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Private International Law

I. INTRODUCTION

  The importance of private International Law (PIL) has increased significantly in recent decade due to three factors: (a) the increased

internationalization of commerce; (b) a significant rise in population movement; and (c) scientific and technological advances that have facilitated communication and transactions over great distances, and have created new modes of creating legal obligations, such as e-commerce and digital signatures.

  In Kazakhstan, two additional factors required a rapid development of PIL rules. First, when Kazakhstan was a constituent part of the USSR, norms of PIL were rarely applied. International issues were decided in Moscow, and Kazakhstan implemented the decisions made by central

governmental authorities. Second, after obtaining its independence, Kazakhstan was faced with a number of challenges such as building a market economy and attracting foreign investment that, in turn, necessitated establishing economic relations with many countries and developing a set of national conflict- of law rules. In response,

in the first years of independence Kazakhstan developed its own jurisprudence of PIL. On July 1, 1999 the Special Part of the Civil Code of RK, which contained a separate section on PIL (section VII), came into force. This legal documents provides the basis for conflict-of law rules.

  As to the nature of PIL, the jurisprudence elaborates the three following view-points: (a) PIL is a part of international law in its broadest

sense;(b) PIL is a part of domestic law; and (c) PIL incorporates both international and domestic norms. In this regard, Kazakhstani

legal science has adhered to the view that PIL is a part of domestic law.

  According to the Civil Code, private international law concerns general civil law relations with the participation of foreign natural persons or foreign legal entities or some other connection of a foreign element (Article 1084). Also, PIL governs relations connected with international family law, international labour law and international private law (or law of alternative dispute – settlement) and, consequently, is a complex branch of law.

However, international civil procedure is not considered a part of PIL since it is a branch of public law. As it is common in international

practice, PIL employs two major methods of legal regulation: (a) the substantive methods (implying direct regulation); and (b) the

selective methods (meaning the application of “renvoi”).

  II. SOURCES OF PIL

  There are four main sources of PIL: (a) international treaties; (b) legislation (c) customs; and (d) judicial precedents. Kazakhstan has become a party to numerous international treaties, so it is easier to mention those important agreement that the country has not joined yet:

the United Nations Convention on Contracts for the International Sale of Goods (1980), the Convention Concerning International Carriage by Rail (COTIF) (1980), the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by air (1929),

many conventions adopted in the framework of International Labor Organization, etc. The Constitution of RK of August 30, 1995 serves as the foundation of Kazakhstan’ s legislation and, therefore, as the primary source of PIL. It is followed by numerous legislative

acts, with the most important of them being: the Civil Code of RK (General Code of 27 December 1994 and Special Part of July 1, 1999), Labor Code of RK of May 15, 2007, Law of RK of December 17, 1998 “On Marriage and Family” (in particular section VI “Application of Norms of the Marriage and Family Legislation to Foreign Citizens and Stateless Persons”), Law of RK of July 24, 2010 “On Subsoil and Subsoil Use”, etc. It should be noted that (in contrast to the first years Kazakhstan’s existence as an independent country) the number of laws specifically regulating relations only with respect to foreign elements is continuously decreasing (e.g., Law of RK of December27, 1994 “On Foreign Investment” was superseded by Law of RK of January8, 2003, No. 373-II, “On Investment” which does not distinguish between foreign and domestic investors). At present, there are only the following laws that govern relations exclusively with respect to foreign elements: Law of RK of June 19, 1995 “On the Legal Status of Foreigners in the Republic of Kazakhstan”, Law of RK of December 28, 2003 “On International Arbitration, “Law of RK of June 13, 2005 “On Currency Regulation and Currency Control” and (regarding labor relations) Law of the RK of December 13, 1999 “On Migration”.

  Furthermore, the Civil Code of RK stipulates that “civil relations may be regulated by customs, including customs of business relations, unless they are contrary to civil legislation prevailing on the territory of RK” (Article 3 III).

  Thus, customary rules (and especially INCOTERMS) are currently receiving increasingly widespread use.

  Finally, judicial precedent is not a source of law in Kazakhstan (which, like the entire former USSR, is established in the civil law tradition). However, after the collapse of the USSR, discussions were held in many post-Soviet countries with respect to the legal nature of regulatory resolutions of the Supreme Court.

