The development of International Commercial Arbitration in Russia and Kazakhstan Introduction



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The development of International Commercial Arbitration in Russia and Kazakhstan

Introduction:

International Commercial Arbitration (ICA) is an establishment that is used to resolve the conflict between different parties from different countries with regard to international commercial agreements. It is an establishment that is aimed at resolving disputes between different parties according to the set procedures of the international commercial arbitration court. The arbitration is formed by the parties that have agreed on the common guidelines as well as the rules that they must adopt and follow if disputes arise between them to solve the disputes of the members. The ICA is formed to cater for the different parties without caring their varying backgrounds and formalities of their legal procedures in their respective countries.

Whenever there is a conflict between the parties, it is always good to use courts because they are unbiased and use of regular lawyers is allowed therefore reducing the cost of hiring a specialised lawyer. Courts on the other hand use the local language and familiar procedures to the conflicting parties. When this is good for one party, there might be a conflict if the involved parties are from different countries and they use different languages and also different procedures because one might be enjoying local privileges while the other is in foreign country1.

International commercial arbitration is meant for reducing inequalities. The reason for the arbitration is to reduce those inequalities and have both parties enjoy equal representation. Arbitration can be conducted in a third party country. There is a high competition between different arbitration organizations trying to offer their services worldwide2.

In this dissertation, the roles and benefits as well as the procedures that are followed by international commercial arbitrators will be addressed. This will be done through the assessing effectiveness of the ICA that has been formed in order to draw a conclusion on whether they are effective. This raises a concern on the effectiveness of the ICA and the research will work towards answering this question. The dissertation will also explain why there is difference in the way different arbitration from different countries have differences in their procedures and laws that govern them. In the recent times, there have been concerns on why arbitrations follow different procedures in Russia and in Kazakhstan. The research will therefore look unto this issue and reasons behind these differences.

Objectives of the study

The main objectives will be to answer the research question as well as achieving the most perfect answers to the research question and may include:



  • Understanding the basic functionality of the ICA

  • Evaluating the process used by the ICA in handling international disputes

  • To evaluate the effectiveness of the ICA in handling international matter

Background of the ICA

Introduction of the chapter

In the literature review, the study will review the studies that were done before on the subject. This will aid in understanding the procedures followed by the ICA and also how effective it has been. The research will also draw its literature from enquiring from different documented cases and individuals who have experience on the issue, example from the companies that had ever had disputes.

The topic is worth studying in order to understand how ICA works in different countries and its capabilities to work in different countries, i.e., internationally.

History of international arbitration

International arbitration was started in 1868 in the presidential campaign when the republican in the US nominated the General Grant for president and Schuyler Colfax for vice-President and on the other hand, the Democrats nominated Horatio Seymour for president and General Frank P. Blair. During this time, there was a misunderstanding between the US and England that could have brought in the war between the two counties. The issue was resolved through international arbitration which was the first in the world and the origin of other arbitrations globally. The board was formed by various countries and they met in Geneva and England was found to be in the wrong because it had allowed the confederate cruisers to cruise despite of the efforts and protest by the United States. England was found to be on the wrong side and was ordered to pay US a total amount of $15,700,000 and they paid3.

The active commercial arbitration is always a progressive work with many team players coming into business every day. The negotiations about International Commercial Arbitration are going on in the United Nation Commission on International Trade Law (UNCITRAL) that is aimed at achieving new development. The developments that are achieved are implemented by different countries at different times, some may be sooner and others may take longer.

Arbitrations were being conducted by the early societies for the settlements of different disputes. The disputes that were being settled were not necessarily commercial disputes but were solving other forms of disputes in the society that included family disputes, labour disputes and sometimes commercial disputes between different parties. In the early days, disputes were merely domestic and all arbitrations that were formed were merely to solve the domestic disputes and they were formed to cater for a specific society. This brought about the difference in arbitrations that were formed in Africa, Europe, Asia and America. The religion in specific regions also played part in the formation of arbitrations because they had to follow specific religions in any given area. In Christian world, Islamic favouring arbitrations could not be formed4.

In some countries like in the Latin America and in England, arbitration was regarded as an extension of the state system litigation. In that regard, the processes that were being followed by the arbitration was exactly as the one that was being followed by litigation in courts. Even where the act of law was not necessary, and where courts were not involved, the litigation procedures were being followed because the lawyers had already developed the habits of following the courts procedures.

Another compelling influence on the formation of the arbitration is that commercial sphere was formed in countries with state trading systems. In these countries, arbitration was seen as a form of administration or adjudication that was appointed and worked towards the resolving of the issues. These kinds of arbitration were influenced by the politics and influenced the decisions that would be arrived at by these arbitrations. In this regard, this was not qualified as an international commercial arbitration because it used the local rules and it did not matter whether one of the parties was a foreigner because all favored the local party whether it was in the wrong or right.

In United Kingdom, there was more arbitration than any other country in the world. Though there were often conflicts as the involved parties were often insurance companies, international trades and shipping companies as well. The decisions of the arbitration did not consider the origin of the company but they all followed the domestic rules in both the arbitration and in the decision made as well5.

International Commercial Arbitration in Kazakhstan

Kazakhstani International Arbitrage (KIA) is a permanent arbitration institution in the Republic of Kazakhstan which deals with disputes under the legislation and the norms of the disputed parties. The application of the dispute resolution merely depends on the will of the concerned parties. The KIA rule is first to take into consideration the interest of the involved parties so that it can bring in the best dispute resolution in accordance with the international standards6.

