MWP'S DISPUTE RESOLUTION PRACTICE

Kazakhstan 2016 | EXECUTIVE GUIDE | REVIEW: LEGAL

Michael Wilson & Partners, Limited / Assel Kulisheva on the growth of its Dispute Resolution Practice and helping clients in Central Asia and the Caucasus weather the current economic storm.

STORMY TIMES

The Kazakh economy retains a positive long-term outlook, with vast energy and mineral wealth that will remain in global demand in the decades to come, and a history of strategic investment by the state that is beginning to bear fruit in diversifying Kazakhstan's economy away from reliance solely on those traditional assets. That said, while demand remains healthy in the energy and mining sectors, since 2014 there has been a significant drop in prices and, correspondingly, in earnings, which is inevitably having an effect on the level of commercial and consumer demand in the economy as a whole. This in turn percolates through to all areas of business. Added to this has been the equally inevitable devaluation of the Kazakh tenge since its exchange rate was unpegged from the dollar and floated against worldwide currencies in August 2015. Although the floatation has had the hoped-for positive impact on exports, GDP is forecast to be only 0.5% in 2016, well down from the 4.1% of 2014 and 6% of 2013. This has added to the sense of uncertainty in the business community and increased the frequency of breaches in commercial contracts, and the reluctance to enter into them in the first place.

The Legal Markets

In the legal context, a marked result of the downturn has been a lull in banking, finance, and transactional work, with less financing, M&A, and associated due diligence and other work, while the incidence of disputes and their associated work has increased. In times of economic uncertainly, full-service law firms will typically shift the focus of their resources away from financing and transactional work toward litigation, debt recovery, restructuring, and insolvency. This partly reflects a reaction to the greater volumes of such work coming through their doors, but also the strategic decisions taken at management level to go out and get more of it. Apart from this somewhat knee-jerk survival reaction, however, legal actors in Kazakhstan and Azerbaijan have also been able to take advantage of their countries' positions as leading members of the CIS, not affected by any of the sanctions currently imposed against Russian and Ukrainian individuals and entities.

Region-Leading Expertise

Michael Wilson & Partners, Ltd. (MWP) was established in Almaty in 1998, building on the experience of its CEO, Michael E. Wilson, an English and Australian-qualified solicitor who rose to be a leading partner at the global law firm Baker & McKenzie (B&M). He established B&M's Major Project Practice Group globally, from a London base, and all of B&M's offices in the Central Asia and Caucasus Region (Almaty/Astana/Baku, Bishkek, and Tashkent) in the period of 1994-1998, thereby creating the most successful group of new offices from scratch in the history of B&M. For almost 20 years, MWP has been successfully representing clients in a range of contentious and non-contentious work in Central Asia and the Caucasus, with its focus on Kazakhstan, which accounts for 82% of the legal market in Central Asia. In 2003, MWP established an office in Baku, from which it has been able to focus on work generated by Azerbaijan's booming economy, but also other projects in the Caucasus and as far afield as Ukraine. MWP's existing and past clients include AXA, Bentley International Oil, BP, Bloomberg, Berkshire Hathaway, Bank of America, Merrill Lynch, Citigroup, Credit Suisse, Dell Computers, Deutsche Bank, ENI, Falck Group, Goldman Sachs, Eurasian Bank, HSBC Holdings, JSC NC Kasmunaigas, MasterCard Europe, Motorola, Marsh & McLennan, Nokia, Rio Tinto, Tele2, and the governments of Kazakhstan and Kyrgyzstan. In addition to its legal services, MWP provides many companies with strategic and tactical consultancy services to maximize the efficiency and profitability of their doing business in Central Asia and the Caucasus.

