Arbitration agreements on disputes involving investors
It is an important element for creating a favorable investment climate. Investors value the predictability and stability of the legal system in the country where they invest their funds. The stability of arbitration agreements demonstrates that the State recognizes the importance of ensuring the protection of investors' rights, including through the refusal of courts of general jurisdiction to consider disputes falling under the arbitration clause.
Investors noted that they had to deal with several judicial acts in the case when the arbitration clause was not recognized by the courts of general jurisdiction.
The possibility of applying to international arbitration
Investors noted that most disputes with government agencies during the implementation of investment projects arise due to the regulatory functions of the state.
Disputes in this category, in accordance with Kazakh legislation, cannot be submitted to either local or foreign arbitration.
Such disputes are considered by the courts of the Republic of Kazakhstan of general jurisdiction.
At the same time, Kazakhstan has ratified or joined more than 40 bilateral agreements on the mutual promotion and protection of foreign investments.
These agreements, as a rule, provide for the protection of foreign investments attracted from the exporting country of investments, guarantees of non–discrimination, most-favored-nation treatment, as well as protection and compensation in the event of expropriation of investments caused by actions or omissions of the Kazakh government or its divisions.
These agreements usually provide a foreign investor with the opportunity to file a lawsuit against the Government in an international arbitration court.
Investors noted that applying to international arbitration and arbitration courts provides for greater predictability and transparency compared to state courts of general jurisdiction.
The procedures of international arbitration and arbitration allow the parties to select arbitrators/arbitrators whom the parties trust, for example: prominent practitioners or legal theorists.
Therefore, in order to increase the chances of an objective and proper consideration of the dispute, foreign investors are often interested in resolving arbitration/arbitration court, including international.
Determination of jurisdiction
The dispute between the courts of first instance located in different regions, cities of republican significance and the capital is resolved by the Supreme Court of the Republic of Kazakhstan upon the submission of the relevant regional or equivalent court (Part 2 of Article 109 of the CPC).
Defendants in investment disputes
The defendant is "an administrative body or official who is being sued in court" (paragraph 15, part 1, Article 4 of the CPC). In turn, the administrative body according to subclause 7) of the first part of Article 4 of the APPC is a state body, a local government body, a state legal entity, as well as another organization that, in accordance with the laws of the Republic of Kazakhstan, are authorized to adopt an administrative act, commit an administrative act (inaction).
The defendant is "an administrative body or official who is being sued in court" (paragraph 15, part 1, Article 4 of the CPC). In turn, the administrative body according to subclause 7) of the first part of Article 4 of the APPC is a state body, a local government body, a state legal entity, as well as another organization that, in accordance with the laws of the Republic of Kazakhstan, are authorized to adopt an administrative act, commit an administrative act (inaction).
Refunds of claims
Refunds for administrative claims are carried out on the grounds provided for in the second part of Article 138 of the CPC.
The basis (subparagraph, part two of Article 138 of the CPC)
2) the claim does not comply with the requirements of the second part of Article 131 of this Code
5) there is a dispute between the same parties in the proceedings of the same or another court.
6) the plaintiff has withdrawn the filed claim
9) the parties have concluded an agreement on reconciliation, mediation or dispute settlement
11) the case is not subject to consideration in the order of administrative proceedings
15) the court refused to restore the missed deadline
17) the case is beyond the jurisdiction of this court
A large number of refunds based on subparagraphs 11) and 17) of the second part of Article 138 of the CPC are related to errors made by plaintiffs when filing civil lawsuits with the SMAS.
In accordance with the second part of Article 5 of the CPC, the task of administrative proceedings is the fair, impartial and timely resolution of administrative cases in order to effectively protect and restore violated or disputed rights, freedoms and legitimate interests of individuals, rights and legitimate interests of legal entities in public relations.
It is important to note that public law relations arise between subjects of law in connection with the exercise by one of the participants of his powers in relation to the other.
If we are talking about challenging the terms of a contract, which is a civil contract, then the state body acts in it as a party to the contract and is not associated with the exercise of authority.
Consequently, such cases are considered in civil proceedings.
For example, SMAS returned the claim, stating that "the defendant's refusal is not an onerous act, does not contain an authoritative expression of will, and is not aimed at the emergence, modification, and termination of the plaintiff's rights and obligations arising from public law relations.
In these circumstances, the claim should be returned, regardless of the wording of the claims, as not subject to consideration in administrative proceedings" (No. 7194-23-00-4/1127).
Or in another case, SMAS noted that "the plaintiff's claims in this case do not relate to public law relations, the plaintiff's claims are based on the terms of the Contract concluded between the parties.
The plaintiff disputes the defendant's refusal to extend the Contract.
Therefore, if there is an investment contract with the State, this dispute cannot be the subject of an administrative claim.
Based on the above, the court considers that the claim is not subject to consideration in administrative proceedings" (No. 7194-23 00-4/675). This is the issue that accounts for the largest number of refunds.
It is described in more detail in section 4.1 of this analysis.
We also note the following regarding the relatively low level of administrative claims. According to Part 1 of Article 120 of the CPC, reconciliation of the parties is allowed if the defendant has administrative discretion, which is the authority of an administrative body or official to make one of the possible decisions based on an assessment of their legality, for the purposes and limits established by the legislation of the Republic of Kazakhstan.
In this regard, the CPC does not oblige the judge to take measures to reconcile the parties, as established by Part 1 of Article 174 of the CPC.
This causes a difference in the number of reconciliations in administrative and civil cases.
In the future, it should be borne in mind that if the concept of an administrative contract is introduced into the APPC, appropriate changes will affect the reconciliation mechanism.
Abbreviations used
1) APPC – Administrative Procedural Code of the Republic of Kazakhstan;
2) CPC – The Civil Procedure Code of the Republic of Kazakhstan;
3) Civil Code of the Republic of Kazakhstan;
4) PC – Business Code of the Republic of Kazakhstan;
5) NP VS – Normative resolution of the Supreme Court of the Republic of Kazakhstan;
6) NC – The Tax Code of the Republic of Kazakhstan;
7) SCAD of the Astana City Court - the judicial board for administrative cases of the Astana City Court;
8) SCAD VS – judicial board for administrative cases of the Supreme Court of the Republic of Kazakhstan;
9) SMAS – Specialized Interdistrict Administrative Court;
10) SMEC – Specialized Interdistrict Economic Court;
11) The CGO is a central government agency.
Used regulatory sources
The rules of substantive law, which were guided by the courts when considering investment disputes, include the legislative acts currently in force.
The main regulatory legal acts regulating the issues of disputes of the generalized category are:
1) The Constitution of the Republic of Kazakhstan;
2) The Civil Code of the Republic of Kazakhstan dated December 27, 1994 No. 268-XIII;
3) Business Code of the Republic of Kazakhstan dated October 29, 2015 No. 375-V;
4) The Administrative Procedural Code of the Republic of Kazakhstan;
5) The Civil Procedure Code of the Republic of Kazakhstan;
6) Land Code of the Republic of Kazakhstan dated June 20, 2003 No. 442;
7) Budget Code of the Republic of Kazakhstan dated December 4, 2008 No. 95-IV;
8) The Code of the Republic of Kazakhstan dated December 25, 2017 No. 120-VI "On Taxes and other mandatory payments to the Budget" (Tax Code), etc.
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