Compared to other forms of jurisdiction and other forms of arbitral tribunals, Kazakhstani International Arbitrage has more advantages that include:


  • A list of international arbitrators which includes representatives of 21 states

  • A strict observance of the rules that are applicable during the arbitral proceedings to avoid biased conclusions

  • A faster and more effective system compared to other forms of jurisdiction and arbitral tribunals

  • Real enforceability of awards of the Kazakhstani international Arbitrage compared to litigation courts7

The Kazakhstani International Arbitrage has already established a partnership with different leading arbitrations institutions in different countries. Among the institutions that the KIA has established relation include:

  • Chinese International Economic and trade Arbitration Commission (CIETAC)

  • Japanese Commercial Arbitration Association (JCAA)

  • International Commercial Arbitration Court of the Russian Chamber of Commerce and Industry (ICACRCCI)

  • Korean Commercial Arbitration Board (KCAB) and

  • International Court of Arbitration (ICC)

The procedures of KIA

In accordance with the Rules of the Arbitration of Kazakhstani International Arbitrage (KIA), the disputes are resolve by either one or more arbitrators. The number of the arbitrators is determined by the parties, if the parties decide to have three arbitrators, which would be the odd number. If the parties have agreed that the dispute will not be solved by a single arbitrator, the tribunal of three arbitrators is formed to solve the dispute. The parties can select arbitrators from the list of KIA arbitrators or they can also propose they own arbitrators as long as they are independent and non-participant8.



The arbitrators can be from any country provided they are signatories and they are free to agree on;

  • The place where arbitration will take place

  • They are also free to choose the language that would be used during the proceedings

  • The rules and the laws that would be applied to the proceedings

After organizing the panel, the award shall be rendered within two months. As follows

  1. The Plaintiff communicates to KIA the claims as well as paying for the arbitrator fees and also appoints the arbitrator and their substitutes. The Statement of claims contains the date the statement was filled, the names of the concerned parties, the residence and addresses, their claims and justification of competence of KIA, the names of the arbitrators and substitutes and the amount in dispute, the list of all documents that would be attached to the claim. The statement must be in five copies if to be considered by three arbitrators or three copies if it’s to be considered by one arbitrator. When filling the statement the statement of claims, the pontiff is needed to pay the registration fee, 70,000 tenge which would also be included in the arbitration fee. The pontiff will be required to pay the fee in order to be granted by the KIA rules of arbitration. In this regard, the KIA chairman can allow the payments to be done in instalments but the first payment must not be less than 50% of the total arbitration fee.

  2. KIA will on the other hand check the compliance of the provided claim to be certain it really complies with the rules of Arbitration. After KIA is convinced that the claim complies with the Arbitration rules, it shall initiate the proceedings of the arbitration and where they will take place. The secretariat will send or hand over the defendant statement copies of claims and other associated copies in order to justify the claims and offer the defendant to offer defence statement and justification of the claims within the given specific period.

  3. The defendant communicates the defence statements as they appoint the arbitrators as well as assistance. On the other hand, the Executive Secretary of KIA shall however propose a defendant within duration of 15 days after the receiving the defendant copies of statement or any documents that support any evidence. Failure to represent valid document, defence may not be considered and recognised by the plaintiff. Within a period of 30 days from the day of receiving the copy of statement, the defendant has to advise on the names of the arbitrators selected and substitute so as they may be appointed by the KIA chairman.

  4. When the presiding arbitrators and substitute presiding arbitrators are selected and appointed by KIA, they may select chairman and substitute chairman from the list of the names of the arbitrators to chair their process. If the arbitrators’ panel is unable to select the chairman within 10 days, the chairman of KIA will appoint a substitute arbitrator to chair the panel.

  5. The arbitrators will prepare for the hearing through asking the concerned parties for all evidence check the state of arbitrators and demand written explanations and any other documents to support the case before it starts. If there are other additional measures that are required to be implemented, the date of the hearing will be set when all the requirements are met. The chairman of the arbitrators’ panel will on the other hand advise the KIA chairman on the state of preparation so as he can advise the executive secretary to call the concern parties to the hearing on the specified date. The parties will be informed on the set period of the oral hearing and place through summons and will have a period of not less than 30 days so as they will have enough time to prepare though this time can be reduced if both parties agree on it.

  6. The oral hearing shall be held in order to give the disputing parties to state their stands and also present any evidence they may have to support their stand. The hearing is always private and any one not authorised or participating in the hearing may not be allowed in unless the panel of arbitrators approves it. The parties may deal with KIA through their appointed and authorised representatives including foreign organizations and citizens. Failure of one party to attend to session may not in any way hinder the hearing and proceedings of case, especially when the reason for not attending is recognised as unreasonable by KIA. The concerned parties may decide not to have an oral hearing if the tabled document has enough information to support the case though if there is no enough information the panel of arbitrators may decide to have the oral hearing.

  7. The parties shall present the evidence that are required for the consideration of the case. The parties shall give evidences to support their stand and claims. The panel of arbitrators have all the right to ask for additional materials if they feel the tabled evidence is not enough. The Panel shall also have an authority to call in third parties to table evidence as well as witnesses. The witness will bring a certified or a copy of certified copy of the original but the panel will have a right to have the document translated to another language if it will be considered an interest of the arbitrate. The examination of the evidence will be done by the panel of arbitrators of which it can be done by one arbitrator who is entrusted by the panel to perform the duty. Failure of one party to present the evidence shall not hinder the panel from making and determine the award to be given according to the available evidence.

