A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in South Korea continues to be governed by the Korean Arbitration Act 1966 (“Arbitration Act“), which was last updated in 2020 to incorporate the 2006 revisions to the UNCITRAL Model Law. There have been no subsequent legislative amendments.
In 2017, the Supreme Court of Korea enacted the Established Rules for Handling Cases Subject to Court Jurisdiction under the Arbitration Act, which regulate matters necessary for handling such cases. The rules provide court forms to be submitted when applying to Korean courts for the appointment of an arbitrator, recognition and enforcement of interim measures, assistance in taking evidence, and recognition and enforcement of merits awards. The Supreme Court also published, on a confidential basis, a 150-page Practical Handbook on Arbitration Trials in 2018 to assist lower court judges in handling cases that fall within the court’s jurisdiction under the Arbitration Act.
A.2 Institutions, rules and infrastructure
A.2.1 Introduction to the KCAB
The leading arbitral institution in Korea is the Korean Commercial Arbitration Board (KCAB), which was established in 1970. The KCAB is an independent institution partially subsidized by the Korean government. For many years, the KCAB had a single set of rules for both domestic and international arbitrations, known as the Commercial Arbitration Rules. In 2007, the KCAB published a separate set of international rules modeled on the then-existing rules of several leading institutions around the world. The KCAB International Arbitration Rules were updated in 2011 and again in 2016, at which time KCAB International was established as an independent division of the KCAB to manage its international cases.
A.2.2 The KCAB Mediation Rules 2024
The most notable development in 2023 was the adoption of the KCAB International Mediation Rules, which entered into force in January 2024, for the efficient resolution of commercial disputes through mediation. It consists of a total of 11 articles and an appendix on fees and costs, which reflect mediation best practices around the world. The fees and costs are quite competitive compared with other institutions, with filing fees of USD 750 and administrative expenses ranging from USD 2,250 if the amount in dispute is not specified.
With the increasing need for amicable and efficient dispute resolution mechanisms and the entry into force of the Singapore Convention on Mediation, which provides for the enforcement of settlement agreements resulting from mediation, there has been growing interest in international mediation. In particular, the KCAB Mediation Rules 2024 introduce provisions such as requesting the KCAB to issue an attestation that a settlement has been reached through mediation to facilitate enforcement under the Singapore Convention.
Following the implementation of the KCAB Mediation Rules 2024, the KCAB has initiated a process for the appointment of international mediators and will organize and set up a specialized group of mediators with the requisite skills and experience. In addition, the KCAB plans to undertake various initiatives to expand the reach of the mediation system, such as conducting training and events related to international mediation.
A.2.3 Inauguration of the KCAB Shanghai Center
In recent years, the KCAB has opened liaison offices in Los Angeles, Shanghai and Hanoi. The KCAB announced that the Shanghai Municipal Bureau of Justice ratified the registration of its business office in Shanghai in December 2023. Previously, WIPO was the first international organization to establish a registered office in Shanghai: the WIPO Shanghai Center for Arbitration and Mediation. The KCAB is now the first foreign arbitral institution to establish a registered office in Shanghai. The establishment of the KCAB Shanghai Center is expected to contribute to the further development and promotion of the use of international arbitration in the East Asia region.
Upon ratification of the registration, the KCAB Shanghai Center will be able to conduct foreign-related arbitration in China for civil and commercial disputes arising from international trade, maritime, investment and other fields after completion of follow-up registration procedures. Its scope of activities will include arbitration case management and services, business consulting, training and seminars.
B. CASES
In 2023, three notable judgments were rendered by the Supreme Court, the Cheongju District Court and the Seoul Central District Court. The Supreme Court confirmed that substantive issues, such as the existence and validity of an arbitration agreement, cannot be heard in court proceedings dealing with the appointment of an arbitrator. The Cheongju District Court held that the interim measures of a foreign tribunal are not recognized and enforceable by Korean courts. Finally, the Seoul Central District Court denied a request for interim measures to stop an appeal to the Hanoi courts without clarifying the availability of anti-suit injunctions by Korean courts.
B.1 Existence and validity of arbitration agreement not subject to arbitrator selection proceedings in Korean courts
B.1.1 Summary of the facts
The carrier (respondent) entered into a voyage charter party with the owner of the vessel to charter the vessel for a certain period of time and then used the vessel to transport a shipper’s cargo. However, an accident occurred while the respondent was transporting the cargo from the shipper to the consignee. The consignee’s cargo insurer (claimant) paid the insured, the original consignee, who in turn delivered a bill of lading to the claimant. The claimant then sought damages from the carrier (respondent) under the charter party.
The charter party agreement contained an arbitration clause for the settlement of disputes between the parties by arbitration in Korea, and the bill of lading stated that the charter party and the arbitration clause were incorporated into the bill of lading. Under these circumstances, the claimant, the holder of the bill of lading, commenced arbitration against the respondent, the issuer of the bill of lading, and sought the appointment of an arbitrator pursuant to the arbitration clause.
