Rule of Law in Kazakhstan:
Maintaining Momentum

By Aigoul Kenjebayeva

Managing Partner,

 Dentons Kazakhstan

Chairman,

Kazakhstan Bar Association

Twenty years ago, Kazakhstan’s Constitution was adopted, which declared it a «rule of law» country. While Kazakhstan has not yet met this standard, it is moving quickly toward this goal.

Kazakhstan is a unique country in many respects. Apart from its vast territory, rich natural resources, small population, multiple nationalities and well-educated society, Kazakhstan is also known as a country that was able to build, rapidly and successfully, a strong state with a foundation for future development. During the years of independence, we have witnessed the country’s successes and failures in various political and economic spheres, but the fact that the country has continued to move forward is very encouraging.

Once an independent state, Kazakhstan introduced a legal system that was quite liberal and encouraged foreign investment. Over time, conservatism and bureaucracy, as well as Soviet heritage and other factors, overtook progress. Kazakhstan was trying to find its way to develop through trial and error. We have now started to see changes that bring us closer than ever to reaching the goal of having a «rule of law» country.

Over the past 20 years, civil society became more mature and conscious of its desires, values and preferences, and the Government became more attuned to society’s wishes. The global economic crisis contributed to a better understanding of the problems and challenges, which as a result, started unprecedented reforms in all spheres of Kazakh society and economics. Legislative and judicial systems reforms were the most important, in addition to certain organizational reforms.

Significant measures aimed at improving the investment climate were introduced one year ago, and a path toward more significant reforms is beginning. This is reflected in the recently announced Presidential Program, «100 Concrete Steps.»

«Assurance of the Supremacy of Law» is included in this program as one of the most important tasks, and 19 of the 100 steps are devoted to concrete measures related to the rule of law (steps 16 to 34). Most of these steps are aimed at improving the judiciary. An independent and professional judiciary has long been recognized as one of the most important elements of a rule of law system. However, little had been done in Kazakhstan to achieve this goal. The Presidential Program includes a number of steps that could be characterized as revolutionary, as they aim to change the mindset of decision makers. The Presidential Program appears to promote the following main principles:

Improved Access to the Judicial System

This principle is not new, but this is the first time it has been brought forward as a cornerstone of judicial reform. Although the Program itself mentions this principle in the context of reducing the number of court instances from five to three, it should be noted that the supporting legislation now being drafted (in particular the new Civil Procedure Code), already contains numerous provisions promoting this principle.

Such proposals could simplify procedures and ensure very quick resolution of disputes. However, the legislator should be cautioned that speed and simplicity are not always desirable, since the provision of justice remains the main goal. Quick and simple procedures could be an impediment to justice where multiple, especially foreign, parties happen to be involved. This would require time for preparing for the case, obtaining apostilled Powers of Attorney, translating lengthy documents, and so on. The law should allow for adequate argument and deliberation in complex cases.

Stricter requirements for judges

The Program includes steps to tighten the requirements for judges.

Firstly, the qualification requirements for candidate judges are to be increased. For instance, the «Draft Law on Amending and Supplementing the Constitutional Law On the Judicial System and Status of Judges» that is now under discussion in the Parliament provides that the age of a candidate judge must be at least 30 years old instead of 25 years in the current legislation or establishes the physiological test and polygraph examination the successful completion of which is a prerequisite for admission of a candidate.

Secondly, the level of accountability of judges is to be increased. For example, the mentioned Draft Law provides that the appeals of individuals and legal entities could be a basis for initiation of a disciplinary investigation against a judge or establishes a mechanism for assessment of the professional activity of the judge.

Utilizing International Expertise

The Program announced the creation of an International Council at the Supreme Court consisting of reputable foreign judges and lawyers. The aim of the Council would be to assist with the introduction of international standards into the judicial system. This is a truly revolutionary idea, since the Supreme Court was considered a very conservative and closed organization. Whether this idea will take hold or whether this Council will have any significant impact is unpredictable. However, the door is open, and the international legal community has a great chance to provide support to Kazakhstan in its judicial reform.

