Kazakhstan Adopts English Law to Inspire Investor Confidence
Kazakhstan, the world’s ninth-largest country and the largest economy in Central Asia, is a rapidly emerging market offering many new business and investment opportunities.
Kazakhstan lies squarely on China’s new Silk Road, and the Belt & Road Initiative (BRI) has already brought new highways and rail links that now enable freight from China to reach Europe in 15 days, vastly increasing Kazakhstan’s trade potential.
The Kazakhstan Global Investment Forum in London on Oct. 2 highlighted the nation’s most promising sectors, which range from oil and gas, mining, manufacturing, chemicals, agriculture and high-tech industries to digital technologies and blockchain.
As economic growth and diversification accelerates in Kazakhstan, the government has recently implemented broad measures to attract international investors and boost innovation. Chief among these efforts is the recent opening of the Astana International Financial Centre (AIFC), which provides a wide array of services for registered companies and individuals doing business in the country, and its AIFC Court, the first in the region to operate under the principles of English law.
Karim Massimov, the former Prime Minister of Kazakhstan, said: “The Astana International Financial Center is a new project, similar to what has been done in London many centuries ago, and Dubai and Singapore a few decades ago. We are going to create a finance center based on English common law, in English language, and an independent court.”*
A distinctive feature of English law is the use of a flexible and transparent approach to resolving disputes. Creating an environment of trust and transparency for enterprises doing business in Kazakhstan, a former Soviet republic unfamiliar to many investors, is a primary goal of the government in its effort to attract FDI to the growing economy.
The AIFC Court—a major feature of the new AIFC, which opened January 1—is completely independent of Kazakhstan’s judicial system, operates using English civil law and procedures and is staffed by nine of the U.K.’s most distinguished judges. The AIFC International Arbitration Centre (IAC), which provides alternatives to litigation, also operates under English, or common, law—a mainstay of global business.
Kazakhstan hopes the application of English law will help to swiftly shape Astana into Central Asia’s leading finance hub, and the government has instituted numerous regulatory, tax, monetary and trade reforms, along with embedding the global familiarity of English law into the AIFC Court and AIFC Arbitration Centre.
The world’s leading finance capitals—New York, London and Hong Kong—have long conducted dispute resolution based on common law, and English is the world’s predominant contract language. Even Paris, in an attempt to attract more investment following Brexit, is planning to implement English law in a new commercial court—but Astana has already done so, a move that will surely encourage FDI in Kazakhstan.
A Distinguished Commercial Court
The AIFC Court is led by Chief Justice Lord Harry Woolf, an eminent U.K. judge who served as Lord Chief Justice of England and Wales from 2000—2005, and headed the committee that modernized U.K. civil procedures in 1998, known as the “Woolf reforms.”
Woolf served as the first president of the Qatar Financial Centre Civil and Commercial Court and on Hong Kong’s Court of Final Appeal prior to his appointment in Astana, and he brings unmatched experience and expertise to the AIFC Court.
Woolf believes the new AIFC Court’s “impact will be significant” because it ensures a safe environment for investors.
“This is the first court of its kind in Eurasia,” he says. “It is special, because it is a common law court staffed by former senior British judges in a part of the world that, we have to say, does not normally have common law courts. It represents the qualities that the commercial world is familiar and accustomed with, and the judges ensure that the independence of the court is without question.”
Level Playing Field
A primary aim of the AIFC is to standardize and streamline business procedures in the country, where in the past regional authorities may have enforced regulations differently and conducted dispute resolution procedures unevenly.
The AIFC’s objectives in establishing the court are clearly stated: “To empower regional commerce by increasing confidence in the administration and accessibility of justice throughout the Astana International Financial Centre, Kazakhstan, the Eurasia region and globally. To be an innovative and technologically advanced commercial court and continually aim to improve working processes and standards.
“To collaborate with and establish working relationships with other courts in Kazakhstan, the Eurasia region and other jurisdictions, particularly those with close trading links to Kazakhstan. To support the delivery of high-quality legal education and training to meet the needs of lawyers and judges in Kazakhstan and the Eurasia region.”
The court also offers an e-filing system that enables cases to be filed electronically at the AIFC Court from anywhere in the world, without the parties having to be physically present in Astana.
“One of the great virtues of the common law is its flexibility,” adds Woolf. "We have no hesitation in saying that there will not be any practical problems in using judges who do not speak Russian or Kazakh in such circumstances. Any advocates who have authority to appear before a court elsewhere will be able to appear before the court in Kazakhstan.”
In addition to Woolf, the AIFC Court has eight justices; six are judges who are eligible to hear cases in the AIFC Court of First Instance and Court of Appeal, and two justices are judges in the AIFC Small Claims Court for claims up to the value of $150,000.
The other highly qualified AIFC Court judges bringing broad experience in business and civil law to Astana are: The Rt. Hon. Sir Robin Jacob, Justice; The Rt. Hon. Sir Rupert Jackson, Justice; The Rt. Hon. Sir Jack Beatson FBA, Justice; The Rt. Hon. Sir Stephen Richards; The Rt. Hon. The Lord Faulks QC, Justice; Andrew Spink QC, Justice; Thomas Montagu-Smith QC, Justice, AIFC Small Claims Court; Patricia Edwards, Justice, AIFC Small Claims Court.
“In addition to giving confidence, the AIFC Court is a signal that facilities found in other, more developed commercial markets are going to be available in Astana,” says Woolf.
Chief Justice Lord Harry Woolf
Looking to the future, Woolf says that the court is working with leading international education institutions to provide world-class professional legal and judicial education that will contribute to the development of future lawyers and judges in the Republic of Kazakhstan.
“It’s been welcomed on all sides, without qualification, because it gives those who wish to have important commercial links with Kazakhstan assurances they will be operating in an atmosphere committed to the rule of law. I think its impact will be significant.”
The implementation of the globally recognized standard of English law within the AIFC Court and International Arbitration Centre has been welcomed by investors and enterprises. The Reuters Practical Law blog said the court is “designed well, presided over by a highly qualified bench and supported by what appear, on their face, to be robust rules of procedure.”
“There's a lot of us pleased with what's happening in Kazakhstan,” added Christopher Marks, Managing Director, Head of Emerging Markets, Mitsubishi UFJ Financial Group (MUFG), at the Kazakhstan Global Investment forum in London.
“I think what is very pleasing is that increasingly it is translating into something very practical, very tangible. We have invested more than $8 billion into the country, and have a portfolio of some $3 billion. If I look at the kind of projects that we have and how they've come about, especially recently, it is as a result of new reforms.”
Written by Gabe Kirchheimer, for Bloomberg Media Studios
*Quote from Financing Economic Diversification of Kazakhstan: Prospects and Challenges, FT-AIFC Webcast
