About the novels of the Law "On arbitration", adopted in April 2016

The new Law of RK "On arbitration" united provisions of the previous two laws of RK "On arbitration courts" and "On International Commercial Arbitration".

The law aims to ensure a common approach in the legal support of domestic and international arbitration for non-judicial settlement of civil disputes. The concept of arbitrage covers now arbitration courts of Kazakhstan and international arbitration.

Private law disputes between individuals and (or) legal entities are assigned to the jurisdiction of arbitration, irrespective of the presence a foreign entity in a dispute. Internal disputes are regulated by the current legislation, i.e. between residents of the Republic of Kazakhstan were reviewed by the arbitration courts, and the ones with participation of a foreign entity through international arbitration.

The new law clearly defines the category of disputes, which can’t be considered in the arbitration process. These include disputes: concerning the interests of minors; arising from personal relations, not related to property; between the subjects of natural monopolies and consumers; on rehabilitation and bankruptcy; persons recognized as incapable or partially capable; between public authorities, public enterprises, entities of quasi-public sector.

With this new law, unlike the previous law "On arbitration courts", it provides an opportunity to deal with disputes between residents of the Republic of Kazakhstan on the one hand, and government agencies, state enterprises, quasi-public sector entities - on the other. However, this requires the presence of the consent of the authorized body of the relevant sector (for republican property) or the local executive body (for municipal property).

This rule, as before, does not apply to disputes where one of the parties is a non-resident of the Republic of Kazakhstan. The consent of the authorized body or the local executive body is not required in disputes with their participation.

A novelty is the possibility of a unilateral refusal of the parties prior to a dispute from the arbitration agreement by giving notice to the other party within a reasonable time. In this case, the dispute may be transferred for consideration by the plaintiff in the court or other procedure.

The law introduced a unified approach to appeal of arbitral decisions both in disputes between residents and with the participation of foreign entities. Decisions adopted by arbitration can’t be checked by state courts on the merits with reference to a violation of the principle of legality, as was the case earlier during appeal of the decision of the arbitral tribunal.

Cancellation of arbitration decisions or refusal of their enforcement shall be allowed only upon provision by the side of the violation of procedural arbitration that are explicitly listed in the Law, Civil Procedure Law, the international conventions to which Kazakhstan acceded.

The novelty of the new law is the fact that it stipulates the reasons for cancelation of the revision of the arbitration decision in case of newly discovered circumstances. Earlier, before the adoption of a unified law on arbitration, the possibility of such a review concerned only the arbitral tribunal courts, which considered disputes only between the residents of the Republic of Kazakhstan.

The law extends the principle of confidentiality of the arbitration, which spreads not only on the referees, but also on the participants of the process, regulates thoroughly dispositivity of arbitration with priority review of the agreement of the parties and the provisions of the Rules, the arbitral institutions.

The age and qualification requirements for arbitrators were expanded, as well as requirements that ensure their independence and impartiality.

The Law gives the parties an opportunity to resolve the dispute under consideration in the course of the arbitration, the procedure of mediation.

In order to ensure favorable conditions for the development of arbitration in the country, monitoring its activities, raising the qualification of the arbitrators and the solution of other problems faced by the arbitration, the law provides provisions for the establishment and functions of the Arbitration Chamber.

It should be noted that the above mentioned changes in the law can’t be directly attributed to the preference of arbitration in relation to the state court.

Preference criteria are different, they existed before. These include, for example: choice of arbitrators and the particular arbitration institution by the parties; confidentiality and finality of the dispute in a single instance; economy on material costs and quick review; simplified procedure of the review and selection of the place; the enforceability of the arbitration decision in most countries, which, like Kazakhstan are parties to the international conventions on arbitration.

At the same time, the inadmissibility of setting aside arbitral decisions by the state court, the absence of a new legal grounds to cancel it on grounds of violation of the law, which took place prior in internal disputes between residents, can be viewed as preference for application to arbitration court rather than to the state court.

The increase of the cases considered through arbitration may serve as a reason for exclusion of the prohibition for review of disputes involving government agencies, state-owned enterprises, as well as legal entities, fifty and more percent of shares of which belong to the state. However, this can be impossible because disputes with their consent, by the law are allowed only in the presence of the consent of  the authorized body of the industry (in terms of republican property) or executive body (for municipal property).

The incorporates the voluntary alternative dispute resolution out of court, and the several advantages of the arbitration process, which enhance the attractiveness of appeals to arbitration. However, this opportunity comes only when both parties agree to review the dispute through arbitration and the conclusion of a written agreement in the contracts before the dispute arose, or separately after its occurrence.

Lack of knowledge of legal possibilities and advantages of arbitration can create difficulties in choosing the body to resolve a commercial dispute. This applies not only to physical persons, individual entrepreneurs, but also to legal persons (their representatives), who often have little concept of arbitration. Novelty on the establishment of the Arbitration Chamber of Kazakhstan is directed, first of all, on the possibility to stimulate arbitrage.

Meanwhile, the adoption of a unified law on arbitration does not exclude certain problematic issues in the development of arbitration, and sometimes exacerbates them. The law differently solved the possibility of concluding an arbitration agreement between various actors, in some cases it is sufficient to conclude an agreement between the parties, in other cases the preliminary consent of the authorized body may be required.

The instability of an arbitration agreement is affected by the introduction of the law, according to which the parties have the right to refuse from the arbitration agreement unilaterally prior to a dispute.

Unlike the previous legislation, it allows the revision of arbitral decisions by the newly discovered circumstances, both for internal disputes and the ones with participation of foreign entities, which may also point to the inconclusiveness of the arbitration decision.

Procedural issues, concerning the arbitration process and the contents of certain documents, such as preparation of the case to arbitration, the content of the protocol, filing of comments, are regulated mandatory procedures.

The term "arbitration" has ambiguous meaning in the law, which may cause difficulty in law enforcement. According to the content of the law this concept is general in nature, and includes the establishment of the arbitration and the arbitrators, while international practice is used along with the term "arbitration" and the term "arbitral tribunal" means a sole arbitrator or a panel of arbitrators.

These and other problematic issues can be resolved in the future through legislation, by making the appropriate changes.