Bar finds a lot to build on in Kazakhstan

14 May 2015

Osman Osman (25 Bedford Row)

Osman Osman is a barrister at 25 Bedford Row specialising in international anti-bribery and corruption

Last week, for the very first time, the Bar Council led a four day mission to the Kazakhstan. A group of UK specialist barristers in the fields of International Arbitration, Corporate Governance, Mediation and International Anti-Bribery and Corruption arrived in the capital Astana on the morning of the re-election of President Nursultan Nazarbayev. The backdrop for the first part of visit was Astana, the relocated capital of an aspiring nation, where internationally renowned architects have realised some of their more adventurous concepts.

The visit followed recommendations by the Foreign Commonwealth Office (FCO) and UK Trade and Industry (UKTI), and was based on the Bar Council International Team's research as to the potential of Kazakhstan for our profession.

This showed that Kazakhstan is the UK's second most significant trading partner. Both enjoy a strong mutual trade and investment relationship based on free market access, significant two-way trade and investment flows. This is matched with regular dialogue at senior levels. Consequently, the UK is one of the largest investors in Kazakhstan, usually either in second or third tier position for Foreign Direct Investment (FDI). UK exports to Kazakhstan in 2011 were circa £530 million whilst UK imports from Kazakhstan were close to £459 million. Both imports and exports are up on a year-by-year basis since 2010 with 124% rise annually between 2010 and 2013.

The significance of Kazakhstan to the UK is easily apparent, a predominantly sub-soil based economy, its economy is second strongest in the CIS, and the largest economy in Central Asia. However, with the current decline in demand for fossil fuels, it is increasingly anxious to diversify its economy which creates investment opportunities as much as legal issues which require advice and resolution. Bordering Russia, China, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan, Kazakhstan has been a significantly stable and economically strong nation. It is no surprise that President Nazarbayev has high aspirations. In 2013, on the 20th anniversary of the nation's independence he announced the "2050 Strategy" that by 2050 Kazakhstan should aim to enter the club of the "30 most developed nations in the world". With 'EXPO 2017' (Astana) around the corner, along with Almaty's hopes of securing the 'Winter Olympics 2022', the world is due to discover a great deal more about this regional economic power.

Kazakhstan's aspirations include the aim of becoming a Central Asian financial centre. This would include the presence of:

  1. an independent and internationally recognised Centre of Arbitration,
  2. a well regulated and safe financial investment sector, as well as,
  3. transparent corporate governance and open government.

One of the keystones in this policy is to allay foreign investors' fears over bribery and corruption. In 2013, Kazakhstan was ranked 50th of the most competitive economies in the world, yet disappointingly remains 126th out of 175 countries included in the 2014Corruption Perceptions Index. Other recent surveys shows that the prime problems of 'bribery and corruption'remain firmly embedded within sub-soil industries worldwide; hence it is not hard to see why Kazakhstan is keen to improve its reputation.

The Kazakh government has pledged to alleviate the millstone of bribery and corruption, which has dogged the nation's reputation. In that regard it has looked closely at the UK's Bribery Act (UKBA). Since the inception of the UKBA in July 2011, jurisdictions around the world are paying increasing attention to what has come to be regarded as one of the most stringent "Anti-bribery and Corruption" (ABC) legislations in the world. Where the US normally leads the field in regulatory law, the UKBA has left the US and its Foreign Corrupt Practices Act (FCPA) a little distance behind. With Kazakh companies keen to list in London as well as foreign investors anxious to deal with transparent partners,  this is a key area where the Bar can assist.

For Kazakh law firms the English legal system and its legal professionals are renowned for their expertise in both commercial and regulatory law. London is a seat of choice for Kazakh parties when it comes to considering the arbitration clauses of complex commercial contracts, with the London Court of International Arbitration (LCIA) being increasingly popular. Of great appeal is the English legal system's reputation for procedural and substantive fairness. Hence it was no surprise to the Bar's International Team that according to a recent survey by thePortland Group, Kazakhstan generates the second highest number of CIS cases decided in the Commercial Court in the UK. In addition there is evidence that many high value arbitrations heard in London emanate from Kazakhstan.

Astana City Kazakh

The city of Astana in Kazakhstan

A key purpose of the mission was to demonstrate the uniqueness that legal services which the independent bar has to offer. An equally important aim was to create strong and lasting ties between the Kazakh legal profession and the Bar of England and Wales to develop professional values and standards as well as the rule of law.

On Monday 27th April, following briefings at the British Embassy, and lunch with various business leaders, a full afternoon of lectures and discussion took place under the title of"International arbitration and corporate governance: as applicable to Kazakhstan".The event was fully subscribed with leading lawyers, judges, as well as, senior officials from the sub-soil industries. The 'Question and Answer' sessions were lively and engaging.

The UK specialist barristers focused in on the traditional contractual models for the sub-soil industries, namely Product Sharing Agreements (PSA), Joint Ventures (JV), Concession Contracts (CC), Service Contracts (SC) and Co-insurance Agreements (CA). It was clear that Kazakh lawyers are familiar with complex legal matters. Whilst the sessions were aided by live interpretation the majority of the attendees understand and spoke excellent English. There was a sense of energy and keenness to see Kazakhstan increase its standing in the international legal world and all seminars were well received.

The same was repeated in Almaty, the country's former elegant capital. With a population encroaching on 2 million, 40% of which are under 24, this is the commercial heart of Kazakhstan. Green, lush and sitting in the foothills of the high Tien Shan Mountains, the conference was full. Much the same as in Astana, the attendees from the main legal firms of the city were highly educated and engaging. Significant questions were posed to the speakers from issues relating 'confiscation proceedings in respect of section 7 BA act offences', through to 'contempt of court in respect of arbitral awards'. The delegation was again engaged till late at night following the event answering the complex questions of attendees.

The UK party left on Friday, with professional friendships and genuine networks created, along with mutual respect enhanced. For the future it is planned that a delegation of the Kazakh profession will visit London for further seminar and professional cooperation projects.

It is also interesting to note that with the majority of major construction work in Kazakhstan being performed by Turkish corporations there is an appetite for Kazakh lawyers to focus on enhancing links with Turkey, with British barristers adding value. The aim is to hold in Istanbul an international symposium on Arbitration, Corporate Governance, ABC and Mediation.

With such promising initiatives on the horizon it was the clear impression of my colleagues and myself that that the mission did achieve its purpose with foundations laid for the creation of long and lasting professional ties between the Kazakh legal profession and the English Bar.

Osman Osman
25 Bedford Row