Recovering international debts in Almaty — we recover money from foreign counterparties

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Recovery of international debts: court, arbitration and enforcement abroad

A foreign buyer received the goods and stopped answering letters, or a supplier took prepayment and did not ship the products. A familiar situation: the contract is signed, there is correspondence, but the money is abroad and the debtor is a foreign company or a citizen of another country. At that moment many make the main mistake — they file a claim in the first court they come across, without checking which decision, and where, could actually be enforced.

Another scenario is that a claim has come to you: a foreign partner asserts a debt or a penalty and threatens court proceedings abroad. Here it is important to understand whether its decision will be recognised in Kazakhstan and how to build your defence. Below is the sequence of steps, the forks between court and arbitration, and what is worth checking in the contract before the dispute begins.

Recovery of international debts: where to start if the debtor is abroad

A debt under a foreign trade contract almost always means that the debtor, its accounts or the goods are in another jurisdiction. Before calculating losses and preparing a demand, you need to understand the main thing: where the dispute can be heard at all and which court's decision can then actually be enforced. This determines the strategy, the timelines, and whether you will have to go to a Kazakhstan court or go abroad straight away.

The first thing to look at in the recovery of international debts is the terms of the contract itself. It is the contract that determines whether the dispute is heard in a particular court (a prorogation clause) or referred to arbitration (an arbitration clause). If there is no such clause, jurisdiction will have to be determined under the rules of private international law, and that is already a dispute over jurisdiction that can drag on for months.

After that the picture is simple: either you go to court at the debtor's location, or you obtain a decision in Kazakhstan and then enforce it abroad. The second route is longer: recognition and enforcement are needed, and that is a separate procedure in the country where the assets are located. So from the very start it is useful to assess whether the debtor has property, accounts or other assets abroad, otherwise even a won case may remain a piece of paper.

What is worth checking first if the debtor is abroad:

• The clause on applicable law and jurisdiction in the contract.
• Whether there is an arbitration or prorogation clause and its exact wording.
• Where the judgment will ultimately be enforced and whether the debtor has assets there.

Recovery of international debts from a foreign national: who the defendant is

Where the debtor is a foreign national, working through a legal entity is not the right approach: you first need to establish where the person actually lives and whether they have an account or property in Kazakhstan. Recovery of a debt from a foreign national depends precisely on this: if the assets are in the country, it is easier to go to a Kazakhstan court and then enforce against them; if everything is abroad, you will have to work out where to apply and how to enforce the judgment there.

Check whether the non-resident has a residence permit, real estate, a car, shares in companies, or accounts with Kazakhstan banks. Even if he has left himself, these assets remain here and can serve as security for the claim — sometimes freezing an account is enough for the debt to be repaid without a lengthy process.

Citizenship and place of residence determine which court to file with and whether the debt can be recovered in Kazakhstan. If the defendant lives abroad, a Kazakhstan court cannot always compel him, and the judgment will have to be recognised in his country. So the first step is to gather information about his presence in Kazakhstan: without this, any procedure will stall.

• whether the foreign national has an account or deposit with a bank in Kazakhstan
• whether real estate or vehicles are registered in his name
• whether he works for a Kazakhstan company or owns a share
• whether he has received income in Kazakhstan under contracts
• whether he is currently in the country and has a residence permit

Recovery of international debts: court or arbitration under the contract

Where a dispute with a foreign counterparty will be heard is decided by the contract itself. If it contains a prorogation clause, the dispute goes to a state court of a specific country — usually at the place of the defendant's location or of performance of the obligation. If the clause is an arbitration one, the state court will not hear the case and will refer the parties to the arbitral body specified in the contract.

Misreading this clause determines everything that follows: where to file, what evidence to gather, how to prove the right and then enforce. File a claim in the wrong place, not where the parties agreed, and you will get the claim returned or left without consideration, losing time during which the debtor will move the assets out. You need to start with the literal text of the clause, not with assumptions about where it is "more convenient" to litigate.

In practice there are mixed and disputed wordings: one clause sends the dispute to arbitration, another to a court, a third does not name the body. Then the question of jurisdiction is decided by the court or arbitral tribunal where the claim is filed — under its own procedural law and the applicable international treaties. Reviewing and interpreting these terms is the first thing that affects the outcome of recovering international debts.

In all cases, the first step is to check the text of the clause, not the convenience of the place of proceedings.

Recovery of international debts through the AIFC Court and the AIFC Arbitration

If a contract with a foreign counterparty contains a clause providing for disputes to be heard in the AIFC Court or the International Arbitration Centre of the AIFC, the recovery of international debts can be pursued in these institutions rather than in a state court. This is an alternative that works only with the consent of the parties, recorded in the text of the contract.

The AIFC Court hears disputes between AIFC participants, disputes connected with activity in the AIFC, and disputes that the parties have referred to it by agreement. The International Arbitration Centre of the AIFC accepts cases where there is an arbitration clause; in Kazakhstan its awards are enforced in the manner established by the Constitutional Law on the AIFC, and abroad under the New York Convention.

The key condition is that the clause must be drafted clearly: which body exactly, what seat of arbitration, what language and what applicable law. A vague wording such as "disputes are resolved in Kazakhstan" or "at the location of the respondent" allows jurisdiction to be challenged and time to be lost. Check whether the contract contains two contradictory clauses at the same time.

• The AIFC Court — for disputes of AIFC participants and disputes referred to it by agreement of the parties
• The International Arbitration Centre of the AIFC — where there is an arbitration clause
• The clause must name the body, the seat, the language and the applicable law
• Contradictory clauses in one contract create a risk of a challenge to jurisdiction

Recovery of international debts: recognition of a judgment in Kazakhstan

If a judgment is rendered abroad, the recovery of international debts in Kazakhstan begins with recognition and enforcement of the document. The procedure depends on who rendered the decision — an international arbitration or a state court of a foreign state — and the grounds here are fundamentally different.

Foreign arbitral awards are recognised and enforced on the basis of the 1958 New York Convention, to which Kazakhstan is a party. The court mainly checks formal conditions: the existence of a valid arbitration agreement, compliance with the procedure for notifying the debtor, and conformity of the award with public order. The substance of the dispute is not reviewed again, so the chances of recognition of an arbitral award are higher.

With judgments of foreign state courts the situation is more complicated: they are recognised on the basis of an international treaty or reciprocity. First it is necessary to establish whether there is a relevant treaty between Kazakhstan and the country where the judgment was rendered, or to rely on the principle of reciprocity. This should be checked before filing the application — the very possibility of enforcement in Kazakhstan depends on it.

The application is filed with a court in Kazakhstan, and a package of documents is attached to it: a certified judgment with an apostille or legalisation, confirmation of the arbitration agreement, documents on sending the judgment to the debtor and on proper notification of the party.

• A certified text of the judgment with an apostille or legalisation
• The original or a certified copy of the arbitration agreement
• Documents on notification of the debtor of the proceedings
• Confirmation of sending the judgment to the respondent

The basis for state courts depends on the country where the decision was made.

Recovery of international debts from CIS countries: legal assistance conventions

If your debtor or counterparty is in a CIS country, a separate regime for recognition and enforcement of decisions applies. It is based on legal assistance conventions, including the Minsk Convention. These international treaties simplify the procedure: a decision of a Kazakhstani court is recognised in another participating country without review of the case on the merits. For commercial disputes between companies, the 1992 Kiev Agreement also applies, and arbitral awards are enforced under the New York Convention.

This regime covers most former Soviet republics. For a manager, this means that you can litigate in Kazakhstan and then seek enforcement abroad. It is important to check whether the convention is in force with the specific country and what reservations it has made.

In practice, recovery of international debts from CIS countries is faster than from countries outside the former Soviet Union, where recognition depends on national law. But there are nuances here too: the competent authority, the list of documents, the grounds for refusal. Below are the key points to check before filing an application.

• The Minsk Convention is the main document for most CIS countries.
• A decision of a state court is recognised without review of the dispute.
• Refusal is possible if the defendant was not notified or the case falls within the exclusive jurisdiction of a local court.
• Enforcement is entrusted to the court enforcement officer of the debtor's country.
• Check the current status of the convention and the reservations of the specific state.

Recovery of international debts: enforcement of a decision in the debtor's country

Recognition of a decision is only half the journey. Then the main part begins: enforcement in the debtor's country, where its accounts are opened, assets are registered and the business is located. A decision of a Kazakhstani court by itself does not make it possible to debit money from an account abroad or seize the property of a foreign company.

Enforcement of a decision in the debtor's country is carried out together with lawyers of that jurisdiction. They know the local procedural rules, document requirements and how court enforcement officers work. Without this stage, even a won case remains just a piece of paper, not backed by actual recovery.

The next steps depend on two factors: where exactly the defendant's assets are located and which enforcement regime applies in that country. In practice, the work is structured as follows:

• identify the jurisdiction where the debtor has accounts or property
• file documents for enforcement under local rules
• engage the enforcement authorities of that country
• monitor the case through to the actual receipt of funds

Recovery of international debts: what to check in the contract before a dispute

Before a dispute, it is worth carrying out a quick review of the contract — it reveals the risks in advance. A contract review takes about 5 days, and during that time it becomes clear whether the debt can be recovered in court or arbitration and where exactly. Most problems are embedded in the text of the contract, not in the debtor's conduct.

Look at the clause on applicable law and jurisdiction: it determines which country's court will hear the dispute and under which law. If jurisdiction is chosen in the debtor's country, enforcement of the judgment will be simpler, while a dispute in Kazakhstan may prove useless. In an arbitration clause, it is better to name a specific arbitration institution or the procedure for constituting the arbitral tribunal, otherwise the enforceability of the clause can be challenged.

Check the notification procedure — it determines whether service of a claim is recognised as proper — and the applicable conventions on legal assistance if the counterparty is from a CIS country. Also make sure the contract contains all the parties' details and the language of the proceedings.

Recovery of international debts: which documents to prepare

For court or arbitration, you will need the entire contract with annexes, specifications and supplementary agreements, not just the signed page. Collect the correspondence with the foreign counterparty: letters, messengers, minutes of meetings — the court reads it as confirmation of the arrangements and acknowledgement of the debt. Invoices, accounts and reconciliation statements show the amount of the claim, while delivery notes, transport documents and customs declarations show the fact of delivery or its absence.

If the defendant is abroad, the package is supplemented with documents on the authority of the signatory and of the company itself: the charter, an extract from the commercial register, a power of attorney, the decision appointing the director. These are usually legalised — apostilled or put through consular legalisation — and, where necessary, translated into the language of the country where the dispute is heard. Without this, the court may leave the claim without movement, and time for recovering the international debt will be lost.

For recognition and enforcement of a judgment abroad, a separate set is prepared: a certified copy of the judicial act with a note that it has entered into force, a writ of execution, confirmation that the debtor was notified, and documents showing that the judgment has not been enforced. In CIS countries, part of the paperwork is replaced by the convention procedure, but the list is still checked against the specific jurisdiction. What is worth keeping to hand:

Copies of the contract with all annexes.

Correspondence and acknowledgement of the debt by the debtor.

Invoices, delivery notes, reconciliation statements.

Documents on the authority of the signatories.

Apostille or consular legalisation.

Recovery of international debts: mistakes that cost money

Most often, money is lost not in court but earlier — at the stage of signing the contract. If the contract has no clause on applicable law and jurisdiction, the dispute risks being stuck between two jurisdictions, and the judgment will prove unenforceable. As a result, the creditor spends time on coordination instead of immediately choosing a convenient forum and securing the evidence.

The second mistake is recording the debt too late. While correspondence goes on in messengers, the reconciliation statement is unsigned and notices of breach have not been sent, the debtor manages to transfer assets or leave. Evidence of notification is needed in the language and under the rules of the debtor's country: otherwise a court abroad simply will not accept the documents, and the debt will remain unproven.

The third misstep is trying to "catch up" with the debtor without taking their jurisdiction into account. Lawyers start with a Kazakhstan court even though the assets are abroad, and vice versa. First you need to understand where recovery is actually possible, whether the defendant has property and whether their country recognises judgments of Kazakhstan's courts. Without this, even a won case will not bring money.

• No clause on law and jurisdiction — the dispute drags on
• No reconciliation statement and official notices — the debt is not proven
• The debtor's country is ignored — there is nowhere to enforce the judgment

Recovering international debts: how to respond to a foreign claim

A foreign counterparty has filed a claim or won an arbitration, and the claim is now coming to a Kazakhstan company — the first thing to do is check jurisdiction. A claim may be brought at the place where the defendant is located in Kazakhstan, or under contractual jurisdiction if the contract expressly names a court or arbitration in another country. If a dispute under the contract must be heard by the AIFC arbitration, and the claim has been filed in a state court, this is a separate objection to the proceedings.

On the merits, the defence is built on the contract. Objections: a jurisdiction clause and an arbitration clause, the limitation period, non-performance by the foreign party of its own obligations, and the absence of the debt itself. At the recognition stage the objections are broader: failure to notify of the proceedings, breach of the notification procedure, conflict with the public order of Kazakhstan, and absence of reciprocity. The rules on recognition in Kazakhstan and under legal assistance conventions have already been covered above, so focus on two questions — did you have a real opportunity to defend yourself, and has the decision entered into force.

The main mistake is to ignore a foreign claim. If you do not respond and do not raise objections, the decision will enter into force and may be recognised in Kazakhstan, and enforcement will proceed through a private or state court enforcement officer: freezing of accounts and property, restrictions for the director. Before recognition you have time to prepare objections and challenge the notification. What is important to check:

• whether the defendant was notified of the proceedings in accordance with the rules of the foreign court;
• whether the contract contains a jurisdiction or arbitration clause;
• whether the decision has entered into force and whether it conflicts with the public order of Kazakhstan;
• whether enforcement documents have been obtained and on what basis they are to be enforced;
• which obligations of the foreign party remain unperformed.

Practical conclusion: before going to court, determine where the debtor's property is located and whether that country will recognise a decision of the court you have chosen. A decision that cannot be enforced is only costs and time.