  8. The arbitration shall be closed through awarding an award. The award shall be awarded through a majority of votes of the panel of arbitrators. If the award cannot be given trough the majority of votes, the Chairman of the Panel shall make the ruling. The award shall be made through a written form and signed by the arbitrators. If one or arbitrators is not satisfied with the award, he shall do so through writing and his opinion shall be subjoined to the award. The award shall be executed within the specified period but if there is no specified period, the award shall be awarded immediately.

  9. The parties may appeal for the KIA award through a court of competent jurisdiction. This will be done through the compliance of the legislature procedures of the Republic of Kazakhstan. The appeal may be done by only parties that feel the award given does not comply with their interest and can be done through production of evidence submitted and if:

    1. The arbitration agreement is valid as given by the laws of the Republic of Kazakhstan or they follow the agreements to which the parties agreed to follow.

    2. If the award has been awarded regarding the dispute that is not stipulated in the arbitration agreement, or through the terms and conditions that had not been agreed on or if the award is beyond the competence of the KIA. If the resolution that is being covered by the panel of arbitrators is different from dispute and are not covered by the KIA award will subject to the nullification of the award.

    3. If the panel of the arbitrators or the arbitration procedure did not meet the agreement of the concerned parties and the rules of the arbitrage.

    4. If the party was not informed about the place and time of arbitration and also was not informed about the process and could not present the reasons to the panel due to some reasons

    5. If the award that has been awarded by the arbitration contradicts the legality, or if the award awarded by the arbitrators contradicts the policies of the Republic of Kazakhstan

    6. If the subject in dispute could not be a subject-matter of the arbitration procedures.

  10. If the award cannot be awarded voluntarily within a specified period of time, it shall be enforced within and ion accordance with the legislation of the republic of Kazakhstan. The KIA shall enforce the award in accordance with the rules of court action that is valid within the period of enforcement and competent jurisdiction.



The procedures of KIA, retrieved from www.arbitrage.kz/149


International Commercial Arbitration in Russia

In Russia, International commercial arbitration has existed for a long time and recognized for settling commercial disputes. In the Soviet Union, contracts between local and foreign parties are usually concluded according to the international arbitration statutes and they specify that any arbitration has to be conducted according to the rules of the Arbitration Institute of the Stockholm Chamber of Commerce (AISCC). The enforcement of the administrative matter and the payment of the arbitral awards had already taken shape and was seen as routing of the arbitration.

With the collapse of the Soviet Union, there has been increased growth of foreign investment in the country has contributed to the rise of disputes between the foreign investors and Russian investors. There has been low confidence and trust in the Russian courts due to favouring local firms and this has brought the need for International arbitration to solve the disputes because they are seen as neutral as well as cost effective in settling of disputes.

Though Russia for a long time have chosen to conduct its arbitration through the Stockholm Chamber of Commerce, there is a growing need and practice of referring its disputes to other international arbitration bodies. Most of the international commercial disputes that involve the local and the international bodies are often referred to the International Arbitration Court that is under the Russian chamber of commerce and industry in Moscow. It the absence of agreement to solve the disputes and commercial conflicts through commercial arbitration, the Russian commercial courts (arbitraz) have jurisdiction that involves the disputes of a foreign body and a local bodies in the country.

The Russian law with regard to the International Commercial Arbitration laws of 1993 is solely based on the ICA and is applicable to all disputes that arise under the international commercial disputes that have taken place within the Russian Federation. This concerns the parties that either have a business in another country or is a foreign company investing in Russia.

The international arbitration awards are acceptable in Russia according to 1958 New York Convention. The recognition and enforcement of arbitral awards in Russia that involves the foreign parties is subjected to the exceptions specified in the New York Convention. The awarding of the arbitral award can be barred or restricted from being given if the time given has already expired9.



Advantages of solving disputes via ICAC in Russia

With current development in the Russian economy, there has been a rise of many investors and international companies investing or looking forward to invest in Russia. Where there are different companies with different cultural backgrounds and difference in interests working together, there are high probabilities that conflicts must arise. There are different ways of solving disputes but in commercial way, arbitrage is the best way since its neutral and would not follow the specific rules of the State.

There are several advantages associated with this that include;


  1. There so many arbitrators who are qualified and there is probability of getting an arbitrator whose area of specificity is the area in dispute.

  2. The decision and the agreement that would be enforced by the ICAC will be applicable in both Russia and abroad in regard to the New York Convention of 1958. An ICAC clause should be included if;

    • If the disputing parties are registered in different jurisdiction as they may prefer to have an international arbitral court than considering a local court because there might rise language barriers and legal procedures that may not favour the foreign party and the influence of the country will be limited

    • The contracts will be executed in countries with different jurisdictions

    • If the parties are registered in one country, one might be stronger than the other thus influencing the decision. The stronger party may either be a state owned party of an international company and a sole proprietor company.

Though the advantages of solving the disputes through ICAC supersedes the advantages of solving the disputes through State Arbitration courts, there are some advantages that may be got through the use of the SAC and may include;

  • The use of the arbitration courts uses shorter period and are cheaper compared to ICAC and they can also involve the legal procedure to challenge the process and also there is a probability of using an appeal if the decision made is not satisfactory.

  • The Russian arbitration procedures are becoming more famous and recognised in international standards though not all specialists approve to the Arbitration Procedure Code (APC) though the progress is evidence of the arbitral evidence.

  • The number of cases that are handled by the Russian Arbitration courts are climbing and the number of cases are still climbing and the state courts are working hard to maintain high standards of performance and accessibility to justice.

Overview of the Arbitration Rules and Regulations in Kazakhstan and Russia

a) Bodies of Jurisdiction

Both countries are signatories of Geneva protocol and yet they have local arbitration centers in their respective countries to aid in solving domestic commercial disputes as well as handling arbitration activities of other member states. They are also signatories and member parties to the New York Convention, Washington Convention.


