1. GENERAL INFORMATION
1.1 Structure of the legal system
Kazakhstan is a unitary state, and every piece of legislation adopted by relevant bodies of the state applies within its entire territory. Kazakhstan's legal system is based on civil law and the traditions of continental European legal systems. Kazakhstan's legal system has broad similarities with the Russian legal system due to a common history within the former USSR, particularly when it comes to civil law.
Kazakhstan's legislation comprises the Constitution, laws issued by the Parliament, edicts of the president, resolutions and orders of the central government or its subdivisions, and resolutions of local municipalities, all placed in a hierarchical order in terms of legal force. International treaties ratified by Kazakhstan have priority over domestic legislation and apply directly, except where such treaties require the adoption of a domestic law for their implementation.
Although the Republic of Kazakhstan Code of Civil Procedure (hereinafter the "CPC") declares that the civil procedure is adversarial, in practice, due to the Soviet past, courts generally tend to take a central role in civil proceedings, requiring parties to produce evidence, questioning the parties and witnesses, appointing experts, and otherwise ensuring that the circumstances of the case are fully and properly examined.
1.2 Structure of the courts
Kazakhstan's court system comprises four tiers of courts: (i) Specialised District Courts and General District Courts; (ii) Appellate Courts; (iii) Cassation Courts; and (iv) the Supreme Court.
Specialised District Courts focus on specific categories of cases, such as administrative, commercial, financial, criminal and juvenile. The vast majority of commercial disputes are tried in Specialised Commercial (Economic) District Courts. These courts have jurisdiction to review all commercial disputes, regardless of their size, provided both parties to the dispute are legal entities or entrepreneurs. General District Courts review all civil cases which do not fall within the jurisdiction of any of the Specialised District Courts.
The distribution of courts according to specialisation exists only at the level of District Courts. There is no such distribution in the Appellate Court and Cassation Court. In other words, regardless of a subject matter falling within the jurisdiction of a special District Court all judgments could be appealed to the relevant higher court. However, within the Appellate Court, the Cassation Court and the Supreme Court there are special panels which focus on certain categories of cases.
Civil courts are spread throughout the territory of Kazakhstan, with each administrative region (the territory of Kazakhstan comprises 16 such administrative regions) having one Specialised Commercial (Economic) District Court, Appellate Court and Cassation Court. There are many General District Courts within each administrative region. Generally, each town and smaller district comprising the administrative region would have a General District Court.
In Kazakhstan proceedings are normally open to the public. Any interested party may participate in court proceedings and record the proceedings, except that a court's approval is required for video filming. In a number of situations where the proceedings concern state secrets or where a party requests the court to hold proceedings in closed sessions in order to ensure the confidentiality of private life, commercial secrets or other information protected by law, the court may declare that proceedings be held in a closed format where the general public is not allowed.
A court's procedural orders, judgments and minutes of the court proceedings are generally available to the public on-line at the electronic database of the Supreme Court. This generally applies to cases reviewed since 2009 and onwards. Other case files, including evidence, the claim, a response to the claim, expert reviews, etc. are not available to the public. These files can only be disclosed to parties to the proceedings with the permission of the court.
1.3 Costs
In order to file a lawsuit, the claimant must pay a state duty. The state duty for property claims, including monetary claims, is set at 3% of the claimed amount when filed by legal entities and 1% when filed by individuals. A state duty in non-monetary claims is generally insignificant, within up to USD50 per each relief sought. Certain categories of claimants, e.g. state institutions, are exempt from state duty.
Generally, each party bears its own costs in connection with the proceedings, e.g. for collection of evidence, inviting witnesses, engaging an expert (except a court-appointed expert), etc. Upon completion of the proceeding, upon request of a party, the court may order the losing party full reimbursement of the costs or pro rata to the extent to which the claim was granted/rejected. An attorney's fees can also be reimbursed upon request and based on similar principles. However, the attorney's fees are capped at 10% of the amount of the claim. The request to reimburse costs, including attorney's fees, must be filed prior to closing of the case at the district court.
The CPC also allows a party to be compensated for so-called loss of time caused by a frivolous lawsuit, delays or groundless objections, although, in practice, it is extremely difficult to prove that the relevant claim or objection had no prospect of success, and courts are generally reluctant to satisfy such requests. However, this possibility still helps to prevent the abuse of procedural rights by the counterparty.
1.4 Funding
The CPC is silent on litigation funding. Thus, there is no prohibition on third-party funding, although in order to have the opportunity to be reimbursed for costs upon completion of the proceeding, if the litigation is successful, it is generally advisable to channel funds through a party to the proceedings which incurred the costs, because it would be impossible for non-parties to the proceeding to be reimbursed for costs. Any funds extended by third parties would be the subject of a contractual arrangement (e.g. a loan) between the funding party and the recipient.
Compensation schemes based on a contingency arrangement are not prohibited by law. In fact, this compensation mechanism is popular among domestic law firms and private lawyers. Because the law is silent, the size of the contingency fee is a matter of contractual agreement, provided it falls within 10% of the claimed amount. However, the court may decrease the fee, if it finds that the fees are unreasonably high. Although there is no obligation to disclose a contingency fee arrangement, because a copy of the legal services agreement must be disclosed to the court to support the fees, it is generally made known to the counterparty.
