Grounds for annulment of arbitral awards

1.1 The arbitration agreement and the non-jurisdiction of the dispute to arbitration

Subparagraph 1) of paragraph 1 of article 52 of the Law specifies two different grounds that may lead to the annulment of the arbitral award.

if the arbitral award contains a decision on an issue that is not provided for by the arbitration agreement or does not fall under its terms, or contains rulings on issues outside the scope of the arbitration agreement.;

due to the non-jurisdiction of the dispute to arbitration.

It should be noted that if the arbitral award is annulled on the above grounds, then the party has not lost the right to apply to a competent court to resolve the dispute.

The first reason for the annulment of an arbitral award by the court is applied in the case when, for example, there is an arbitration clause in the pledge or guarantee agreement, but there is no arbitration clause in the main loan agreement. In this case, if the arbitration considers the dispute, the arbitration decision is subject to cancellation by the court in accordance with subparagraph 1) paragraph 1 of Article 52 of the Law.

On the second ground, an arbitral award may be overturned by the court if the party proves that the dispute is not subject to arbitration.

According to paragraph 1 of Article 8 of the Law, a dispute may be referred to arbitration if there is an arbitration agreement concluded between the parties.

Subparagraph 4) of article 2 of the Law defines an arbitration agreement as a written agreement between the parties to submit to arbitration a dispute that has arisen or may arise from civil law relations.

It follows from the meaning of article 9 of the Law that an arbitration agreement can be concluded in various ways, by committing :

arbitration clause in a document signed by the parties (as a rule, the arbitration clause is included in the text of the main agreement);

independent arbitration agreement, independent arbitration agreement;

an arbitration agreement concluded through the exchange of letters, telegrams, telephone messages, faxes, electronic documents or other documents defining the composition of the subjects and the content of their declaration;

an arbitration agreement concluded by exchanging claims and a response to a claim, in which one of the parties claims to have an agreement, and the other does not object to it.

And also if the contract provides for a reference to a document from the contents, which follows on the transfer of the dispute to arbitration, provided that the contract is concluded in writing, and this reference is valid, which makes the arbitration agreement part of the contract.

An important issue to be reviewed by the court when considering a request for the annulment of an arbitral award or an application for the issuance of a writ of execution is the issue of the parties concluding an arbitration agreement. It is no coincidence that the legislator imposed the obligation to attach such a document to the application for the issuance of a writ of execution, since the arbitration agreement entails legal consequences for the parties to the arbitration agreement and has legal significance for the arbitration, confirming its authority to conduct arbitration proceedings. The courts should also give due legal assessment to the conditions that are included in the arbitration agreement. This is due to the fact that since 2019, the parties have determined the terms of the arbitration agreement only at their discretion, i.e. the current version of article 9 of the Law no longer requires the inclusion in the arbitration agreement of such conditions as the parties' intention to submit the dispute to arbitration; an indication of the subject to be considered by arbitration; an indication of a specific arbitration. All conditions are determined by agreement of the parties.

Since an arbitration agreement is a civil law agreement, therefore, the relevant norms of the Civil Code on contracts should be applied to it.

According to paragraph 1 of Article 393 of the Civil Code, a contract is considered concluded when the parties have reached an agreement on all its essential terms in the form required in all cases. The essential conditions are the conditions on the subject of the contract, the conditions that are recognized as essential by law or are necessary for contracts of this type, as well as all conditions regarding which, at the request of one of the parties, an agreement should be reached. Without defining the subject of the agreement, no agreement can be considered concluded.

The subject matter of the arbitration agreement may include the obligation of the parties to submit certain disputes to arbitration, therefore, the arbitration agreement should contain information that allows for the identification of a particular arbitration, to which the parties are obliged to submit a dispute that has already arisen or may arise.In the absence of such information in the arbitration agreement, as well as the possibility of applying complementary rules (in particular, the provisions of the European Convention on Foreign Trade Arbitration), such arbitration agreements should be considered not concluded.

Article IV of the European Convention contains a mechanism for the individualization of the arbitration court in the event that the parties have not specified a specific arbitration in which the dispute will be considered.

When applying the Convention, courts should take into account the scope of its application, as well as verify the status of States that are parties to the Convention.

Thus, in accordance with subparagraph (a) of paragraph 1 of Article 1, the European Convention applies to arbitration agreements of both natural and legal persons who, at the time of conclusion of such an agreement, have permanent residence or, accordingly, their location in different Contracting States, on the settlement of disputes arising in the course of foreign trade operations.

The Republic of Kazakhstan joined the European Convention in accordance with the Decree of the President of the Republic of Kazakhstan dated October 4, 1995 No. 2484 On the Accession of the Republic of Kazakhstan to the European Convention on Foreign Trade Arbitration, adopted in Geneva on April 21, 1961.

For example, by a decision of the judicial board for civil Cases of the Supreme Court dated July 19, 2022, the ruling of the Board for civil cases of the Nur-Sultan City Court dated February 22, 2022 was canceled, and a new ruling was issued on the annulment of the arbitration award of First Economic Arbitration LLP dated December 13, 2021 in the civil case filed by Crocus Engineering S.A. Kolesnichenko. LLC Tissa on termination of the contract, recovery of losses, incurred expenses.

Tissa LLC, applying to the court for the annulment of the decision, one of the arguments indicated that the dispute was not under the jurisdiction of arbitration.

