Amendment, Termination and Invalidity of Arbitration Agreements
Courts return claims or leave them without consideration seeking to invalidate arbitration agreements, on the grounds that the parties have entered into arbitration agreements providing for the resolution of disputes by arbitration.
For example, by a ruling of the Specialized Interdistrict Economic Court of Karaganda Region dated April 8, 2025, which was upheld by the appellate court, the claim of LLP “T” against LLP “Joint Venture ‘A’” seeking to invalidate an arbitration clause was returned.
In this case, pursuant to subparagraph 7) of part 1 of Article 152 of the Civil Procedure Code (CPC), the court essentially returned the claim correctly, since an arbitration agreement existed providing for the resolution of disputes by the International Arbitration Centre of the AIFC. However, the court incorrectly referred in its judicial act to Article 20 of the Law on Arbitration, because the Law on Arbitration does not apply to the International Arbitration Centre of the AIFC. Accordingly, there were no grounds for referring to that provision.
Pursuant to subparagraph 7) of part 1 of Article 152 of the CPC, the courts returned the claims of K. against LLP “L” seeking to invalidate a service agreement and an arbitration agreement and to recover a monetary amount (Bostandyk District Court of Almaty), as well as the claim of LLP “G” (G) against JSC “C” and LLP “S” seeking to invalidate the arbitration clause in the agreement (Specialized Interdistrict Economic Court of Astana), since valid arbitration agreements existed providing for the resolution of disputes by arbitration.
Due to the existence of an arbitration agreement, the claim of S. and others against LLP “M” and LLP “O” seeking to invalidate transactions was left without consideration pursuant to subparagraph 5) of Article 279 of the CPC (Interdistrict Court for Civil Cases of Astana).
When returning the above claims and leaving them without consideration, the courts correctly substantiated their conclusions in the judicial acts by referring to Article 20 of the Law on Arbitration.
When considering disputes concerning the amendment, termination and invalidation of arbitration agreements, courts must apply the provisions of the Law on Arbitration.
Thus, pursuant to paragraph 1 of Article 401 of the Civil Code (CC), a contract may be amended or terminated by agreement of the parties, unless otherwise provided for by this Code, other legislative acts or the contract.
Paragraph 2 of Article 401 of the CC establishes the circumstances in which a contract may be amended or terminated by a court decision at the request of one of the parties:
- in the event of a material breach of the contract by the other party;
- in other cases provided for by this Code, other legislative acts or the contract.
Pursuant to paragraph 3 of Article 401 of the CC, a contract shall be deemed amended or terminated in the event of unilateral refusal to perform the contract (withdrawal from the contract in whole or in part, respectively, under Article 404 of this Code).
Thus, a literal interpretation of this provision of law means that a contract may also be amended or terminated in a manner other than that established by the CC.
An arbitration agreement, by its legal nature, is a civil-law contract, but one that has specific features arising from the principles of arbitration proceedings.
Therefore, the Law on Arbitration establishes a different procedure for amending and terminating arbitration agreements, which differs from the general procedure established in Article 401 of the CC.
According to paragraph 7 of Article 8 of the Law on Arbitration, an arbitration agreement may be terminated by agreement of the parties in the same manner in which it was concluded.
Paragraph 1 of Article 9 of the Law on Arbitration establishes the requirement that an arbitration agreement must be made in writing.
The procedure for concluding an arbitration agreement is set out in Article 9 of the Law on Arbitration.
Pursuant to paragraph 1 of Article 9 of the Law on Arbitration, an arbitration agreement shall be deemed to have been concluded in writing if it is contained in the form of an arbitration clause in a document signed by the parties, or if it is concluded through an exchange of letters, telegrams, telephone messages, facsimiles, electronic documents or other documents that identify the parties and the substance of their expressions of intent.
According to paragraph 2 of the aforementioned provision, an arbitration agreement shall also be deemed to have been concluded in writing if it is concluded through an exchange of a statement of claim and a statement of defence, in which one party asserts the existence of an agreement and the other party does not object.
Furthermore, paragraph 3 of the aforementioned article provides for another procedure for concluding an arbitration agreement, namely, by including in a contract a reference to a document containing a provision on referring a dispute to arbitration, provided that the contract is concluded in writing and the reference is such that it makes the arbitration agreement part of the contract.
Thus, in order to terminate an arbitration agreement, the parties must conclude a corresponding written agreement in the same manner in which the arbitration agreement was concluded.
An arbitration agreement may also be terminated by filing a claim with a court and submitting a statement of defence in which the defendant does not object to the dispute being considered by the court.
As a general rule, where a valid arbitration agreement exists, the court is not entitled to consider the dispute.
