Introduction
Over the past fifteen years, many European and Asian countries have created international hubs for dispute resolution. Although the demand for specialised courts dealing exclusively with commercial disputes is high, International Commercial Courts (ICommCs) are not a new phenomenon, as one of the most reputable courts – the London Commercial Court (LCC) – has existed since 1895.Footnote 1 However, it is interesting to note that it is only recently that many different jurisdictions have begun to create similar courts or special commercial chambers. Evidently, this is not a single or unified trend; each region has distinct motivations driving the creation of an ICommC. A 2019 survey underscores the importance of such an institution, revealing that the world's top ten economies share common traits such as robust regulatory quality and efficiency and specialised commercial courts.Footnote 2
In order to meet contemporary challenges, the newly established ICommCs have blended characteristics of state courts and private alternative dispute resolution mechanisms or, as it has been described, represent ‘a careful marriage between litigation and arbitration’.Footnote 3 They typically operate on the basis of the English common law system or similar international standards, use English as a primary or alternative language, and make extensive use of advanced technologies.Footnote 4 Notably, the Republic of Kazakhstan stands out as the sole post-Soviet country to have followed international trends by establishing a common law-based court within the Astana International Financial Centre (AIFC), which is regarded as a ‘legal enclave’ in the Central Asian region. Two neighbouring states, however, the Republic of UzbekistanFootnote 5 and the Kyrgyz Republic,Footnote 6 are in the process of establishing similar international financial centres with common law jurisdiction. Evidently, one of the main purposes for the creation of such financial centres with ICommCs is to attract international investors to the national economy. Nevertheless, the creation of a common law jurisdiction within a civil law system has caused considerable legislative discrepancies within the Kazakhstani legal system, not to mention a backlash from the legal community.
This article analyses the recently established AIFC Court, its characteristics, and its potential impact on the Central Asian region. The second part of the article briefly reviews the types of newly emerging ICommCs worldwide and considers the peculiarities of the AIFC Court, its structure, and substantive law. The third part focuses on the existing criticisms of the new ICommC and the anticipated negative impact on Kazakhstan's legal system. The fourth part analyses the potential benefits that the AIFC Court could bring to the justice system of the Republic of Kazakhstan, and the lessons that the neighbouring Central Asian states could learn from the creation of a similar court. The final part will summarise and conclude the article.
AIFC Court: Following International Trends
The creation of the AIFC Court coincided with the emergence of similar ICommCs on the European and Asian continents. However, it is important to note that this was not the result of a single trend, but rather of a multitude of diverse political and economic factors driving the proliferation of ICommCs worldwide. Hence, it is crucial to consider the AIFC Court not in isolation, but from an international perspective within the context of the race for the best dispute resolution hubs.
The Position of the AIFC Court on the World Map of ICommCs
Contrary to what their name might suggest, ICommCs are not ‘international’ in the sense of being established by international organisations or through international treaties.Footnote 7 ICommCs are created by sovereign states; the use of the term ‘international’ in their name signifies the subject matter of their jurisdiction, ie, commercial disputes that have an international component.Footnote 8
ICommCs can be divided into four categories. The first group includes the courts of London and New York, which are well established and considered the most reputable and sought-after commercial courts in the world.Footnote 9 The LCC, for example, hears almost a thousand high-profile cases a year.Footnote 10 Not only is the number of cases continuously increasing; the number of judgments has also risen over the last decade, from about 150 judgments in 2015 to 257 in 2023. In addition, almost 60% of the litigants were foreign parties from 75 different jurisdictions, which is a significantly higher number compared to any other state in the world.Footnote 11
The significant influx of international litigants in commercial courts has changed the perception of the courts from mere dispute resolution mechanisms to commodities capable of attracting business to specific litigation forums.Footnote 12 Besides its direct effects on the dispute resolution market, the LCC has also indirectly influenced the rise of ICommCs in Europe: the current European trend of creating ICommCs, for example, has been attributed to the UK's decision to leave the European Union in 2016. Assuming that London would lose procedural privileges once it was no longer part of the EU,Footnote 13 European states such as Germany, Belgium, the Netherlands, and France created special chambers that deal exclusively with international commercial disputes.Footnote 14 Although Germany and France had already created special commercial chambers prior to the announcement of Brexit, the process itself provided an impetus to reassess their plans and develop new strategies.Footnote 15 Hence, European states did not necessarily see the ICommC as a tool to attract international investors, but rather as an opportunity to take London's place in the business litigation market in the wake of Brexit.Footnote 16
In contrast to their European counterparts, Asian states seem to have taken a more comprehensive approach. For instance, Singapore recently created the Singapore International Commercial Court (SICC) as part of its strategy to become a regional economic and dispute resolution hub,Footnote 17 which is presumed to complement its existing and promising arbitration and mediation centres.Footnote 18