In Kazakhstan, this matter was resolved by the Constitution of 1995, which provides that regulatory resolutions of the Supreme Court belong to the sources of law in Kazakhstan (Article 4 I).

  III. CONFLICT-OF –LAW RULES

Conflict-of -law rules define which state’s law will be applied in a civil law relation with a foreign element involved. The structure of such rules consists of two elements: (a) extent (ob’yom) and (b) connecting factor (privyazka). The extent indicated the kind of legal relationshipwith a foreign element that is involved while the connecting factor determines what law is to be applied with respect to this relationship .

  Depending on the type of connecting factor, conflict-of-law rules may be divided into: unilateral rules that explicitly state the law of what country is to be applied (e. g., transactions involving immovable property listed in Kazakhstan’s state register is governed by the law of RK (Article 1104 III CC); and

(b) bilateral rules that do not state the law of a particular country but formulate the principles for the choice of the law of one country or another (these principles are often referred to as “form of attachment”).

  As in the conflict-of-law rules of other states (and in particular those related to the continental law system), in Kazakhstan there are following main “forms of attachment”:

  (1) Lex personalis (the personal law of a natural person) that, in turn, has two alternates:

(a) Lex nationalis or Lex Patriae (national law or law of citizenship), the primary personal law of a natural person (Article 1094 I CC); and (b) Lex domocilii (law of the domicile), which is applicable both to stateless persons (Article1094 II CC) and legal issues of inheritance (Article 1121 CC).

  (2) Lex societatis (the law of a legal entity) implies the application of the law of the state to which a legal entity belongs (nationality of a legal entity).

  In jurisprudence there are different doctrines to determine the nationality of a legal entity: (a) doctrine of settlement, i., law of the location of its administrative headquarters; (b) doctrine of the center of operations, i.e., law of location of its core activities; and (c) doctrine of incorporation, i.e., law of the country where it was founded. The Kazakhstani legislation follows the third one and provides that “the law of a legal entity shall be deemed to be law of a country where that entity was established” (Article 1100 CC).

  (3) Lex rei sitae (the law of the location of property) applies to rights in rem (Article 1107 CC) and inheritance of immovable property (Article 1123 CC).

  (4) Lex voluntaris (law chosen by the parties to a particular civil law relation) may be found in the provision saying that “an agreement shall be regulated by the law of the country selected by agreement of the parties, unless it is otherwise stipulated in legislative acts of RK” (Article 1112 CC).

  (5) Lex loci actus (law of the place where an act is performed) has many different expressions.

(a) Lex loci contractus (law of the place where a contract is performed) may be applied with respect to the “dispositive” legal capacity of a natural person regarding transactions or obligations that emerge in consequence to causing harm”(Article 1095 III CC). However, this law is rarely applied due to the fortuity of where international contracts are concluded, and difficulties in identifying the location of their conclusion. (b) Lex loci solutionis (law of the place where a contract is executed) may be taken into consideration with respect to the “formal acceptance of the execution of an agreement”

(Article 1113 V CC) and to the “method and procedure of the execution as well as measures that must be taken in the case of an improper execution” (Article 1115 II CC). (c) Lex loci celebrationis (law of the place where a marriage is celebrated) applies to family relations (Article 200 LMF). (d) Lex loci delicti commissi (law of the law of the place where the harm was caused) may be found in the provision stipulating that “the right and obligations under obligations that emerge in consequence of causing harm shall be determined in accordance with the of the country where the action has taken place” (Article 1117 CC). (e) Locus regit formam actum (the form of a transaction is subject to law of the place where it was performed) is stipulated in Article 1104 I of Civil Code.

  (6) Lex venditoris (law of the country of a vendor) is applied in Contract Law when there is no agreement of the parties with regard to which law is applicable to their agreement (Article 1113 I CC).

  (7) Lex loci activities (law of the lace where activities are carried out) is applied as a subsidiary connecting factor to legal capacity and dispositive legal capacity of an individual entrepreneur (Article 1095 IV CC) and to contracts of joint ventures and construction (Article 1113 III CC).

