Central Asian Power-Energy v KIF Energy
AIFC Arbitration Did Not Need Kazakhstan State-Body Consent
The Astana International Financial Centre (AIFC) Court enforced an International Arbitration Centre (IAC) award for Success K LLP and dismissed Kazakhstan's Ministry of Health's set-aside application. The Ministry's objection had two steps. First, Kazakhstan's ordinary Arbitration Law says a state body needs State Property and Privatization Committee consent to enter an arbitration agreement. Second, the Ministry had no such consent, so it said the arbitration agreement was invalid. That argument worked only if Kazakhstan's ordinary Arbitration Law supplied the validity rule for this arbitration agreement. The court held that it did not. The parties had chosen IAC arbitration; the IAC is an AIFC body; that choice brought the arbitration within the AIFC Arbitration Regulations; and Regulation 7 of those Regulations excludes Kazakhstan Arbitration Law requirements for arbitrations conducted under them. Thus, the missing consent did not make the arbitration agreement invalid under the law that actually governed it, and the Ministry had no Article 47 basis to resist recognition and enforcement.
Background
Success K LLP provided consultancy services to the Ministry of Health of the Republic of Kazakhstan under a 2019 contract. The contract used Kazakhstan law for the parties' substantive rights and obligations. The same contract used a separate dispute-resolution clause for arbitration: disputes went to arbitration administered by the IAC under the IAC Arbitration and Mediation Rules.
That separation between contract law and arbitral law created the decisive question. Kazakhstan law governed the debt claim under the consultancy contract. The court still had to decide whether Kazakhstan Arbitration Law also governed the arbitration agreement itself.
The arbitral tribunal awarded Success K 74,031,989 tenge as debt and 1,207,090.98 tenge as a contractual penalty for late payment. Success K applied to the AIFC Court for recognition and execution of the award. The Ministry filed the mirror application: it asked the court to set aside the award and to refuse recognition and enforcement.
The Ministry's central point was that a Kazakhstan state body could not validly enter into the arbitration agreement without consent from the State Property and Privatization Committee (CSPP), the state-property authority. Article 8(10) of Kazakhstan's Arbitration Law restricts state bodies from entering arbitration without CSPP consent. Article 9(4) requires the arbitration agreement to record that consent. The Ministry had obtained and recorded no such consent.
The Court's Decision
The Ministry's consent point worked only if Kazakhstan Arbitration Law applied to the arbitration agreement. The missing consent was a problem only under Kazakhstan Arbitration Law. If another arbitral law governed the arbitration agreement and did not contain the same consent rule, the missing consent had no legal consequence for recognition and enforcement. That condition followed from Article 47(1)(a)(i) of the AIFC Arbitration Regulations. Under that provision, the court may refuse recognition or enforcement if the arbitration agreement is invalid under the law chosen by the parties for the arbitration agreement or, without such a choice, under the law of the award's place.
The first logical step was to identify the law governing the arbitration agreement and the arbitral proceedings. The contract's general Kazakhstan-law clauses did not answer that question because they addressed the contract's substantive law. Article 18 of the IAC Rules also did not answer it because Article 18 addresses only the law for the merits of the dispute. It says nothing about the law governing the arbitration itself.
The arbitration clause then supplied the missing link. Special Condition 49 sent disputes to arbitration administered by the IAC under the IAC Rules. The IAC is an AIFC body, and the AIFC is a special legal regime inside Kazakhstan. AIFC law consists of the Constitutional Statute and AIFC Acts, including the AIFC Arbitration Regulations, while Kazakhstan law applies only where the AIFC regime leaves a matter ungoverned.
The court read Special Condition 49 as a choice of IAC arbitration within that AIFC regime. It did not read the reference to the Republic of Kazakhstan as a choice of ordinary Kazakhstan arbitral law. Once the arbitration fell under the AIFC Arbitration Regulations, Regulation 7 answered the Ministry's consent argument: the requirements of Kazakhstan's Arbitration Law do not apply to arbitrations conducted under those Regulations.
That made Article 8(10) irrelevant to this arbitration agreement. Article 8(10) may invalidate an arbitration agreement where Kazakhstan Arbitration Law governs and CSPP consent is missing. In an AIFC-IAC arbitration governed by the AIFC Arbitration Regulations, Regulation 7 removes that Kazakhstan Arbitration Law rule before the consent question can arise.
The court distinguished Apex Consult LLP v The Ministry for the same reason. Apex confirmed that an arbitration agreement under ordinary Kazakhstan law may fail where Article 8(10) applies and the state body lacks CSPP consent. It did not decide that Article 8(10) applies to IAC arbitration under the AIFC Arbitration Regulations. The case helped the Ministry only after the Ministry proved that ordinary Kazakhstan Arbitration Law governed this arbitration agreement; Regulation 7 prevented that proof.
The Ministry then tried a second route. It argued that the Law on State Property required consent directly because the Ministry used budget funds and the contract involved a large amount of money. The court found that the Ministry had identified no provision in that law requiring authorization for ordinary commercial contracts of this kind.
The court added one final structural reason. If the Law on State Property could impose the same consent rule directly on AIFC-IAC arbitration agreements, it would bypass Regulation 7 and make the AIFC exemption ineffective. The court rejected a reading that would let the same consent rule return through a different statute after Regulation 7 had excluded it from Kazakhstan Arbitration Law.
Result
The AIFC Court dismissed the Ministry's application to set aside the award and to refuse recognition or execution. It granted Success K LLP's application for recognition and execution of the 4 October 2021 IAC award. Unless either party raised special circumstances within seven working days, the Ministry had to pay the costs of both applications, with the court to assess the costs if the parties could not agree them.