It follows from the case file that on April 21, 2017, the parties entered into a purchase and sale agreement.

By the decision of the Economic Court of the Minsk region of the Republic of Belarus on March 24, 2021, the claim of Tissa LLC against Crocus Engineering Kolesnichenko S.A. for debt collection in the amount of 6,214,560 Russian rubles, 7,081.51 Belarusian rubles in compensation for the plaintiff's expenses for the payment of state duty (dispute under the above-mentioned agreement) was satisfied.

By the ruling of the Council of Economic and Social Council of the city of Nur-Sultan dated August 2, 2021, the above-mentioned decision of a foreign court was recognized and enforced on the territory of the Republic of Kazakhstan at the location of the debtor, and a writ of execution was issued for recovery.

By the decision of the First Economic Arbitration LLP dated December 13, 2021, the claim of Crocus Engineering Kolesnichenko S.A. Tissa LLC for termination of the contract, recovery of the amount of damages and expenses incurred was satisfied.

By virtue of clause 7.2 of the contested agreement, disputes and disagreements arising under this Agreement, if they cannot be settled through negotiations, are subject to resolution in the Arbitration Court of the plaintiff's country. The court's decision is final and binding on both parties.

The issues of jurisdiction of the dispute to arbitration are determined by the content of the arbitration clause.

In the present case, the arbitration agreement was confused with the prerogative one. A prorogation agreement is an agreement on the jurisdiction of cases involving foreign entities. Such an agreement modifies the general rule of jurisdiction and determines, at the option of the parties, the competent court of the foreign State under whose jurisdiction the dispute resolution is attributed. The legal nature of clause 7.2 of the Agreement is controversial, since the term "Arbitration Court" is understood differently in Belarus and the Republic of Kazakhstan. There are no state arbitration courts in Kazakhstan and Belarus.

In accordance with sub-paragraphs 2) and 3) of Article 2 of the Law, a court is a court of the judicial system of the Republic of Kazakhstan, which, in accordance with the civil procedure legislation of the Republic of Kazakhstan, is authorized to consider cases of disputes arising from civil law relations at first instance; and arbitration is arbitration formed specifically to consider a specific dispute or permanent arbitration.

The Law does not provide for such a thing as an "arbitration court".

Clause 7.2 of the agreement does not contain the exact name of the arbitration, which makes it impossible to reliably individualize permanent arbitrations in the Republic of Kazakhstan if the parties intended to conclude an arbitration agreement. In this case, according to subparagraph 2) of paragraph 1 of Article 27 of the Law, arbitration returns the claim if it is filed with arbitration, which is not provided for in the arbitration agreement. The plaintiff does not have the right to apply for arbitration at his choice without prior written agreement of a specific permanent arbitration with the other party. In this case, the parties concluded not an arbitration agreement, but a prerogative agreement. Since it contains an indication of the court of the plaintiff's country, this agreement can be attributed to relatively specific prorogation agreements. Thus, the competent court will be the appropriate specialized inter-district economic court, which is the court of the Republic of Kazakhstan, where it was necessary to apply in accordance with the provisions of the CPC of jurisdiction and jurisdiction.

The literal content of the terms of the contract allowed the Court of cassation to come to the following conclusions:

In the present case, the arbitration agreement was confused with the prerogative one. A prorogation agreement is an agreement on the jurisdiction of cases involving foreign entities. Such an agreement modifies the general rule of jurisdiction and determines, at the option of the parties, the competent court of the foreign State under whose jurisdiction the dispute resolution is attributed. The legal nature of clause 7.2 of the Agreement is controversial, since the term "Arbitration Court" is understood differently in Belarus and the Republic of Kazakhstan. There are no state arbitration courts in Kazakhstan and Belarus.

In accordance with sub-paragraphs 2) and 3) of Article 2 of the Law, a court is a court of the judicial system of the Republic of Kazakhstan, which, in accordance with the civil procedure legislation of the Republic of Kazakhstan, is authorized to consider cases of disputes arising from civil law relations at first instance; and arbitration is arbitration formed specifically to consider a specific dispute or permanent arbitration.

The Law does not provide for such a thing as an "arbitration court".

Clause 7.2 of the agreement does not contain the exact name of the arbitration, which makes it impossible to reliably individualize permanent arbitrations in the Republic of Kazakhstan if the parties intended to conclude an arbitration agreement. In this case, according to subparagraph 2) of paragraph 1 of Article 27 of the Law, arbitration returns the claim if it is filed with arbitration, which is not provided for in the arbitration agreement. The plaintiff does not have the right to apply for arbitration at his choice without prior written agreement of a specific permanent arbitration with the other party. In this case, the parties concluded not an arbitration agreement, but a prerogative agreement. Since it contains an indication of the court of the plaintiff's country, this agreement can be attributed to relatively specific prorogation agreements. Thus, the competent court will be the appropriate specialized inter-district economic court, which is the court of the Republic of Kazakhstan, where it was necessary to apply in accordance with the provisions of the CPC of jurisdiction and jurisdiction.

