is construed as an agreement independent of other terms of the contract.
Questions about the jurisdiction or non-jurisdiction of one or another arbitration do not arise if the parties to the agreement have entered into a separate arbitration agreement, where they have clearly defined which arbitration will consider the dispute if it arises.
If the arbitration clause is written incorrectly, the following problems may arise:
1. Refusal to accept for consideration a civil dispute by arbitration tribunals and a simultaneous refusal to accept for consideration by state courts, which will certainly lead to the inability to exercise the right to defence of one of the parties.
Taking into account the legally enshrined rules of contractual jurisdiction, the parties to the contract have the right to determine it independently, considering the jurisdiction of the dispute by the court in specific legal relations. When drafting and agreeing on an arbitration clause, the parties may decide to save time, money and, for less formal proceedings, will resolve the dispute(s) that may have arisen in a specific arbitration, including the AIFC International Arbitration Center.
Thus, when drawing up an arbitration clause in a contract, the parties must specify the permanent arbitration tribunal as accurately and in detail as possible, or agree in advance on the conditions for creating a new arbitration tribunal.
2. Another problem that the parties may face is the lack of an established judicial practice of appealing against decisions of arbitration tribunals.
State courts empowered to decide the issue of jurisdiction or non-jurisdiction of the arbitration proceeding are based only on the rules of a written form of the arbitration agreement indicating the specific arbitration.
Following Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (hereinafter - the 1958 Convention), each Contracting State recognizes a written agreement by which the parties undertake to submit to arbitration all or any disputes that have arisen or may arise between them in connection with any specific contractual or other legal relationship, the object of which may be the subject of arbitration.
According to international practice, an arbitration agreement is a basis for the competence of a permanent arbitration tribunal. It can be drawn up not only as an independent document.
According to the European Convention on Foreign Trade Arbitration dated April 21, 1961, a) the term "arbitration agreement" means an arbitration clause in a written transaction or a separate arbitration agreement signed by the parties or contained in the exchange of letters, telegrams, or teletype messages, and in relations between states, in which none of the laws requires a written form for the arbitration agreement, this means any agreement entered into in the form permitted by these laws. Thus, all international acts signed by our state recognize as arbitrable any agreement of the parties to the dispute, according to which the parties voluntarily chose arbitration as a body instead of the state court, thereby expressing a desire to exercise their constitutional right to judicial protection by using alternative dispute resolution.
Thus, Kazakhstan legislation, judicial practice, and international practice proceed from the presumption of arbitrability of disputes: all private law disputes are arbitrable unless otherwise provided by law. The establishment of non-arbitrability of any dispute by a court decision, as well as the principle of uniformity of judicial practice may not serve as grounds for recognizing any other dispute or a set of disputes as non-arbitrable.
Author: Meruet Zhunubaeva, Partner at MG Partners