Pursuant to subparagraph 7) of part 1 of Article 152 of the CPC, a judge shall return a statement of claim if, in accordance with the law, the parties have concluded an agreement to refer the relevant dispute to arbitration, unless otherwise provided for by law.
According to subparagraph 5) of Article 279 of the CPC, the court shall leave a claim without consideration where, in accordance with the law, the parties have concluded an agreement to refer the dispute to arbitration or to the court of the Astana International Financial Centre, unless otherwise provided for by law.
The provision “unless otherwise provided for by law” is set out in Article 10 of the Law on Arbitration, according to which a court before which a claim has been filed concerning the subject matter of arbitration proceedings must, at the request of either party, refer the parties to arbitration no later than the submission of its first statement on the merits of the dispute, unless it finds that the arbitration agreement is invalid, has ceased to have effect or cannot be performed.
Where one of the parties files a claim with a court concerning the subject matter of arbitration proceedings, the defendant may, but is not obliged to, object to the dispute being considered by the court. Such an objection is usually made in the form of a motion to leave the claim without consideration, which must be submitted no later than the defendant’s first statement on the merits of the dispute. The objection to court proceedings must contain a request that the dispute not be considered by the court.
The provisions of Article 401 of the CC do not apply to the amendment or termination of an arbitration agreement.
The resolution of disputes concerning the termination, amendment or invalidation of an arbitration agreement falls within the competence of the arbitral tribunal.
Thus, pursuant to subparagraph 7) of Article 5 of the Law on Arbitration, arbitration proceedings shall be conducted in compliance with, among other things, the principle of autonomy of the arbitration agreement. This principle means that the revocation, amendment or invalidation of an arbitration clause does not result in the termination, amendment or invalidation of the underlying agreement. Accordingly, the revocation, amendment or invalidation of the underlying agreement does not result in the termination, amendment or invalidation of the arbitration clause.
It clearly follows from the meaning of paragraph 1 of Article 20 of the Law on Arbitration that the arbitral tribunal independently decides whether it has jurisdiction.
For example, by a decision of the Specialized Interdistrict Economic Court of Almaty dated February 17, 2025, which was upheld by the appellate court, the claim of Individual Entrepreneur “K” against LLP “I” seeking to invalidate an arbitration clause was dismissed.
The case established that the parties had entered into an equipment supply and installation agreement dated September 1, 2023. Clause 7.2 of the agreement contained an arbitration clause providing that, in the event of a dispute, it would be referred to the “AVAL” International Arbitration Court in Almaty.
The claimant considers this arbitration clause invalid, arguing that it violates the requirements of the law.
In resolving the dispute, the local courts proceeded from the fact that the parties had freely entered into the agreement and that there were no grounds indicating the invalidity of the arbitration clause.
The court stated that, in order to invalidate a transaction, it must be established that, at the time the transaction was concluded, the law had been violated or the requirements concerning freedom of expression of intent, form, content and parties to the transaction had not been complied with. However, the claimant had not submitted such evidence.
The local courts found no grounds for invalidating the disputed arbitration clause, due to the absence of the grounds for invalidity provided for in Articles 157–159 of the CC.
Furthermore, by a decision of the Specialized Interdistrict Economic Court of Karaganda Region dated July 30, 2025, the claim of LLP “S” against LLP “K” seeking to invalidate clause 5.8 of the agreement and Section 7 of the agreement insofar as they concerned the arbitration clause was dismissed.
The case established that the parties had entered into a works agreement dated February 22, 2024. Clause 7.2 of the agreement provided that all disputes, disagreements and/or claims arising out of or in connection with the agreement, including those concerning its conclusion, amendment (supplementation), performance, breach, termination, cessation and/or invalidity, which could not be resolved through negotiations, were subject to final settlement and resolution by the permanently operating “Industrial Arbitration Court”, located in Astana, in accordance with its rules then in force.
In dismissing the claim, the court of first instance reasoned that the agreement had been concluded between the parties in writing, signed by the parties, contained the essential terms and complied with the requirements of applicable law, since the claimant had agreed to its terms and had expressed its intention to enter into such an agreement.
In this regard, the court concluded that, since the claimant had not submitted evidence demonstrating the invalidity of the arbitration clause, the arbitration agreement was valid.
In both cases, the courts failed to apply the provisions of Article 20 of the Law on Arbitration, which establishes that, where an arbitration clause exists, the arbitral tribunal is entitled to determine whether it has the authority (jurisdiction) to hear the dispute referred to it for resolution.
The provisions of this rule are derived from international practice, including the UNCITRAL Model Law on International Commercial Arbitration. This provision prevents a party acting in bad faith from initially entering into an arbitration agreement and subsequently, instead of filing a claim with arbitration for the resolution of a dispute that has arisen, bringing an action before a court.