  (8) Lex loci laboris (law of the place where the labor takes place) is applied in international labor law.

(9) Proper Law of Contract (i.e., law that is most closely associated with a particular legal relation) is stipulated in the rule that “if it is impossible to determine the execution of a contract that has the principal significance to its contents the law of the country with which the contract is most closely associated shall apply” (Article 1113 V CC). Furthermore, in this regard we gave a broader meaning to the Civil Code setting forth the rule that “if it is impossible to determine the law that is subject to application the law shall apply that is most closely associated with the civil and legal relations complicated by a foreign element” (Article 1084 II CC).

  (10) Lex fori or lex arbitri (the law of the place where a dispute is considered either by court or arbitral body) is applied quite extensively in the Civil Code, in particular with respect to recognition of legal capacity or dispositive legal capacity of a natural person (Article 1095 V CC), recognition of a natural person to be missing or deceased (Article 1096 CC) and protection of right in rem (Article 1111 I CC).

  The application of PIL (conflict-of-laws) rules is more complex than applying domestic law because different legal system interact when PIL is applied. Therefore, the application of these laws involves the following two stages (which are regulated in detail by Civil Code):

  (1) Applying a conflict-of-law rule: At this stage, it is necessary to find out whether a conflictof- law rule is applicable, what rule is to be applied specifically and the law of what country it refers to. Consequently, many legal issues may arise in this regard (in particular related to reciprocity, retortion, and legal qualification, circumvention of laws, renvoi and reference to the legal system of a third party).

  (2) Determining the law that a conflict-of-law refers to: this stage commences after all legal issues of the first stage are clarified and involves the application of norms of substantive law (either domestic or foreign). Therefore, different legal issues arise (related to determining the foreign law’s content, application of public law and imperative rules as well as application of the law of a country with multiple legal systems).

  IV. SUBJECT OF PIL

  Subject of PIL are natural persons (citizens, foreign citizens and stateless persons), legal entities as well as the state and other public law subjects.

  Natural persons:As a general rule, Lex nationalis (or Lex Patriae)applies to foreign citizens (Article 1094 I CC). However, it does not determine the legal capacity of foreigners. Foreign citizens who have a certain extent of their legal capacity in their home country are precluded from referring to the same extent of legal capacity during their stay on the territory of another country. During their stay in other countries, they possess the legal capacity defined by the legal order of that state and usually to the extent provided by applying national treatment to them. Thus, the Civil Code of RK provides that “foreign citizens and stateless persons shall enjoy civil legal capacity in RK on an equal basis with the citizens of RK, except for cases established by legislative acts or international treaties of RK”(Article 1095 I CC) .

  The issues surrounding the conflict-of-law occur mainly upon the application of provisions on the dispositive legal capacity of natural persons. Most often, it is connected with the age at which full dispositive legal capacity emerges, as this can differ between countries. In this regard, the Civil Code of RK stipulates that the dispositive legal capacity of a natural person is determined by his personal law (Article 1095 II CC). However, there is an exclusion from this general rule: the dispositive legal capacity of a natural person in respect of transactions and obligations that emerge due to causing harm is determined by the law of the country where those transactions are performed (lex loci actus, lex loci contractus) or where the consequences resulting from the harm caused occur (lex loci delicticommissi) .

  Legal Entities: As it was mentioned above, Kazakhstan applies the doctrine of incorporation with respect to legal entities (Article 1100 CC). Consequently, the legal capacity of a legal entity is generally defined by the law of the legal entity (Article 1101 I CC). However, there are certain exceptions from the doctrine of incorporation; in particular, a “foreign legal entity may not refer to the restriction of powers of its body or representatives with regard to carrying out a transaction that is not known to law of the country in which the body or the representative of the foreign legal entity carried out that transaction”(Article 1101 II CC) .

  It should also be noted that the Civil Code provides a concept of a “legal entity with foreign participation”, saying that agreement on its establishment are governed by “the law of the country where a legal entity is or was founded” (Article 1114 I CC). Furthermore, Law of RK of January 8 , 2003, No. 373-II, “On investment” provides that a “legal entity with foreign participation that is founded in an order set by the legislation of RK (Article 1 XI). At the same time, however, the legal concepts of “foreign enterprise” and “joint venture” (which existed according to the now obsolete Law of RK of December27, 1994 “On Foreign Investments”) were not retained.