  1. The arbitration Rules

The arbitration rules lays down the procedure of application for arbitration, the qualification of arbiters, appointment of arbiters, the roles of arbiters and sets out the procedure to be followed by each party from the onset through to submission of the award. There are different chambers of commerce in both countries which administer arbitration. They administer arbitration according to the Arbitration Rules and Arbitration Law. They also have their own rules which they also apply in administering arbitrations.

  1. Supervision of Arbitrators and Awards

In Russia and kazakhstani, arbitrators can either be males or females but must be citizens or expatriates. Where there is more than one arbitrator, the final judge in the arbitral tribunal must have knowledge of the concerned arbitration law, be conversant with commercial regulations and know the customs and traditions that apply in these countries. The arbitrator should be a neutral person with no interest in the dispute. Any person who has committed a crime (such as murder, adultery, drunkenness or theft and robbery or anything that has been prohibited by the law) or has been dismissed from public office is prohibited from becoming an arbitrator. The Board of Grievances supervises the arbitrators. If any matter of concern between both parties and the arbitrator arises during arbitration, it is dealt with by the Board of Grievances court. There is only a limited room for the review of the award of the arbitration.

  1. Setting up of an Arbitral Tribunal

The arbitral process starts when a party submits to the court originally competent to decide the dispute an arbitration instrument. This should include the appointment of the arbitrator(s), the consent of the appointed arbiters to hear the dispute and give all the necessary details pertaining to the dispute.

The court then approves or rejects the application within a period of 15 days. If a time limit is specified in the arbitration document, then an arbitration award must be made within this period according to the Arbitration Rules. If no such time is specified, then an award has to be made within 90 days starting from the day the arbitration document is approved. The number of times that the arbitration process may be adjourned is limited by the by the Arbitration Rules in order to enable the process get completed in time. A party may request for adjournment in order to furnish the arbitrators with documents which may be of importance as evidence during the process of arbitration.



  1. Failure to Participate

The arbitrator is free to decide on the dispute in case one party fails to show up during the first hearing. This is however not possible unless the arbitrator is satisfied with the way in which both parties have filled their statements of claim, defenses, and documentation and that the absent party was properly served with notice of the hearing. If this is done, the award made is considered to have been made in the presence of both parties. If the arbitrating tribunal establishes that notice was not properly served to the defaulting party, the process is adjourned until the notice is properly served. If however the absent party attends before the end of arbitration, then he or she is given the chance to present his case and award will be made only after he has had a chance to present his case. Any award made in the absence of one party is considered null and void if it is established that the defaulting party was not properly served with notice of the hearing.

  1. Interim Measures

The parties to arbitration may apply to the court originally competent to decide on the dispute for certain types of interim actions like restraining a party from leaving the country or attaching assets.

  1. Challenging the Appointment of an Arbitrator

The process of challenging the appointment of an arbitrator is the same as that of challenging a judge. The two disputing parties have the right to remove an arbitrator from the tribunal by mutual consent. The appointment of an arbiter can be challenged on the basis that the arbiter has an interest in the subject of the dispute, or that he is a part of the conflicting parties, or has been dismissed from a public office or has in the past committed a crime.

  1. Appealing against the Arbitrator’s Decision

Either party can appeal to the court originally competent to hear the dispute within 15 days of the award. The court will then either accept it and issue a judgment or dismiss it and order the execution of the award. The court originally competent to decode on the dispute may declare the award final and that there is nothing to prevent its execution if one party makes this request. The arbitral tribunal is also free to correct any typographic or arithmetic errors in the award if one of the arbitrators or one of the disputing parties requests so.

  1. Procedure of Enforcing an Arbitration

In Kazakhstan and Russia, awards made in arbitration are enforced by the Board of Grievances, subject to article 5 of the New York convention. This article provides that a foreign arbitration can fail to be recognized if:

  1. the arbitration agreement is invalid in the country in which the award is made,

  2. the arbitrator acted beyond his powers,

  3. the composition of the arbitral tribunal was not right,

  4. the decision of the arbitral tribunal was not final in the country in which it was made,

  5. it is prohibited to decide the dispute by arbitration according to Kazakhstan law and vise versa in Russian law,

  6. the award contravenes public policy in both countries,

Cost of Arbitration

Normally the disputing parties and the arbitrators agree on the fees to be paid to the arbitrators, otherwise the court originally competent to decide on the dispute makes the decision on the amount and allocation of the fees. Such a decision can be challenged within 8 days of notification.



  1. Evidence

Parties to arbitration may introduce both oral and documentary evidence in the course of arbitration as provided by article 31 of the Arbitration Regulations. The arbitrators may order a party to produce documentary evidence and the party so required may ask for adjournment in order to furnish the arbitrators with such documents. The arbitrators have mandate to conduct on-site inspections and carry out independent investigations. They are also empowered to obtain the help of an expert to give technical details. The arbitrators will then decide on which party will pay for the fees of the expert10.

Enforcing Arbitration awards

The ability to resolve the disputes in the most neutral way and the enforcement of the bidding decisions is taken as the main advantage of international arbitration in resolving disputes compared to domestic courts. On the other hand, there is a very solid legal support for it. An international award that originates from a country that is a member to the New York Convention of 1958 can be passed to another country which is a signatory because they use the same statute and they would be delivered as if they were given by the domestic courts. For example, if the Russian firm and Kazakhstani firm decide to resolve their disputes in the US, and all three countries must be signatories of the New York Convention, this means that, even if the arbitration has taken place in US, the decision of the award that would be given will be as if it has been awarded in the home country courts.

