Labor Disputes Are Not Subject to Arbitration
The dispute is not subject to arbitration under the legislation of the Republic of Kazakhstan (subparagraph 2) of paragraph 2 of Article 52 of the Law on Arbitration).
Pursuant to paragraph 2 of Article 24 of the Constitution of the Republic of Kazakhstan (hereinafter – the Constitution), everyone has the right to working conditions that meet safety and hygiene requirements, to remuneration for work without any discrimination, and to social protection against unemployment.
Thus, the right to work and to receive remuneration for such work is protected, inter alia, as a constitutional right.
Arbitration does not form part of the system of courts established by the Constitution (relevant clarifications are provided in paragraph 2 of the regulatory resolution).
Pursuant to subparagraph 21) of paragraph 1 of Article 1 of the Labour Code, labour relations are relations between an employee and an employer arising in the exercise of the rights and obligations provided for by the labour legislation of the Republic of Kazakhstan, agreements, employment and collective agreements, and acts of the employer.
Under subparagraph 1) of paragraph 1 of Article 616 of the Code of the Republic of Kazakhstan “On Taxes and Other Obligatory Payments to the Budget” (the Tax Code), plaintiffs in claims for recovery of remuneration for work and other claims related to employment activities are exempt from payment of the state duty in courts.
Paragraph 5 of Article 8 of the Law on Arbitration provides that, by agreement of the parties, disputes arising from civil-law relations between individuals or legal entities may be referred to arbitration.
The list of disputes not subject to arbitration is provided for in paragraphs 8, 9 and 10 of Article 8 of the Law on Arbitration. This list is not exhaustive.
Chapter 1 of the Civil Code contains provisions governing civil-law relations.
Paragraphs 1 and 3 of Article 1 of the Civil Code provide that civil legislation regulates commodity-money and other property relations based on equality of participants, as well as personal non-property relations connected with property relations. Civil legislation applies to labour relations possessing the characteristics specified in paragraph 1 of Article 1 of the Civil Code only where such relations are not regulated by labour legislation.
Therefore, labour legal relations do not constitute civil-law relations and, accordingly, cannot be subject to arbitration. Courts should set aside such arbitral awards and refuse recognition and enforcement of arbitral awards on the grounds provided for by subparagraph 2) of paragraph 2 of Article 52 and subparagraph 2) of paragraph 1 of Article 57 of the Law on Arbitration.
At the same time, there have been cases where arbitral tribunals have considered disputes arising from labour relations.
For example, by an arbitral award of the Permanent Arbitration Court of Astana dated 14 November 2023, the claims of D. and U. against LLP “A” for recovery of wage arrears were granted. The respondent was ordered to pay D. wage arrears in the amount of KZT 20,700,000 and KZT 69,000 in arbitration costs paid by D. upon filing the claim with the arbitration; U. was awarded wage arrears in the amount of KZT 13,500,000.
In considering the labour dispute, the arbitral tribunal referred to the fact that, under the arbitration agreement dated 13 November 2023, the parties had agreed to refer the dispute that had arisen to the Permanent Arbitration Court of Astana, with I. appointed as the arbitrator.
By a ruling of the Civil Cases Judicial Panel of the Astana City Court dated 5 June 2025, the respondent's application to set aside the arbitral award was dismissed on the grounds that the arbitral award did not contradict the public policy of the Republic of Kazakhstan and that the dispute in respect of which the arbitral award had been rendered could be subject to arbitration under the legislation of the Republic of Kazakhstan, since the parties had agreed to resolve the dispute through arbitration.
However, the appellate court failed to take into account that, pursuant to the above-mentioned legal provisions, labour disputes are not subject to consideration by arbitral tribunals.
Furthermore, it follows from the case materials that, when applying to the arbitration, the plaintiffs paid an arbitration fee of KZT 69,000 for consideration of the claim, whereas the State has provided, for this category of disputes, a benefit whereby plaintiffs are exempt from payment of the state duty when applying to courts.
Another example concerns a case in which the Permanent Arbitration Court of Almaty rendered an award partially granting the claim of LLP “G” against Zh. for recovery of the amount of damage caused by an employee in the performance of employment duties.
By a ruling of the Civil Cases Judicial Panel of the Almaty City Court dated 13 February 2024, the arbitral award was set aside on the grounds that the dispute could not be subject to arbitration under the legislation of the Republic of Kazakhstan.
As follows from the arbitral award, on 1 June 2022, the parties entered into an employment agreement under which the respondent was employed as a coordinator in the marketing division of the non-alcoholic beverages business of LLP “G”.
On the same day, the parties entered into an agreement on full individual material liability, under which the respondent assumed full material liability for ensuring the safekeeping of the material assets and documents entrusted to her.
Pursuant to subparagraph 1) of paragraph 8 of Article 123 of the Labour Code, an employee shall bear material liability for the full amount of damage caused to the employer in the event of failure to ensure the safekeeping of property and other assets entrusted to the employee under a written agreement assuming full material liability.
Issues concerning the material liability of the parties to an employment agreement are governed by the provisions of the Labour Code.
The agreement on full material liability entered into between “G” and Zh., as expressly stated in the agreement itself, constituted an annex to the employment agreement.
Accordingly, it was established that the relationship between LLP “G” and Zh. constituted an employment relationship. Therefore, the appellate court correctly concluded that a dispute between an employee and an employer cannot be subject to arbitration.
The court correctly applied subparagraph 2) of paragraph 2 of Article 52 of the Law on Arbitration, since the challenged arbitral award had been rendered in a dispute that could not be subject to arbitration under the legislation of the Republic of Kazakhstan.
However, the conclusions concerning the invalidity of the arbitration clause were erroneous, since under the Civil Code, transactions are void only where they are expressly declared void by the Civil Code itself or by other laws. Article 8 of the Law on Arbitration contains no express provision declaring an arbitration clause void.
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