In this regard, where claims seeking to invalidate an arbitration clause are filed, the court shall return the claim pursuant to subparagraph 7) of part 1 of Article 152 of the CPC or leave the claim without consideration pursuant to subparagraph 5) of Article 279 of the CPC, explaining to the party its right to apply to arbitration. This is because, pursuant to Article 20 of the Law on Arbitration, it is the arbitral tribunal that must first determine whether it has jurisdiction, including where one of the parties alleges that the arbitration agreement is invalid.
If the arbitral tribunal concludes that the dispute falls within its jurisdiction, it shall render an arbitral award. Such award may be reviewed by a court upon the filing of an application to set aside the arbitral award, since the court is empowered to verify the existence of jurisdiction, which includes examining whether the arbitration agreement is valid or invalid (paragraph 3 of Article 465 of the CPC). Moreover, the invalidity of an arbitration clause is expressly provided for as a ground for setting aside an arbitral award (subparagraph 2) of paragraph 1 of Article 52 of the Law on Arbitration).
Particular attention should be paid to issues concerning arbitration agreements in contracts of adhesion and loan agreements.
Pursuant to Article 10 of the Law on Arbitration, a court before which a claim has been filed concerning the subject matter of arbitration proceedings must, at the request of either party, refer the parties to arbitration no later than the submission of its first statement on the merits of the dispute, unless it finds that the arbitration agreement is invalid, has ceased to have effect or cannot be performed.
Notwithstanding the filing of a claim referred to in the first part of this Article, arbitration proceedings may be commenced or continued, and an arbitral award may be rendered, while the court is considering whether the subject matter of the arbitration proceedings falls within its jurisdiction.
This provision makes it possible to address the issue of pathological arbitration agreements, where the arbitral tribunal is unable to hear the dispute due to an incurable defect in the arbitration agreement. Such disputes must therefore be heard by a court.
Article 10 of the Law on Arbitration provides for three circumstances in which, notwithstanding the conclusion of an arbitration agreement between the parties, the dispute cannot be heard by arbitration:
- the arbitration agreement is invalid;
- it has ceased to have effect;
- it cannot be performed.
This list is exhaustive and is not subject to expansion.
Paragraph 4 of Article 8 of the Law on Arbitration establishes a special requirement for an arbitration agreement incorporated into a contract of adhesion:
- it is valid only if concluded after the grounds for bringing a claim have arisen. Relevant clarifications are provided in paragraph 14 of the Regulatory Resolution.
On April 30, 2025, the Medeu District Court of Almaty granted the claim of A. against LLP “E” seeking to invalidate a tourist services agreement, a supplementary agreement and an arbitration agreement dated May 21, 2023, and to recover damages.
It follows from the case materials that, on May 21, 2023, the parties entered into a tourist services agreement, under which the service provider undertook to provide the client (and the persons specified in Appendix 2 to the Agreement) with the tourist services necessary to meet their needs during the trip.
Clause 10.1 of the agreement provided for the resolution of disputes by the permanently operating International Arbitration of the Eurasian Economic Space in accordance with its rules then in force.
In bringing the above claim before the court, A. stated that the tourist services agreement did not comply with the requirements of applicable law. In particular, A. argued that removing the provision on court proceedings for dispute resolution from the tourist services agreement and replacing it with an arbitration clause constituted a violation of the law.
The court granted the claim in full.
In this case, the dispute arose out of a contract of adhesion. This issue is explained in detail in the Supreme Court’s Review of Judicial Practice on the Recognition, Enforcement and Setting Aside of Arbitral Awards for 2019–2022, dated February 10, 2023.
Pursuant to paragraph 1 of Article 389 of the CC, a contract of adhesion is a contract whose terms are determined by one party in forms or other standard formats and may be accepted by the other party only by adhering to the contract as a whole.
The arbitration agreement incorporated into the text of the contract of adhesion deprived the adhering party of freedom of expression of intent.
Thus, an arbitration agreement incorporated into a standard tourist services agreement before the grounds for bringing a claim have arisen may be declared invalid pursuant to paragraph 1 of Article 158 of the CC as a transaction whose content does not comply with the requirements of arbitration legislation.
It is apparent from the statement of claim that, in addition to seeking a declaration that the arbitration agreement was invalid, the claimant brought four other claims on the merits, including a claim seeking to invalidate the agreement.
In this case, since the claimant had applied to the court, it would have been appropriate for the claimant to file a claim addressing only the merits of the dispute (a claim seeking to invalidate an arbitration agreement cannot be heard by a court, as this falls within the jurisdiction of the arbitral tribunal) and to substantiate the invalidity of the arbitration clause in the statement of claim by referring to paragraph 4 of Article 8 and Article 10 of the Law on Arbitration.
