When considering the request for annulment of the arbitral award, the court went beyond its competence, assessing the legality of the decision and reviewing its merits.
The company "J" applied to the court with a motion to overturn the decision of the Arbitral Tribunal of the Kazakhstan International Arbitration Court in case No. 18\2015\AR dated April 6, 2016 on the recovery of the amount of the double deposit and the penalty. By the ruling of the specialized interdistrict Economic Court of Almaty dated June 27, 2016, the petition of the Company "J" was satisfied. The decision of the Arbitration Panel of the Kazakhstan Arbitration Court dated April 6, 2016 on the claim of Company "H" against Company "J" for the recovery of the amount of the double deposit and the penalty was canceled. By the ruling of the Judicial Board for Civil Cases of the Almaty City Court dated August 10, 2016, the ruling of the court of first instance remained unchanged. The Judicial Board for Civil Cases of the Supreme Court overturned the judicial acts of local courts and dismissed the petition of J Company for the annulment of the decision of the Arbitral Tribunal of the Kazakhstan International Arbitration Court in case No. 18\2015\AR dated April 6, 2016 on the following grounds. According to paragraph 1 of Article 53 of the Law of the Republic of Kazakhstan "On Arbitration", a petition for the annulment of an arbitration award is filed with a local court in accordance with the norms of the civil procedure legislation of the Republic of Kazakhstan.
Part 1 of Article 464 of the CPC stipulates that such a petition may be filed by the parties to the arbitration proceedings, third parties not involved in the case, but in respect of whose rights and obligations the arbitration has decided on the grounds provided by law, within one month from the date of receipt of the award. The Court of first instance, overturning the decision of the arbitration court of April 6, 2016, referred to violations of the rule of law and public order of the Republic of Kazakhstan. The Board of Appeal of the Almaty City Court also agreed with these conclusions of the court. The judicial board considered these conclusions of the local courts to be untenable. In particular, when canceling the award, the courts proceeded from the requirements of subparagraph 5) of paragraph 2 of Article 52 of the Arbitration Rules of the Kazakhstan International Arbitration, according to which the decision may be appealed by the parties to a competent court in accordance with the procedure established by the civil procedure legislation of the Republic of Kazakhstan, if the decision contradicts the principle of legality. Meanwhile, the local courts did not take into account that the rules of the Kazakhstan International Arbitration are not a normative act or an international treaty, therefore, the rules of the said rules cannot be accepted by the court as a basis for verifying the legality of the arbitration decision. Such grounds for revocation of the decision are not provided for by the Law on Arbitration. During the consideration of the petition for the annulment of the arbitration award, J also failed to provide evidence confirming that the contested decision, made in a dispute between two foreign commercial companies, contradicts the public policy of the Republic of Kazakhstan. Thus, Company "J" is a resident of Panama, and Company "H" is a resident of the People's Republic of China. The arbitration award will be executed outside the Republic of Kazakhstan. Consequently, the arbitration award in no way encroaches on the foundations of the rule of law (public order) of the Republic of Kazakhstan. In such circumstances, the board found the arguments of the petition justified that the local courts, when considering the petition of Company "J" for the annulment of the arbitration award, went beyond their competence, assessing the legality of the decision and reviewing its merits. Considering that the arguments of the parties had been fully investigated by the courts of the first and appellate instances, and therefore the collection and additional verification of evidence were not required, but they made an error in the interpretation and application of the rules of procedural law, the judicial board quashed the contested judicial acts with a new decision rejecting the petition of Company "J" to cancel the arbitration solutions.
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