MWP's Dispute Resolution Practice

MWP's Dispute Resolution Practice has expanded in recent years to encompass a diverse range of curial and arbitral work around the globe. Expertise is offered in the areas of traditional litigation, international and regional arbitration under the ICC, UNCITRAL, LCIA, AAA, ICE, ICSID and ad hoc rules, international and regional mediation, and IP anti-counterfeiting and enforcement. MWP's expertise extends to associated areas of asset-tracing and asset recovery. In contrast to the regional expertise of MWP's other services in Central Asia and the Caucasus, its disputes practice draws on years of experience in the leading common law jurisdictions of the world, including the UK, the US, Australia, New Zealand, and Canada, as well as offshore in the BVI and Bahamas, and in the emerging quasi-common law jurisdictions of the UAE and Bahrain.

MWP is now actively expanding its Dispute Resolution Practice with the addition of resources to match its region-leading M&A, banking, financial services, corporate, commercial construction, energy, and mining practices. MWP is able to advise at all stages of dispute resolution: from drafting the relevant contractual clauses, to an initial assessment of the merits of a claim or defense and litigation and arbitration options, drafting statements of case and skeleton arguments, and acquiring evidence, to the selection of the most appropriate leading counsel to argue esoteric points of law at the point where curial and arbitral actions meet—in anti-suit injunctions. MWP also has ample experience of having foreign judgments and awards recognized and enforced in the state courts of the CIS. MWP is able to offer this advice and draw on this experience in a way that best ensures the immediate and long-term business priorities of its clients and their wider relationships. The disputes team fielded by MWP includes English, Russian, Kazakh, and Kyrgyz-qualified lawyers with rights of audience in several jurisdictions, many of whom hold master's degrees from leading Western universities, and all of whom are able to advise and advocate, both orally and in writing, in English.
MWP also has substantial experience litigating in the Kazakh courts, including hearings in the Supreme Court of the Republic of Kazakhstan, and is able to advise both regional and international clients on using these forums. Occasionally international clients will be drawn into litigation in the Kazakh courts, which they would otherwise have sought to avoid as venues; however, the Kazakh courts also continue to develop and modernize their codes, procedure, and focus on the independence of the judiciary in line with international best practice, and thereby slowly become more attractive venues for dispute resolution themselves. Several MWP members sit on the respective drafting committees set up by the Kazakh government to reform its tax, subsoil-use, and other codes and procedure. A key priority of Kazakhstan's legislative drafting work is to improve the options available to clients for arbitration, most notably in the context of a planned Astana International Finance Centre, which will have its own legal system based on the principles and rules of English law and its own two-tier court system to apply these laws. It is expected that foreign judges and arbitrators will be invited to sit in these courts and tribunals. Eventually there will be a strong legal architecture in place for settling disputes in the CIS region, of which MWP will be part.

Disputes Work Leaving The Region

More broadly, MWP believes that the Central Asian and Caucasus legal markets are ripe for the expansion of its disputes practice. This reflects not only the strained economic times being felt here, but also the fact that such a high volume of work arising in the region continues to go “offshore” to be managed by teams in London, New York, Moscow, and elsewhere. Sending work offshore in this way has a number of disadvantages for businesses operating and involved in disputes in the region. First, there are the prosaic problems of preparing for litigation or alternative forms of dispute resolution at distance and given the time-zone differences, because, even with the aid of modern communications, the problems associated with document assessment and transmission, conferencing and negotiation, and other procedural meetings will be significant and costly. More importantly, however, the work often also ends up being directed by partners and teams with no particular regional expertise or feel for the subtleties of business relations in the region, including an appreciation of the need for face-to-face contact with business and government. MWP estimates that, in 2014, the vast majority of the dispute resolution work naturally arising in the region, with a total value of many millions of dollars, was managed and largely carried out elsewhere. 95% of Kazakhstan's legal market is composed of the revenues of its top 20 firms, many of which do not manage all the litigation component of their work in the country, and bill accordingly for taking it offshore. Yet at the same time, Central Asia and the Caucasus continue to become more integrated into the global economy and foreign direct investment into its constituent countries continues to increase (though with the bulk—70%—going to Kazakhstan, according to the OECD for 2013), meaning that international and regional companies are missing the opportunity to have much of their disputes work managed more efficiently from work in the region.