The literal content of the terms of the contract allowed the Court of cassation to come to the following conclusions:

The provisions of clause 7.2 of the agreement define the entity that resolves disputes - the plaintiff's Arbitration Court. In this case, the plaintiff is a resident of the Republic of Kazakhstan, therefore, we are talking about the Arbitration Court of the Republic of Kazakhstan. In accordance with paragraph 1 of article 75 of the Constitution, justice in the Republic of Kazakhstan is administered only by the court. The judicial system of the Republic of Kazakhstan does not include Arbitration Courts.

since the same clause 7.2. of the Contract also reflects the name of the relevant act - the court decision. Consequently, the parties decided to apply to the court. Moreover, according to subparagraph 8) of article 2 of the Law, arbitration issues an act called an arbitral award.

The law does not provide for arbitration proceedings to be conducted in an arbitration court. The legislator assigns the arbitration proceedings to the arbitral tribunal or the arbitrator. At the same time, the Law provides a separate definition of definitions: arbitration, arbitrator, court, thereby indicating the various entities resolving the dispute.

Tissa LLC attached the decision of the Economic Court of the Minsk Region of the Republic of Belarus No. 140-2/20 dated March 20, 2021 to the application for the annulment of the arbitration award, from the content of which it follows that the defendant interprets the concept of an arbitration court as an arbitration clause (taking into account the reference to the norm of the relevant Law), the plaintiff - as an official state body administering justice; from the content It is not possible to unambiguously determine the fact of the existence and type of the reservation, including taking into account the defendant's position on its use. Thus, the competent court of a foreign State has concluded that there is no arbitration clause in the Contract. By the ruling of the Specialized Interdistrict Economic Court of the city of Nur-Sultan dated August 2, 2021, the above-mentioned decision of a foreign court was recognized and enforced on the territory of the Republic of Kazakhstan at the location of the debtor, and a writ of execution was issued. The recognition of the legal force of the court's decision indicates the onset of the legal consequences of the judicial act, while the recognition was carried out before the start of arbitration proceedings until November 8, 2021, and the presence of this decision by Tissa LLC was brought to the attention of the arbitrator. However, this fact was not given a proper legal assessment by the judicial board for civil cases of the Nur-Sultan city Court when resolving the argument of Tissa LLC about the non-jurisdiction of the dispute to arbitration.

An improper assessment by the court of appeal of the terms of the contractual part of the arbitration clause led to an incorrect resolution of the dispute, which was the basis for a review of the judicial act of the appellate institution in a higher court.

Therefore, when considering applications for the annulment of arbitral awards on the grounds provided for in subparagraph 1) of paragraph 1 of Article 52 of the Law, an important issue to be clarified in court is the issue of concluding an arbitration agreement and its terms.

Subparagraph 1 of article 8 of the Law provides that a dispute may be submitted to arbitration if there is an arbitration agreement concluded between the parties.

In accordance with paragraph 7 of Article 8 of the Law, the arbitration agreement may be terminated by agreement of the parties in the same manner in which it was concluded.

The literal content of these rules of law means that in order for the arbitration agreement to expire, the parties must conclude a corresponding written agreement. If the parties have not carried out such actions, the dispute is resolved in accordance with the terms of the arbitration agreement and cannot be considered by the court of general jurisdiction.

For example, the decision of the Judicial board for Civil Cases of the Supreme Court of August 11, 2021 overturned the decision of the Karasai Regional Court of the Almaty region of January 15, 2020 and the ruling of the Judicial board for Civil Cases of the Almaty Regional Court of September 30, 2020.

By the court of cassation instance, the claim of Yerkebayev A.A. to IP "STORY KZ"Rakhmanova (Demidova) A. A. the termination of the construction contract, the recovery of the amount was left without consideration.

In accordance with subparagraph 5) of Article 279 of the CPC, the court leaves the claim without consideration if, in accordance with the law, an agreement has been concluded between the parties to transfer the dispute to arbitration, unless otherwise provided by law.

Within the meaning of this provision of the Code, if the contract contained an arbitration clause, this dispute is not subject to the jurisdiction of the court of general jurisdiction, is subject to arbitration, including in the part of the arbitration clause.

The parties to the agreement have defined the jurisdiction of the dispute to the Kazakhstan International Arbitration.

If there is an arbitration agreement, the court has no right to consider such a dispute.

The dispute is subject to consideration in court if Yerkebayeva.A. had appealed to the court, and the defendant IP "STORY KZ" Rakhmanova (Demidova)A.A. submitted a response to the claim (other written confirmation), in which she indicated that she did not object to the court considering the dispute. This position corresponds to the provision of paragraph 7 of Article 8 of the Law.

By the decision of the Judicial Board for Civil Cases of the Supreme Court dated September 7, 2021, the ruling of the Judicial Board for Civil Cases of the Almaty City Court dated June 9, 2021 on the refusal to satisfy the petition of E.T. Masanova for the cancellation of the decision in absentia of the Adilet Arbitration Court dated July 12, 2016 on the recovery of E.T. Smasanova in favor of Platinum Collection LLP (hereinafter - LLP) amounts in the amount of 829,914 tenge.

One of the arguments of E.T. Masanova when applying to the court for the annulment of the decision was the absence of an arbitration agreement signed between the parties.

Thus, it follows from the content of the default judgment that the basis for the LLP's application to arbitration is an arbitration (arbitration) agreement signed by the parties, however, there is no arbitration agreement signed by the parties in the case file.

Evidence of the debtor's written consent to the arbitration dispute and participation in the arbitration proceedings has not been presented to the court, whereas, by virtue of article 9 of the Law, the existence of an arbitration agreement is mandatory.