The two disputing parties can decide to solve their disputes in a third country which can be neutral because its not involved in the dispute and on the other hand, it can give a better and a fair decision and knowing that an award can be given in any country provided is a signatory of the New York Convention. For example, a country like Qatar cannot offer arbitration decisions because it is not a signatory of the New York Convention. This gives an international arbitration award a greater power to make decisions compared to domestic courts decisions.

If one of the disputing parties decides to move to court and both parties are signatories of the New York Convention, the court under the Chapter 2 of the federal Arbitration Act, any court in the member state is required to stay the proceedings. The statutory requires the court to stay the proceedings that fall under the ambit of the New York Convention11.



a) Regional Institutions

Russian and Kazakhstan are members of the ICA. This makes them recognized to enforce arbitration services to other member states and they can also seek arbitration services from other member states. This is normally regarded as a Reciprocal Enforcement of Judgments Agreement. According to Article 3 of the agreement, arbitral awards issued in one member state are enforceable in another member state. Still in this article, the courts are barred from interfering or engaging in any subject or an affair of the dispute being handled by the ICA. The article also gives an exception rule giving refusal to enforce the award under the following cases:



  1. If the dispute cannot be resolved by arbitration according to the laws of the state where enforcement is sought.

  2. If the agreement of arbitration from which the award is given is not valid

  3. If the disputing parties were not properly notified,

  4. In case the award includes anything that contradicts public policy or principals of morality of the country where enforcement is sought, and

  5. If the decision of the arbitrator was not final in the country where the award is issued.

  6. If the arbitrators acted in excess of their powers in issuing the award.

The two countries, Kazakhstan and Russia are members of the ICA New York Convention. There are several domestic arbitration centers in both countries and there are plans to make them more effective in future. Currently, regional institutions are responsible for enforcing all foreign jurisdictions, including arbitral awards.

b) New York Convention

Article 1 of the New York Convention of 1958 provides that an arbitral award awarded in the territory of one state shall be recognized and enforceable in another state. The New York Convention provides that the award will be recognized and enforced in accordance with the contracting state’s law. On the other hand, it states that the awards will be recognized in other non contracting states. Kazakhstan and Russia provide that they would only accept awards that are from contracting states. This was regarded as a Reciprocity Reservation. Article 5 of the New York Convention also states that the party may decline from enforcing an award if the party against whom action is sought can prove that:



  • The parties to the arbitration were not qualified in accordance to the law applicable to them.

  • According to the law governing arbitration the agreement was not valid.

  • Proper notice was not served or the party did not get the chance to present its case.

  • The subject of the dispute falls outside the terms of submission to the arbitration.

  • The arbitral authority was wrongly composed according to the arbitration agreement.

  • The arbitral award has been suspended and is therefore not final according to the arbitrating authority.

In the Act, it is also stated that, the contracting state can voluntary decline to recognize and enforce an award if:

  • The nature of the dispute is not solvable by arbitration according to the laws of the state where enforcement is sought.

  • Recognition or enforcement of the award contravenes public policy in the state where enforcement is sought.

Both countries would decline any award that would be enforced based on the religion or ethnic laws as per Article 512.

c) Washington Rules

The International Center for the Settlement of Investment Disputes (ICSID Convention) or the Washington Convention provides arbitration and conciliation as a means of solving investment disputes between nationals of countries who are signatories to the convention. Kazakhstan and Russia are members of or contracting parties of the Washington Convention. Both countries have endorsed the fact that they may not disclose any information that may in one way or another jeopardize the sovereignty of these countries. Member countries of the ICSID Convention contracted after realizing the need to have international cooperation. Considering the fact that from time to time disputes relating to investments are bound to occur, and that they may be between nationals of a contracting state and another of another contracting state. The international center of arbitration was then set up with its seat in the International Bank of Reconstruction and Development in Washington.

Article 1 of the NYC agreement provides that the arbitration center shall make the conciliation and arbitration of contracting states and nationals of other contracting states in disputes relating to investment13. Article 18 states that the arbitral centers have full international legal powers to contract, to acquire and dispose property and to bring legal action upon a legal entity. Article 28 provides that in order to institute proceedings, a national of a contracting state will submit and application in writing to the Secretary-General of the Center. The Secretary-General shall then inform the other party by sending him/her a copy of the application. The application shall contain information concerning the subject of the dispute, the consent to arbitrate and the identities of the parties. The Secretary-General of the center shall determine the fees payable for the use of the center’s facilities. This shall be in accordance to the rules adopted by the Administrative Council14.

Difference between arbitration and mediation

International commercial arbitration is an important practice in different countries of arbitration. The international arbitration contracts is not what makes the international arbitration different from the domestic arbitration, but rather it’s because it entails different legal practitioners as well as usage of different rules and procedures in achieving their respective goals.

Though most countries offer international arbitrations and it allows it to take place within the country, it is sometimes regarded as internationalized though domestic arbitration should not be confused as the international arbitration exists outside and above the law and jurisdiction of any particular law that is being used in the country. The practice of the international commercial arbitration has no connection with the common national law even though it is taking place within a state territory.

In the international commercial arbitration context, it is worth making a clear differentiation between the arbitration and mediation which play the same role and are easily confused as they are both forms of Alternative Dispute Resolution (ADR). In most countries that are trying to introduce arbitration as a form of nonbinding dispute resolution, there is often misleading that mediation is arbitration. Arbitration looks beyond the parties rights and interests as well as the agreements that will be satisfactory according to the set rules that govern the arbitration. In mediation, the core determinant of the results is the parties’ interests and the local statute that governs such kind of disputes and conflicts15.