At the same time, as China is aiming to consolidate and expand its influence through the Belt and Road Initiative, it has established the Chinese International Commercial Court (CICC). This move reflects China's intent to leverage its strategic position by developing a ‘one stop shop’ for international commercial disputes.Footnote 19 While the newly established court is presided over by local judges only, it also has an international committee of experts to advise the court on matters of foreign laws and cases relevant to the disputes brought before it.Footnote 20
Finally, there are states such as the United Arab Emirates (UAE), Qatar, and the Republic of Kazakhstan, which have established new forms of special economic zones (SEZs), calling them ‘international financial centres’.Footnote 21 The Dubai International Financial Centre (DIFC) and the Qatar Financial Centre (QFC) were created in the early 2000s and became an inspiration for the subsequent zones created a decade later, such as the Abu Dhabi Global Market (ADGM) and the AIFC. The DIFC and the QFC are widely regarded as unique special or financial economic zones, which differ from the traditional trans-shipment and manufacturing zones and encompass areas that facilitate economic and financial services.Footnote 22 New financial hubs have similar and elaborate internal structures, which include several bodies, such as a Management Council, a President or Governor, a Financial Services Authority, an Administration, a Court, and an International Arbitration Centre.Footnote 23
The AIFC Court is also one of the dispute resolution centres that exist within the new types of SEZs, which aim to resolve exclusively commercial disputes that fall within the jurisdiction of the Court. Notably, all of the aforementioned financial centres and their courts operate on the basis of common law,Footnote 24 which effectively makes these SEZs ‘legal enclaves’ or ‘jurisdictions within a jurisdiction’.Footnote 25
The Structure of the AIFC Court and its Jurisdiction
As previously mentioned, the AIFC Court, as well as the AIFC itself, was established in a similar manner to the special economic zones of the Gulf region, most notably the DIFC. The initiative was proposed by the first President of the Republic of Kazakhstan in 2015 as part of his election campaign.Footnote 26 Later, the Kazakh government presented a national strategy (‘Nation's Plan’) called ‘100 Concrete Steps’, whereby five steps were directly related to the creation of the AIFC and its Court, based on the example of the DIFC.Footnote 27 In accordance with the Nation's Plan, the legislative framework for the creation of the AIFC was established and in 2015 the AIFC Constitutional Statute was adopted, which is the most important piece of legislation regulating the financial centre. It provides that the AIFC has six main bodies in addition to the AIFC Court: the Management Council, which is the highest body; the Governor; the AIFC Authority; the Astana Financial Services Authority; and the International Arbitration Centre.Footnote 28 The AIFC Court, as well as its other bodies, are independent in their activities,Footnote 29 and the Court consists of two tiers: the Court of First Instance and the Court of Appeal. The Court of First Instance also includes the Small Claims Court (SCC), which has a special fast-track procedure for four types of disputes: where the amount in dispute is less than USD 150,000; where the claim is less than USD 300,000 and all the parties agree in writing to submit the claim to the SCC; where the claim relates to the employment or former employment of a party and all parties agree in writing to submit the claim to the SCC; and any other claim that the Chief Justice orders to be heard by the SCC.Footnote 30
The AIFC Constitutional Statute provides for the exclusive jurisdiction of the AIFC Court over three types of disputes, specifically pertaining to civil and commercial matters arising out of transactions, contracts, arrangements, and incidences (notably, the Court cannot hear and adjudicate on criminal or administrative cases). The disputes that fall under the jurisdiction of the Court are divided into the following categories: firstly, disputes between AIFC participants, AIFC bodies, and their expatriate employees (AIFC participants are legal entities registered and recognised by the AIFC, and licensed to conduct specific types of activities);Footnote 31 secondly, disputes arising from activities conducted within the AIFC's territory and governed by its applicable law;Footnote 32 and finally the disputes transferred to the AIFC Court by agreement of the parties. Generally, there are twenty-nine types of regulated activities, including but not limited to dealing in investments as a principal, dealing in investments as an agent, managing investments, managing a collective investment scheme, and providing or arranging custody.Footnote 33 Moreover, the AIFC has contractual jurisdiction, which relates to disputes referred to the AIFC Court by the agreement of the parties. Accordingly, the term ‘parties’ relates to any party, even those not registered and those not conducting business in the AIFC. Parties may ‘opt in’ to the AIFC jurisdiction not only before the dispute arises but also after it has arisen.Footnote 34 And finally, the AIFC Court has an exclusive jurisdiction to interpret the AIFC Acts.Footnote 35 However, the substantive law of the AIFC does not specify the procedure or instances in which the Court is to provide the official interpretation of the AIFC Acts.
Above that, the AIFC Court Regulations provide that the Court of First Instance has exclusive jurisdiction to hear and determine an appeal from a decision made by the AIFC bodies, organisation, or participants, where the appeal relates to: a question of law, an allegation of a miscarriage of justice, an issue of procedural fairness, or a matter provided for in or under AIFC law. Consequently, should there be an issues where the dispute falls within the jurisdiction of an AIFC Court, such a matter will be resolved by the Court itself, and its decision will be considered final.
