Introduction
In his insightful article A Golden Age of International Commercial Arbitration in Central Asia (2021), Elijah Putilin heralds a new age for the Central Asian countries as a ‘seat’ or host for the resolution of international legal disputes in the commercial sphere. The last decade in the region has drawn attention from international lawyers due to the foundation of a series of arbitration institutions, from the Tashkent International Arbitration Centre (TIAC) in Uzbekistan and the Astana International Financial Centre (AIFC) in Kazakhstan to the more recent late-2023 re-establishment of the Central Asian Court of International Arbitration (CACIA) in Bishkek, the Kyrgyz capital, that has also become host to Arbitration Days, events for the international legal community, in the same period.
Central Asian states pursue the establishment of international arbitration institutions in part in the hope that, by providing a forum for commercial dispute resolution, they can offer security and legal expertise to foreign investors. Said investors have shown increased interest in the region as it has increasingly healed from the hangover of recent Soviet control and benefitted from the Chinese Belt Road Initiative (BRI). Such movements also help to draw the attention of the international legal community, raising the region’s profile and so its soft power as a place which cares about crucial policy issues in the law such as environmental and social governance (ESG), the role of technological innovation, and the protection of judicial independence. Tracing this trend is a way to trace both the economic viability of the region as a site for foreign investment and the state of certain kinds of legal reform in the region.
Arbitration in Central Asia
International commercial arbitration came to Central Asia through the establishment of the Foreign Trade Arbitration Commission (FTAC) and Maritime Arbitration Commissions (MAC) in Moscow during the Soviet era. These institutions contributed to Central Asian knowledge in the area as the Soviet works on the law of arbitration applied by these institutions were passed down through Central Asian law schools and practices, so building subject matter expertise across the region. Central Asian states did not, however, exceed this inheritance: as W.E. Butler writes, “the state monopoly of foreign trade would have ensured that enterprises located on Central Asian territories did not and could not become directly involved in international commercial arbitrations as parties”. It is not until after the end of Soviet Central Asia in 1991, the hangover from which was (and is) considerable, that the legal systems of the independent Central Asian states began to mature.
Reforms such as the Uzbek Law on Investments and Investment Activity 2019 and the Tajik International Commercial Arbitration Law 2015 have begun to introduce an internationalism and commercialism to the region’s economies alongside which has come market liberalisation, subscription to bodies of international law, and engagement with the global legal sector. The nations have also formed partnerships with post-Soviet regional organisations like the Eurasian Economic Union (EEU) and Commonwealth of Independent States (CIS) and with close-by economic powerhouse China, whose Shanghai Cooperation Organisation (SCO) and BRI have contributed considerably to foreign commercial presence in the region. These partnerships have raised the region’s profile both among other nation-states and among private investors and businesses.
Much of this attention has, according to Yue-Zhen Li, been effectively leveraged alongside programmes of legislative reform on civil procedure and accession to international agreements to rapidly increase the viability of the region as a location of arbitral seats. Li notes, however, that foreign investment and approval remains unreliable for as long as the region struggles with mixed economic prospects and corrupt governance. Furthermore, some of the five countries must still overcome barriers to full ratification and membership of international norms such as UNCITRAL, the body of rules on international trade disputes, and the New York Convention, the global ruleset for enforcement of foreign judgments.
Putilin notes that the Centenary Principles produced by the Chartered Institute of Arbitrators (CIArb), the international arbitration membership and training organisation, provide an easily navigable and descriptively accurate picture of the considerations which play into the viability of various fora as ‘safe seats’ for commercial dispute resolution. The key to the success of some Central Asian nations and the failure of others, he argues, directly corresponds with the extent of their success at meeting those principles, most crucially with their membership of and compliance with international norms.
At this stage, delving into some specifics is helpful.
Kazakhstan
Kazakhstan benefits from being home to a legal sector which is particularly active in the field of commercial dispute resolution, from being the largest economy in the region, and from housing offices for many of the world’s largest arbitration law firms. The Kazakh legal profession also continues to push towards modernisation, using the European internationalist approach with a unified profession and a strong civil procedure regime as its model, making it both attractive to and in solidarity with the majority of the private international law profession. It’s also home to the Astana International Arbitration Centre (AIC), founded in July 2018, and the Kazakhstani International Arbitrage (KMA), founded in 2005, both of which are leaders in the region in institutional arbitration provision.