The dispute arose under a bank loan agreement dated July 25, 2012, concluded between ForteBank JSC and E.T. Masanova. Subsequently, the rights under the loan agreement were assigned to LLP on the basis of a trust management agreement dated November 2, 2015, in favor of which a decision was made in absentia.

The LLP, referring to the assignment by the former creditor of the right to claim the debt, did not provide evidence of the conclusion of an arbitration agreement with Masanova E.T. in the form of a separate document or an arbitration clause provided for in the loan agreement, and did not prove that it had the right to appeal.

The Court of Cassation concluded that the parties did not agree on the possibility of considering disputes between them in arbitration by signing a separate written document and making additions to the loan agreement, did not determine the jurisdiction of the dispute to arbitration, therefore, the LLP's claim was accepted and reviewed by arbitration in violation of its competence due to the absence of an appropriate arbitration agreement.

Subparagraph 2 of paragraph 1 of Article 52 of the Law establishes two violations that may lead to the cancellation of the arbitration award by the court.:

one of the parties to the arbitration agreement was declared legally incompetent.:

The arbitration agreement is invalid according to the law to which the defense subordinated it, and in the absence of such an indication - according to the legislation of the Republic of Kazakhstan.

The concept of legal capacity is applied in the Republic of Kazakhstan in relation to individuals; legal capacity is applied in relation to legal persons.

In this rule of law, the term "incapacitated" is used.

In the practice of courts, arbitral awards on these grounds have been uncontested.

Therefore, the courts may have a question about whether, on this basis, it is possible to cancel an arbitration award in respect of a legal person?

Therefore, the courts may have a question about whether, on this basis, it is possible to cancel an arbitration award in respect of a legal person?

The Scientific and Practical Commentary to the Law, edited by N.K.Suleimenov and A.E.Duisenova, explains:          "Kazakh law uses the concept of "legal capacity" in relation to legal persons.  However, the use of the term "incapacity" in subparagraph 2 of paragraph 1 of the commented article does not mean that the court cannot cancel the arbitration award in relation to a legal entity on the basis of the submitted grounds.

The legal capacity of Kazakhstani legal entities is determined in accordance with Article 35 of the Civil Code. The civil legal capacity of a legal entity in accordance with paragraph 1 of Article 1101 of the Civil Code is determined by the law of the legal entity.According to Article 1100 of the Civil Code, the law of a legal entity takes into account the law of the country where this legal entity is established."

The invalidity of an arbitration award means that the arbitration agreement has not been concluded, is invalid, has become invalid, or cannot be enforced. Such an approach would be correct, since with a narrow understanding of the "invalidity" of an arbitration agreement, it would be impossible for a court to cancel arbitral awards made by arbitrators in the presence of an unfinished, invalid arbitration agreement or an arbitration agreement that cannot be enforced.

In order to cancel an arbitration award under subparagraph 3) of paragraph 1 of article 52 of the Law, the party filing a motion for cancellation must provide evidence that:

The party was not properly notified of the appointment of an arbitrator or of the arbitration proceedings;

I could not provide my explanations for the reasons recognized by the court as valid.

It has been established that in this case, the courts correctly do not apply the provisions of Chapter 11 of the CPC, but check the arguments of the party for compliance with the actions of the arbitration upon notification of the parties to the arbitration proceedings in accordance with the requirements of paragraph 3 of Articles 26 and 30 of the Law.

The largest number of arbitral awards were cancelled due to the fact that the respondent's side was not properly notified of the appointment of an arbitrator or of the arbitration proceedings.

Arbitration proceedings by virtue of article 5 of the Law are conducted in compliance with the principles, the violation of which, depending on the materiality, entails the cancellation of the arbitral award.

Improper notification by a party of the appointment of an arbitrator or arbitration proceedings indicates a violation of the principle of the parties' compulsion and equality, since the party's right to participate directly in the arbitration proceedings has been violated, which, by virtue of paragraph 3) of paragraph 1 of article 52 of the Law, is an independent justification for the annulment of the award.

If the party against whom the award was made applies to the court with a request for its cancellation due to failure to notify the arbitration proceedings, the court verifies the said argument on the basis of documentary evidence of the fulfillment by the arbitration of the requirements for proper notification.

Since the dispute resolution procedure in arbitration is regulated by the arbitration agreement and the rules of arbitration, the courts should bear in mind that such documents may establish specific deadlines and rules for notifying the parties of the time and place of the arbitration meeting, therefore the courts should clarify these circumstances and give them a legal assessment.

The burden of proving that a party was not properly informed of the appointment of an arbitrator or of the arbitration proceedings, or for other reasons deemed valid by the court, could not provide its explanations, lies with the party who petitioned the court.

At the same time, courts need to take into account certain features.

If the arbitration was conducted not by a permanent arbitration, but by an arbitration court established to consider a specific dispute, in this case the burden of proving that the party was not properly notified of the appointment of an arbitrator or arbitration proceedings, or for other reasons deemed by the court to be respectful, could not provide their explanations, always lies on the side that petitioned the court.

When the arbitration proceedings have been conducted by a permanent arbitration, in this case, if the party declares an improper notification, but for objective reasons cannot provide evidence to this, the court, upon a reasoned request from the defense or on its own initiative, to resolve the issue of proper notification of the parties to the arbitration proceedings, demands the necessary documents from the arbitration on the basis of part 4 of Article 15, part 4 of Article 73 of the CPC.