We are not aware of the use of insurance as a means of funding litigation.
2. INITIATING A LAWSUIT
2.1 Statute of Limitations
Statutory limitation is a matter of substantive law, and the rules governing its application are described in the Civil Code. The expiry of the statutory limitation period prior to filing a lawsuit is a ground for rejecting a claim. Statutory limitation is applied by a court only at the request of the defendant, provided this is done prior to the issuing of the judgment. Generally, the statute of limitation in commercial cases is three years following the date when an affected party became aware or ought to have become aware of the violation of his/her right. The Civil Code lists a number of situations where the statute of limitation could be suspended, e.g. if filing a lawsuit was impossible due to force-majeure, suspension of the legal effect of relevant laws or regulations, there is a moratorium applicable to the performance of certain categories of obligations as declared by the president, etc, provided these circumstances existed within the last six months of the statute of limitation. The statute of limitation renews with the filing of a lawsuit, entry by the parties into a mediation agreement, or a debtor's actions which demonstrate recognition of debt or other commitment. Under certain exceptional circumstances where a court may find that the statutory limitation period was missed due to valid reasons, e.g. serious illness, the court may restore the statutory limitation period, provided such circumstances existed within the last six months of the statutory limitation period. There are categories of claims to which the statute of limitation does not apply, e.g. claims of depositors against a bank seeking the return of deposits, claims seeking reimbursement of damage to health, etc. For a number of other civil but non-commercial categories of claims, there are different statutory limitation periods. For example, in relation to claims seeking to challenge acts of a state authority or claims seeking reinstatement following illegal dismissal the statutory limitation period is three months. In relation to all other employment disputes, the statutory limitation period is one year following the date when an employee became aware of a violation of his/her right.
2.2 Filing
Generally, there are no mandatory prerequisites for filing a lawsuit. There are two categories of exceptions to this rule: such prerequisites could be established by (i) special laws in a rare set of situations or (ii) contract.
For example, in relation to certain categories of claims, e.g. claims against transport operators, claims against mass media, claims of consumers, or claims seeking termination of a contract, etc. prior submission of the claim to the potential defendant is mandatory. Bringing a lawsuit would be possible only upon expiration of a time frame set by law following the submission of such prior claim.
Alternatively, if parties agreed in a contract that, prior to bringing a lawsuit, parties would follow certain preliminary procedures, e.g. mediation, negotiation, expert determination, etc, such preliminary procedure must be observed by the time a lawsuit is filed. Otherwise, courts would refuse to initiate the proceeding until such procedures are observed, unless one can prove that it is no longer possible to observe this preliminary procedure.
2.3 Jurisdictional requirements for defendants
According to the CPC, Kazakh courts would have jurisdiction over a defendant in the following cases: (if filed against individuals) the defendant resides, has assets, or his/her last known address is in Kazakhstan. If filed against legal entities, the defendant's body of corporate management, branch, representative office, or any asset is located in Kazakhstan. Kazakh courts would also have jurisdiction to hear cases where parties agreed to submit to Kazakh courts, where the event which serves as the basis for a claim arises out of damage to health or property that occurred on the territory of Kazakhstan, in claims relating to compensation for damage to health where the claimant resides in Kazakhstan, or where the claim arises out of a contract which envisages its performance in Kazakhstan and in other cases. The general principle underlying a Kazakh court's decision to take jurisdiction over a defendant is that the defendant must have some presence in Kazakhstan or, if a claim arises out of a non-contractual relationship, such relationship must take place on the territory of Kazakhstan. Apart from these general grounds, the CPC grants Kazakh courts exclusive jurisdiction to hear the following categories of claims, regardless of any agreement to the contrary: (i) claims over rights to real property located in Kazakhstan; (ii) claims against transport operators, provided a permanent corporate body of such operator is in Kazakhstan; (iii) claims over divorce between a citizen of Kazakhstan and a foreign citizen, provided both parties are residents of Kazakhstan, etc. The rules described above are commonly applied in all Kazakh courts.
2.4 The initial complaint
Most proceedings are initiated by filing a statement of claim. In a number of special proceedings, a petition would be filed to initiate the proceeding, e.g. bankruptcy proceedings, proceedings over challenging of acts of state authorities, proceedings seeking recognition of a legal fact, etc.
The statement of claim (petition) must be in written or electronic form and bear a signature (digital signature). The statement of claim (petition) must indicate the name of the court, the name and contact details of the parties, and their identification number and electronic address (if known), and describe the violation or risk of violation of the right or interest protected by law, the relief sought, the circumstances and evidence supporting the claim, and the amount claimed (applies to property claims). Along with the statement of claim, the claimant must submit evidence supporting the claim, a document which proves payment of state duty and a document supporting the power of an attorney to sign the claim and participate in proceedings.
The legal basis of the claim (specific provisions of law or contract giving rise to the claim) or the subject matter of the claim (the relief sought), including the amount of compensation claimed, can be modified by the claimant prior to closing of the evidence-gathering period by way of submitting a modification to the statement of claim.
