In the absence of a treaty, Kazakhstan will not recognize or enforce judgments of the PRC court. Both the PRC and Kazakhstan, however, are parties to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). By virtue of the Convention, Kazakhstan courts recognize awards issued by foreign arbitral tribunals (including CIETAC).

Article V.1(e) of the Convention allows competent authorities of any member state (which includes Kazakhstan) to set aside an arbitral award issued outside such member state if the award was made under its law. Also, recognition and enforcement of such award in other member states in this case may be refused at the request of a party against whom the award is invoked if that party furnishes proof that the award was so set aside.

The Convention leaves regulation of grounds for setting aside an award to national legislation. The underlying logic of Article V.1(e) is to let the judges of the country of governing law have a final say in case an arbitral tribunal incorrectly applies the rules of domestic legislation and renders an award in breach of some basic legal principles of the country whose law applies.

Kazakhstan law does not allow the challenge of an arbitral award simply on a point of law. The Kazakhstan Law "On International Commercial Arbitration" ("Law") provides only a limited number of grounds for Kazakhstan court to set aside an arbitral award:

• A party to arbitration agreement was found legally incapable by a competent court, or the arbitration agreement is invalid under the law to which it was subjected by the parties;

• A party to arbitration was not duly notified of appointment of an arbitrator or of arbitration or for other good reason could not provide its explanation;

• The award was issued on a dispute that does not fall within the scope of arbitration agreement or contains decision on issues that exceed the scope of arbitration agreement or the award exceed competence of arbitral tribunal;

• The competent court finds that the award contradicts public order of Kazakhstan or the subject matter of the dispute may not be considered in arbitration.

The Law also sets forth procedure for recognition and enforcement of foreign arbitral awards and allows courts to refuse to recognize and enforce an award on same grounds as setting an award aside.

The application of the Law, however, is limited to governing (i) relations which arise in the course of activity of international commercial arbitration courts on the territory of the Republic of Kazakhstan", as well as (ii) procedure and terms of recognition and enforcement in Kazakhstan of international arbitral awards.

As the procedure for setting aside an award is distinguished from its recognition and enforcement (or refusal thereof), the Law does not govern procedure and terms of setting aside an award which was issued outside the Republic of Kazakhstan. Article 426-1 of the Civil Procedure Code ("Code") supports this approach and authorizes Kazakhstan courts to set aside arbitral awards "at the place of resolving the dispute", that is, only if the dispute was resolved in Kazakhstan. Thus an award issued by CIETAC or LCIA outside of Kazakhstan and under Kazakhstan law may not be set aside in Kazakhstan by application of the Law regardless of whether it contradicts Kazakhstan's public order or exceeds arbitral agreement, or whether a party to arbitration agreement is legally incapable.

Such award can still be refused recognition and enforcement in Kazakhstan, but defendants would not be protected against enforcement of the award if it has property in other member-states of the Convention. Thus, where the arbitral tribunal has incorrectly understood and applied Kazakhstan law (including to decision on its own competence) and issued an award in contradiction of some of Kazakhstan's underlying legal principles, Kazakhstan law would not protect the defendant to the level offered by the Convention for such a purely technical reason as the seat of arbitration.

Ironically, if parties to a dispute agree that a seat of arbitration shall be Kazakhstan, CIETAC or LCIA awards made in Kazakhstan would fall within the scope of the Law and may be set aside by a Kazakhstan court on the grounds specified in its Article 31.

Arguably, the courts should be able to look beyond the formality of the seat of arbitration. After all, according to the Code, the task of Kazakhstan's civil dispute resolution is to fortify Kazakhstan's public order.

Kazakhstan courts have not yet dealt with the request to set aside an award made outside of Kazakhstan. The odds appear to be, the courts would be prone to take the path of least resistance and find that such an award may not be set aside. There may be a change in what we consider a legislative lapse in the future. Today, however, Kazakhstani defendants prefer not to subject their foreign assets to the risk of seizure and choose to pay the awards despite, as it happens from time to time, a clear breach by such awards of Kazakhstan's public order and exceeding of arbitration agreement.