Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015
Author: Dautbayeva Dinara, Kazakh - American Free University, Kazakhstan
dispute considered in the context of legislation of a certain country (internal
investment dispute) is a variety of civil law disputes. Analysis of Kazakhstan
legislation shows that investment activity in Kazakhstan is a component and
integral part of civil legal relationships, within the frame of which dispute
settlements connected with investment activity are performed as civil
proceedings. It would be fair to mention that “the array of legal directions,
which constitute foreign investment legislation, is heterogeneous and includes
norms of civil, administrative, financial, currency, customs and other laws”.
specific character of investment disputes brings up the idea of a necessity to
delimitate investment and civil law disputes, at least for the research
purposes. The criterion of delimitation of investment disputes from civil law
disputes is the fact that investment disputes arise only in the process of
investment activity. Investment disputes differ from civil law disputes in the
fact that such disputes can be both national and international.
is a trustworthy fact that one of the current directions of the state policy in
economic development of the country is attracting national and international
investment. It’s an overall observation that the Republic of Kazakhstan
has created and is consolidating a complex of economic, legal and
organizational measures for protection of national and foreign investments,
which is formalized as a set of rules and norms and is declaring a favorable
regimen for mutual investments.
national investment dispute we understand the situation when there is a
conflict between a domestic investor and its country in a certain investment
activity issue, which is settled in accordance with the law chosen by the
investment dispute differs from national investment dispute in the structure of
its subjects, since one of the parties of the dispute is a foreign one (foreign
investor). Peculiarities of relationship between foreign investor, recipient of
foreign investments, the country – recipient of foreign investment and the
country of investor often lead to a complicated legal regulation of both the
relations between the subjects mentioned and approaches to dispute settlement
[1, с.9]. The problem of choosing the law, applicable to material and
procedural aspects of investment relationships with foreign interest indicates
the autonomy of the parties in selection of applicable material and dispute
settlement law. Foreign investor interest in the investment process influences
the peculiarities of disputes settlement.
the meaning of the international legal investment regime is in determining an
acceptable combination of laws and duties for both investors and governments.
notion of public policy started to form as early as the Middle Ages in the
works of Roman Law researchers – glossators. Public order clause is contained
in different forms in the legislation of almost all countries that have
international private law codifications. It was also a part of Civil
Legislation of the USSR and its republics, which was active in Kazakhstan prior
to adoption of the Civil Code of the Republic of Kazakhstan.
of all we need to clarify that we speak about public order clause or «ordre
public», which is vested in Article 1090 of the Civil Code of the Republic of
Kazakhstan  (hereinafter referred to as CC RK) in connection with foreign
law norms application. Thus, foreign law is not applicable in cases when its
application contradicts the law and order of the republic of Kazakhstan (public
policy of the Republic of Kazakhstan). In such cases the Law of the republic of
Kazakhstan is applied. But Clause 2 Article 1090 of CC RK specifies that
rejection to use foreign law cannot be used based only on difference of
political and economic systems. At the same time legal literature indicates
that non-usage of foreign law based on public policy violation is possible only
in “exceptional cases”. Each of such cases should have a solid basis and cannot
just come to formal violation of national law norms.
the whole the notion of public order (ordre public) has not yet been defined,
which causes certain difficulties with its application.
some countries it has not been decided yet which law should be applied in case
foreign law is excluded due to public order motives. Hungarian legislation
stipulates applying the law of the country where the trial takes place,
Austrian legislation stipulates applying Austrian law.
we should consider the issue of public order clause in a civil proceeding, in
connection with the Laws of Kazakhstan adopted on December 28, 2004: “On
arbitration tribunals”, “On international commercial arbitration”, and “On
making amendments to certain legislative acts of the Republic of Kazakhstan in
arbitration tribunals and arbitration activity issues”.
state authoritative court can overturn the decision (or reject arbitration
decision execution), if the court ascertains that arbitration decision or its
acknowledgement and execution contradict public policy of the Republic of
Kazakhstan (subclause 2) Article 425-3 of Civil Procedure Code of the republic
of Kazakhstan (hereinafter referred to as CPC RK); subclause 5 clause 2 article
44, subclause 2 clause 2 article 31, subclause 2 clause 1 article 33 of the
International Commercial Arbitration Law.