2.5 Serving proceedings
Generally, a court informs the defendant of the lawsuit by post. Depending on circumstances, instead of post, notice could be served by courier, electronic mail, text message, fax, telegram or other means of communication, provided it records the notice. Sometimes, a court may request that the claimant serve notice, if he/she agrees. There is no specific time frame within which a notice must be served. Generally, notice is served within two to three weeks of opening the case, unless the defendant is located outside of Kazakhstan, where service may take considerably longer, up to six months. This delay stems from Kazakh courts' recent practice of serving notices to foreign defendants through official diplomatic channels of serving notices upon foreign defendants. Earlier, it was sufficient to deliver notice to a foreign defendant by courier. Along with the notice, the defendant is also provided with a copy of the claim and documents supporting the claim which the claimant has submitted to court. In practice, this rule is rarely observed. The notice is served at the address of the defendant as indicated by the claimant. If a defendant is not present at their address, the notice could be served at the defendant's place of employment or residence. If the defendant is not available, the notice is served with a local municipality or property management organisation at the defendant's last known place of residence. If a claim is filed in the interests of state, in connection with alimony payments, or damage to health or property, the defendant would be sought through law enforcement agencies. At the time of receipt, the defendant or his/her representative must sign for the receipt. If the defendant refuses to receive notice, a person responsible for the service of notice must record this in writing on the notice and have it certified by local municipality or property management organisation at the defendant's place of residence. Refusal to receive notice does not prevent hearing of the case.
Kazakh law does not prohibit bringing lawsuits outside Kazakhstan, provided the subject matter does not fall within the exclusive jurisdiction of Kazakh courts.
2.6 Failure to respond to a lawsuit
Assuming that the notice has been properly served and provided: (i) there are no valid reasons for the defendant's absence, (ii) the defendant fails to inform court of his/her failure to appear in court (defendant is obliged to inform the court of the circumstances which prevent him/her from appearing in court), (iii) the court concludes that the defendant is deliberately trying to delay proceedings, or (iv) the defendant does not request the court to review the case in his/her absence, the court may conduct proceedings ex parte. Prior to ex parte proceedings, generally, courts make one or two postponements which in total do not usually take more than one month unless there are exceptional circumstances. Ex parte proceedings are identical to proceedings where the defendant is present, and the court would decide the case based on evidence submitted by the plaintiff and other parties to the proceeding (if any). The defendant may seek to cancel ex parte judgment within five days upon receipt, provided he/she can prove that he/she has been unable to appear in court for valid reasons. If this deadline is missed or the request to cancel the ex parte judgment is rejected, the defendant may file a complaint with an Appellate Court within 15 days. Within ten days following receipt of the request to cancel the ex parte judgment, the court would have a hearing to decide on the request. In the majority of cases, such requests are satisfied. If the ex parte judgment is cancelled, the court would resume the proceeding on merits. This time, if the defendant fails to appear in court, a judgment issued in the course of such new review of the case would not be deemed ex parte, and the defendant would not be allowed to cancel it. This does not prevent the defendant from resorting to the Appellate Court and others.
2.7 Class Action
The possibility of bringing representative or collective actions in Kazakh civil procedure law is extremely narrow. The CPC very lightly mentions that a public prosecutor may bring claims on behalf of unlimited scope of persons in a social sphere.
Collective actions could also be brought by consumer protection organisations on behalf of an unknown number of parties. This possibility is expressly set out by the Republic of Kazakhstan Law "On Protection of Consumer Rights" dated May 4, 2010. However, the law does not further elaborate on the legal framework and implications of initiating such proceedings.
3. PRETRIAL PROCEEDINGS
3.1 Dismissing the lawsuit
Before we delve into a discussion of motions which parties could submit to dismiss the claim, it would be appropriate to describe procedures where courts can do so on their own initiative. Generally, prior to commencement of proceedings, the court preliminarily reviews the claim to determine whether any of the following circumstances exists: (i) the subject matter of the claim cannot be reviewed by the court (if the matter falls within the competence of another authority; (ii) there is a judicial act which entered into effect between the same parties, on the same subject matter and legal grounds or ruling of court recording withdrawal of the claim or settlement of the dispute or an agreement to settle the dispute by way of mediation; or (iii) there is an arbitral award between the same parties, on the same subject matter and legal grounds. If any of these circumstances is established, the court on its own initiative would terminate the proceedings, and such ruling to terminate proceedings would prevent submission of the same claim, although it could be appealed.
If, in the course of preliminary review of the claim, the court finds any of the following circumstances pertain, the court would return the claim: (i) the claimant has not observed procedures preceding the submission of the claim (e.g. mandatory negotiations) and the possibility of observing such procedures still exists; (ii) the court has no jurisdiction to review the claim; (iii) the claim has been signed by an unauthorised individual; (iv) there are ongoing judicial or arbitral proceedings between the same parties, on the same subject matter and legal grounds; (v) there is an agreement to submit the subject matter of the claim to arbitration, etc. A court's ruling to return the claim could be appealed, but it does not prevent the claimant from repeatedly filing the same claim at a later stage when the circumstances which lead to the return of the claim no longer exist.
If, in the course of a preliminary review of the claim, the court does not find any of the circumstances referred to above, the court would initiate proceedings. Then, once the proceeding is initiated, the defendant may request that the court dismiss proceedings, if he/she presents evidence that any of the circumstances referred to above exists. Upon review of the defendant's motion to dismiss, the court would issue a ruling to terminate proceedings or leave the claim without consideration. A court's ruling to leave the claim without consideration has similar legal implications to a ruling to return the claim, i.e. it does not prevent a claimant repeatedly filing the claim.