  State and Other Public Law Subjects: Apart from participating in public law relations, the RK can enter into property relations with foreign legal entities and natural persons governed by PIL. In this regard, the following two types of civil law relations are of the most importance: (a) contracts on concession of the subsoil to foreign investors; and (b) receipt of loans from foreign borrowers (by concluding simple or syndicated loan agreements or issuing Eurobonds).

  An important feature of any state is its immunity, i.e., a state is not subject to the jurisdiction of another state. There are two theories of state immunity: (a) the theory of absolute immunity; and (b) a more modern and wide spread theory of restricted (or functional) immunity.

  Until recently Kazakhstan in principle ad adhered to the former. However, on October 27, 2009 Kazakhstan ratified the UN Convention “On Jurisdictional Immunity of States and Their Property” of December 2, 1994, which is based on the doctrine of restricted immunity. Subsequently, on February 5, 2010 the Law of RK “On the Introduction of Amendments to Certain Legislative Acts of RK Concerning the Issues of Immunity of the State and its Property, Improvement of the Activity of Arbitration Courts and International Commercial Arbitration” was adopted, which introduced amendments both to the Civil Procedure Code of RK and the Civil Code of RK. Currently both Codes have reintroduced the concept of absolute immunity. However, the principle of absolute immunity may be displaced by a respective international treaty.

  V. RIGHT IN REM

  In Kazakhstan, right in rem are subject to lex rei sitae (i. e., the law of the place where the property is located) with certain variations (Articles 1107-1111 CC).The main legal issues related to rights in rem within PIL deal with the legal regulation of nationalization, privatization and foreign investments.

  Nationalization is defined by the Civil Code as the conversion of property owned by natural persons and legal entities to state ownership (Article 249 IV CC). The issues of nationalization (as well as privatization) are covered in detail by the Law of RK of March 1, 2011, 2011, No. 413-IV, “On State Property”. This Law provides a more comprehensive definition of nationalization specifying it as “compulsory and compensated alienation of property owned by natural persons and non-state legal entities to state ownership of the Republic of Kazakhstan” (Article 1 XII LSP). Also, it is stipulated that nationalization may apply not only to ownership right but to other property rights (in particular, to the right to book-entry shares (shares without a certificate), which are regarded not as ownership right but as a right to claim). Furthermore, the LSP contains detailed regulations on the principles of the effectuation of nationalization, grounds for nationalization, procedure for compensation payments, competences of state bodies regarding nationalization and protection of the rights of the owner of the property subject to nationalization (Articles 54-60 LSP). However, the Law does not provide the detailed procedures of nationalization(that will be done by the Law of RK “On Nationalization”, which has not yet been adopted) .

  Privatization of state property was previously regulated by the Law of RK of December 23, 1995 “On Privatization” which defined privatization as any sale by the state of its property to natural persons or legal entities. However, the LSP which superseded the Law “On Privatization”, introduced a concept of “alienation of state property” and privatization is now regarded only as one type of alienation of state property. Thus, there are also other types of such alienation (e.g., transfer of property as a property contribution to the chartered capital of a limited liability partnership or as payment for the acquisition of shares of joint-stock companies; alienation of land plots; alienation of state property registered with the National Bank of RK; alienation of property that formed part of the state property for various reasons such as confiscation, escheat, etc.; and transfer of the state natural grant to private ownership). All provisions on privatization apply equally (without any exceptions) to foreign legal entities and natural persons.

  Foreign investments, to which all types of property and titles thereto are related, are subjected to the regulation of the Law of RK of January 8, 2003 “On Investments”. This Law establishes general provisions on investments and state guarantees that are provided by RK to foreign investors. It should also be noted that Kazakhstan acceded to many major international conventions in the area of investments (Seoul Conventions establishing the Multilateral Investment Guarantee Agency of 1985, the Energy Charter Treaty of 1994, Washington Convention on the Settlement of Investment Disputes between States and National of Other States of 1965) and concluded more than 40 bilateral agreements with other countries on promotion and mutual protection of investments.