Integration of Common Law Jurisdiction into a Civil Law System
The creation of modern ICommCs has raised many questions, such as how the newly emerged common law jurisdictions – namely the DIFC, QFC, ADGM, and AIFC – fit into a civil law system. Many Kazakhstani scholars and legal practitioners have been sceptical or outright opposed to the initiative of creating a legal enclave within the state capital, Astana.Footnote 36 Critics have pointed out that there is a fundamental incompatibility between the civil law and the common law systems;Footnote 37 some have even suggested that the AIFC should be liquidated.Footnote 38
When discussing legal frameworks, it is crucial to account for different international experiences. As noted above, ICommCs within the DIFC, the ADGM and the QFC operate under common law principles. This stands in contrast to the traditional civil law system in both the UAE and Qatar.Footnote 39 Similarly, the Republic of Kazakhstan has transitioned to a civil law jurisdiction since its time within the Soviet Union.Footnote 40 However, one of the main differences between the Gulf States and the Republic of Kazakhstan is that the UAE and Qatar have been under the political and legal influence of the United Kingdom,Footnote 41 whereas the Republic of Kazakhstan was isolated from the rest of the world, having been part of the Soviet totalitarian regime for eighty years until its collapse. Post-independence, the sovereign Kazakhstani state made attempts to harmonise its legal system with other post-Soviet countries within the framework of the Eurasian Economic Union (EAEU), especially in the financial sphere.Footnote 42 The experiment of creating a legal enclave with common law jurisdiction is unprecedented in any of the post-Soviet countries. Moreover, despite the fact that the Gulf States and the Republic of Kazakhstan are considered to be civil law states, some scholars have suggested that this is not a relevant comparison due to the different state structures of the UAE and Qatar. As both states are monarchies, the establishment of a SEZ in the Gulf States is not subject to the same constitutional and legal issues as the establishment of a SEZ in the Republic of Kazakhstan.Footnote 43
Despite claims of incompatibility between civil and common law systems, and the legislative discrepancies they entail, there are many examples of convergence between the two systems. Jurisdictions like Louisiana, Quebec, Puerto Rico, Ireland, and South Africa exhibit mixed legal systems incorporating case law and statutes.Footnote 44 In this regard, the experience of another unitary state is noteworthy, namely Israel, which is considered one of the classic examples of a mixed legal system, heavily influenced by Western legal principles and traditions.Footnote 45 Unlike most traditional mixed legal systems, the Israeli state was initially developed as a common law jurisdiction which later integrated civil law principles due to the influence of immigrants from continental Europe.Footnote 46 It is apparent, therefore, that the process of convergence of different legal systems is not limited to monarchies like the UAE and Qatar, but that it is also taking place within unitary republics such as Israel. Moreover, research suggests that most of the countries around the world have mixed legal systems,Footnote 47 and this is generally described as a process with many positive effects, such as the facilitation of international trade, overall economic development, further globalisation, the diffusion of culture, and a better understanding of legal traditions.Footnote 48
Analysis of the Criticisms of the AIFC Court
Status of the AIFC Court
One of the main criticisms of the AIFC, and in particular its Court, relates to the place of the AIFC Court within the architecture of the judicial system of the Republic of Kazakhstan. As previously discussed, the AIFC Court, established in accordance with the AIFC Constitutional Statute, operates independently from state courts and is not formally part of Kazakhstan's judicial system.Footnote 49 This autonomy has raised concerns, given that Kazakhstan's Constitution prohibits to establish a special or emergency court under any name.Footnote 50 Indeed, some have described the AIFC Court as precisely such an ‘emergency’ or ‘special’ court,Footnote 51 which raises constitutional concerns. However, a closer examination reveals otherwise. Official interpretations (so-called Normative Resolutions) of the Kazakhstani Constitution, made by the now-abolished Constitutional Council, but still in force,Footnote 52 delineated ‘special’ and ‘emergency’ courts. According to their definition, ‘emergency courts’ historically emerged as special judicial or quasi-judicial bodies under the conditions of a totalitarian regime, typically linked to politically charged events, and include revolutionary tribunals as well as military revolutionary and military field courts.Footnote 53 ‘Special courts’, conversely, have one of the following characteristics: they are created and regulated by special regulatory acts and not by the Constitution or constitutional statutes; their administration is exempted from the general order of the legal proceedings, which creates conditions for the infringement of constitutional rights and the freedoms of the human being and the citizen; and finally, their creation violates the principle of the division of state power into legislative, executive, and judicial branches, which results in the dependence of special courts on the bodies of the executive branch. In this sense, the AIFC Court does not meet the definition of a ‘special’ or ‘emergency’ court, since it was established in accordance with the Constitution and the AIFC Constitutional Statute and is also regulated by the Constitutional Statute of the Judicial System and the Status of the Judges of the Republic of Kazakhstan.Footnote 54 Secondly, AIFC law does not infringe on the constitutional rights and freedoms of the citizens. It is also independent in its powers from the executive branch of the state.
As mentioned above, the AIFC is not an international court either, nor a supra-natural court, as it was not established by international agreements, but by a statute passed by Parliament in accordance with the Constitution. The AIFC Constitutional Statute explicitly states that the AIFC Court also operates independently from the national judicial system. Nevertheless, a review of the legislation shows that in order to harmonise the national judicial system and to avoid the problems of enforcement of the decisions of the AIFC Court, both domestically and abroad (which will be discussed later in this article), the AIFC Court should be integrated into the national judicial architecture.