A party may also seek dismissal of the claim in any of the following situations: (i) when a party to the proceeding no longer exists and procedural succession is not possible; (ii) the claimant fails to appear in court two times in a row and the defendant does not request that the court review the claim on its merits; (iii) the parties failed to appear in court two times in a row; or (iv) the claimant filed a motion to return the claim, and the defendant does not request review of the claim on its merits.
Generally, motions to dismiss the claim could be filed before or after taking evidence, because the existence of circumstances which serve as grounds for terminating returning/leaving the claim without consideration could be discovered before or after evidence is taken. There are exceptions: for example, a motion seeking referral of parties to arbitration, if there is a valid and enforceable arbitration agreement, must be submitted to court prior to any submission on merits, and failure to do so could be construed as implied consent to review the claim in court.
3.2 Dispositive motions
Although it is difficult to generalise dispositive motions that are generally filed before trial, it would be worth mentioning the following: in circumstances where, as it follows from available evidence, there is no disputable question of law (e.g. if the defendant recognised a debt in writing), the claimant may request that the court issue an order. In such case, simplified proceedings commence which do not envisage inviting parties to the proceedings, and the order would be used solely based on documents presented by the claimant. The court would review the request within three days and issue an order. If the defendant disagrees, he/she may request the court to cancel the order within ten days following receipt of the order. In this case, the case would proceed according to the generally accepted procedure. State duty payable in order to initiate simplified proceedings would be equal to 50% of the state duty payable in property claims in generally accepted court proceedings.
3.3 Joinder
The CPC permits third parties to join proceedings before a district court issues a judgment. Joinder could be achieved by way of: (i) bringing a separate lawsuit against the defendant or the claimant (so-called third parties asserting independent claims) or (ii) acting on the side of the claimant or the defendant, if the outcome of the proceedings would affect the rights or obligations of such third party toward the claimant or the defendant (so-called third parties not asserting independent claims).
Third parties not asserting independent claims could be invited upon request of the parties to proceedings or on the initiative of the court.
Third parties asserting independent claims have procedural rights and obligations similar to the claimant. The procedural rights of third parties not asserting independent claims are limited, e.g. they cannot change the subject matter or the legal basis for the claim, change the amount of the claim, withdraw the claim, recognise the claim, settle the claim, etc.
4. DISCOVERY
The CPC does not recognise discovery. However, either party may request that the court require the counterparty or any third party to produce certain evidence which is not available to the requesting party, provided the requesting party can indicate the evidence being requested and the circumstances such evidence would prove or disprove, the circumstances which prevent such party from obtaining the evidence, and the location thereof. As you may see, generally, it is difficult to achieve production of evidence from the counterparty or third parties, unless you know what specific evidence you are looking for. Obtaining a court order to produce evidence is even more difficult, if the counterparty actively resists, arguing that the level of detail being indicated in the motion to produce evidence is not sufficient. When a court order to produce evidence has been issued the court or the party requesting production of evidence could submit the order to the counterparty or third party, and such parties must provide the evidence to court or the requesting party. In certain situations, the evidence can only be submitted to court.
When a party which holds the evidence which is the subject of the court's request refuses to provide the evidence, it is assumed that the evidence supports the position of the requesting party. In practice, however, it is extremely difficult to prove that the counterparty is holding the requested evidence. Courts also very rarely assume that the evidence which the counterparty refused to provide supports the requesting party's position.
The CPC also allows a party to request that the court take appropriate actions to preserve evidence, if there is a possibility that relevant evidence could be destroyed or its production may become difficult. Preservation of evidence could be achieved by way of collecting witness statements, an expert assessment, examination on site, or other means. In the motion seeking preservation of evidence, a party must indicate relevant evidence, the circumstances which such evidence is intended to prove or disprove, and grounds which lead the requesting party to file the motion. In practice, motions to preserve evidence are rarely submitted, because, generally, it is extremely difficult to satisfy the applicable legal standard described above.
A party may also request that the court invite certain individuals as witnesses. The legal standards described above do not apply to such a request. In order to obtain a court order to invite a witness, the requesting party must indicate the name and contact details of the witness and demonstrate to the court the need to invite such witness for the purposes of the proceedings.
4.1 Legal privilege
Kazakh law recognises attorney-client privilege and work product protection to a limited extent. The degree of privilege generally depends on whether a person is represented by a licensed advocate or a professional lawyer without a licence of an advocate (non-advocate). Under Kazakh law, a lawyer must have a state licence of an advocate to act in criminal proceedings and certain categories of administrative proceedings. This requirement does not apply to civil proceedings. Thus, in practice, the vast majority of professional lawyers representing clients in civil disputes do not possess a state licence of an advocate, i.e. they are not advocates, and their activity is subject to general rules of the CPC relating to privilege.
The activities of an advocate are subject to a separate law: the Republic of Kazakhstan Law "On Advocate Activity" dated December 5, 1997. The law provides that communication between an advocate and client as well as work products of an advocate are protected and cannot be disclosed. An advocate cannot be questioned in court as a witness.