Features of international commercial arbitration

The main reason many conflicting parties opt to have their disputes resolved by international commercial arbitration is to avoid uncertainties that could be brought about by litigations and national courts in any given country. In most cases, when the national courts are used, they would rule strictly following the procedures set forth by the country and may work in favour of the local company even if it was on the wrong side.

With many and different variants that exist in most of the industrialized countries, the international commercial arbitration is not tied down to one of the players’ jurisdiction but it is a rather neutral procedure. Unless the concerned parties elect to follow the jurisdiction of the given state or country, their election and their wish do not change the entire process and the interest of the arbitration. International commercial arbitration is mostly regarded as a hybrid of a form of dispute resolution (IBA) International Bar Association as it takes evidence in the International Commercial Arbitration to aid in solving the dispute. These rules set forth by the international commercial arbitration neither follow the common jurisdiction law nor the civil law in their operations. International commercial arbitration follows the hybrid rules that would accommodate the disputed parties so that they can follow any agreed rules16.

A committee that was chaired by David Rivkin to draft rules that would be followed and adopted by the international commercial arbitration has contributed to the widely use of the rules by the common practitioners and expand the use of the arbitration by the international conflicting firms. The use of arbitration has risen due to use of none specific country rules and legal systems and this makes it different from other forms of legal systems17.



The growth of ICA

International commercial arbitration began in Europe. There were some difficulties that needed solutions. One of the most critical difficulty that hindered the working of the arbitration was the validity of the information and the existing disputes and was regarded as compromis. The agreement of arbitrating was only to be used in one event and was not in any way could be used in another dispute. This made it difficult to make rules that would be followed and referred when solving disputes. On the other hand, this did not prohibit the courts from taking jurisdiction on the disputed matters. If one of the disputing parties decided to proceed to courts, there might later be a penalty for breaching the arbitration agreements though this was just an empty remedy that was never exercised.

The difficulties were not because one of the parties was a foreign, but because they were made to cater for the domestic disputes. These difficulties and confusions were eliminated in 1923 Geneva Protocol on Arbitration Clauses that were adopted by the League of Nations and was a success as on the same time many states joined the membership.

The second difficulty that was widely recognized regarded the recognition and the enforcement of the foreign arbitral awards. Barely four years after the adoption of the Protocol on the Arbitral Clauses in 1927, the League of Nations therefore adopted the Geneva Convention so as they could be able to accommodate the foreign Arbitral Awards. All contracting states agreed to enforce the arbitral awards that were made in conformity with the 1923 protocol in another contracting State’s territory. This convention was adopted by many states and was a great success.

There also came a need to have an international arbitration. This brought about the adoption of the 1922; the International Chamber of Commerce (ICC) adopted a new rule on arbitration and in 1923, the first court was formed. The headquarters of the ICC were in Paris, France and still they are and there has never been any suggestion that the ICC was a French arbitral organization. In addition to what was achieved is that the protocol and the convention as well as the creation of the ICC courts of Arbitral was that it was raised a need to have agreements on what was supposed to be followed in order to have a common rule that will take care of all arbitral cases. The other thing was that the International Law Association adopted the Amsterdam Rules in 1938 session18.

The session contained issues that dealt with the arbitral powers, the roles of the chairman and the committee, the procedure to follow when transmitting documents between the parties, the tabling of evidence as well as well as how the judgments will be done. On the other hand, the issue dealt with the issues on the cost of the arbitration, the contents of the awards that would be awarded though the Amsterdam Rules had no any practical effect.

The international institute for the Unification of the Private Law (UNIDROIT) was preparing a draft of the uniform law of the arbitration before the outbreak of the Second World War in1939 in Europe that brought everything to stand still. Before the outbreak of the Second World War, there was steady development in regard to the arbitration and they had a recognized way of solving their disputes in regard to the international commercial issues. On the other hand, the amount of the foreign firms that were in need of the European arbitral services were still low though there was no extension of services beyond the European region19.

Why parties choose International commercial Arbitration

Arbitration allows the disputing parties to choose persons they who they believe are fit and qualified to represent them or judge in their dispute. In most cases, the State judges may not have experience in following arbitral procedures and may not have as much knowledge compared to the lawyers that are presenting these parties in the arbitral courts. Though in most cases, it depends with industry the parties are from, example, in construction arbitration, engineers, architectures and lawyers can act as arbitrators. In some cases, it a mandatory the arbitrator to have an experience in the field he is arbitrating. The issue of selecting the specialized knowledge is only applicable to the states that do not restrict the arbitration laws20.

Arbitrators are chosen for a given case, whether the arbitral tribunal is composed by one or three arbitrals, the tribunal remains with the arbitration from commencement till the conclusion of the process. The continuity of the procedure makes the arbitral to become familiar with the procedure and the case or dispute as well. In the State law, the dispute may be handled by different judges and they may never be familiar with the entire dispute thus giving a questioned conclusion21.

Procedures that are followed in arbitration are flexible and can be adapted to the needs of any given dispute. In the modern arbitration, the procedure to be followed is left to the disputing parties to agree on what procedure they should follow in regard to the arbitral tribunal. Each party must be treated equally and be given equal opportunity to present their version of evidence. Though the flexibility in the International Commercial Arbitration is of some importance, the lawyers and representatives of disputing parties might have different expectations in regard to the procedures to be followed. This will merely depend on the category or industry of the parties, ie, the construction dispute cannot be the same as the domain violation dispute.

In arbitration, there is no an issue of appeal, what the concerned parties loose when using the arbitration is legal security because the errors that are made by the tribunal cannot be corrected, the main benefit is that they reach to the final decision fast than when they could have used the legal system and the cost of the procedure is much less.