It is not necessary to claim an arbitration case, since the court does not have the right to review an arbitration award (paragraph 3 of article 52 of the Law).

In addition, the burden of proof to the contrary may be placed by the court on the other side. In this case, the other party may request the embassy to provide documents confirming the notification of the opposing party.

Violation of the principle of confidentiality provided for in paragraph 6) of Article 5 of the Law will not take place in this case, since the legislator provided for the court's right to request the necessary documents in order to implement the tasks of civil proceedings.

Therefore, the court is obliged to establish that the party has not been notified of the appointment of an arbitrator or of the arbitration proceedings. For this, the court will require documents from the arbitration on proper notification of the parties.Such documents may include notices, subpoenas, invoices, dispatch registers, receipts, letters from postal organizations, extracts from communications and other documents confirming the notification of the parties, which must be certified by arbitration.

As an example, we can cite the case of challenging an arbitration award, which recovered an amount from K^Lshynbek N.E. in favor of "Money to the Population" LLP.

K^lshynbek N.E. petitioned for the annulment of the arbitration decision, indicating that she had not been notified of the place and time of the arbitration case.

By the ruling of the Petropavlovsk City Court No. 2 of the North Kazakhstan Region dated February 4, 2020, the petition was granted, the arbitration decision was canceled.

The court requested an arbitration case, from which it followed that on January 15, 2018, a notification was sent to K^lshynbek N.E. that arbitration proceedings would take place on January 31, 2018. This notification is sent by mail to the place of residence of the answerer. However, there is no evidence in the materials of the arbitration case that the defendant has received a notification.

The notification is sent by a simple letter, whereas in the legislation, an appropriate notification of the party is a notification sent by a registered letter with a notification of its delivery, a telephone message or telegram, as well as a report confirming the delivery of a text message to a cellular subscriber number, ensuring that the notification is recorded.

In addition, on January 15, 2018, a telephone message was sent to Lshynbek N.E. about the date of the arbitration, while the telephone message did not indicate by whom or at what time the message was transmitted, and there was no information about its receipt.

Thus, there is no information confirming the actual delivery of the messages to the defendant. In this connection, the court concluded that the arbitration violated the applicant's right to judicial protection.

Despite the detailed regulation in the Law of actions to notify the parties to the arbitration (articles 26, 30 of the Law), the courts identify the following violations committed by arbitration:

notification of the appointment of arbitration proceedings on a certain date and, at the same time, the absence of notification at the subsequent arbitration meeting.

sending a notification to the party by registered mail without notification of the delivery of postal correspondence and subsequently attaching it as proof of the register of registered letters.

sending a notification to the addressee at an address that does not correspond to the information about the location of the party reflected in the contract.

failure to send a notification.

These circumstances are legitimately recognized by the courts as evidence of improper notification of the participants in the arbitration proceedings.

When considering claims for the annulment of an arbitral award by the court, on the grounds that the party was notified of the appointment of an arbitrator and the arbitration proceedings, but could not, due to objective circumstances, provide their explanations, the courts must bear in mind that the party against whom the award was made must prove the existence of valid reasons preventing the presentation of explanations. An explanation is understood not only as the presentation of a response by an answering machine, explanations can be oral, which are carried out at an in-court meeting. At the same time, it should be borne in mind that the consideration of an arbitration case can be conducted without oral hearings, since the parties have the right to provide in the arbitration agreement a dispute resolution procedure based on written documents.

Thus, by the decision of the judicial board for civil Cases of the Supreme Court of July 19, 2022, the ruling of the appellate instance of February 22, 2022, was canceled, which refused to revoke the arbitration award on the claim of Crocus Engineering Kolesnichenko S.A. to Tissa LLC for termination of the contract, recovery of excess.

One of the grounds for the annulment of the award was that the party could not provide an explanation for a valid reason. The court of appeal did not verify the arguments of the side on the compliance of the arbitration actions with the requirements of the Law in terms of notifying the parties to the arbitration proceedings.

Upon consideration by the court of cassation, it was established that on January 4, 2022, a postal item was received by Tissa LLC, which simultaneously contained the arbitration award dated December 13, 2021, as well as the ruling dated December 10, 2021 on the existence of Arbitration and the postponement of consideration of the case on the merits of the dispute on December 13, 2021.

In this regard, the court of cassation concluded that these circumstances confirm the arguments of the party about the violation by the arbitrator of the principles of arbitration on the adversarial nature and equality of the parties provided for in article 5 of the Law, and are the basis for the cancellation of the award.

By the decision of the Judicial Board for Civil Cases of the Supreme Court of September 7, 2021, the ruling of the Judicial Board for Civil Cases of June 9, 2021 was canceled with the issuance of a new decision on the cancellation of the absentee decision of the Adilet Arbitration Court of June 12, 2016 against E. T. Masanova in favor of Platinum Collection LLP in the amount of 829,914 tenge.

In support of the arguments for restoring the deadline for filing a petition, the applicant indicated that the debtor became aware of the decision on December 22, 2020, upon reviewing the materials of the enforcement proceedings, a copy of the absentee decision was received on January 13, 2021.The case was considered on the merits in the absence of the defendant.

At the same time, there is no reliable information about sending or handing over a copy of the arbitral award to the defendant in the case file.

