A relatively new international dispute resolution venue, the Court of Astana International Financial Center (AIFC Court) launched its activities in 2018 to handle commercial disputes falling under its purview. This LawFlash focuses on the practical aspects to consider when contemplating choosing the AIFC Court as a dispute resolution forum.
The AIFC Court was established in accordance with article 13 of Constitutional Law No. 438-V dated 7 December 2015, “On Astana International Financial Center” (AIFC Statute). The activities of the AIFC Court are regulated by AIFC Court Regulations dated 5 December 2017 and the AIFC Court Rules dated 1 January 2018.
AIFC COURT JURISDICTION
Pursuant to the AIFC Statute and AIFC Court Regulations:
- The AIFC Court has exclusive jurisdiction in relation to (1) any disputes arising between the AIFC participants, AIFC participants and AIFC bodies, and AIFC participant or AIFC body and its expatriate employee(s); (2) any disputes relating to activities conducted in the AIFC and governed by the acting law of the AIFC; (3) any disputes transferred to the AIFC Court by agreement of the parties; and (4) the interpretation of AIFC acts.
- The term ‘disputes’ means civil or commercial disputes arising from transactions, contracts, arrangements, or incidences. Thus, the AIFC Court does not have jurisdiction in criminal or administrative proceedings.
- Parties to a dispute may “opt in” to AIFC Court jurisdiction at any time before or after the dispute arises, including in the course of proceedings in the state court. The AIFC law imposes no limitations as to the nationality (residency) of the parties of such disputes. This possibility “to the extent not prohibited under the law” is reflected in the Civil Procedure Code of Kazakhstan (CPC), as amended on 10 June 2020, and explicitly endorsed by the Kazakhstan Supreme Court.
- If there is any issue as to whether a dispute falls within the jurisdiction of the AIFC Court, the matter shall be determined by the AIFC Court, and its decision is final.
AIFC COURT JURISDICTION VS. JURISDICTION OF KAZAKHSTAN STATE COURTS
As stated above, the AIFC Court jurisdiction explicitly excludes administrative and criminal proceedings. However, as a matter of practice, there may be borderline situations where a dispute may concern both commercial and administrative law issues.
For instance, under investment contracts, the state (represented by a competent state authority) may grant various tax incentives to investors subject to compliance with certain requirements that are set in legal acts that regulate administrative relations (e.g., Tax Code, Entrepreneurial Code) and typically reiterated in relevant investment contracts. Investment disputes under Kazakhstan law are those “arising out of contractual obligations between the investors, including major investors and state bodies, in relation to investment activity” and can be resolved in accordance with the dispute resolution procedure agreed upon by the parties.
Thus, theoretically, the AIFC Court may have jurisdiction over investment disputes. However, given that investment contracts inevitably deal with regulatory authorities of state bodies and any investment dispute potentially affects the interests of the state, state bodies (agencies) tend to argue that such disputes are subject to the jurisdiction of Kazakhstan state courts.
Unfortunately, to date, neither Kazakhstan, nor AIFC law, nor relevant practice suggests any clarity as to the jurisdiction for such borderline disputes.
Exclusive Jurisdiction of Kazakhstan State Courts
The CPC provides for the exclusive jurisdiction of Kazakhstan state courts over disputes involving foreign entities or individuals. Such disputes include, amongst others, disputes related to the rights to immovable property located in Kazakhstan, claims challenging decisions, and actions and/or omissions of state bodies and/or public officials.
The question that can be raised in this context is whether the aforesaid CPC norms may set aside AIFC Court jurisdiction agreed upon by the parties to a dispute. Given the CPC provisions (that support jurisdiction of the AIFC Court to the extent it does not contravene Kazakhstan law) and the AIFC Statute (that provides for institutional independence of the AIFC Court from the Kazakhstan judicial system), the answer is most likely ‘yes’.
Noteworthy, according to the AIFC Court Regulations, if the AIFC Court considers it desirable or appropriate, it may decline jurisdiction or may refer any proceedings to another court within Kazakhstan.
Based on the above, while the AIFC Court jurisdiction can apply rather broadly to purely commercial disputes, it is reasonable to infer that
- the jurisdiction of the AIFC Court over the borderline disputes (i.e., relating to both commercial activities and regulatory authorities of state bodies, such as investment disputes) is questionable; and
- the AIFC Court lacks jurisdiction over the disputes falling under the exclusive jurisdiction of Kazakhstan state courts as provided for under the CPC.