The reduction of the costs and faster in achieving the decision has been the reason why arbitration have been preferred though there are arguments on whether arbitration and fast and less expensive compared to litigation. There is not empirical evidence that have been presented to back the issue. The only thing that can be said is the parties can make the process less costly and fast if they want. The longer the time the case takes the costly it would be, these all depends on the wish of the parties as arbitration can expensive than litigation if delayed22.



Arbitration practice

In most cases, there are no specific procedures that are followed when arbitrating. The procedure to be followed in most cases is determined by the backgrounds of the concerned parties, their representatives and the arbitrators as well. On the other hand, the industry of the parties also determines the procedures to be followed in order to bring in a perfect solution to any given dispute. Over the time, there develops different ways of handling such disputes and therefore a procedure is developed at long last that on the other hand gives a way to follow in order to a get a solution to any dispute regardless of participants. On the other hand, the domestic arbitrations are influenced by the local courts and they follow court procedures to solve a dispute. In the International Commercial Arbitration, the arbitration is not within an industry or specialization of the industry, it can be difficult if the arbitration did not have a strategize procedure. The arbitrators may have come from different countries with different litigation procedures and they may not be applicable to the legal system where the arbitration is taking place, this may on the other hand raise different ideas on how the arbitration should be conducted. The procedure of arbitration have remained consensus among the arbitration practitioners, among them, the issue of culture difference have been the most controversial issue23.

There are some efforts that have been made to reduce the misunderstandings that have been arising in the arbitration procedures through the publication of the “UNICITRAL Notes on Organizing Arbitral Proceedings” The note contains some procedures that can be used or considered during the commencement of the arbitration. Though the procedures will not eliminate disputes concerning the proper way to proceed, it will on the other hand reduce the extent by which one party might be caught by surprise24.

Methodology

Introduction of the chapter

The method study will be both the qualitative and quantitative. This is because the study will be gathering new information, pure research and will also use other studies that were done by different scholars before. The topic will also compare ICA perspective from different countries as well as the cases that had ever been tackled by the ICA.



Qualitative method

In this research, qualitative method was employed because there were not measurements or statistics that was being involved. The research was depending on the history of the International Commercial Arbitrations in Russia and Kazakhstan without specifying the arbitration companies involved. The study was going deep in to the history of ICA of both countries in order to know how the systems work and how they are different from each other. Background of ICA and how it started taking effect in both countries was also a major source of understanding how the ICAs work and the procedures they follow in order to bring in justice in their functions25.

In the qualitative method, data collection and method of observation is commonly used, it requires the researcher to be a participant in the context that is being observed. In this regard, the data being collected concerning the arbitration must be got from the legal practitioners in order to understand the process being employed in the ICA in both countries in question. Since the participant requires to have lived in the place or has vast knowledge on what is being researched on, qualitative method fits this because legal practitioners have to be consulted for this regard and also for the sake of having a neutral phenomenon.

In the direct observation, the observer does not necessarily have to be a participant but has to try as hard not to bias the observations. In this regard, the observer has to observe and not take part in the context. In this regard, concerning the topic in question, since the research is not taking part in the arbitration and does not take part in the process, there is a great need of neutrality. In this regard, in the qualitative method, the researcher has not participated in any process but he can observe the process through different ways or collect data in different methods and will definitely come to a conclusion26.

Qualitative method also allows interviewing of the respondents, though in our question of research, interviews are less applicable since there is no specific case that would be followed. The question concerns the entire arbitration in both countries regardless of how many cases taking or have taken place in both countries. However, though unstructured interviews are necessary if the collection of data through individuals or cases will be necessary. Unstructured interviews are in most cases hard to analyze, the research will not use them to avoid bias in the results achieved.

Case studies are the most appropriate in this research. They involve intensive study of formally collected data concerning the topic in question. Case study can handle other forms of data collection in the qualitative method to achieve the results27.



Quantitative methods

Quantitative methods are techniques that are used to gather data in a quantitative way and deal with numbers and any other measurable ways. In most cases, this is regarded as statistical method of data collection. This method is commonly used to present the results and that’s where it derives the title quantitative. There is not controversy between the qualitative and quantitative methods since they are both different in the way they are used to collect data. Qualitative methods will be used to understand the data that have been presented by the quantitative method.

In this research, data analyses will be vital so as to understand how the two countries have handled different arbitration cases and how many cases have been handled. This will help in understanding the process being used to handle International Commercial Arbitration cases28.


Reference:

Abe, H., & Wiseman, R. (1983). A cross-cultural confirmation of the dimensions of intercultural effectiveness. International Journal of Intercultural Relations, 7, 53-67.

Aboul-Enein, M. The need for establishing a perfect balance between confidentiality and transparency in commercial arbitration. Stockholm arbitration report (Stockholm) 2:25-37, 2007.

Aboul-Enein, M. The need for establishing a perfect balance between confidentiality and transparency in commercial arbitration. Stockholm arbitration report (Stockholm) 2:25-37, 2007.

Alan, R., Martin H. & Constantine, P. 2004, Law and Practice of International Commercial Arbitration, 4th ed. Sweet & Maxwell.

Balsley, H.L. (1970). Quantitative research methods for business and economics. New York: Random House.

Bogdan, R., & Taylor, S.J. (1975). Introduction to qualitative research methods. New York: John Wiley.

Cambridge J.L. Privatization of public services: UNCITRAL and transparency. World arbitration and mediation review (Huntington, New York) 1:6:1-6, 2007.