As for the general legal regime provided for by the CPC, professional lawyers who do not possess a state licence of an advocate cannot be questioned as witnesses in relation to the circumstances of the case in which they acted. The CPC is silent on any other protections available to non-advocates. Thus, we may infer that communication and work products between a non-advocate and a client are not protected by legal privilege. However, in our experience, such communication and work product is extremely difficult to obtain due to the high legal standard applicable to production of evidence from the counterparty. Generally, it is difficult to prove that a certain specific communication or a work product on a specific subject matter exists, and that it is possessed by the counterparty. Thus, in practice, the absence of an advocate's licence in a civil case does not create considerable risks regarding the disclosure of confidential information.
5. TRIALS
5.1 Structure
Proceedings in district courts are held before a sole judge. Parties are usually represented by a professional lawyer or an advocate, or, alternatively, a party is free to represent himself/herself.
Proceedings are commenced by the judge's announcement that the proceedings are open and a description of the dispute. A secretary to court would report to the judge as to which parties are present in court, whether the parties which have failed to appear in court were served notice, and what are the circumstances preventing such parties from appearing in court. The judge would check the identities of attorneys and their powers to participate in the proceedings.
The judge would then introduce himself/herself, the public prosecutor, the expert (if applicable) and the secretary, and inform the parties of the possibility of submitting a request to recuse any of them. The judge would explain procedural rights and duties of the parties, including the right to refer the dispute to arbitration or mediation and the legal implications of such a referral. Then, the judge would ask if either party has any motions or requests and proceeds to listen to such motions or requests and invites the counterparty to express an opinion. Then, the judge would decide on the motions or requests.
The judge would then commence a review of the claim on merits. The judge would ask if the claimant supports his/her claim and if the defendant recognises the claim, if the parties would like to settle the dispute or submit the dispute to arbitration or mediation. Then, the claimant would present his/her statement of claim, and the defendant would be required to submit the statement defence. Further submission of objections and rejoinder are voluntary.
The judge would listen to witnesses and examine evidence, such as expert reports. Upon completion of the review of evidence, the judge would ask the parties if they wish to add any new evidence to the case. Then, the judge would close the evidence-gathering period and the parties would present final speeches. Once the final speeches have been given, the parties would be allowed to make additional responses to each other's arguments. Then, if applicable, the public prosecutor would express an opinion on the case. The judge would leave the courtroom to deliberate and inform of the date the judgment would be announced.
Jury trials in civil litigation are not available. Jury trials are available in criminal proceedings in relation to limited categories of crimes.
5.2 Evidence
The three main principles which govern the admission of evidence at trial are: (i) relevance, i.e. the evidence proves, disproves, or puts circumstances of the case into question; (ii) admissibility, i.e. that the evidence is obtained through legal means; and (iii) authenticity. All evidence is tested against these three principles.
Any circumstances established by a court judgment that has entered into effect would have a binding effect on other courts, which would review disputes between the same parties. Circumstances recognised by court as being public knowledge do not require proof.
There are circumstances which the CPC assumes as having been proven, unless in the course of the proceedings it is established otherwise: (i) an assumption that research methods applied in modern science, technology, art and craft are accurate; (ii) an assumption that a person knows the law; (iii) an assumption that a person is aware of his/her professional duties; and (iv) an assumption that a person does not possess special skills or education, unless any documents are provided to support that he/she does possess such special skills or education.
Generally, Kazakh courts tend to rely primarily on documentary evidence.
5.3 Expert testimony
Expert testimony is frequently used in civil proceedings. Either party may apply to court for expert testimony. Alternatively, expert testimony could be ordered by court. A court's ruling to engage an expert could be appealed.
Parties are free to indicate experts whom they would wish to engage. A court may invite any expert which it finds appropriate, including experts proposed by either of the parties.
Each party may formulate questions to be raised with an expert and propose such questions to court. The court would decide on the final questions to be raised with the expert. The court must explain why any of the questions proposed by parties were not admitted for expert testimony.
6. SETTLEMENT
6.1 Court approval
An agreement to settle a lawsuit requires approval of court in all cases. A court's approval aims to examine whether the settlement agreement violates law or affects the rights of third parties not invited to participate in the proceedings. If the settlement agreement is approved by court, by the same resolution the court would terminate the proceedings. If the court does not approve the settlement agreement, the case would proceed.
6.2 Confidentiality
The settlement of a lawsuit must be disclosed to a court, because the settlement agreement or an agreement to settle the dispute by way of mediation must be approved by court and the terms of such settlement must be reflected in a court's ruling to approve the terms of the settlement and terminate the proceedings. There is a possibility that the court may refuse to approve the settlement, if it finds that the settlement violates law or affects the rights of third parties.
Proceedings could be held in sessions where only parties to the proceedings could participate, and the general public is not allowed to take part (closed sessions). The proceedings could be held in a closed session where the subject matter of the proceedings concerns state secrets or where a party requests the court to hold proceedings in closed sessions in order to ensure the confidentiality of private life, commercial secrets or other information which is protected by law. In our view, the settlement of a lawsuit could remain confidential if the proceedings were held in a closed session.