In such circumstances, the court would have resolved the issue of the invalidity of the arbitration clause, referring to the above provisions of law in the reasoning section of the judicial act, and would have rendered a decision only on the merits of the claim.
Another example. By a ruling of the Civil Cases Judicial Panel of the Pavlodar Regional Court dated May 29, 2025, the ruling of the Terеңкөл District Court of Pavlodar Region dated April 1, 2025, returning the claim of LLP “Collection Agency ‘C’” against K. for debt recovery, was set aside.
The court of first instance justified the return of the claim by the need to apply to the Eurasian Economic Arbitration, in view of the arbitration clause contained in clause 6.3 of the loan agreement.
Pursuant to paragraph 4 of Article 8 of the Law on Arbitration, an arbitration agreement providing for the resolution of a dispute arising out of a loan agreement between a commercial organization and an individual who is not an individual entrepreneur is valid only if such agreement is concluded after the grounds for bringing a claim have arisen.
Paragraph 15 of the Regulatory Resolution clarifies that these provisions apply to arbitration agreements concluded after February 2, 2019, since the law does not provide for retroactive effect (Article 4 of the CC; paragraphs 1 and 2 of Article 43 of the Law on Legal Acts).
In the case under consideration, the agreement was concluded on March 20, 2020, and the debt arose on April 20, 2020. Therefore, in order to resolve a dispute arising out of the loan agreement by arbitration, an arbitration agreement must be concluded after the dispute has arisen, which may be formalized by a supplementary agreement.
The appellate court concluded that, since the arbitration clause had been incorporated into the loan agreement before the grounds for bringing a claim arose, the dispute was subject to resolution by a court.
The Appeal Panel Reversed the Judicial Act and Remanded the Case to the Court of First Instance for New Consideration
On similar grounds, the following arbitral awards were set aside: the arbitral award of the International Arbitration Court “I” dated 26 April 2024 in the claim filed by LLP “M” against D. for recovery of indebtedness (Almaty City Court); the arbitral award of the Eurasian Economic Arbitration Court dated 16 February 2024 in the claim filed by LLP “Collection Agency “A” (CA) against M. for recovery of indebtedness (Almaty City Court); and the arbitral award of the International Arbitration Court “Imperium” dated 4 June 2024 in the claim filed by LLP “M” against A. for recovery of indebtedness (Karaganda Regional Court).
During the analysis and examination of the case materials, specifically upon reviewing the statement of claim in the above-mentioned case, it was established that, when applying to the court, the party had not referred in the statement of claim to Article 10 of the Law on Arbitration (the court before which a claim concerning the subject matter of the arbitration proceedings has been brought shall, at the request of either party, no later than the submission of its first statement on the merits of the dispute, refer the parties to arbitration unless it finds that the arbitration agreement is invalid, has ceased to have effect, or cannot be performed). Where a claim is filed with a court despite the existence of an arbitration agreement, this constitutes a necessary condition. It follows from the meaning of the aforementioned provision that even where an arbitration agreement exists, a party may file a claim on the merits of the dispute with a court; however, the court may consider such a claim only in compliance with the requirements of Article 10 of the Law on Arbitration.
Therefore, if, despite the existence of an arbitration clause, a claim is filed with a court and the party refers in the claim to Article 10 of the Law on Arbitration, the court must retain such claim in its proceedings and consider it on the merits, while providing reasons as to why, despite the existence of an arbitration agreement, it is considering the dispute. In other words, there are three circumstances in which a court may consider a dispute despite the existence of an arbitration clause: the arbitration agreement is invalid, has ceased to have effect, or cannot be performed (Article 10 of the Law on Arbitration, as detailed above). If these circumstances are not established by the court, the claim shall be returned or left without consideration.
Where, despite the existence of an arbitration clause, a claim is filed with a court and the party neither refers to Article 10 of the Law on Arbitration in the claim nor presents arguments before the court taking into account the provisions of Article 10 of the Law on Arbitration, the court shall return such claim or leave it without consideration and refer the parties to arbitration, while explaining in the ruling the provisions of Article 20 of the Law on Arbitration.
Pursuant to Article 20 of the Law on Arbitration, the arbitration tribunal determines the issue of its own jurisdiction, i.e. the arbitration tribunal assesses the arbitration agreement and determines whether it is valid or invalid.
If the arbitration tribunal concludes that the arbitration agreement is invalid, it shall issue a ruling to that effect, following which the party may file a claim with the court on the merits of the dispute.
If the arbitration tribunal concludes that the dispute falls within its jurisdiction, it shall render an arbitral award, which may be challenged by a party before the court by filing an application pursuant to paragraph 3 of Article 465 of the Civil Procedure Code. The court must assess the validity of the arbitration agreement and, depending on the circumstances established in the case, render a lawful and well-founded judicial act.
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