The Court of Cassation considered that the stated circumstances prevented the timely filing by the applicant of a petition for the annulment of the arbitration award and limited the defendant's ability to defend his rights and legitimate interests, and therefore the time limits for filing the petition were restored.

It follows from the descriptive part of the award that Masanov A.T. did not appear at the arbitration hearing, despite proper notification of the time and place of the case, therefore, a ruling was issued on the examination of the case in absentia.

Meanwhile, the materials of the arbitration case do not contain information about the defendant's notification of the appointment of arbitration proceedings, the time and place of consideration of the case, the delivery of a copy of the claim and documents attached to it, or the receipt by the defendant of other court notices.

At the request of the appeals board dated May 18, 2021, the civil case was not provided by the arbitration court, citing its absence from the archive.

Under such circumstances, E.T. Masanova's arguments about improper representation as a party to the arbitration case and the unjustified consideration of the case without her participation by the court were not refuted, therefore they deserved attention.

Arbitrations do not always have the opportunity to submit an arbitration case at the request of the court, referring to its absence in the archive.

In such cases, it would be right if the courts would assess this circumstance in favor of the applicants, since in the absence of an arbitration case, the arguments about improper notification cannot be refuted.

At the same time, the courts should keep in mind that, according to paragraph 6 of Article 8 of the Criminal Code, no one has the right to take advantage of their unfair behavior.

When considering petitions for the annulment of arbitral awards on the grounds of improper notification, courts should, among other things, assess whether there was any evasion by the party from receiving the notification or the arbitration award, that is, evaluate the behavior of the party from the point of view of principles of good faith and fairness in order to exclude abuses by unscrupulous participants in the arbitration proceedings.

For example, the arbitration decision of Central Kazakhstan Permanent Arbitration LLP dated March 25, 2021 No. 1/1-303 satisfied the claim of Microfinance Organization Everest Finance LLP to A.Zh. Kzhuldybaev for debt collection in the amount of 2,557,019 tenge.

Zhuldybaev A.Zh. appealed to the court with a motion to cancel the said decision, arguing that he was not properly notified of the day and time of the hearing of the case, since he did not receive an SMS message and a summons letter.

By the ruling of the Judicial Board for Civil Cases of the Karaganda Regional Court dated June 3, 2021, the request was denied.

The court, having requested and studied the arbitration case, came to the conclusion that there should be a notice of the time and place of the arbitration session, since failure to appear at the post office to receive the notice and failure to notify the postman to appear for postal correspondence cannot be considered as improper fulfillment by the arbitrator of obligations to provide proper notification.

In this case, there was unfair behavior by the party who refused to receive notification of the arbitration proceedings.

Sardarov E.S. appealed to the court with a motion to overturn the decision of the International Arbitration Court for the West Kazakhstan region dated April 10, 2019 on the recovery of debts and arbitration fees from him in favor of Kdryz Loans LLP (hereinafter referred to as LLP). He motivated the demands by the fact that he did not receive notification of the arbitration meeting, as he lost his phone, and changed his place of residence in connection with the sale of the house by his son.

By the ruling of the court No. 2 of the city of Uralsk, West Kazakhstan region, on March 2, 2020, the petition was denied.

The court requested an arbitration case, the study of which established that the SMS notifications sent to the applicant's mobile phone number +7708-xxxxxxxxxx specified in the loan agreement were delivered to the applicant on March 15, 2019 and April 3, 2019, which is confirmed by the screenshots of the notification.

The court also noted that the parties provided for a written notification of the change of address and mobile phone number in the contract. In case of fulfillment of this requirement, SMS messages are sent and considered duly delivered to the address specified in the contract.

The applicant did not provide the court with evidence confirming the LLP's notification of the loss of the phone and the change of address, therefore, the court recognized the applicant's arguments about the improper notification of the hearing of the arbitration case as untenable.

If the court refuses to satisfy the request for annulment of the arbitration award, it must be established that the arbitration notice:

sent to the proper addressee;

received by the person to whom it is addressed;

it was sent in such a way that the party had the opportunity to prepare for arbitration (the deadline may be stipulated by agreement of the parties or the rules of permanent arbitration, if it is not explicitly provided for, then it should be reasonable, for example, by analogy with Article 277 of the Civil Code).In order to cancel an arbitral award under subparagraph 4) of paragraph 1 of article 52 of the Law, the party filing a motion for cancellation must provide evidence that the arbitral tribunal or the arbitration procedure:

did not comply with the agreement of the parties;

they did not comply with the Law.

This rule of law applies if the court finds a violation of the arbitration procedure provided for by the agreement of the parties or the requirements of the Law.

The courts should keep in mind that an arbitration award on the above grounds may be set aside if a significant violation has been committed.The Law does not specify what can be attributed to significant violations, therefore, in each specific case, the court itself determines and determines whether the arbitration allowed a significant violation or not.

At the same time, when assessing violations, the courts must take into account the provisions of article 6 of the Law, which provides that a party who knows that any provision of this Law or any requirement of the arbitration agreement has not been complied with, nevertheless continues to participate in the arbitration proceedings without objecting to such non-compliance within the time limit set by the arbitration regulations. for this purpose, it is considered to have waived its right to object.