However, the respondent refused to agree to the appointment of an arbitrator, claiming that there was no arbitration agreement. The claimant then applied to the court for the appointment of an arbitrator pursuant to Article 12(3) of the Arbitration Act.[1] The lower court rejected the respondent’s argument and appointed an arbitrator as requested. The respondent appealed the lower court’s decision, and this special appeal was made directly to the Supreme Court.
B.1.2 The court’s reasoning
In its Decision 2020Geu633, 29 December 2022 (published in the Korean Supreme Court Reports No. 652, 15 February 2023), the Supreme Court held that the existence and validity of an arbitration agreement is a substantive matter that can only be determined by the tribunal. Therefore, the respondent could not rely on a claim that the arbitration agreement is nonexistent or invalid as a valid defense to prevent the claimant from seeking the appointment of an arbitrator. Consequently, the Supreme Court dismissed the appeal, holding that the respondent’s claim of an invalid arbitration agreement was not an issue that could be considered by the court in determining the application to appoint an arbitrator.
B.1.3 Significance of the case
The Supreme Court’s decision is the first to declare that substantive issues, such as the existence and validity of an arbitration agreement, cannot be heard in Korean court proceedings concerning the appointment of an arbitrator. The decision takes into account the characteristics of arbitration, such as autonomy and speed, and is consistent with the terms, purpose and intent of the Arbitration Act. This conclusion is also reasonable in light of the doctrine of competence-competence followed by the Arbitration Act that has adopted the UNCITRAL Model Law.
B.2 Foreign tribunal’s interim measures not recognized and enforceable by Korean courts
B.2.1 Summary of the facts
The supplier (respondent) entered into a distribution agreement pursuant to which it agreed to grant the distributor (claimant) the exclusive right to sell the respondent’s products in China in exchange for a per-product payment from the claimant. The distribution agreement contained a SIAC arbitration clause for the settlement of disputes between the parties by arbitration in Singapore.
The claimant began marketing and selling the products supplied by the respondent in China under its own brand. However, the respondent subsequently asked the claimant to discuss lifting the exclusivity in China and repeatedly indicated that it would soon start supplying the products to other companies. Finally, the claimant’s competitor announced the launch of a virtually identical product in China.
The claimant filed a request for arbitration seeking injunctive relief and damages against the respondent, as well as an application for emergency interim measures to prevent the respondent from supplying the same product to the claimant’s competitor. The emergency arbitrator, appointed under the SIAC Rules 2016, issued an interim award that largely upheld the application. The claimant then filed a request for similar interim measures with the Cheongju District Court, and the respondent claimed that the request was inadmissible.
B.2.2 The court’s reasoning
In its Decision 2022KaHap50245, 8 June 2023, the Cheongju District Court held that the claimant’s request was inadmissible because it violated the parties’ arbitration agreement, which incorporates Rule 30.3 of the SIAC Rules 2016, as well as the Arbitration Act, which does not provide for the recognition and enforcement of a foreign tribunal’s interim measures, as explained below.
First, Rule 30.3 provides that a request for interim measures to a judicial authority prior to the constitution of the tribunal or in exceptional circumstances is compatible with the SIAC Rules 2016. Interpreting this provision in reverse, a request for interim measures to a judicial authority after the constitution of the tribunal is incompatible, except in exceptional circumstances, which in turn would render such a request inconsistent with the parties’ arbitration agreement incorporating Rule 30.3.
Indeed, a SIAC tribunal is currently constituted for the alleged breach of exclusivity under the distribution agreement. There appears to be no reason why the claimant should not be able to seek the same interim measures from the SIAC tribunal as it seeks from the court, and no evidence has been provided that the claimant is in exceptional circumstances that would require it to seek such measures from this court, a judicial authority.
Moreover, Article 6 of the Arbitration Act limits the scope of the court’s involvement in arbitral proceedings to the matters governed therein.[2] This is intended to ensure the independence of arbitration as an out-of-court dispute resolution method. Article 2(1) also establishes the principle that the Arbitration Act applies only to arbitrations in Korea, except for a few matters, such as the recognition and enforcement of foreign merits awards (and not interim measures).[3] Accordingly, the recognition and enforcement of interim measures in which the court may intervene is limited to those granted by Korean tribunals. Thus, the court cannot intervene in the recognition and enforcement of interim measures granted by foreign tribunals.
However, the claimant’s request for interim measures before this court appears to be identical to, and not materially different from, the interim award issued by the SIAC emergency arbitrator. Therefore, the claimant’s request essentially seeks recognition and enforcement of the interim measures granted by the foreign tribunal. The Arbitration Act precludes the court from intervening in such matters.