  VI. FOREIGN ECONOMIC CONTRACTS

  A foreign economic contract is the same as a civil law contract, but the parties to it are located in different countries. The Civil Code does not contain any definition of a foreign economic contract, but it provides that such a contract must be concluded in written form if one of its participants is a Kazakhstani legal entity or a citizen (Article 1104 II CC) and that non-observance of this provision with respect to a foreign economic contract entails the contract’s invalidity (Article 153 III CC).

  The general connecting factor for this type of contract is lex voluntaris. (Article 1112 CC). In the absence of lex voluntaris, lex venditoris is usually applied (Article 1113 I, IV CC). In addition, with respect to specific types of legal relations, the following connecting factors may apply: lex rei sitae,lex loci activities, lex loci actus, lex loci solutionis and proper law of contract. Furthermore, lex socieatatis is applied regarding contracts that establish legal entities with foreign participation (Article 1114 CC). The latter rule met significant criticism by foreign investors (especially in cases involving legal entities exclusively made up of foreigners). Nevertheless, we kept this norm and even strengthened it by applying is not only with respect to the establishment and termination of a legal entity, but also to the transfer of participation shares and other mutual relations between its participants (including those defined by subsequent agreements) (Article 1114 II CC) . These provisions also apply in cases where other foundation documents establish the mutual right and obligations of the participants in a legal entity with foreign participation (Article 1114 III CC).

  Many international contracts (in particular related to transportation) are governed by international conventions and Kazakhstan is not an exception. Nevertheless, in this regard the following legislation should also be mentioned: Law of RK of January 17, 2002 “On Merchant Shipping”, Law of RK of June 13, 2005 “On Currency Regulation and Currency Control”, Law of RK of June 29, 1998 “On Payments and Money Transfers”, Law of RK of April 28, 1997 ‘On Circulation of Bills in the Republic of Kazakhstan”, Law of RK of December 15, 2000 “On Stamp Duty on Bills and Notes in the Republic of Kazakhstan”, and Budget Code of RK of December 4, 2008 (in particular section XII “State and State-Guaranteed Borrowing and Debt as well as State Guarantee”).

  VII. INTELLECTUAL PROPERTY

  Kazakhstan has acceded to almost every international conventions related to intellectual property. In addition, with regard to connecting factors, Kazakhstani legislation follows generally accepted international practice and applies lex fori (Article 1120 CC). As to domestic legislation, copyright and adjacent rights are regulated by the Civil Code of RK (Articles 971- 983, 985-990) and the Law of RK of June 10, 1996 “On Copyright and Adjacent Rights”.

  Regarding copyright, there are the following three major provisions: (a) copyrights on the works of foreign authors first published on the territory of RK shall belong to those authors; (b) copyrights on works created by citizens of RK and published on the territory of the foreign state shall belong to those citizens; (c) copyrights on work first published on the territory of a foreign state shall belong to those foreigners in RK only upon the availability of an international treaty (Article 980 CC, Article 5 of the Copyright law).

  With respect to the sphere of effect of adjacent rights, the following rules are stipulated:

  (1) The rights of the performer to a performance that has first taken place within the territory of RK shall be valid on the territory of Kazakhstan. In this case, the right shall be recognized as belonging to the performer and to his heirs, as well as to other legal successors of the performer, irrespective of citizenship.

The right of a Kazakhstani performer shall also be recognized and as belonging to him in cases where the performance is first given within the territory of a foreign state, and equally to his legal successors.

  (2) The rights of the creator of the recording of a performance shall be valid in the territory of Kazakhstan, if this recording was first publicly played back or its copies were publicly distributed in RK. The right of the producer of the recording shall be recognized as belonging to citizens of RK or legal entities that have their place of residence or place of location in the territory of Kazakhstan.

  (3) The rights of an air or cable broadcasting organization shall be recognized as belonging to it in case where the organization has its official location in the territory of RK and carries out the broadcasting with the help of transmitters located within the territory of RK.