Treatment of Investment Disputes

The Kazakh judicial system is often criticized for not being able to consider disputes with foreign investors fairly and professionally. In many cases involving investors against the state authorities, courts are biased in favor of the authorities, based on a quest for greater revenue in the state budget. Therefore, improving the judiciary requires a recognition that the judiciary is not to be viewed as a source of budget financing, either formally or informally.

Courts should not be concerned with revenue streams for the state budget when establishing court fees or penalties and deciding substantive matters. The amount of penalties and other monetary awards in court judgments should not be included as an income source in the state budget.

Another problem when considering disputes with investors, in particular with foreign investors, is that many judges are not familiar with international standards, basics of international law, or international business transactions. The Program envisions steps to improve the selection process for judges, enhance educational programs and ensure compliance with ethics rules.

The Program includes establishment of a distinct type of judicial proceedings with regard to all civil disputes related to investment activities - the investment judicial proceedings. The Supreme Court will have exclusive competence to consider investment disputes involving large investors. For this purpose a special Investment Panel of the Supreme Court will be created. The Specialized Court of Astana City will be authorized to hear as the first instance all other investment disputes with no large investors involved, where the Supreme Court will serve as an appellate instance.

The idea of creating special proceedings for consideration of disputes involving large investors is revolutionary. Considering the circumstances, this could be viewed as recognition that the judicial system is not well equipped to provide justice to investors. In this sense, the creation of this Panel is a bold step by the state in recognizing inherent problems in the judicial system and working to find ways to resolve them. Therefore, the creation of this Panel should be supported as a first step in testing new approaches. However, it is essential that these new principles be expanded to the rest of the judicial system.

Creation of the investment judicial proceedings is described in more detail in the Draft Civil Procedure Code that is now under discussion in the Parliament. The scope of competence of the investment courts is still not clear This idea will only work if the «Law on Investments» is significantly amended to expand and clarify the definition of «investor». Without such changes, the investment courts will have very little to do as the current definition is too narrow and would actually only cover a small number of companies.

International Finance Center

One of the boldest and promising steps of the Program is creation of an International Finance Center «Astana» («IFCA») in the capital of Kazakhstan with Dubai International Financial Centre serving as a prototype. Notwithstanding the fact that the Program does not include this into the «rule-of-law-steps», it will have a significant impact, negative or positive, on the law and judicial systems of Kazakhstan.

The key specific feature of IFCA is that its governing law will be English law. It will be a distinct law system independent from the general statute law of Kazakhstan. Following this, an independent court with its own jurisdiction will be established to settle disputes involving IFCA members in accordance with English law. The IFCA court itself will consist of foreign judges and English language will be used throughout the court proceedings.

The reform is going to be a deep one. Significant amendments are to be made to a wide number of major legislative acts, in particular Constitution, Civil Procedure Code, Tax Code, etc. The «Draft Law on Amending and Supplementing the Constitutional Law On the Judicial System and Status of Judges» that is now under discussion in the Parliament provides for a special status of IFCA’s court and its independence from the judicial system of Kazakhstan.

State Accountability and Self-Regulated Organizations

The Program pays close attention to the mechanisms for accountability of the state through a number of steps, including the creation of «The State for Citizens,» a state corporation similar to the «Canada Service» and «Centrelink» (Australia). Involving society in the management of country’s affairs is an important task.

The transfer of certain functions to self-regulated and non-governmental organizations is now an important principle of the reforms. One such organization is the Kazakhstan Bar Association, which should be given the opportunity to play a serious role in the implementation process as a whole, as well as in the parts related to the rule of law.

In conclusion, this Program shows that Kazakhstan is making serious efforts to break through to become a true «rule of law» country. Undeniably, not everything necessary has been done or is planned. However, the country is moving in the right direction, which is important, and this momentum should be maintained.