But there is still a crucial question lingering about how the AIFC Court fits into the architecture of the national courts. In general, the justice system of the Republic of Kazakhstan consists of a three-tier system, with the Supreme Court as the highest judicial body, followed by the regional and their equivalent courts, and finally the district and their equivalent courts.Footnote 55 Regional and district courts are collectively known as local courts. In addition, other types of courts may be established in Kazakhstan, including ‘specialised courts’ in military, financial, economic, administrative, juvenile, and other spheres.Footnote 56 Specialised courts are established by the President of Kazakhstan and have the status of either a regional or a district court.Footnote 57 Potentially, the AIFC Court could be recognised as a local court, specifically as a specialised court in the financial sphere, as the Court's jurisdiction is limited to the resolution of civil or commercial disputes arising from transactions, contracts, arrangements, or incidences.Footnote 58 If acknowledged as a local court, the AIFC Court would be subject to the jurisdiction of the Supreme Court of the Republic of Kazakhstan, which is the highest judicial body in civil, criminal, and other cases.Footnote 59 However, AIFC law provides that the decisions of the AIFC Court of Appeal stand as final, immune to appeal, and binding on all natural and legal persons.Footnote 60 Moreover, the genesis of the AIFC Court was to position it outside the jurisdiction of the Kazakhstani Supreme Court, assuring international investors exemption from the jurisdiction of the national courts. This could potentially lead to political and social tensions and will eventually require a legislative solution.
Another pressing matter revolves around the enforcement of AIFC Court decisions abroad. Legislative steps have been initiated for the decisions of the AIFC Court to be enforced within the Republic of Kazakhstan.Footnote 61 However, scholarly discussions have surfaced regarding the applicability of Kazakhstan's international agreements governing the enforcement of decisions to the AIFC Court, considering that it is not part of the national court system.Footnote 62 Against this background, it is within the interests of the Republic of Kazakhstan to clearly identify the place of the AIFC Court within the justice system of the state.
One possible solution involves amending two legislations: the AIFC Constitutional Statute and the Constitutional Statutes on Judicial System. Specifically, addressing the provision that exempts the AIFC Court from the Kazakhstani court system could resolve the conflict of norms, stating that the AIFC Court is part of the Kazakhstani judicial system, albeit still operating outside the jurisdiction of the Supreme Court or any other local courts within the Republic of Kazakhstan. This adjustment would establish the AIFC Court's autonomy from national courts while seamlessly integrating it into the judicial system.
The Applicable Law of the AIFC and its Court
Despite the fact that the experience of the DIFC was primarily taken into account in the creation of the AIFC, a considerable amount of work had to be done in order to create a new regulatory framework adapted to Kazakhstan's realities. The legal system of the AIFC is referred to by the term ‘acting law’,Footnote 63 which relates to the set of existing normative documents regulating the financial centre and its activities.
To establish a clear structure, the AIFC laws have a specific descending hierarchy, which is outlined by the AIFC Constitutional Statute. At the pinnacle stands the Constitution, possessing the highest legal authority. Following this, the hierarchy includes the AIFC Constitutional Statute itself, subsequent internal acts of the AIFC adopted by the AIFC bodies, and finally, the laws of the Republic of Kazakhstan, which are applicable to matters not regulated by the preceding acts.Footnote 64
However, there is an act called the AIFC Regulations on AIFC Acts of 2017 Footnote 65 that also establishes a hierarchy of applicable law, although the hierarchy differs from that specified in the AIFC Constitutional Statute. Notably, while the AIFC Constitutional Statute stipulates that the ‘acting law’ of the AIFC is based on the Constitution of the Republic of Kazakhstan, the AIFC Regulations on AIFC Acts bind the ‘acting law’ only to a single paragraph of the Constitution regarding the establishment of the special legal regime in the city of Astana. Another difference is that the Regulations on AIFC Acts do not include Kazakhstani laws as part of the applicable law or within the hierarchy of AIFC law.
The narrowing of the scope of application of the Constitution by the internal AIFC law does not seem to be in line with its general concept that AIFC Acts shall not revise or amend the provisions of the legal acts that hold greater legal authority. This is evident from the fact that the AIFC Constitutional Statute itself stipulates that the AIFC Acts shall not be ‘inconsistent with this Constitutional Statute’.Footnote 66
Apart from the laws mentioned above, two other sources contribute to AIFC law. The first comprises ratified international treaties, which hold precedence over the substantive law of the AIFC.Footnote 67 The second involves case law, since it has been established that the AIFC Court may take into account its own final judgments and ‘final judgements of the courts of other common law jurisdictions’.Footnote 68 However, the precedents are regarded as subsidiary; the law explicitly allows their consideration during adjudication, at the judges’ discretion.
There is, however, some ambiguity in the reference to ‘other common law jurisdictions’. While it is reasonable to assume that the AIFC Court will mainly reference English case law since the AIFC Acts are developed ‘on the principles, legislation and precedents of the law of England and Wales and the standards of leading global financial centres’,Footnote 69 the language in the AIFC Constitutional Statute evidently allows for the application of precedents from other common law jurisdictions. However, the applicable law of the AIFC does not specify the exact list of such jurisdictions, which raises questions about whether the decisions of the courts of a mixed common law jurisdiction such as Scotland, Quebec, or LouisianaFootnote 70 could be considered by the AIFC Court. Clarity on this matter falls within the purview of the Court, given its exclusive jurisdiction to interpret AIFC Acts.