This rule of law corresponds to the UNCITRAL Model Law on International Commercial Arbitration (United Nations Commission on International Trade Law, June 21, 1985) (with amendments adopted on July 7, 2006) (hereinafter referred to as the UNCITRAL Model Law). Similar provisions are laid down in articles 5,6 of the European Convention.

Such a waiver of the right to object is effective not only in relation to the arbitration proceedings themselves, but also in the course of court proceedings on the issue of revocation or recognition and enforcement of the award made as a result of the arbitration proceedings.

This means that in such cases, a party no longer has the right to invoke a violation of the arbitration procedure in support of its position, both during further arbitration proceedings and during the hearing of the case in court.

In judicial practice, this rule of law is practically not applied by the courts.

However, there are isolated examples of the application of the provisions of article 6 of the Law.

For example, by the decision of the judicial board for civil Cases of the Supreme Court dated November 3, 2020, the ruling of the Judicial board for civil cases of the West Kazakhstan Regional Court dated March 20, 2020 was canceled, while the ruling of the specialized district Economic Court of the West Kazakhstan region dated February 7, 2020 remained in force.

Atyrau Construction Project LLP appealed to the court with an application for cancellation of the Arbitration decision dated December 27, 2019, which satisfied the claim of DanAi-Realty LLP against Atyrau Construction Project LLP for recognition of works and an act of completed works in the amount of 84,808,845 tenge.

The ruling of the specialized interdistrict Economic Court of the West Kazakhstan region dated February 7, 2020 denied the application.

By the ruling of the Judicial Board for Civil Cases of the West Kazakhstan Regional Court dated March 20, 2020, the ruling of the court of first instance was canceled. The application of Atyrau Project LLP has been satisfied. The Arbitration decision of December 27, 2019 was overturned. The Court of Appeal concluded that the arbitration award did not comply with the requirements of article 47 of the Law, and the arbitration resolved the dispute under its jurisdiction, in the absence of an arbitration agreement between the parties.

The Court of Cassation found that on November 8, 2019, the claim of DanAi Realty LLP was accepted for arbitration, sent to Atyrau Project LLP, which provided a response to the claim. During the arbitration proceedings, the arbitrator clarified the rights and obligations of the parties, including the right to object. The representative of the defendant is familiar with the Rules of International Arbitration of the West Kazakhstan region, approved by the Minutes of the general meeting of participants of the International Arbitration of the West Kazakhstan Region LLP dated November 30, 2014 (hereinafter referred to as the Rules), about which there is a corresponding receipt in the materials of the arbitration proceedings. Moreover, Atyrau Construction Project LLP filed a counterclaim with the arbitration court declaring the contract invalid, which was subsequently revoked.

According to paragraph 2 of article 20 of the Law, a party has the right to declare that the arbitral tribunal does not have the authority to consider a dispute transferred to its resolution after it submits its first statement on the merits of the dispute.

At the same time, none of the parties to the arbitration proceedings were raised or provided with objections.:

against arbitration proceedings due to the invalidity of the arbitration agreement;

on the absence of the arbitration authority to consider the dispute referred to it.

Thus, in this case, the court of appeal did not apply the provisions of article 6 of the Law. Also, the requirement of paragraph 2 of article 9 of the Law was not taken into account, which stipulates that an arbitration agreement is also considered concluded in writing if it is concluded by exchanging a claim and a response to the claim, in which one of the parties confirms the existence of an agreement, and the other does not object to it.

According to paragraph 2 of article 52 of the Law, an arbitration award is revoked by a court regardless of the provision of evidence if:

The arbitration award contradicts the public policy of the Republic of Kazakhstan;

The dispute on which an arbitration award has been rendered cannot be the subject of arbitration proceedings under the legislation of the Republic of Kazakhstan.

The circumstances provided for in paragraph 2 of article 52 of the Law, if established by the court, are an unconditional basis for the annulment of the court's decision, regardless of the fact that the party who petitioned the court for the annulment of the arbitral award does not refer to this ground.

A dispute on which an arbitral tribunal has rendered an arbitral award, but it cannot be the subject of arbitration under the legislation of the Republic of Kazakhstan, can be attributed if, for example, there is no arbitration agreement (paragraph 1 of Article 8 of the Law), there is no consent of an authorized body to resolve the dispute by arbitration (paragraph 10 of Article 8 of the Law), if the arbitration agreement is invalid (paragraph 4 of Article 8 of the Law).

Subparagraph 1 of Article 2 of the Law defines the public order of the Republic of Kazakhstan as the basis of law and order, enshrined in the legislative acts of the Republic of Kazakhstan.

Thus, from this rule of law, it can be concluded that the concept of public order is not disclosed, its application is left to the court, that is, the compliance of the arbitration award with the public order of the Republic of Kazakhstan is checked by the court.

The use of the institution of public order is possible in exceptional cases when the enforcement of an arbitration award encroaches on the foundations of the rule of law of the Republic of Kazakhstan. In this regard, the courts, when revoking an arbitration decision on this basis, should be motivated by which specific public order has been violated and in what way.

The definition of public order is also given in paragraph 1 of Article 1090 of the Civil Code, according to which foreign law is not applied in cases where its application would contradict the fundamentals of the rule of law of the Republic of Kazakhstan (public order of the Republic of Kazakhstan).