notion of public policy is fixed in subclause 10 clause 2 of the International
Commercial Arbitration Law, in accordance to which under public policy of the
republic of Kazakhstan we understand the fundamentals of state and public
system ascertained by the legislation of the Republic of Kazakhstan .
can be noticed that the definition is different from one given in article 1090
of CC RK – fundamentals of law and order . This notion is wider than
fundamentals of state and social structure, and in case of disagreement CC RK
norms will be applied. But, in principle, these two notions do not contradict
each other: in any case – fundamentals (of law and order or system) and it does
not automatically follows that a usual controversy to imperative legislation
norms of the Republic of Kazakhstan can be admitted as contradicting the public
December 23, 2005 the Supreme Court of the Republic of Kazakhstan adopted
normative resolution #10 “On court application of legislation norms concerning
arbitration tribunals decision enforcement”, in which it emphasized the
importance of public order clause and the necessity to limit this clause
application. In accordance with clause 10 of the normative resolution, in
particular, it is understood that application of the institution of public
order is possible in exclusive cases when the enforcement of arbitration
tribunal decision infringes the basics of law and order of the Republic of
public order (ordre public in French) can be determined as fundamental and
social community integrity productive rules, requirements, norms, characterized
by presence of moral and ethical platform and considered as a criterion of
balance between private and public interests of social community actors. At the
present moment we can witness the establishment of international public order
(real international public), which concentrates common for the states standards
of public-private relations on the one hand and certain state public order
establishment of the other. This is the reason why using public order clause it
is necessary to be guided by international public order.
public order clause in court practice it is possible to proceed from the
that of partial deviation of foreign law and order and application of the law
of the country of the court, content of which is the most similar to that of
that of decision divisibility, which presupposes partial rejection to enforce
foreign decision, or recognition but rejection to enforce.
public order clause is applied to prevent the following: violation of
international public order, application of foreign law of criminal character,
attribution of responsibility on an innocent person, violation of weak party
rights, violation of fair and commensurate reimbursement principles (both
upwards and downwards), immoral deals execution, corruption, bribery.
against debtor’s property is executed in accordance with the legislation of the
country of debtor location by the claimant request to the competent court of
Contracting party, which the claimant must provide with: a properly certified
copy of competent court decision with a confirmation of its entry into force,
or solicitation of its enforcement; a competent court document certifying
debtor’s participation in a court trial, and in case of absence from court – a
document certifying the debtor was properly notified of the court trial; a
court order. In accordance with clause 3 article 59 of the Convention on legal
assistance and legal relations on civil, family and criminal matters
(hereinafter referred to as Convention) as of October 7, 2002 foreign court
decision acknowledgement and execution can be rejected in case acknowledgement
and execution contradict public order of the inquired Contracting party. Clause
3 article 57 of the Convention states that decision acknowledgement and
execution order is defined in accordance with the legislation of the
Contracting Party, on whose territory the execution must take place .
accordance with clause 9 part 3 article 77 of the Constitution of the republic
of Kazakhstan while applying the law the judge should be guided by the
jurisdiction principle according to which evidence received illegally is of no
legal effect .
accordance with the norms of article 8 of CC RK citizens and legal entities
must act honestly, reasonable and fairly while exercising their rights .
This obligation cannot be excluded or limited by a contract. Actions of
citizens and legal entities aimed at doing harm to another person, abuse of
rights in any other form, and at exercising of right at variance with its
purpose are inadmissible. In case of failure to follow specified requirements
the court has the right to reject a person in applicable law protection.
an issue of public order clause application the court inevitably faces the
problem of balancing two interests. Thus, on the one hand, state court should
not execute arbitration decision, acknowledgement and execution of which
contradict principles that form public order of the country of decision
execution. On the other hand, state court should not tolerate such standard of
public order application which would violate the principle of conclusiveness of
foreign arbitration decision. Considering the possibility of broad
interpretation of this judicial review, one of the conditions of legal
distinctness achievement in law enforcement practice is the awareness of both
public order clause notion and content and appropriateness of its use by
should note that in both Kazakhstan and foreign science public order clause is
a universally recognized principle of international private law. Besides, not a
single country, where application of public order clause is stipulated by the
legislation, gives a detailed description of public order. Thus, they either
use the term “public order” providing no explanation or use some general
guidelines referring to basic law principles, basics of law and order
(references to certain national laws). All mentioned above leads us to a
conclusion that public order clause meaning has not yet been clearly defined.