Notwithstanding its relatively clear structure, the AIFC law remains a controversial subject, with many scholars struggling to identify its essence and its place within the national legal system.Footnote 71 Some researchers define AIFC law as English lawFootnote 72 or identify the Acts of the AIFC as the primary law and the laws of England and Wales as the secondary law, whilst Kazakhstani laws are not applicable in the territory of the AIFC's jurisdiction.Footnote 73
This statement, however, does not seem to be accurate. Despite the fact that the AIFC Acts are integrating common law principles within the financial centre's jurisdiction, it is incorrect to label them as laws of a foreign country, specifically England and Wales. We have established that the Constitution of the Republic of Kazakhstan and the AIFC Constitutional Statute stand as the primary legal sources within the AIFC. Above that, the Acts of the AIFC bodies that follow in the hierarchy of applicable law ‘may be’ based on the principles, legislation, precedents of the law of England and Wales, alongside standards of leading global financial centres. The term ‘may be’ signifies that the AIFC Acts do not directly adopt English and Welsh legislation, but instead use them as a model law for the AIFC when developing and adopting internal regulations, akin to the standards of leading global financial centres like the DIFC, the ADGM, and the QFC.
To date, more than four hundred distinct AIFC Acts have been adopted, including rules, regulations, notices, glossaries, and consultation papers, which cover and regulate a vast array of issues, ranging from corporate law to banking and Islamic financing.Footnote 74 Moreover, in matters not governed by the AIFC Constitutional Statute and the AIFC Acts, the legislative system of the Republic of Kazakhstan does in fact apply in the AIFC.Footnote 75 For instance, payment of taxes is carried out in accordance with the Kazakhstani tax legislation,Footnote 76 and an analysis of the AIFC employment regulation reveals that it is conducted in accordance with the Kazakhstani labour laws, including enrolment in pension schemes for Kazakhstani citizens.Footnote 77
Regarding legal precedence, the hierarchy of the AIFC suggests that Kazakhstani law holds priority over case law, since the national legislation of the Republic of Kazakhstan holds a specific place in the hierarchy, mandating that the AIFC Court adheres to AIFC laws, while the precedents of the AIFC Court or any other common law court ‘may be’ taken into account when adjudicating disputes in the AIFC Court.
Therefore, the AIFC Acts cannot be solely considered as part of the legal jurisdiction of England and Wales. Furthermore, for the principles stemming from England and Wales to be applicable within the AIFC, they must be adopted by the AIFC bodies in the form of Acts.
However, the AIFC Trust Regulations of 2019 Footnote 78 explicitly reference ‘[t]he common law of Trusts and principles of equity applicable in England and Wales’, determining that they shall ‘supplement these Regulations, except to the extent modified by these Regulations or any other AIFC Act or by the Court’. Notably, however, this provision in the AIFC Acts only assigns a ‘supplementary’ role to the law of trusts of England and Wales. Overall, an analysis of the functioning of the AIFC suggests that the AIFC could be considered as an area of mixed jurisdiction, based on statutory law and supplemented by case law. Furthermore, the substantive law should not be defined as law of England and Wales, but rather as a part of the legal system of the Republic of Kazakhstan. Similarly to the AIFC Court, the AIFC laws are enacted in accordance with the Constitution and the AIFC Constitutional Statute. The laws of the Republic of Kazakhstan apply to the relations not governed by the AIFC Acts. In addition, the AIFC Acts are adopted in accordance with the AIFC Constitutional Statute; they regulate only the specific scope of issues identified by the AIFC Constitutional Statute and their applicability is limited to the territory of the AIFC within the capital city of Astana.Footnote 79
Potential Benefits of the AIFC Court
Despite the inherent legal inconsistencies that the AIFC and its Court create within the national legal system of the Republic of Kazakhstan, there are still many advantages to creating a court that operates on the principles of the common law system. It has been noted that the blending of arbitration and litigation, internationalisation, and the increasing autonomy of the parties are values of modern ICommCs.Footnote 80 Moreover, the example of the LCC proves the lucrative benefits of a competitive ICommC.Footnote 81 Against this background, ICommCs can therefore constitute effective instruments to attract international investors by providing a venue for the resolution of high-value disputes.Footnote 82 This generally marks an interesting trend where states view the court system as a commodity, and dispute resolution as a service market. As a result, the ICommCs and their respective international chambers are seen as an independent businessFootnote 83 generating a significant amount of profit.Footnote 84 This section, however, will examine the non-economic factors that could positively contribute to the development of the national justice system of the Republic of Kazakhstan and its neighbouring states.
The Impact of the AIFC and its Court on the National Justice System of the Republic of Kazakhstan
The existence of the AIFC and its Court has triggered several interesting processes, including interaction with the national judicial system of the Republic of Kazakhstan, as well as influence on other Central Asian states. In general, the last six years have been marked by several important initiatives to develop the Kazakhstani justice system,Footnote 85 and many experts note positive trends.Footnote 86
This is a particularly sensitive issue for international investors, who seek security and stability for their investments and business operations. As a result, one of the Central Asian states’ key credentials in attracting foreign business is ensuring the security of investments. However, a 2022 report by the ‘World Justice Project’ (WJP), which assesses and ranks judicial and legal systems in what it calls the ‘Rule of Law Index’, states that access to an impartial judicial system is a tangible problem for the region: the Republic of Kazakhstan is ranked 65th on the index, the second highest of all post-Soviet countries, after Georgia, which is ranked 49th.Footnote 87 Ukraine is ranked 76th, the Republic of Uzbekistan 78th, the Belarusian Republic 99th, the Kyrgyz Republic 100th, and the Russian Federation 107th out of 140 countries in the world. With most of the post-Soviet countries being in the second half of the index, it is clear that not only the Republic of Kazakhstan, but also all neighbouring jurisdictions are in need for judicial reform.