7. DAMAGES & JUDGMENT
7.1 Rules relating to damages
Damages are a matter of substantive law, and the applicable legal standards and rules are governed by the Civil Code. Damages are defined as expenses which were incurred or ought to have been incurred by a person whose rights had been violated or whose property had been damaged, as well as lost income which such person would have incurred in the normal course of business had his right not been violated. Thus, the underlying legal principle is that damages are aimed to compensate for loss.
As a general rule, if a contract stipulates a penalty, including penalty interest, for the failure to perform an obligation, damages are ordered for the difference between the actual size of the damage and total amount of the penalty. However, a party may seek compensation for so-called moral harm on top of the damages for personal sufferings caused by the breach.
The Civil Code prohibits agreements to exclude damages when made prior to the occurrence of the damage. However, parties are free to agree to limit the damage to the volume of damage to property. There are certain categories of cases where limitation of damage is permitted by law, e.g. in disputes with transport operators.
Courts may decrease damages payable by a debtor if it is established that the party seeking damages contributed to the occurrence of damage or failed to take actions to limit the size of the damage.
7.2 The collection of interest
It is possible for a successful party to collect interest both before and after the judgment is entered. If a contract is silent on interest, prior to the judgment, a party may request the court to award statutory interest which equals the official financing rate of the National Bank of Kazakhstan, which is currently set at 5.5% per annum, from the date of the breach until the date of the judgment. After the judgment is issued, a party may request the court to apply the same statutory rate until the date of actual enforcement of the judgment. To review this request, the court would hold a hearing and invite the parties. A court ruling awarding interest after a judgment could be appealed.
7.3 Non-monetary relief
Apart from injunctive relief, a party may request that the court recognise a right (e.g. to recognise title to property), reinstate the situation which existed prior to the breach, for example, by way of issuing an order requiring certain parties to take certain actions to reinstate rights (e.g. in claims seeking protection of rights to land), issue an order prohibiting a party from taking certain actions which violate or pose the risk of violating a right, order specific performance, declare a transaction or an act of state authority as being invalid, recognise the occurrence of a legal fact, etc.
Generally, the most frequently sought forms of non-monetary relief are injunctive relief, a declaration of a transaction as invalid, and specific performance. Out of four categories of non-monetary relief frequently sought in Kazakh courts, we would like to focus specifically on injunctive relief, as this category is the most common.
Parties may request the court to grant injunctive relief when the failure to do so would make the enforcement of the judgment impossible or difficult. Apart from the risk that the enforcement of judgment may become impossible or difficult, if injunctive relief is not granted, the party seeking an injunction must demonstrate that the injunction is comparable with the claim that is the subject matter of the proceeding. For example, one cannot request the arrest of property when the underlying claim is seeking a non-monetary judgment, e.g. the declaration of a contract's invalidity. Similarly, one cannot request injunctive relief when the value of the claim is less than the injunctive relief sought. There is a considerable body of law governing the granting of injunctive relief for interpreting whether or not in a specific situation injunctive relief would be appropriate.
Injunctive relief could be requested prior to the initiation of the proceedings (filed along with the claim), and the defendant would not be invited to express an opinion on such request, or after the proceeding is initiated where the court would request the opinion of the defendant on the request seeking injunctive relief. The CPC provides for a number of categories of injunctive relief, such as the arrest of property, prohibiting the defendant from taking certain actions, prohibiting third parties from performing obligations for the defendant or transferring property to him/her, suspending the legal effect of an act of a state authority, and other categories not prohibited by law.
A declaration of the invalidity of a transaction could be sought when it is alleged that the form of a transaction or its contents contravene law, or the parties had no authority to enter into the transaction or there have been other serious irregularities in the course of entering into the transaction. For example, apart from duress, coercion and mistake, a transaction could be invalidated when it has not been registered in cases where this is required by law or when a party entered into the transaction without a state licence, if such state licence is required for this category of transactions, etc.
7.4 Enforcement procedure
Kazakh courts would recognise and enforce foreign judgments only if this is required by law or an international treaty to which Kazakhstan is a party, on the basis of reciprocity. Kazakh courts do not recognise or enforce foreign judgments based on reciprocity.
Kazakhstan is a party to over seven bilateral treaties on the recognition and enforcement of foreign judgments, e.g. with China, India, Turkey, UAE. None of the treaties has been signed with western jurisdictions. Kazakhstan is also a party to two multilateral treaties signed within the framework of the Commonwealth of Independent States on the recognition and enforcement of judgments within several of the former states of the USSR.
As you may see, enforcement in Kazakhstan of foreign judgments issued in western jurisdictions would be impossible. This is why most foreign parties resort to international arbitration, as Kazakhstan is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1961 European Convention on International Commercial Arbitration, and the 1965 ICSID Convention. Kazakh courts generally recognise and enforce foreign arbitral awards without significant issues.
8. APPEAL
8.1 Grounds for appeal
According to the CPC, a judgment of district court or resolution of Appellate or Cassation Court could be appealed, if a party can demonstrate that any of the following circumstances exist: (i) the court has not accurately defined and established the scope of circumstances necessary to resolve the dispute; (ii) circumstances established by court as being relevant to the dispute are not proven by evidence; (iii) the findings of the court as reflected in the judgment do not correspond to the circumstances of the case; or (iv) the court has violated or inaccurately applied substantive or procedural law.
