Ruby Roz Agricol LLP v The Republic of Kazakhstan

An arbitration clause referring disputes to foreign arbitration only where the interests of a foreign investor are affected does not extend to a locally incorporated entity merely because it has foreign participation. Contractual language is construed according to its literal meaning where it is clear. A statutory stabilisation provision protecting a foreign investor’s position applies only to investments falling within the statutory definition of foreign investments. It does not extend to other investments made by or through the investor. Where the legislation specifies the relevant forms of investment, that definition cannot be enlarged by reference to commercial purpose or general investment policy.

Ruby Roz Agricol LLP challenged an arbitral award under section 67 of the Arbitration Act 1996. The tribunal had concluded that it lacked jurisdiction. Ruby Roz argued that clause 14.2 of its investment contract with the Republic of Kazakhstan provided for arbitration because it had foreign participation. Alternatively, it relied on the Foreign Investments Law, including its statutory protection against deterioration of a foreign investor’s position following legislative change.

The central issues were whether Ruby Roz was a foreign investor under the Contract and whether its investment in buildings, land and equipment constituted foreign investments protected by the statutory stabilisation provision.

1. The challenge was dismissed. The court agreed with the arbitrators that they had no jurisdiction, although the reasons were not identical.
2. Clause 14.2 of the Contract provided for referral to foreign arbitration only where the interests of a foreign Investor were affected. Investor was a defined term meaning Ruby Roz. Ruby Roz was an LLP established under the laws of Kazakhstan and was therefore not foreign under the Contract. The literal meaning of the contractual language was decisive, consistently with Article 392 of the Civil Code.
3. The draft Framework Agreement and the Foreign Investments Law did not justify a different construction. The Framework Agreement applied to national as well as foreign investors and the Contract was drawn up only in Russian. Foreign investment in Ruby Roz was distinct from investment made by Ruby Roz.
4. The alternative statutory case also failed. Article 6.1 of the Foreign Investments Law preserved the former legislation only in relation to foreign investments. By the relevant amendments, foreign investments were confined to participation in the authorised capital of Kazakh legal entities, qualifying loans or credit facilities, and qualifying leased assets.
5. Ruby Roz’s contractual commitments consisted of reconstructing buildings and purchasing land and equipment. Those commitments did not fall within the statutory definition of foreign investments. That conclusion was clear on the statutory language and was fatal to the alternative case.
6. The court declined to determine further arguments that were immaterial to the result, particularly where they involved additional questions of Kazakh law.

First-instance decision on a section 67 challenge to an arbitral award. The arbitrators had ruled that they lacked jurisdiction; the Commercial Court upheld that conclusion and dismissed the challenge.