  (4) The rights of other foreign performers; producers of sound and performance recordings; and air and cable broadcasting organizations shall be protected on the territory of RK in accordance with international treaties of RK (Article 987 CC, Article 36 of the Copyright Law). The main legislative acts with respect to industrial property are the Patent Law of RK of July 16, 1999 and the Law of RK of July 26, 1999 “On Trademarks, Service Marks and Appellations of Origin”. Both acts (Article 38 of the Patent Law and Article 48 of the Law on Trademarks) extend national procedures to foreign citizens, foreign legal entities and stateless persons.

  VIII. INTERNATIONAL LABOR LAW

  In employment relations complicated by a foreign element, labor law applies either lex loci laboris (in most cases) or lex voluntatis as its connecting factor. The labor Code of RK of May 15, 2007 stipulates that “the effects of this Code… shall apply to: (1) employees, including employees of organizations located on the territory of RK, owners of property, participants or shareholders that are foreign individuals or legal entities;

(2) employers, including organizations located on the territory of RK, owners of property, participants or shareholders that are foreign individuals or legal entities” (Article 9 II). Thus, it is evident that Kazakhstan generally applies the principle of lex loci laboris.

  The procedure for attracting foreign workers to Kazakhstan is determined by a number of laws and regulations, including the law of RK of January 23, 2001 “On Employment”; the Law of RK of RK of December 13, 1997 “On Migration”; the regulations “On Determining Quotas as well as Conditions and Procedure for Issuing Permits to Employers for attracting Foreign Labor to RK” approved by the Resolution of the Government of RK of June 19, 2001, No. 836; and the annual Resolutions of the Government of RK establishing quotas for attraction of foreign labor for the upcoming years. In order to attract foreign workers, an employer must obtain permission from local governmental executive body in particular and afterward enter into an individual employment contract with the foreign worker. 

  IX. INTERNATIONAL FAMILY LAW

  There are two major legislative acts in this area: the Law of the RK of December17, 1998 “On Marriage and Family” and the Law of RK of August 8, 2002 “On Right of a Child”. The main connecting factor to the conclusion of marriage (as well as to its termination or invalidation) is lex loci celebrations, although the conditions of the conclusion of marriage may also be determined by lex nationalis or lex patriae (Articles 200-204 LMF).

  On great significance are also legal issues related to adoption (article 209 LMF). The procedure for the adoption of children who are citizens of RK by foreigners has a number of conditions. Adoption is permitted only in those cases where it is not possible to transfer these children to the care of citizens of RK or the child’s relatives, regardless of their citizenship and place of residence. The foreigners applying to adopt a child are required to personally choose a child; to have direct contract with him for at least two weeks; to submit a written statement  to their will to adopt the child to the relevant Trusteeship and Guardianship Agency; and to present information to the Agency verifying their financial solvency, marital status, health status and moral qualities (confirmed by agencies licensed to provide such services) (Article 76 LMF).

 X. PRIVATE PROCEDURAL LAW

 Though many disagree, international civil procedure, as it is public in nature, should not be considered a part of PIL . Instead of international civil procedure, PIL should include as its fundamental component international law of alternative dispute- settlement or, in other words, private international procedural law. Private international procedural law

should consist of three major institutions: (a) negotiation; (b) mediation; and (c) arbitration.

  Negotiation as a means of dispute resolution is still rarely applied in Kazakhstan, although it is increasingly common in relations with foreign partners. In contrast, mediation has achieved some progress. On January 28, 2011 the Law of RK “On Mediation” was adopted; it defines mediation as a procedure for resolving disputes (conflicts) between parties through the assistance of a mediator (mediators) with the aim of achieving a mutually acceptable solution that will be implemented by the voluntary agreement of the parties (Article   2). However, the most considerable development was enjoyed by another type of dispute resolution, Law of RK of December 28, 2004, No. 23, “On International Commercial Arbitration . On the whole, this law meets the standards of international practice and in particular, the provisions of the UNCITRAL Model Law on International Commercial Arbitration of June 21, 1985. In addition, it should be noted that RK is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958. That Convention requires Kazakhstan to enforce final arbitral awards (unless an Article V exception applies) and the courts of RK are prohibited from reviewing the final award on its merits .

Author of the article: Suleimenov M.K.

The article is published in "Научные труды "Әділет" [Scientific works of 'Adilet'] journal.

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