Violation or inaccurate application of substantive law refers to a situation where the court: (i) has failed to apply the law which is applicable; (ii) applied law which is not applicable; (iii) incorrectly interpreted the law; or (iv) incorrectly applied an analogy of law.
Violation or inaccurate application of procedural law refers to a situation where: (i) the dispute has been reviewed by a judge who had no power to review the dispute; (ii) the claim was reviewed in the absence of any party to the proceeding where such party had not been served proper notice; (iii) in the course of a review of the case there have been violations of law governing the language in which the proceedings were held; (iv) the court resolved on the rights and obligations of parties that were not invited to participate in the proceeding, etc.
The most common ground of appeal is "inaccurate application of substantive law".
8.2 Time limits and triggering events
Generally, appeals could be submitted within a time frame set by the CPC for appealing the relevant type of judicial act. For example, a judgment of a district court could be appealed within 15 days following receipt of a copy of the judgment, failing which the judgment would enter into effect. A resolution issued by an Appellate Court upon review of the appeal enters into force immediately after the announcement. A resolution of the Appellate Court or a judgment of the district court which entered into effect (if the deadline for appeal was missed) could be appealed to a Cassation Court within six months. A motion to the Supreme Court to reconsider the resolution of the Cassation Court could be filed within one year following the entry of the Appellate Court's resolution into effect. An Appellate Court's resolution cannot be the subject matter of a motion to the Supreme Court; if the resolution was not reviewed by Cassation upon submission of a motion to consider a judicial act, the Supreme Court would hold a preliminary hearing to decide on whether or not to initiate proceedings. In the vast majority of cases the Supreme Court does not reconsider resolutions of Cassation Courts. However, if such proceedings are initiated, in the majority of situations this would imply that the Supreme Court would cancel the resolution of the Cassation Court.
The CPC also provides for the possibility to reconsider a judgment which entered into effect, on the basis of newly discovered circumstances, if one can prove that at the time of issuing the judgment there existed circumstances of which the party filing a motion to reconsider was not aware and such circumstances, if known to the court at the time of issuing the judgment, would have led to a different judgment. A motion to reconsider the judgment on newly discovered circumstances could be filed within three months following the date when the party filing the motion became aware or ought to have become aware of the new circumstances. The legal standard applicable to reconsideration of judgments on newly discovered circumstances is very high, and such motions are rarely successful. For example, one cannot seek reconsideration based on the fact that certain evidence was not collected in the course of the proceedings, if such party had the opportunity to produce or request relevant evidence or take other relevant procedural actions, but failed to do so.
9. ALTERNATIVE DISPUTE RESOLUTION
Arbitration, particularly in a cross-border context, has become increasingly popular among businessmen in Kazakhstan. Although the main legislation governing the conduct of arbitration seated in Kazakhstan was adopted in late 2004, arbitration achieved a reasonable degree of popularity only recently, within the past three years. This is probably because it took some time for state courts to reconsider their approach to arbitration. The legislation was also modified several times and in many respects to improve the stability of awards issued by arbitral tribunals. Currently, legislation governing conduct of arbitration in Kazakhstan is broadly similar to UNCITRAL Model Law, and the CPC is also constantly modified to improve flow of cases to arbitration and the interconnection between state courts and arbitrations.
Arbitral institutions operating in Kazakhstan have been able to gain a reasonably high degree of trust. We notice that, unlike earlier, where any dispute, regardless of the size, complexity and governing law, was referred to foreign arbitration, primarily under LCIA, ICC and SCC rules of arbitration, now parties try to submit disputes to well-known local arbitration institutions, although complex and large-scale disputes are still referred to foreign arbitrations, particularly where potential political risks are involved.
Kazakh courts generally recognise and enforce foreign arbitral awards, provided there is an international treaty between the state where the award was issued and Kazakhstan, and, as mentioned above, Kazakhstan is a party to all major international treaties on the recognition and enforcement of arbitral awards. So, from a cross-border context, if there is a need to enforce the award throughout several jurisdictions, arbitration is the only means of dispute resolution capable of achieving this.
Kazakh courts are generally supportive of arbitration, as parties may obtain injunctive relief from state courts in aid of ongoing domestic or foreign arbitration. For example, Kazakh state courts do not, generally, grant injunctive relief in aid of foreign litigation, unless there is an international treaty. Kazakh state courts refer parties to arbitration, if there is a valid and enforceable arbitration agreement.
Mediation is a relatively new notion in Kazakh law, first introduced in 2011. Although the underlying legal framework for mediation has been established, mediation is still not popular among disputing parties. Kazakh law allows parties to submit to mediation before or after the proceedings commenced in state court or arbitration. An agreement to settle a dispute by way of mediation would have a res judicata effect and prevent parties from repeatedly litigating the same claim, between the same parties and on the same subject matter. We would expect that it will take some time for mediation to gain popularity among businessmen, as it has been with arbitration at the initial stages of its development.