In connection with that the basic elements of public order are described in
literature with consideration to national court practice.
the issue of features and application of applicable imperative norms to foreign
elements in court practice, it is necessary to mention that Constitution norms,
its corresponding laws, other legal acts, international contractual and other
obligations of the Republic, and legal resolutions of Constitutional Court and
Supreme Courts of the Republic of Kazakhstan are the active laws of the
Republic of Kazakhstan.
has the highest legal effect and direct impact on the entire territory of the
republic. International agreements ratified by the Republic have a priority
over its laws and are applied directly, except for the cases when an
international agreement specifies that its application requires adoption of a
1091 of CC states that rules of section 7 of CC “International private law”
does not involve imperative norms of the legislation of the Republic of
Kazakhstan, which due to reference to them in the law or due to their great
importance for ensuring rights and protected by the law interests of the
subjects of civil circulation, regulate certain relationships regardless of
means that even if conflict of CC laws requires foreign law application, but
this law contradicts imperative norms of CC, foreign law will not be applied.
Priority of imperative norms over foreign law norms, which are to be applied by
the virtue of conflict of laws, is vested in the legislation of a number of
European countries (art. 7 of Rome Convention on the law applicable to
contractual obligations of 1980, art. 18 of the Private International Law of
Switzerland, art. 34 of the Private International Law of FRG of 1986). Such
imperative norms include, in particular, consumer protection norms, currency
law rules, see carrier responsibility limits norms, antitrust law norms, export
and import restrictions, norms, limiting freedom of contracts for the behalf of
its weaker party protection, some equity rules, norms, ensuring implementation
of the state policy in the sphere of insurance and banking activity.
accordance with clause 1 article 1091 of CC and due to its special relevance
for the interests of citizens and legal entities of the Republic of Kazakhstan
or due to a reference made by the court, such imperative norms as basics of
civil law (art. 2 of CC), exercise of civil rights (art. 8 of CC), invalidity
of a bargain which is deliberately offensive to basics of norms and rules or
moral (cl. 1 art. 158 of CC), freedom of contracts (art. 380 of CC) can be
such imperative norms are applied in special exclusive cases, which can take
place during a certain court trial. This is a kind of a safety valve, which is
activated when application of some foreign norms application would affect the
basics of the legislation of the Republic of Kazakhstan. Conduct of cases with
foreign interest is regulated by section 5 chapter 45 articles 413-426 of CPC
problem of defining the notion of “imperative norms characteristics” is studied
in the theory of civil law and procedure, the notion of “imperativeness”
implies exact determination of rights and obligations of the subjects of law,
i.e. imperativeness, in the first place, depends on the subject of disputable
legal relationships, which means one of the parties should be a foreigner, if
we speak about citizens, or a foreign enterprise, in we speak about legal
Council of the Republic of Kazakhstan explained that foreign citizens also
cannot exercise other rights and freedoms, which they cannot use in accordance
with the requirements of the Constitution, laws and other normative and
regulatory acts, and also in cases, stipulated by international agreements of
the Republic of Kazakhstan.
accordance with art. 3 of the Law “On legal position of foreign citizens in the
Republic of Kazakhstan” foreign citizens have all the rights and freedoms, and
perform the duties, fixed in the Constitution, Law, and international
agreements of the Republic of Kazakhstan, except for the cases stipulated by
laws and international agreements of the Republic of Kazakhstan. In accordance
with art. 6 of the Law, foreign citizens can be involved in labor activity in
the Republic of Kazakhstan on the basis and in order stated in the legislation
and international agreements of the Republic of Kazakhstan.
citizens cannot be appointed at certain positions and be involved in certain
labor activities if in accordance with the legislation of the Republic of
Kazakhstan appointment at these positions and involvement in such activity are
connected with citizenship of the Republic of Kazakhstan.
accordance with the reciprocity principle the state applies foreign right or
determines the amount of rights of foreign subjects depending on whether the
other country has established the same principle. This point of view, called
public, gives a general description of a notion of reciprocity, but concerning
arbitration decisions recognition it requires certain concretization.