At the same time, most common law countries rank very high in the index: New Zealand is ranked 7th, the Republic of Ireland 10th, Canada 12th, Australia 13th, the United Kingdom 15th, Singapore 17th, Hong-Kong 22nd, and the United States 26th. However, the President of the Republic of Kazakhstan has announced a reform of the judicial system and continues to pursue the goal of improving the overall situation, and the fact that an institution such as the AIFC Court exists and is available to the international business provides additional protection for investor interests and gives the Republic of Kazakhstan an edge, especially when competing with other Central Asian and Eastern European neighbours.
Another positive trend emerges as the Supreme Court of the Republic of Kazakhstan displays a willingness to cooperate and integrate the experiences of the AIFC Court and its judges.Footnote 88 In 2017, prior to the official opening of the AIFC Court, a memorandum on mutual cooperation between the Supreme Court and the AIFC was signed.Footnote 89 Since then, numerous official meetings have been held between national judges and justices of the AIFC Court,Footnote 90 including lectures conducted by the AIFC Court to local judges.Footnote 91 This clearly demonstrates an understanding of the value of the AIFC Court from the perspective of the national justice system and what it could potentially bring to the Kazakh state.
In terms of the composition of the AIFC Court, it was initially established under the supervision and chairmanship of Lord Woolf,Footnote 92 the former Lord Chief Justice of England and Wales.Footnote 93 Following his resignation in 2020, Lord Mance, who is also regarded as one of the most eminent judges, was appointed Chief Justice of the AIFC Court.Footnote 94 Currently, the position is held by Lord Burnett of Maldon, who previously served as Lord Chief Justice of England and Wales from 2017 to 2023.Footnote 95 In addition, the remaining judges of the AIFC Court are highly respected experts in the field.Footnote 96 Against this background, the existence of such dispute resolution mechanisms is not only beneficial to the local legal system, but could also add value to the Republic of Kazakhstan as a safe place for investors to operate and do business.
Potentially, the role of English common law could increase further if the country's leadership continues to adopt international practices and expand their applicability. For example, it is interesting to note the dynamics of the interactions between the AIFC and the state authorities. As mentioned earlier, the national justice system is clearly interested in cooperating with the AIFC Court. Moreover, the Parliament of Kazakhstan has taken into account common law principles in regulating civil relations. To this end, the lower house of the parliament, the Mäjilis, has proposed several amendments to the Civil Code of the Republic in order to incorporate English law norms, including promissory estoppel, representation and warranties, and indemnity clauses into the civil law.Footnote 97 Evidently, common law principles have a direct influence and impact on the judicial and legal system of the Republic of Kazakhstan.
Moreover, the AIFC Court and the practice of English judges in administering justice stands as a potential blueprint for advancing other facets within Kazakhstan's legal system. Before Kazakhstan joined the Russian Empire and later became part of the Soviet Union, it had a significant customary legal system known as adat. Within this system, judges played a pivotal role in dispensing justice.Footnote 98 For instance, customary laws were constantly evolved and refined through the judicial activity of khans, sultans, and particularly the revered biys Footnote 99 – Kazakh judges that held immense significance in traditional Kazakh society, exercising crucial roles in administering justice for centuries.Footnote 100 The practice of the court of biys served as a formative source of law for many centuries, though it was not until the 19th century that this practice was formalised in writing, leaving room for varied interpretations in law enforcement practices.Footnote 101 Unfortunately, the court of biys ceased functioning when Kazakhstan became part of the Soviet Union.
Recently, however, the government has taken the initiative to revive this traditional practice, and ‘biy councils’ have begun to operate again in various regions of the country as mediation centres for the resolution of civil disputes,Footnote 102 though many national legal scholars and practitioners are calling for a re-evaluation of the historical legacy of the traditional Kazakh legal system and a further expansion of the implementation of the council of biys.Footnote 103 In this regard, there is an opportunity to learn from the existing AIFC Court and the practice of English judges in administering justice, with the aim of using it in the reconstruction process of the traditional Kazakh court of biys.
Important Precedents
Although it has generated considerable controversy within the Kazakhstani legal community, the work of the AIFC Court itself and its decisions have been largely ignored. However, in order to assess the impact of the AIFC Court, it is essential to analyse its decisions and the reputation that it has gained in relation to the AIFC and the Republic of Kazakhstan.
The AIFC Court was established in 2017,Footnote 104 but only began its work in 2018.Footnote 105 Within six years of operation, it had issued 101 decisions.Footnote 106 The first case was decided in 2019, which was the only dispute resolved that year. However, in 2020 the Court issued eleven decisions; fifteen and twenty-seven decisions in 2021 and 2022, respectively; and fourty-six decisions in 2023.