However, Kazakhstan’s authoritarian government — which has a history of rigged elections and hostile takeovers of rival parties – poses a threat to Westernising legal reforms. Those pushing for liberal Western-style legal reforms will share with foreign legal commentators a desire for greater certainty and transparency from Prime Minister Bektenov and his government, but whether they can expect it is unclear. The ethical dilemma of benefitting from the economic liberalism of a socially illiberal government is a familiar one to international investors, but one to which an easy answer does not exist.
Uzbekistan
Like Kazakhstan, Uzbekistan has a growing economy, a strategic location on the former Silk Road, and has seen growing attention from international law practices such as Dentons, and legal teams from ‘Big Four’ members EY and KPMG. It also possesses prevalent natural resources industries, the value of which it has sought to unlock through an ‘ambitious programme to create a more favourable environment for businesses and investors, which has had a positive impact on foreign investment’ (Dentons). Its new arbitration centre, the aforementioned TIAC, has a strong focus on foreign investment and aims to build expertise in that area – alongside technology and innovation – to gain foreign attention.
Uzbekistan has put partnerships first in its pursuit of this. In the same year as they founded TIAC, the Uzbek government opened its borders visa-free to EU citizens. This growing internationalism as part of the Uzbek approach is not slowing down either: the government has been pursuing a programme of red-tape-cutting and tax reform continuously since 2019 and have gained UNCITRAL Model Law compliant status. Further, they have established a unique joint rules framework between TIAC and the Hong Kong International Arbitration Centre (HKIAC), Asia’s leading arbitration chamber, and one of the most important in the world. The Ministry of Justice has also announced it is pursuing the establishment of an International Commercial Court for the resolution of international disputes in the country, which would mark significant progress towards international integration.
Uzbekistan’s internationalist ambitions seem to suggest a desire to compete with Kazakhstan for regional dominance in the sphere of international arbitration. The Uzbek government’s decision to go beyond the aforementioned New York Convention and UNCITRAL hallmarks towards an approach which is more interested in building international connections, and which continues to expand the institutional arbitral framework beyond the ‘national centre’ paradigm, is very ambitious and may offer potential for it to become a significant player on the global stage.
Turkmenistan
Upon the accession of President Serdar Berdymukhamedov in March of 2022, Turkmenistan finally joined and became the last Soviet state to accede to the New York Convention. That is not to say that there are not barriers left for the country to overcome, however. Most of Turkmenistan’s presence on the international stage as the location of arbitration at present are as a defendant in a slew of international trade law claims that it has been fighting consistently for years despite efforts to improve compliance and partnership with international standards. As may be expected, the existence of several international claims against a state harms its reputation, and so its chances of growth. It may therefore be reasonable to expect that Turkmenistan’s legal profession will be waiting for such heat to subside before advancing any ambitions to establish its own arbitration seat or to pass substantial legal reforms around international commercial dispute resolution.
Tajikistan
Tajikistan is the only CIS member to have not signed the ICSID Convention, has limited grounds in its Commercial Procedure Code for the denial of recognition and enforcement, and lacks in its legal profession meaningful experience with domestic and international arbitration (Steven Finizio and Kenneth Beale (2014)).
In 2015 it passed its International Commercial Arbitration Law (ICAL), which facilitates the removal of procedural barriers to cases being heard effectively. But ICAL does not amount to sufficient reform or framework to establish Tajikistan’s place on the international stage, nor can it be expected to correct for the country’s inexperience in the area. Whilst the Chamber of Commerce and Industry has shown in its 2020-21 statement that it shares the values expressed in the CIArb principles, and Putilin would suggest that this is crucial, ICAL’s potential may remain dormant without other changes.
This is because Tajikistan lacks the significant amount of international arbitration lawyers or arbitral seats seen in Kazakhstan and Uzbekistan, or the history of educational excellence in commercial arbitration seen in Kyrgyzstan. Without this, any legal reforms introduced cannot be finetuned. For that, they need to be ‘broken in’ by practitioners and judges with subject matter expertise and the opportunity to apply them in domestic cases.