Kazakhstan, reciprocity means that arbitration decision, taken by a certain
country, will be recognized and executed only in case if arbitration decision,
which is taken in Kazakhstan and is considered as Kazakhstani, will be recognized
and executed in this certain country. In other words, execution of Kazakhstan
arbitration decisions in other countries is a necessary condition and basis for
execution of decisions of this certain country in Kazakhstan.
can say that reciprocity is a certain type of “consent” of the executing
country for recognition and execution. Such consent can be realized through
three channels: bilateral international agreement; multilateral international
agreement; on the basis of national legislation.
425 of CPC RK and part 2 clause 1 article 32 of the Law of the Republic of
Kazakhstan “On international commercial arbitration” as of December 28, 2004
presupposes that “arbitration decision taken by a foreign country is recognize
by a competent court and is executed by execution agencies on a reciprocity
basis”. The list of motives for rejection to recognize and execute arbitration
decision, stipulated for by the Law of the Republic of Kazakhstan, coincides
with the list accepted by New York Convention.
Kazakhstan recognizes the arbitration decisions taken by the countries –
members of the Convention. However, execution of these decisions causes certain
problems. International agreements ratified by the Republic of Kazakhstan, have
a priority over Criminal Procedure Code of the Republic of Kazakhstan and are
applied directly. (cl. 3 art. 3 of CPC RK). Having joined international
conventions and agreements, having signed bilateral intergovernmental
agreements, our state got obliged to recognize the effect of arbitration
agreements and clauses in dispute settlement order contracts, and also
recognize and execute decisions of foreign, international and national
of the arbitration decisions requires appropriate instruction of a competent
body of the country, where execution is solicited, that is the instruction of
Kazakhstan as the variety of arbitration decision execution there exist
exequatur – appealing to court with a request of recognition and execution of
the decision. Herein after consideration of arbitration decision regularity
(absence of rejection motives) the court issues a court order – an execution
order by the request of the interested party.
in accordance with the regulation of article III of New York Convention
exequatur is realized in accordance with the procedural norms of the territory,
where recognition and execution of these decisions are requested. Herein, the
regulation of article 425-1 of CPC RK states that the claimant has a right to
appeal to the court with the request of local action concerning arbitration
decision enforcement .
means in case of enforcement of the decision taken, say, in the USA as respects
to the Kazakhstan resident respondent, in accordance with article 425-1 of CPC
RK, it is necessary to go to the court located in the USA.
in accordance with article I of New York Convention this decision will be
considered by the USA courts as local, not foreign. Besides, the USA court can
reject the enforcement of such decision since it should be executed on the
territory of the Republic of Kazakhstan. In accordance with this rule,
stipulated for by article 425-1 of CPC RK, we can conclude that in occurs only
as respects to arbitrations located on the territory of the Republic of
we believe that the regulation of article 425-1 of CPC RK amounts to nothing
the declared principle of recognition and execution of foreign arbitration
decisions in the Republic of Kazakhstan.
recognizes arbitration decisions, taken by the other Convention member state.
Consequently in accordance with the Law on Arbitration Tribunals only
procedural violations and contradiction to the public order can become motives
for rejection of enforcement.
of article 32 of the Law of the Republic of Kazakhstan “On international
commercial arbitration” states that arbitration decision is acknowledged
obligatory when a written request is sent to the competent court in accordance
with Civil Procedural legislation of the Republic of Kazakhstan .
this arise certain difficulties in determining the competent court which should
be addressed to have the local arbitration decision executed. In connection
with this we can ask a question: which court can be considered competent when
there are several state courts on the territory of a dispute consideration?
issues have not been yet solved completely by Kazakhstan legislation. We
believe that the issues are of considerable importance for the claimant and
should be solved by the arbitration that has taken a decision, and not by the
local action court, since, if not, the arbitration decision will be changes,
which is inadmissible. These and other issues should be solved by making
amendments and additions to the legislation, which would regulate the processes
of arbitration decisions recognition and execution.
decisions execution is regulated not only by the national legislation norms,
but also by regulations of international agreements signed by Kazakhstan.
Appropriate and exact execution involves considering requirements of not only
norms of our legislation, but also norms of international agreements – both
multilateral (conventions in the first place) and bilateral, stipulating
reciprocal civil, family and criminal assistance by member countries.
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Table of contents: The Kazakh-American Free University Academic Journal №7 - 2015