A VIEW from Kazakhstan

During 2001, the Republic of Kazakhstan will celebrate its tenth year of independence. This is a time for reflection on how far and how fast the country has distanced itself from its Soviet past. There is much to be proud of, and the current mood is rather optimistic, due in large part to the sustained high price of oil on international markets. Moreover, a major new oil pipeline will soon open to the West, and news of enormous fresh oil discoveries under the Caspian Sea reinforces the view that a very good future is in store for Kazakhstan. The crisis years of 1998 and 1999, when the woes of the Asian and Russian financial meltdowns could not be averted, are now almost forgotten. Many commentators rank Kazakhstan as the leader in legal reform among the post-Soviet countries. However, this is still very much an emerging country that is not yet entirely comfortable with the open market economy and democratic ways.

Foreign investors took time to gear up to the opportunities in Kazakhstan, and it was not until 1993 that foreign law firms began to set up offices in Alma-Ata, the then capital of the country. The past decade saw dramatic change in almost all spheres of life. Alma-Ata is now Almaty, and the capital has moved far off to the north in Astana. Like many foreign investors, the law firms have been bounced around by the vagaries of Kazakhstan’s economy. Several firms arrived during the boom years of 1993-1995, but departures, downsizing and mergers have taken their toll. Consolidation was a dominant theme of 1999 and 2000.

The practice of law in Kazakhstan poses unusual challenges for international law firms. The usual “model” is to establish a base of operations in the main financial and commercial centre. This, of course, has happened in this country. All of the international law firms in Kazakhstan are based in Almaty, the commercial and financial centre, which is located close to China and has a population of about 1.5 million. However, it is oil that has attracted most of the main foreign investors to Kazakhstan, and most of that is found 1,800 miles and two time zones to the west under or near the Caspian Sea. (Kazakhstan is the size of Western Europe but has a population of only around 15 million, which is about twice that of London.)

It is difficult and expensive, particularly in light of the infrequency of internal flights, to service client needs at such remote distances. Also, there are three major oil and gas centres – at Atyrau (the “Houston of Kazakhstan”), Aktau and Aksai – each of which might deserve its own local service office. At the same time, following the move of the nation’s capital to Astana a couple of years ago, many international law firms find it necessary to maintain a presence there for government contact and access to the country’s Supreme Court.

There is also the somewhat unusual problem of too much legislation. Whereas some of the neighbouring countries of Central Asia are still struggling with outmoded laws, which would be better suited to the command economy of the Soviet era, here in Kazakhstan there is a kind of permanent and constant legislative reform underway.

Language is another challenge. Russian continues as the predominant language, but pressure grows to use Kazakh, the official state language, in legal documents. Formerly, many documents were in English and Russian, whereas the tendency now is to include a third version in Kazakh or to displace the Russian version with a Kazakh text.

Tom Johnson is head of Denton Wilde Sapte’s banking and finance practice in Kazakhstan