Kyrgyzstan
Kyrgyzstan benefits from strong trade relationships with regional powers that have accelerated since the BRI was launched by the Chinese government in 2013, and its major exports include energy, agricultural products and construction materials, all of which are subject to considerable attention in international arbitration. Unfortunately, however, Kyrgyzstan’s economic position is not strong enough to capitalise on foreign investment and exports in the same way as its neighbours: as the second poorest country in the region, and 78th on the Heritage Institute’s economic freedom ranking, its credentials are weak compared to those of Uzbekistan and Kazakhstan in particular, and since the Covid-19 pandemic it has struggled to recover and keep up with international trends of decreasing reliance on the unsustainable natural resources on which the local economy is so dependent.
That is not to say that prospects are entirely poor, however: among the economic freedoms, Kyrgyzstan leads in trade freedom, tax burden and government spending and its markets are opening, rather than closing, despite economic hardship. These signs of liberalisation may indicate a future ability to leverage the nation’s natural minerals, which could benefit its relevance in the international arbitration scene. CACIA, founded in its current form in November 2023, does indeed focus on “international commercial affairs, energy and mineral resources” and claims “significant influence in the Shanghai Cooperation Organisation, the Eurasian Economic Union and the countries and regions of the Russian-speaking region”. Its prominent position in the region as a partner in mining investment agreements is, however mitigated by the fact of its non-ratification of the ICSID Regulation, which considerably limits its ability to attract substantial local investment on the international dispute resolution stage.
Academic commentary tells much the same story of considerable unlocked potential. Putilin notes that Kyrgyzstan’s ICC branch is one of the most active in the region, that arbitration practitioners’ expertise in the Republic is excellent, and that arbitration scholarship in Kyrgyz law schools is of some of the highest quality globally. However, there are issues. Firstly, Kyrgyzstan’s arbitration legislation is not entirely compliant with the UNCITRAL Model Law, and in particular excludes foreign and foreign-qualified lawyers from practicing. Secondly, judicial education on arbitration law is lacking, and there is no infrastructure to remedy that despite the expertise of practitioners and academics. Finally, the regulatory regime on the procedure and ethical conduct of arbitration practitioners is both limited and imprecise in its scope and needs a rework to match the higher standards now expected of other modern legal practitioners. However, as Putilin notes, “when/if there and other less vital initiatives are implemented, Kyrgyzstan will proudly enter the golden age of arbitration in Central Asia and even may be potent enough to lead the regulatory competition”.
Conclusions
Ioanna Knoll-Tudor has called the growth in Central Asian arbitration, Putilin’s ‘golden age’, the product of “an intersection of economic flux, investment influx and arbitration reform” that has been allowed for by a decrease in ICSID cases against the region, freeing up commercial centres to focus on international legal work and encourage further foreign investment. There is no doubt that investment influx and economic influx go together, and that those countries in the region who have profited most from this have been those that have liberalised their economy through tax reforms and the pursuit of modernisation despite the region’s usual reliance on industries climate change has made unreliable, such as agriculture, or unfashionable, in the case of fossil fuels.
The story when it comes to arbitration reform is more complicated: institutional and procedural changes have spread across the region in a remarkably concerted and large-scale burst of legislative activity, but the ability of some states to leverage this reform is binary: either they work, in a very ‘by-the-numbers’ way, towards the standards set by UNCITRAL and ICSID, or they don’t; either they accede to the New York Convention, or they don’t. Compliance with the principles of a ‘safe seat’ in international arbitration ultimately comes down to that more than anything else, even when abstracted through the lens of CIArb’s framework of principles.
The story of Central Asia’s ‘golden age’ is therefore in some ways a simple one. Central Asia’s momentum in gaining the attention of the international arbitration community is going to be maintained not by their ability to continually leverage arbitration-relevant domestic industries or decreasing their status as a party to investment arbitrations (even if that is what first gained them the international attention), but by state commitment to the procedural foundations of the international legal community. As is often the case in international law, it is about ‘the circle of friends’: Central Asia’s dispute resolution infrastructure has got out from under the wreckage left by the Soviet era and its immediate aftermath, but if it wishes for its commercial hubs to join London, Paris, New York, Vienna, Hong Kong and the rest as international arbitration centres it will have to do more than dust itself off. There is a game to be played, and the region’s success stories are of those countries who know how to, and want to, play by the rules.