A review of the Court's decisions shows that twenty-six decisions concerned contractual disputes, and twenty-three concerned the enforcement of mediation and/or arbitral awards. Above that, fifteen decisions concerned labour issues, and seven mergers and amalgamations. Ten cases were discontinued, two of which were due to the Court's lack of jurisdiction over the dispute, one case on anti-suit injunction and one claim seeking an order from the AIFC Court to enforce a foreign court's judgment. The remaining cases were the appeal decisions of the disputes between the same parties.
Of the total of 101 decisions, four pitted state agencies against private parties in disputes whose outcomes may be of particular interest to international investors, since one of the main reasons for creating the AIFC within the common law court system in the first place was to attract international business to the region. However, as noted in the previous section, the justice systems of the Central Asian states, including the Republic of Kazakhstan, still lack the necessary credibility with the international community. Therefore, the decisions of the AIFC Court in disputes with government agencies can serve as a stepping stone in developing a good reputation for the AIFC as a safe environment for international investors.
Across these four cases, the AIFC Court consistently ruled in favour of the private businesses. For instance, in the Court's first case in 2021, the company Success K LLP brought a claim against the Ministry of Healthcare of the Republic of Kazakhstan to recognise and enforce the arbitration award of the International Arbitration Centre of the AIFC (IAC).Footnote 107 The defendant's argument rested on Kazakhstan's Law on Arbitration Footnote 108 and Law on State Property,Footnote 109 asserting that the arbitration clause was null and void without consent from the Ministry of Finance. The claim was dismissed on the grounds that the AIFC Arbitration Regulations of 2017 Footnote 110 were applicable. After reviewing the dispute, the AIFC Court dismissed the Ministry of Healthcare's application to set aside and refuse recognition or enforcement of the award and granted recognition and enforcement of the original arbitral award for payment of approximately 75 million tenge (USD 172,000).
The second and third cases concerned disputes between the private company JSC Cengiz Insaat Sanayi ve Ticaret AS (JSC Cengiz) as claimant and the Committee for Roads of the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan (Ministry of Industry) as defendant. At first instance, the claimant sought payment from the defendant for construction work it had carried out.Footnote 111 After considering the case, the AIFC Court ordered the defendant to pay the claimant a total of 1,335,170,366 tenge (approximately USD 3,065,257). In the subsequent case, the same claimant, JSC Cengiz, sought enforcement of the arbitration award against the Ministry of Industry, which was granted by the Court for the amount of almost 460 million tenge (approximately USD 1 million), in addition to the arbitration cost of USD 20,000.Footnote 112
Finally, the fourth case also concerned the enforcement of an arbitration award between Firm 800 Limited Liability Company as claimant and the Ministry of Healthcare of the Republic of Kazakhstan as defendant. The AIFC Court ordered the Ministry of Healthcare to pay debts totalling USD 27,747, including the costs of the arbitrator's fees of USD 1,000 and the legal costs of USD 1,800.Footnote 113
As can be seen, the AIFC Court has ruled in favour of the private parties in all cases involving government agencies. The four cases seem to set precedents for international investors and present the AIFC Court as an impartial dispute resolution centre. The fact that the AIFC Court ordered the government agencies to pay a substantial amount of money shows that the AIFC Court is beyond the influence of state bodies. This sets the Court apart from the national judicial system, which, despite undergoing important reforms, still requires substantial transformations to drastically change its current state.Footnote 114
The Impact of the AIFC on Other Central Asian States
In the six years of its existence, the AIFC has made a significant impact not only within the Republic of Kazakhstan, but also within the Central Asian region as a whole. For instance, the neighbouring Kyrgyz Republic announced the creation of a similar SEZ in the financial sphere, the Bishkek International Financial Centre (BIFC).Footnote 115 An analysis of the draft of the Constitutional Statute, published by the Ministry of the Economy of the Kyrgyz Republic on its official website, clearly indicates that the leadership of the Kyrgyz Republic has taken the AIFC Constitutional Statute as a model.Footnote 116 However, at this stage it is not clear whether the initiative will be implemented in the same way as it in the Republic of Kazakhstan, as the Kyrgyz government has not provided any information on the plans for its creation.Footnote 117
The third Central Asian country in the process of establishing a financial centre is the Republic of Uzbekistan. At present, the Uzbekistani government is also actively discussing the creation of the Tashkent International Financial Centre (TIFC) with the government of the United Kingdom.Footnote 118 Similar to the approach taken by the Kyrgyz Republic, Uzbekistan has formally disclosed its study of the AIFC's experiences during the initial phase of analysing the prospective project.Footnote 119
As can be seen, the experiences of the Republic of Kazakhstan have aroused considerable interest and clearly influenced its neighbours. Bearing in mind that all three republics are former socialist states with a civil law tradition, the fact that the AIFC has adopted a completely different legal framework, with its Court operating on the basis of the common law system, sets a compelling precedent. It is plausible that the future financial centres in Bishkek and Tashkent follow suit, establishing similar ICommCs built upon an English common law system.
