Arbitration Clause in Loan Agreements
By Law No. 97-VIII dated June 19, 2024, paragraph 8 of Article 8 of the Law “On Arbitration” (hereinafter – the Arbitration Law) was supplemented with a provision stating that disputes between second-tier banks, organizations performing certain types of banking operations, microfinance organizations, and their borrowers—individuals under bank loan agreements or microcredit agreements not related to entrepreneurial activity—are not subject to arbitration.
The Arbitration Law also provides that the requirements of the first part of this paragraph extend to collection agencies with respect to assigned rights (claims) under bank loan agreements or microcredit agreements concluded with individual borrowers not related to entrepreneurial activity.
Such amendments were adopted by the legislator to protect the weaker party in a loan agreement who is not an individual entrepreneur.
The said Law dated June 19, 2024 (effective from July 1, 2024) does not contain any provision on retroactive effect; therefore, these amendments do not apply to arbitration agreements concluded before July 1, 2024.
Disputes arising from loan agreements concluded before July 1, 2024, which contain an arbitration clause, are subject to consideration in the relevant arbitration.
For example, by the ruling of the Judicial Panel for Civil Cases of the Almaty City Court dated January 16, 2025, the arbitral award of the Arbitration Court of Almaty dated August 5, 2024, in the claim of the liquidation commission of JSC “B” against Zh. for debt recovery was set aside.
The appellate court justified the annulment by stating that the arbitration procedure in this case contradicts paragraph 8 of Article 8 of the Arbitration Law, since the agreement was concluded with an individual not engaged in entrepreneurial activity.
At the same time, the court failed to take into account that the loan agreement between the parties was concluded on March 19, 2018, i.e., prior to July 1, 2024, and contained an arbitration clause under which all disputes were to be resolved by the Almaty Arbitration at LLP “A”.
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