REUTERS | Sergio Moraes

New arbitration centres in Russia and Kazakhstan: starting from a good base, but more work ahead

Earlier this year, the Arbitration Centre at the Institute of Modern Arbitration in Russia (ACIMA) announced that it had obtained a government licence to operate as a “permanent arbitral institution” under the new Russian arbitration legislation. The ACIMA is the new kid on the block, having been established only a little over a year ago, in August 2016. Meanwhile, in Kazakhstan, work appears to continue apace on the creation of the Astana International Financial Centre (AIFC), which will host the new Astana International Arbitration Centre (AIAC) from January 2018. The AIFC is being modelled on the Dubai International Financial Centre (DIFC), which signed a consultancy agreement with Kazakhstan to assist in the establishment of the AIFC.

These developments, on their face, confirm the trend towards regionalisation in international arbitration that has been in evidence for a number of years. However, as the closure of the LCIA India demonstrates, regionalisation has its limits as established “universalist” institutions, such as the International Chamber of Commerce (ICC) and the London Court of International Arbitration (LCIA) (London), continue to attract parties from around the world. In this context, what are the prospects for the new arbitration centres in the CIS region? To answer that question it is worth taking a look at the broader regional context.

Russian arbitration law reform

In the past few years, both Russia and Kazakhstan significantly revised their respective arbitration laws. In Russia, the wide-ranging reform to arbitration legislation sought to tackle, amongst other things, the domestic problem of so-called “pocket arbitrations”. In that context, of particular note was the introduction of a new licencing regime for “permanent arbitral institutions”, which, under the new legislation, requires a licence from the government to administer arbitrations in Russia. The way in which the new licencing regime has been implemented has drastically reduced the number of arbitral institutions in Russia from around 400 to only four at present, the ACIMA being one of them. Notably, no foreign arbitral institution has applied to obtain a licence, with the result that awards made under their auspices in Russia will be deemed to be made in an ad hoc arbitration, and therefore subject to less advantageous treatment under the new laws.

Kazakhstan arbitration law reform

In Kazakhstan, the new arbitration legislation introduced in 2016 included restrictions on state bodies, state enterprises and majority state-owned companies entering into arbitration agreements. It also provided for the mandatory application of Kazakh law in arbitrations involving those entities, and a prohibition on arbitration between such entities. In addition, the law provided for a right to resile from an arbitration agreement prior to a dispute arising, though that provision has since been repealed. There appears to have been some confusion as to the extent to which the law applies to arbitrations seated outside Kazakhstan, although it seems that the legislature is taking steps towards clarifying (and revising) the new arbitration laws, including revisiting the requirement on the application of Kazakh law to arbitrations involving state-related entities.

AIFC arbitration law

It is unclear to what extent Kazakh arbitration law will apply to the AIAC. However, if the AIFC follows the DIFC model (as is Kazakhstan’s stated intention), it is likely to be subject to an arbitration regime based on the UNCITRAL Model Law and English common law. What is known at present is that according to Article 4(4) of the AIFC law, the rules of ratified international treaties will prevail over those set out in AIFC law. Presumably, this provision should catch the New York Convention. Recognition and enforcement of arbitral awards issued in the AIFC, according to Article 14 of the AIFC law, would be carried out in accordance with the legislation of Kazakhstan. It is also unclear at this stage whether recourse to the AIAC arbitration will be limited to parties registered in the AIFC (similar to the position in the DIFC prior to 2014) or open to any party irrespective of its place of incorporation.

Starting from a favourable base

The new legislative environment in Russia and Kazakhstan appears to favour the ACIMA and the AIAC respectively. In Russia, the ACIMA stands to benefit from the restrictive implementation of the licencing regime as the number of licenced permanent arbitration institutions is likely to stay low for the foreseeable future. In Kazakhstan, the arbitration regime at the AIFC will likely compare favourably with the general arbitration regime. In particular, it is likely that the express recognition of English common law principles in the AIFC law will prove popular with potential arbitration users. In addition, the AIAC will likely benefit from the cross-selling of its services to the users of the AIFC, or as a “package” with other proposed advantages – such as a preferential tax regime for its members and visa-free entry for up to 30 days for citizens of OECD countries (the UAE, Malaysia, Singapore and Monaco)(Article 7(5) of the AIFC law).

Still work ahead?

However, will these advantages prove sufficient to draw potential users away from the global institutions, such as the ICC and the LCIA, and towards these regional centres? In the case of the AIAC, it seems that it has good prospects provided that it can emulate the best elements of the DIFC model and attract internationally recognised judges for its court system. For the ACIMA, the challenge will be to demonstrate its attractiveness beyond being one of only a few available choices. The adoption of a modern set of rules and attracting high calibre arbitrators on its recommended list are clearly steps in the right direction. The ACIAM also seeks to present itself as a more-cost effective institution, with the option of expedited arbitration and the ability to agree to hourly rates for proceedings rather than using an ad valorem system. The ultimate test, however, will be users’ experience of the ACIAM’s and AIAC’s practical handling of cases, as and when they start coming in.

King & Spalding Grigori Lazarev Emma Walker

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: