The American Journal of Interdisciplinary Innovations
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TYPE
Original Research
PAGE NO.
17-23
10.37547/tajiir/Volume07Issue04-03
OPEN ACCESS
SUBMITED
20 February 2025
ACCEPTED
21 March 2025
PUBLISHED
25 April 2025
VOLUME
Vol.07 Issue04 2025
CITATION
Assel Salikhova. (2025). Choice of Forum for Dispute Resolution: A
Comparison of State Courts and Arbitration. The American Journal of
Interdisciplinary Innovations and Research, 7(04), 17
–
23.
https://doi.org/10.37547/tajiir/Volume07Issue04-03
COPYRIGHT
© 2025 Original content from this work may be used under the terms
of the creative commons attributes 4.0 License.
Choice of Forum for
Dispute Resolution: A
Comparison of State
Courts and Arbitration
Assel Salikhova
Director of Anteris Partners LLP “Legal Consultant, member of the
Chamber of Legal Consultants” Justus” Almaty, Kazakhstan
Abstract:
This article examines the issue of choosing
between state courts and arbitration institutions for
resolving commercial disputes arising in business
activities, with a particular focus on the Republic of
Kazakhstan. Based on a comparative analysis, four key
criteria are investigated: the amount in dispute, the
nature and essence of the conflict, the time and quality
of proceedings, and the impartiality of the decision
rendered. It is concluded that state courts offer lower
direct costs (such as court fees), but are characterized
by a relatively lengthy process due to workload and
multiple layers of jurisdiction. In contrast, arbitration
provides the parties with procedural flexibility, the
ability to select arbitrators, and often resolves disputes
more quickly, although it requires payment of
arbitration fees and may be vulnerable to the risk of
"pocket" adjudications. In conclusion, it is emphasized
that under both Kazakhstani and international practice,
entrepreneurs should take into account the specific
features of their dispute and carefully assess the
reliability of arbitration in advance. A combination of
analysis of national legislation, international legal
norms (the New York Convention, the UNCITRAL Model
Law), and examples from practical cases allows for the
formulation of practical recommendations on selecting
the optimal mechanism for resolving commercial
conflicts.
Keywords:
state court, commercial arbitration,
arbitration fee, court fee, impartiality, corruption risks,
multi-instance litigation, Republic of Kazakhstan,
commercial disputes, entrepreneurship.
Introduction:
The development of entrepreneurship in
modern times, particularly in the Republic of
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Kazakhstan, has led to a significant increase in the
number of commercial disputes [1, 2]. While the state
seeks to support the private sector [1], the more active
market processes become, the more pressing the
question of ensuring the protection of entrepreneurs’
rights and choosing the most effective method for
resolving conflicts becomes [3, 4]. Traditionally,
businesses resort to state courts; however, according
to the Tax Code [5], court fees, the heavy workload of
judges, and potential procedural delays often force
businesses to seek alternatives in arbitration
institutions. On the other hand, commercial arbitration
itself [6] guarantees flexibility and relatively short
resolution times, yet it comes with its own limitations
and risks, including the necessity for an arbitration
agreement and the absence of a fully multi-instance
process [7, 8].
Thus, the choice between state courts and arbitration
becomes paramount. This choice determines not only
the costs and timelines but also the effectiveness of the
final protection of the parties’ rights [9]. Moreover,
international practice demonstrates the growing role of
arbitration
—
especially in cross-border disputes where
the enforceability of decisions in different jurisdictions
is crucial [10, 11]. The issue becomes even more
relevant when considering the presence of certain
corruption risks and sanctions regimes that influence
the choice of forum [12]. All of this underscores the
urgent need for scientific analysis and the
systematization of criteria for choosing the forum for
dispute resolution in light of established Kazakhstani
and international practices.
Scientific research comparing state courts and
commercial arbitration has a fairly extensive basis [2,
4]. Some works provide detailed analyses of the types
of arbitration agreements, the procedure for enforcing
arbitration awards, and international approaches to the
arbitrability of disputes [3, 7]. At the same time, many
existing publications focus primarily on international ad
hoc or institutional arbitration within the chambers of
commerce of developed countries [9]. This article relies
on materials that examine in detail the peculiarities of
judicial and arbitration dispute resolution in the
Kazakhstani context, as well as on the results of several
primary sources cited in scientific publications [2, 3, 4,
12] and legislative acts of the Republic of Kazakhstan [1,
6]. Thus, this work systematizes the main criteria for
choosing a forum for dispute resolution as applied to
entrepreneurial activity, taking into account the most
relevant aspects
—
from cost to impartiality.
The main aim of the article is to conduct a
comprehensive comparison between state courts and
arbitration from the perspective of both Kazakhstani
and international law enforcement practices, and to
formulate practical recommendations for selecting a
mechanism for resolving commercial disputes.
In this way, the work contributes to the development
of legal theory and practice by highlighting the most
significant issues in choosing between state courts and
arbitration, using the Kazakhstani experience and
international sources as examples.
MATERIALS AND METHODS
Economic activity in the private sector, especially in
Kazakhstan, forms the foundation for sustainable
growth and prosperity, but at the same time leads to an
increase in the number of commercial disputes. The
state, aiming to ensure lawful, fair, and peaceful
resolution of such disputes, establishes a judicial
system that provides guarantees for the protection of
entrepreneurs’ rights [1]. However, in practice,
businesses are increasingly turning to alternative
mechanisms, including various forms of arbitration [4,
9]. Below, we consider the basic nature of state courts
and commercial arbitration, as well as the legal
prerequisites
and
limitations
associated
with
arbitration agreements.
State courts, according to the Constitutional Law of the
Republic of Kazakhstan dated December 25, 2000, No.
132-II "On the Judicial System and the Status of Judges
of the Republic of Kazakhstan" [1], serve as the official
judicial
authority
empowered
to
hear
civil,
administrative, and criminal cases. Their key
characteristics include:
●
Mandatory Nature of Judicial Acts: Decisions
are rendered in the name of the state, and non-
compliance leads to the application of coercive
measures.
●
Multi-Instance Structure and Procedural
Guarantees: The possibility to appeal decisions at the
appellate and/or cassation levels increases the
likelihood of correcting judicial errors [7].
●
Specialization of Judges: In large cities, there
are specialized panels or courts for civil cases, economic
disputes, etc., although the assignment of a particular
case depends on the internal structure and may not
take into account the specific nuances of the conflict.
●
Overload: A large number of cases in process
often leads to lengthy proceedings, which does not
always meet the interests of entrepreneurs who expect
prompt resolution [2].
An alternative mechanism for economic disputes is
commercial arbitration [6]. In arbitration, the parties,
by agreement, submit disputes that have arisen or may
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arise in the future to independent arbitrators who do
not have the status of state judges [9]. The main
features of arbitration proceedings can be summarized
as follows:
●
Procedural Flexibility: Unlike the rigidly
regulated procedural norms of state courts, arbitration
rules often allow for an adaptable process
–
including
accelerated proceedings or the agreement on specific
stages by the parties [4].
●
Ability to Choose Arbitrators: The parties
appoint the arbitrator (or arbitrators) themselves
based on qualifications, experience, and competence in
the specific subject matter. This feature is particularly
valuable in cases requiring specialized knowledge [7].
●
Confidentiality: Arbitration proceedings are
often conducted without public hearings and without
disclosing materials publicly, which appeals to
entrepreneurs who wish to preserve business
reputation and protect proprietary information [8].
●
Finality of Decisions: In most cases, the
arbitrators' verdict is final and enforceable in
accordance with the law (see Article 54.1 of the
Arbitration Law No. 488-V [6]). However, cancellation
or review of a decision is possible only on a limited set
of grounds [11].
In Kazakhstan, arbitration proceedings are separated
from the judicial system, meaning they are not directly
part of it [1]. Nevertheless, arbitration performs a
similar function in resolving economic disputes and is
intended to relieve the burden on state courts [3]. In
many cases, entrepreneurs prefer arbitration because
it:
●
Allows for prompt conflict resolution (assuming
professional arbitrators and effective rules).
●
Provides the opportunity to control the
composition of decision-makers.
●
Minimizes the “procedural details” that often
complicate case review in regular courts.
However, there are also drawbacks. First, there are
cases of "pocket arbitrations," where one of the parties
has created or is affiliated with an arbitration institution
and effectively “secures” the desired decision [12].
Second, entering arbitration incurs additional expenses
(arbitration fees), which may be higher or lower than
court fees depending on the specific institution. Third,
the procedural guarantees for review in state instances
(appeals, cassation) for arbitration cases are extremely
limited, imposing additional responsibility on the
parties when choosing the forum [7].
For a clear demonstration of the differences between
the state judicial system and arbitration, the following
comparative Table 1 can be provided.
Table 1. Comparison of the State Judicial System and Arbitration [1, 5, 6, 11]
Criterion
State Court
Arbitration
Legal Basis
Constitutional Law of the RK
No.
132-II
(2000);
other
procedural codes
RK Law No. 488-V "On Arbitration" (2016);
arbitration rules (e.g., MCOAS, other
institutions)
Status
of
Decision-
Makers
State
judges,
appointed
or
approved in accordance with the
law
Arbitrators (not state judges) chosen by the
parties or appointed by the arbitration
institution
Nature
of
Proceedings
Formal procedural norms, multi-
instance process, and, in most
cases, open hearings
Flexible rules, limited grounds for appeal,
generally confidential proceedings
Cost
Court fees, the amount of which
is regulated by tax legislation
Arbitration fee plus possible registration
fees, which may be higher or lower than state
court expenses
Enforcement
of Decisions
The state ensures enforcement;
judicial acts are binding on all
Binding as an arbitration award, but
recognition and enforcement may be
required (New York Convention, 1958)
Time
for Can be prolonged due to court Generally faster with effective rules;
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Criterion
State Court
Arbitration
Resolution
overload and formal procedures
depends on the arbitrators' competence and
the parties' cooperation
Table 1 reflects the key features of both dispute
resolution forms [2, 4, 10]. It is evident that both
approaches have their strengths and limitations, and
the choice should be made based on the specific
circumstances, the parties' interests, and the nature of
the business.
Another determining factor affecting the applicability
of arbitration is the presence of an arbitration
agreement. According to Article 8.1 of the RK "On
Arbitration" Law (2016), referral of a dispute to
arbitration occurs only if there is a corresponding
written agreement between the parties. The disputing
parties may include an arbitration clause directly in the
main contract (based on the principle of party
autonomy) or establish a separate agreement [2]. Such
an agreement typically specifies which arbitration
institution will hear the potential dispute, the
procedure for appointing arbitrators, the language of
the proceedings, and other procedural aspects.
However, not all categories of disputes are subject to
arbitration. Both international practice and national
legislation provide for a number of exceptions related
to personal non-property rights, family and labor
disputes, as well as issues of a public law nature [9]. In
Kazakhstan, a specific list of restrictions is provided in
Articles 8.8
–
8.10 of the Arbitration Law (2016). If a
dispute is not "arbitrable," the only option for
resolution remains state courts [1].
Thus, the overall characterization of state courts and
arbitration, as well as the requirements for an
arbitration agreement, demonstrate that although
commercial arbitration creates a more flexible and
potentially faster alternative to state justice, it retains
several vulnerabilities
—
from the risks of "pocket"
arbitrations to high costs. Nevertheless, given the
overload of state courts and the need to resolve
economic disputes quickly and confidentially,
arbitration mechanisms are increasingly in demand by
entrepreneurs.
RESULTS AND DISCUSSION
In commercial disputes, the amount subject to recovery
is often the decisive factor, as overall costs depend on
it. According to general rules, the court fee payable to
the state budget when a legal entity files a property
dispute in a state court is 3% of the claim amount (see
Article 610.1.1 of the Tax Code of December 25, 2017,
No. 120-VI "On Taxes and Other Mandatory Payments
to the Budget") [5]. Thus, filing a case in a state court
would cost 30,000 tenge, not including expenses for
legal representation, expert opinions, and other
potential costs. However, this is only the basic level of
judicial expenses: additional costs are often required
for paying representatives, conducting expert
examinations, and other related procedures [2, 9].
In arbitration, there is no obligation to pay a court fee,
but arbitration fees must be paid to cover the
arbitrators’ work, and in some cases, a so
-called
"registration fee" is also required [6]. Data analysis
shows that for the same claim amount
—
1,000,000
tenge
—
the final payments in commercial arbitration in
Kazakhstan sometimes average 264,560 tenge. The
specific tariffs of different arbitration institutions vary
significantly, ranging from 20,000 tenge to 716,475
tenge, not including possible registration fees [4].
Additionally, the party must consider payment for
attorneys, experts, translators, etc., which can
significantly increase the overall costs.
For illustration of the cost differences and potential
additional expenses, Table 2 is provided below.
Table 2. Cost Differences and Possible Additional Expenses
Parameter
State Court
Arbitration
Basis
for
Payment
Court fee (3% of the claim for
a legal entity)
Arbitration fee plus possible registration fee
Example for a
Claim
of
1,000,000
tenge
30,000
tenge
(excluding
expenses for representatives,
experts, etc.)
On average 264,560 tenge (sample range:
20,000–716,475 tenge, excluding additional
expenses)
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Parameter
State Court
Arbitration
Obligation for
Further
Expenses
Depends on the complexity of
the dispute (involvement of
specialists, translators, etc.)
A similar situation: it is often necessary to
cover costs for attorneys, experts, translators,
and organizing hearings
Overall
Assessment of
Accessibility
Relatively cheaper compared
to some arbitrations, but may
take longer time
May be more expensive, but it offers a more
flexible procedure and the ability to choose
arbitrators
Additional
Expenses
Costs for appeals, cassation,
and court fees for filing
complaints
Possible expenses for expedited proceedings,
payment for an arbitration panel (if multiple
arbitrators are appointed), venue rental, etc.
The issue of financial burden is closely related to the
nature and essence of the dispute itself. If a non-trivial
contract structure is anticipated (for example, complex
brokerage activities in a foreign market or the
involvement of multiple co-executors), engaging an
arbitrator with the appropriate expertise can prove
critically important [7]. In such situations, arbitration is
a more advisable option because the parties have the
opportunity to choose an expert who is specifically
competent in that field [8]. Conversely, if the dispute is
relatively simple and not burdened with specific
peculiarities, a general jurisdiction court or an
economic court (depending on the subject matter) is
fully capable of rendering a decision without significant
risk of incompetence [3, 4].
It is important to note that certain categories of
disputes are explicitly excluded from arbitration
jurisdiction. As mentioned earlier, according to Articles
8.8
–
8.10 of the RK "On Arbitration" Law (2016),
arbitration is not authorized to hear cases arising from
personal non-property relations, family matters, or
certain public law issues [12]. In such cases, state courts
remain the only option [1]. Hence, the overall
conclusion is that when choosing between a state court
and arbitration, an entrepreneur must consider the
specifics of the contract, the level of expertise required
from the adjudicator (arbitrator), and the potential
legal limitations [9]. If the case involves significant
technical or industry-specific nuances and the law
permits the dispute to be referred to arbitration, opting
for arbitration often provides a more accurate
assessment of the circumstances.
The next key criterion is the quality and timeliness of
the resolution. Arbitration institutions are generally
geared toward expedited proceedings, which is
particularly important given high demands for prompt
execution [4]. In state courts, an overload of cases can
prolong the process, and even the first-instance
decision may take several months [3]. Furthermore,
subsequent appeals and cassation further extend the
overall duration, though they increase safeguards
against judicial errors [7]. In contrast, arbitration often
operates in a single instance, and the arbitrators'
decision is final [11]. Given that arbitrators are less
overloaded and can flexibly adjust procedural rules,
cases are typically resolved more quickly [9].
For example, when considering a case between a
contractor and a client (both being limited liability
companies), the average resolution time at the first
instance in a state court is about 2.5 months, while
arbitration can resolve the dispute in a shorter period.
However, the "single-instance" nature of arbitration
may be a disadvantage for a dissatisfied party, as there
are no practical review mechanisms beyond the narrow
grounds for overturning a decision [12].
Finally, impartiality plays a significant role in the choice
of dispute resolution forum. Every entrepreneur
expects that the third party deciding the dispute will be
independent and unbiased regarding the outcome [7].
In state courts, a strict hierarchy of subordination and
judicial accountability to the state theoretically reduces
the risk of corruption; however, in practice, case
overload and human factors may negatively affect
attention to detail [2]. Arbitration, on the other hand,
faces the issue of "pocket" institutions, where founders
are affiliated individuals who secure the desired verdict
for themselves [12]. Moreover, the lack of state
oversight (apart from enforcement procedures) can
encourage unethical practices, especially in cases
involving large sums [9].
If one party believes that its rights have been violated
due to the dishonest actions of a judge in a state court,
it can appeal or file a cassation, with the discovery of
corruption serving as grounds for overturning the
decision (Articles 361
–
371 of the Criminal Code dated
July 3, 2014, No. 226-V). In arbitration, however, the
opportunity for review is limited: Articles 51 and 52 of
the Arbitration Law (2016) specify only a few narrow
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grounds (such as procedural rule violations or the
absence of an arbitration agreement) under which a
decision can be overturned [3]. Consequently, when
opting to transfer a case to arbitration, an entrepreneur
must ensure the integrity of the arbitration institution
or arbitrators, and the initial stage of choosing the
dispute resolution forum (by including an arbitration
clause in the contract) becomes one of the most critical
steps.
Thus, the main conclusion from the analysis is that each
of the four aspects
—
dispute amount, the essence and
nature of the disagreements, timeliness/quality of
resolution, and impartiality
—
must be evaluated
comprehensively. If the claim amount is significant and
the issues require specialized expertise, arbitration may
offer more precise evaluation but will be associated
with higher costs and limited options for contesting the
outcome. In contrast, a state court is less expensive and
offers a multi-instance process, but its proceedings
often take longer, and overload may reduce both
promptness and the depth of detail analysis. Therefore,
Kazakhstani entrepreneurs should analyze in advance
the nature of potential disputes, the availability of
qualified arbitrators, and the specifics of legal
restrictions to choose the optimal forum for dispute
resolution.
CONCLUSION
Thus, when choosing between a state court and
arbitration, the parties must consider several key
factors. First, in a state court the expenses for court
fees are usually lower than the arbitration fee, but the
high workload of judges and procedural complexity
often result in prolonged proceedings. Second,
arbitration allows for a faster outcome and offers
flexible mechanisms for party participation, but its
costs can significantly exceed the expenses of litigation
in court. Third, impartiality remains a pertinent issue in
both courts and arbitration proceedings. In practice,
both institutions are exposed to risks of corruption or
affiliated actions; however, when disputes are heard in
the state judicial system, the party that feels aggrieved
by such violations has a better chance of having its
rights restored through higher-level courts, whereas in
arbitration the possibilities for review are extremely
limited.
Overall, while both forums face similar risks of
corruption, state judges are somewhat better
protected from unethical influence due to state
oversight. Although financial costs in court may be
lower, arbitration compensates for the price difference
with quality and speed of resolution
—
a significant
advantage for many entrepreneurs. In light of all the
above, the final choice depends on the specific
conditions, the amount in dispute, and the level of
expertise required for the fair and competent
resolution of the commercial conflict.
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