During the generalization, it was found that the courts, checking the compliance of an arbitration award with the public order of the Republic of Kazakhstan, are correctly oriented towards the fact that the arbitration award is subject to cancellation if the consequences of its execution may be incompatible with the foundations of the rule of law.

The following cases can be cited as an example.

By the decision of the permanent arbitration at the Central Kazakhstan Permanent Arbitration LLP dated August 27, 2021, Sh.Sh.Sshershkhanova in favor of Microfinance Organization Everest Finance LLP (hereinafter referred to as LLP), debts in the amount of 1,141,942 tenge, arbitration fee - 34,258 tenge, postage - 800 tenge were collected.

It follows from the case file that an agreement was concluded between LLP and Sharshkhanov Sh.Sh., under the terms of which the latter was provided with a micro-loan in the amount of 400,000 tenge, with an interest rate of 45% per annum, for a period of 12 months, on terms of urgency, payment and irrevocability, for a tourist trip to the Maldives (hereinafter referred to as the Agreement).

In accordance with clause 1.8 of the Agreement, the borrower, without additional requests from the lender, must, within 30 calendar days from the date of receipt of the microcredit, provide him with documents confirming the fact of the intended use. If the conditions for the purpose of the microcredit are not fulfilled, the borrower is obligated to repay the loan amount received along with the payments due within the next 3 days.

Subsequently, the parties entered into an agreement to transfer all disputes arising from the terms of the Agreement to arbitration.

The arbitration agreement has been signed, has not been challenged or cancelled.The LLP, referring to the defendant's failure to provide documentary evidence of the intended use of the microcredit and the delay in the payment of monthly payments, filed a claim with arbitration, which satisfied the claim.Sharshkhanov Sh.Sh. appealed to the court with a petition for the annulment of the arbitration award, arguing that the contested arbitration decision violated the principles of law and order enshrined in the legislative acts of the Republic of Kazakhstan.

By the ruling of the Judicial Board for Civil Cases of the Karaganda Regional Court dated November 10, 2021, the request was denied.

While upholding the judicial act issued in the case, the cassation board, as well as the court of appeal, concluded that the negotiated arbitration award does not infringe on the fundamental rights and principles of society and the state, the foundations of law and order (public order).The consideration of a dispute in arbitration does not contradict the principles of law and order, since the category of public order is applied only when a decision is not made, namely, the consequences of its execution may be incompatible with the principles of law and order.

In this case, the award of a high penalty to the defendant is not a violation of public policy, since it affects the private interests of the debtor and the creditor parties to the Contract, and is actually aimed at reviewing the arbitration award on its merits, which, based on the specifics of the arbitration, is unacceptable and unacceptable.

In another case, the decision of the permanent Arbitration Court "International Arbitration of the Eurasian Economic Area" dated June 25, 2021 satisfied the claim of Kolesnikov D.V. to Kazakhtransstroy LLP (hereinafter referred to as the partnership) for the obligation to conclude a contract for the sale of real estate.

N.A. Satbergenov (the third party) filed a petition with the court, arguing that the Arbitration decision violated his rights as a recoverer.

By the ruling of the judicial board for Civil Cases of the Almaty City Court dated October 25, 2021, the petition was granted, the arbitration decision was canceled.

The Court of Appeal found that judicial acts that had previously entered into force resolved the issue of collecting the company's assets in favor of N.A. Satbergenov. the amount of debt in the amount of 411,348,391 tenge and court costs, followed by an investigation of the disputed property. These issues were considered by the courts of general jurisdiction before the contested arbitration decision was rendered, as the company was aware of. However, the latter did not notify the arbitration of the earlier decisions.

In this regard, the court of appeal reasonably granted the petition of N.A. Satbergenov, since the decision of the arbitration violated and contradicted the public policy of the Republic of Kazakhstan.

In this case, the court came to the correct conclusion that the earlier judicial act was subject to mandatory execution (Article 21 of the CPC), it has priority, and the later arbitral award contradicted the public order of the Republic of Kazakhstan, i.e. the court motivated what it saw as a violation of public order.

The court of cassation agreed with such conclusions.

At the same time, it is impossible to develop at the legislative level a definite list of all the principles and norms of law that would fully disclose the concept of "public order", since this concept is very "flexible". Therefore, each case must be thoroughly substantiated by the court in each specific case. No offense can be reduced to a "violation of public order."

For example, by the ruling of the judicial board for civil Cases of the Almaty City Court dated September 11, 2019, the ruling of the court of first instance was canceled and the time limit for appealing the arbitration award of the international arbitration Court "IUS" dated May 17, 2019 was restored to the applicant of Asia Munai Service LLP. The decision has been reversed.

The Court of cassation overturned the ruling of the court of appeal and upheld the judicial act of the first instance by the fact that an arbitration award can be recognized as violating public order of the Republic of Kazakhstan only if, as a result of its execution, actions are committed that are either directly prohibited by law or are detrimental to the sovereignty or security of the state, affecting the interests of large social groups.

The applicant did not provide such evidence in court, since in this case the subject of the proceedings in the International Arbitration "IUS" was a commercial dispute between two Kazakhstani private commercial enterprises. The claims of the parties considered by the arbitration are exclusively private law and are related to the fulfillment of contractual obligations. The parties to the dispute are residents of the Republic of Kazakhstan, on the territory of which the arbitration decision will be executed.

Therefore, the conclusion of the court of appeal that public order was violated when making the arbitration decision is untenable.

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