ENFORCEMENT OF JUDGMENT OUTSIDE OF KAZAKHSTAN
According to the AIFC Statute and Kazakhstan Supreme Court Clarification No. 1 dated 15 April 2021, judgments, orders, and directions of the AIFC Court shall be enforced on the same terms and conditions as judicial acts of Kazakhstan state courts, i.e., on the basis of international treaties or reciprocity principle.
Execution orders issued by the AIFC Court are deemed to be an enforcement order in accordance with Kazakhstan Law No. 261-V dated 2 April 2010 (“On Enforcement Proceeding and Court Bailiffs Status”). However, the Supreme Court is silent as to enforcement of AIFC Court judgments outside of Kazakhstan, while the AIFC Court Rules merely state that “any party seeking to enforce a judgment or order of the [AIFC] Court outside the Republic of Kazakhstan may apply for a certified copy of the judgment or order to be issued by the [AIFC] Court”.
As per information from the AIFC Court website, the AIFC Court judgments can be enforced outside of Kazakhstan under the Minsk and Kiev Conventions and other treaties entered into by Kazakhstan with Azerbaijan, China, Georgia, India, Kyrgyzstan, Uzbekistan, Lithuania, North Korea, Pakistan, Turkey, Turkmenistan, and the United Arab Emirates.
None of the aforesaid treaties, however, specifically refers to the AIFC Court or specifically covers it within the definition of ‘Contracting Party(ies)’ courts’. Given this and the independent status of the AIFC Court provided for under the AIFC Statute, it might be difficult to argue that the AIFC Court judgments should be enforced by the member states or Kazakhstan counterparties under the aforementioned international treaties.
Historically, extraterritorial enforcement of judgments of such special status courts (e.g., Court of Dubai International Financial Center (DIFC court)) has proven to be problematic. In the case of DIFC court enforcement, difficulties were partially overcome by memoranda signed with the competent courts of other countries (e.g., with the UK Commercial Court or Australia Federal Court). To date, there are no such memoranda signed by the AIFC Court with the courts of foreign jurisdictions. There is also no publicly available information on any proposed amendments to the existing international treaties or laws of Kazakhstan to address this issue.
According to public statistics, there is no judgment of the AIFC Court yet that has been enforced or requested to be enforced outside of Kazakhstan. Thus, whilst enforcement of AIFC Court acts within the territory of Kazakhstan seems to be a straightforward procedure, the practice with respect to enforcement of AIFC Court acts outside of Kazakhstan is yet to be developed.
FEES & ADDITIONAL COSTS
All applications, administration, and hearings at the AIFC Court were free of charge until 31 December 2021 inclusive. Furthermore, according to an announcement on the AIFC Court website, all parties to a contract which is agreed upon before 31 December 2021 and includes the AIFC Court for dispute resolution will be eligible to receive free administration of any dispute resolution at the AIFC Court under that contract before and after 31 December 2021.
To date, there is no official information as to the amounts of fees and charges payable to the AIFC Court. According to the AIFC Court, fees and tariffs are currently under discussion, and the AIFC Court aims at making them reasonably competitive compared to state court fees (which is 3% of a claim value).
Applicable Law & Experts
The law to be applied by the AIFC Court in exercising its powers and functions is the acting law of the AIFC, and the law as is agreed upon by the parties to a dispute, to the extent not inconsistent with Kazakhstan public order (public policy). In adjudicating disputes, the AIFC Court may also take into account final judgements of the AIFC Court on related matters, and final judgements of the courts of other common law jurisdictions.
Given that the AIFC Court panel consists of English law qualified judges, in cases where the dispute is governed by non-AIFC and non-English law, the parties to the dispute may need to engage legal experts or practitioners from the relevant jurisdiction. In other words, if the governing law of the contract under dispute is English or AIFC law, choosing the AIFC Court is practical and justified.
However, if applicable law under the dispute is other than common law, the parties should be aware of potential additional costs and expenses associated with dispute resolution at the AIFC Court.
Pursuant to the AIFC Court’s Regulation and Rules, all proceedings before the AIFC Court must be conducted in English, and all documents for use in the AIFC Court must be in English or accompanied with an English translation. Translation into English is also required for witness testimony if a witness is not sufficiently fluent in English to give his evidence in that language.
The relevant translations are arranged by the parties to a dispute at their own cost and must be notarized to be accepted by the AIFC Court. The AIFC Court registrar arranges for booth (simultaneous) interpretation of witness testimony at the parties’ cost. Thus, if the dispute is between non-English speaking parties and/or documents related to the disputes are not in English, the dispute settlement at the AIFC Court would require translation/notarization costs to be borne by the parties.