Cassell, C., & Symon, G. (1994). Qualitative research in work contexts. In C. Cassell, & G. Symon (Eds.), Qualitative methods in organizational research (pp. 1-13). Thousand Oaks, CA: Sage Publications.

Christophel, D.M. (1996). Russian communication orientations: A cross-cultural examination. Communication Research Reports, 3(1), 43-51.

Gary, B., 2001, International Commercial Arbitration Commentary and Materials, 2d ed. Transnational Publishers/Kluwer Law International

Howard H, & Joseph N, 1989, A guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History, Kluwer.

International Trade Centre, 2001, Arbitration and alternative dispute resolution.

Julian D., Loukas A, and Stefan M, 2003, Comparative International Commercial Arbitration, Kluwer Law International .

Julian, D, 1978, Applicable Law in International Commercial Arbitration, Oceana.

Klaus, B., 2002, Arbitration Interactive, Peter Lang

Lawrence, C., William, W. & Jan P. ,2000, International Chamber of Commerce Arbitration (3rd ed. Oceana).

Lawrence, C., William, W. & Jan P. 1998, Annotated Guide to the 1998 ICC Arbitration Rules with Commentary (Oceana)

Lew and Mistelis. Pervasive Problems in International Arbitration (Kluwer Law 2006).

M. K. Suleimenov. Arbitration in Kazakhstan: Past, Present, and Future. NII (2007).

Michael J. & Stewart C, 1989, Commercial Arbitration, 2d ed. Butterworths.

Michael J. & Stewart C, 2001, Commercial Arbitration 2001Companion, 2d ed. Butterworths.

Yves D. & Bryant G., 1996, Dealing in Virtue – International Commercial Arbitration and the Construction of a Transnational Legal Order, University of Chicago Press .

Yves D. & Eric A, 1998, A Guide to the New ICC Rules of Arbitration, Kluwer.



1 Aboul-Enein, M. The need for establishing a perfect balance between confidentiality and transparency in commercial arbitration. Stockholm arbitration report (Stockholm) 2:25-37, 2007.

2 Klaus, B., 2002, Arbitration Interactive, Peter Lang

3 Lawrence, C., William, W. & Jan P. 1998, Annotated Guide to the 1998 ICC Arbitration Rules with Commentary (Oceana)

4 Howard H, & Joseph N, 1989, A guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History, Kluwer

5 Lawrence, C., William, W. & Jan P. ,2000, International Chamber of Commerce Arbitration (3rd ed. Oceana).

6 Michael J. & Stewart C, 1989, Commercial Arbitration, 2d ed. Butterworths.

7 Michael J. & Stewart C, 1989, Commercial Arbitration, 2d ed. Butterworths

8 M. K. Suleimenov. Arbitration in Kazakhstan: Past, Present, and Future. NII (2007).

9 Michael J. & Stewart C, 2001, Commercial Arbitration 2001Companion, 2d ed. Butterworths.

10 Michael J. & Stewart C, 2001, Commercial Arbitration 2001Companion, 2d ed. Butterworths.

11 Jack J. Coe, Jr., 1997, International Commercial Arbitration: American Principles and Practice in a Global Context (Irvington-on-Hudson, NY: Transnational Publishers, Inc. 968p. WLaw53077

12 Jack J. Coe, Jr., 1997, International Commercial Arbitration: American Principles and Practice in a Global Context (Irvington-on-Hudson, NY: Transnational Publishers, Inc. 968p. WLaw53077

13 Jack J. Coe, Jr., 1997, International Commercial Arbitration: American Principles and Practice in a Global Context (Irvington-on-Hudson, NY: Transnational Publishers, Inc. 968p. WLaw53077

14 Gary, B., 2001, International Commercial Arbitration Commentary and Materials, 2d ed. Transnational Publishers/Kluwer Law International

15 Cambridge J.L. Privatization of public services: UNCITRAL and transparency. World arbitration and mediation review (Huntington, New York) 1:6:1-6, 2007

16 Julian D., Loukas A, and Stefan M, 2003, Comparative International Commercial Arbitration, Kluwer Law International

17 Yves D. & Bryant G., 1996, Dealing in Virtue – International Commercial Arbitration and the Construction of a Transnational Legal Order, University of Chicago Press .

18 Cambridge J.L. Privatization of public services: UNCITRAL and transparency. World arbitration and mediation review (Huntington, New York) 1:6:1-6, 2007

19 International Trade Centre, 2001, Arbitration and alternative dispute resolution.

20 Abe, H., & Wiseman, R. (1983). A cross-cultural confirmation of the dimensions of intercultural effectiveness. International Journal of Intercultural Relations, 7, 53-67

21 Julian, D, 1978, Applicable Law in International Commercial Arbitration, Oceana.

22 Alan, R., Martin H. & Constantine, P. 2004, Law and Practice of International Commercial Arbitration, 4th ed. Sweet & Maxwell

23 Lew and Mistelis. Pervasive Problems in International Arbitration (Kluwer Law 2006).

24 Yves D. & Eric A, 1998, A Guide to the New ICC Rules of Arbitration, Kluwer

25 Christophel, D.M. (1996). Russian communication orientations: A cross-cultural examination. Communication Research Reports, 3(1), 43-51.

26 Bogdan, R., & Taylor, S.J. (1975). Introduction to qualitative research methods. New York: John Wiley.

27 Cassell, C., & Symon, G. (1994). Qualitative research in work contexts. In C. Cassell, & G. Symon (Eds.), Qualitative methods in organizational research (pp. 1-13). Thousand Oaks, CA: Sage Publications.

28 Balsley, H.L. (1970). Quantitative research methods for business and economics. New York: Random House.



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