B.2.3 Significance of the case
In practice, issues may arise in relation to interim measures of a foreign tribunal being enforced in Korean courts. In particular, it is important to know whether interim measures of a foreign tribunal can be recognized and enforced in Korea. The Cheongju District Court, in handling the first case in Korea that addresses this issue, clarified that the arbitration rules or agreements may preclude the court from granting interim measures under certain circumstances and that attempts to have a court effectively recognize and enforce interim measures granted by a foreign tribunal may be denied pursuant to the Arbitration Act.
B.3 Korean court’s anti-suit injunction remains unclear after recent lower court case
B.3.1 Facts of the case
A constructor (respondent) borrowed funds from a lender (claimant) and entered into a subordinated debt agreement under which the respondent agreed not to exercise any rights to enforce its existing claim against a Vietnamese third party (the claimant’s affiliate), including filing a lawsuit, until the claimant received full repayment of the loan.
Nevertheless, the respondent filed a lawsuit against the Vietnamese affiliate in the Hanoi People’s Court, seeking payment of the construction price. The claimant then filed a request for interim measures with the Seoul Central District Court to prevent the respondent from appealing the impending judgment of the Hanoi People’s Court based on the subordinated debt agreement.
B.3.2 The court’s reasoning
In its Decision 2023KaHap139, 24 October 2023, the Seoul Central District Court denied the claimant’s request for interim measures based on the following considerations.
First, even if an appeal in breach of a subordinated debt agreement is without merit, this is a matter for the Hanoi courts to decide by reviewing the legality of the appeal. The court found that it would be inappropriate for the claimant to ask the Seoul Central District Court to induce the respondent to waive its right to appeal to the Hanoi courts without first seeking a direct remedy by intervening in the Vietnamese proceedings and challenging the legality of the appeal. Nor do there appear to be any urgent circumstances justifying such interim measures.
Moreover, the Korean court’s involvement in the foreign court’s proceedings should be kept to a minimum because the merits proceedings before the foreign courts and the interim measures proceedings before the Korean courts are independent of each other. Granting the claimant’s request would effectively neutralize the independence of a foreign court. The doctrine of competence-competence remains valid not only for arbitral tribunals but also for foreign courts, which should be able to determine their own jurisdiction and decide whether or not to proceed with the case.
The court found that it was difficult to conclude that the harm or risk to the claimant — if the respondent is not enjoined from filing an appeal in the Vietnamese proceedings — is so great or serious as to outweigh the harm or risk that the respondent would be prevented by the court’s interim measures from filing an appeal.
B.3.3 Significance of the case
In line with the UNCITRAL Model Law, Article 18(2)(ii) of the Arbitration Act provides for the possibility of a tribunal’s anti-suit (or anti-arbitration) injunction.[4] On the other hand, it is the established view of the Supreme Court, since its Decision 2017Ma6087, 2 February 2018, that a court’s anti-arbitration injunction is not permitted, as Article 6 of the Arbitration Act limits the scope of the court’s involvement in arbitral proceedings to the matters governed therein.
As for a court’s anti-suit injunction, there are only a few cases that have provided an explicit position. The Seoul Central District Court again refrained from explicitly declaring the possibility of such an injunction as inadmissible. Instead, the Seoul Central District Court took a circuitous approach by denying the claimant’s request based on the policy argument that the independence of foreign courts should be respected while at the same time finding that the claimant had not sufficiently demonstrated the need for an anti-suit injunction against the Vietnamese proceedings.
[1] Arbitration Act, Articles 12(2) and (3) (Appointment of Arbitrators): “(2) The parties are free to agree on a procedure of appointing arbitrators. (3) Failing such agreement under paragraph (2), arbitrators shall be appointed according to one of the following subparagraphs: (i) In an arbitration with a sole arbitrator: If the parties fail to reach an agreement on the appointment of an arbitrator within thirty days of receipt of a request to do so from the other party, the arbitrator shall be appointed, upon request of a party, by the court or arbitration institution designated by the court; or, (ii) In an arbitration with three arbitrators: […].”
[2] Arbitration Act, Article 6 (Court Intervention): “In matters governed by this Act, no court shall intervene except where so provided in this Act.”
[3] Arbitration Act, Article 2(1) (Scope of Application): “This Act shall apply to cases where the place of arbitration under Article 21 [Place of Arbitration] is in the Republic of Korea: Provided, That […] Articles 37 [Recognition or Enforcement of Arbitral Award] and 39 [Foreign Awards] shall apply even in cases where the place of arbitration is not in the Republic of Korea.” The recognition and enforcement of interim measures is governed by Article 18-7 (Recognition and Enforcement of Interim Measures), which is not referred to as an exception in the above proviso to Article 2(1).
[4] Arbitration Act, Article 18 (Interim Measures): “(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures as considered necessary. (2) An interim measure under paragraph (1) is any temporary measure, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to perform any of the following subparagraphs: […] (ii) Take action that would prevent current or imminent harm or prejudice to the arbitral proceeding itself, or prohibiting action that may cause such harm or prejudice […].”