9.1 Relevant law
The main legislation governing the conduct of international arbitration with its seat in Kazakhstan was adopted in December 2004. The applicable legislation comprises: (i) the Republic of Kazakhstan Law "On International Arbitration", which applies to arbitration proceedings with their seat in Kazakhstan where at least one party to the proceedings is a foreign national; (ii) the Republic of Kazakhstan Law "On Treteiskii Courts" (as we call it, Law on domestic arbitration tribunals), which applies to arbitration proceedings with their seat in Kazakhstan where both parties to the proceeding are nationals of Kazakhstan; (iii) the CPC also contains a number of rules applicable to the conduct of arbitration as well as recognition and enforcement of foreign arbitral awards.
As you may see, there are two laws which separately govern international arbitration involving foreign nationals and one which governs arbitration between Kazakh nationals. The public policy rationale for this situation is a matter of long debate which is beyond the scope of this survey. However, the two laws have been adopted deliberately, so as to subject the parties to different legal regimes depending on their nationality. For example, the Law "On International Arbitration" is considerably broader in terms of the scope of arbitrability of disputes. Pursuant to this law, any dispute arising out of civil law relations may be the subject of arbitration. However, according to the Law "On Treteikii Courts", arbitral tribunals which review disputes between Kazakh nationals also review disputes arising out of civil law relations, except where the dispute concerns the interests of state, state organisations, companies having the status of monopolies or companies having significant market power. There are other differences between the two laws. However, the key issue with the Law "On Treteikii Courts" is that it allows a state court to set aside an arbitral award (among other generally accepted grounds) where the arbitral award contradicts the "principle of legitimacy". This wording has been the subject of much debate among Kazakh legal practitioners who argue that, in theory, a violation of law due to an arbitral award, could be construed as violating this principle which would imply that state courts may effectively review arbitral awards on merits. However, we have never heard of arbitral awards being cancelled on this particular ground.
Recognition and enforcement of foreign arbitral awards in Kazakhstan is relatively quick and straightforward, and the practice proves that Kazakh courts are generally friendly towards foreign arbitral awards save for exceptional situations. In order to recognise and enforce a foreign arbitral award a party must submit an application to the District Commercial (Economic) Court of the administrative region where the debtor's assets are located requesting the court to (i) issue a court ruling to recognise and enforce an arbitral award and (ii) issue an enforcement order. The application must be accompanied by an original or certified copy of the arbitral award, the arbitration agreement, and certified translations thereof, if applicable. The court would invite the defendant to provide objections to the application and hold a hearing. The court must decide on the application within 15 days following receipt, although, in practice, it takes approximately four weeks to issue the ruling. The grounds to refuse to recognise and enforce a foreign arbitral award under domestic law are similar to those stated in Article 5 of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Sometimes, however, the court may require the applicant to produce documents which prove entry of the arbitral award into effect, if this does not follow from the text of the award, or that the defendant has been properly informed of the arbitration proceeding.
The court's ruling to recognise and enforce an arbitral award could be appealed to Appellate Court, Cassation Court and the Supreme Court. These appeal opportunities are frequently used to delay enforcement, although the Appellate Court's resolution would become binding and enforceable upon announcement. Thus, the applicant may proceed to enforce without waiting for the Cassation Court and the Supreme Court, although there is a narrow possibility that the Appellate Court's resolution could be cancelled.
Once the court's ruling becomes binding and an enforcement writ is issued, the applicant would need to initiate enforcement proceedings. For that purpose he/she would have the choice between submitting the enforcement writ to a state court enforcement officer who charges no fee, but usually takes a considerably long time to enforce the award, as he/she is usually overloaded, and a private enforcement officer who charges fees ranging between 3% and 25% of the collected amount, but who, in practice, has proved to be very time-efficient and effective. Considerable delays and procedural battles may occur at this stage as well.
CONTRIBUTORS
The dispute resolution practice at GRATA is headquartered in Kazakhstan, with eight fee earners and three members of support staff, including former Justice of the Supreme Court, a head of the debt recovery and restructuring department of one of the largest banks in Kazakhstan, professional litigation lawyers with broad international law firm experience, academics, and experienced in-house counsel. The firm also has dispute capabilities in the following jurisdictions: Azerbaijan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan. The main practice areas of the firm are domestic and international litigation, domestic and international arbitration, pre- and post-dispute resolution, due diligence and enforcement.
The authors
Bakhyt Tukulov is the joint head of the dispute resolution department. He specialises in civil litigation, arbitration, and pre- and post-dispute due diligence. He is a member of the Kazakhstan Bar Association. He has published numerous articles on litigation and arbitration in Kazakhstan. He has a Master of Laws degree from Georgetown University Law Center (with distinction) in International Legal Studies with a specific focus on International Arbitration.
Andrey Reshetnikov is a junior associate in the dispute resolution department. He specialises in civil litigation, arbitration, and pre- and post-dispute due diligence. He is a member of the Kazakhstan Bar Association. He has a Master's of Law degree from the Catholic University of Lyon (France) in Theory and Practice of Human Rights with specific focus on Conflict Resolution & Mediation Procedure. He has previously published work on litigation and unconditional bank guarantees in Kazakh law.
Shakhrukh Usmanov is the joint head of the dispute resolution department. He specialises in civil litigation and enforcement. He has published a number of articles on litigation in Kazakhstan. He graduated from Tashkent State University with a law degree and highest honours. He has over 15 years' experience as a consultant and in-house counsel.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