Therefore, it is crucial for Kyrgyzstan and Uzbekistan to carefully analyse all of the existing issues related to the legal regulation of the AIFC before starting the operation of a financial centre with an ICommC. The fact that all three republics share the same historical and legal heritage is still reflected in the current stage of development of the countries. For example, the Constitutions and the legal regulations of the respective justice systems of the three republics are very similar,Footnote 120 which is especially true when comparing the Republic of Kazakhstan and the Kyrgyz Republic.Footnote 121 Therefore, before creating a common law court, it is important not only to analyse the previous legislative reforms carried out in the AIFC, but also to review all the legal discrepancies revealed after the regulation of the financial centre and its ICommC.
Enforcement of Judgments
Dispute resolution is commonly acknowledged as a complicated, protracted, and costly undertaking. Even upon the conclusion of litigation itself, the ordeal persists. The victorious party encounters a final hurdle – the enforcement of the court's decree – a process that can prove exceedingly challenging, particularly when enforcing judgments in foreign jurisdictions. This holds true for the Republic of Kazakhstan despite its participation in several international treaties, including the Minsk Convention of 1993 on legal assistance and legal relations in civil, family, and criminal matters; the Chisinau Convention of 2002 on legal assistance and legal relations in civil, family, and criminal matters; the Kiev Convention of 1992 on settling disputes related to commercial activities; and the Moscow Agreement of 1998 on the procedure for mutual enforcement of decisions of arbitration, commercial, and economic courts in the territories of the member states of the Commonwealth. Despite these affiliations, issues persist in enforcing foreign judgments in Kazakhstan,Footnote 122 especially when originating from a state lacking an international agreement with Kazakhstan.Footnote 123 Consequently, the local legal community has acknowledged the imperative need to reform the process for the enforcment of foreign decisions to enhance the nation's overall investment climate.Footnote 124 This necessity extends beyond judicial decisions and encompasses arbitration awards as well.Footnote 125
In this respect, the existence of the AIFC Court does not directly contribute to solving this problem, but it does provide an alternative forum with more efficient means of enforcing judgments. Accordingly, necessary amendments have been made to the national legislation of the Republic of Kazakhstan to ensure the enforcement of the AIFC Court's decisions. Specifically, these amendments recognise AIFC Court as enforceable writs, encompassing orders securing or cancelling a claim's security.Footnote 126 However, according to the AIFC Constitutional Statute and the Civil Procedure Code,Footnote 127 the AIFC Court's decisions, as judicial acts, primarily pertain to the merits of the dispute. Consequently, only the merits of AIFC Court judgments are subject to enforcement within Kazakhstan. The assumption that the orders of the AIFC Court to secure a claim or to cancel the security of a claim are equivalent to a writ of enforcement hence goes beyond the provisions of the AIFC Constitutional Statute, which may lead to controversies regarding the enforcement of acts of the AIFC Court that are not decisions based on the merits of a case.Footnote 128
Despite the aforementioned legal challenges, significant efforts have been made by the leadership of the Republic of Kazakhstan to create the legal basis for the AIFC and to develop a functioning ICommC within the financial centre. As a result, the AIFC Court's decision are currently enforced on the same grounds as the judicial acts of the national courts.Footnote 129 This is of crucial importance, as it is difficult to enforce decisions in favour of private parties against the sovereign states, which is also true for the Republic of Kazakhstan. The fact that the AIFC Court has already issued four decisions against government agencies only increases the value of such a dispute litigation forum for the international and local business community. Notably, the report of the AIFC Court issued in 2021 confirms that all decisions of the AIFC Court and the International Arbitration Centre have been fully enforced in the Republic of Kazakhstan.Footnote 130 In addition, the AIFC Court has an ‘enforcement judge’ appointed by its Chief Justice to monitor the enforcement of the court's decisions.Footnote 131 Although the precise scope of this judge's responsibilities remains somewhat unspecified in AIFC law,Footnote 132 the presence of an ‘enforcement judge’ stands to positively influence the actual implementation of enforcement orders by aiding litigating parties.
Conclusion
Over the past decade, a peculiar trend has emerged across Europe and Asia: the emergence of different types of ICommCs. While European states are using their position in the post-Brexit era to try to compete with the LCC, China and Singapore have sought to create a one-stop shop in their respective regions and provide all the dispute resolution mechanisms. Conversely, the Gulf States and potentially a number of Central Asian countries alongside the Republic of Kazakhstan are focusing on creating SEZs for investors with a commercial court operating under English common law principles. At this stage, it is very difficult to assess how these new forms of ICommCs will interact with traditional judicial systems and how they will change the commercial dispute resolution landscape. Nevertheless, there is a growing perception that litigation is a form of commodity or service to some extent. Notably, the Republic of Kazakhstan is the first Central Asian country to align with these trends, yet the eligibility of the AIFC Court as a reputable destination for the international community remains to be proven. Internally, scepticism persists within Kazakhstan, with concerns over legislative discrepancies within the national systems caused by the AIFC Court.
Despite the backlash from the local legal community, however, the international experience of the Gulf State counterparts suggests that it is possible to successfully operate a common law court within a civil law jurisdiction. As international reports highlight deficiencies in Kazakhstan's national judicial system, lacking credibility and impartiality, it may be preferable to take advantage of the AIFC Court and seek to legally integrate the Court into the Kazakhstani judicial system. Accordingly, the existence of an alternative court operating on common law principles seems to be a worthwhile experiment, especially considering that its main purpose is to attract foreign investment into the national economy.
