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
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. Since then, there have been no significant updates to the KCAB’s institutional framework or arbitration rules until the end of 2024.
B. CASES
In 2024, several notable arbitration-related decisions were issued by the Korean courts. These decisions address important issues in Korean arbitration law and practice. Summaries of the most significant decisions are provided below.
B.1 Supreme Court clarifies reasonable inquiry requirement for service of arbitral documents and setting aside of arbitral award
B.1.1 Summary of the facts
In its Judgment 2023Da277529 dated 11 January 2024, the Supreme Court considered a case concerning the setting aside of an arbitral award. The plaintiff (respondent in the arbitration) sought to set aside the award, on the basis that it had not received proper notice of the arbitration, in particular the request for arbitration and the notice of the arbitrator selection procedure. The lower court found in favor of the plaintiff and set aside the award, and the defendant (claimant in the arbitration) appealed to the Supreme Court.
B.1.2 The court’s reasoning
The Supreme Court upheld the lower court’s decision and dismissed the defendant’s appeal. The Supreme Court clarified the interpretation of “reasonable inquiry” under article 4(3) of the Arbitration Act, which governs service of documents by mail when the recipient’s address is unknown after reasonable efforts.[1]
The court stated that simply sending the arbitral documents to the address listed in the company register without further efforts to find the correct address does not constitute reasonable inquiry. The court emphasized that due diligence requires reasonable and proactive efforts to ascertain the actual address of the recipient, taking into account the specific circumstances of the case. Examples of reasonable efforts include checking contract documents, contacting known contacts of the recipient, and visiting the last known address.
In this case, the Supreme Court found that the defendant had not made reasonable efforts because it had not attempted to contact the plaintiff directly or to visit its last known address before resorting to service at the company’s registered office. Therefore, the service of the request for arbitration was deemed improper, which justified the annulment of the award pursuant to article 36(2)(i)(b) of the Arbitration Act, which allows for annulment if a party was not properly notified of the arbitral proceedings.[2]
B.1.3 Significance of the case
This Supreme Court decision provides important clarification on the “proper notice” requirement for service of arbitral documents under article 36(2)(i)(b) of the Arbitration Act. It underscores the need for arbitrators and arbitral institutions to ensure procedural fairness and due process in the service of documents, particularly when relying on service at the company’s registered office. The decision underscores the need for parties initiating arbitration in Korea to make diligent and reasonable efforts to locate the responding party and ensure actual notice of the proceedings, rather than relying solely on publicly available registry information. This case serves as a cautionary reminder to arbitration practitioners in Korea to prioritize proper service and due process to avoid potential challenges to the enforceability of arbitral awards.
B.2 Supreme Court clarifies distinction between “place of arbitration” and “venue of arbitration” for enforcement of arbitral award
B.2.1 Summary of the facts
In its Decision 2024Ma5904 dated 27 June 2024, the Supreme Court considered a challenge to the enforcement of a foreign arbitral award. The claimant sought enforcement of an arbitral award made against the respondent. The respondent opposed enforcement, arguing that the award was invalid because the arbitral tribunal had improperly designated the place of arbitration as Seoul, Republic of Korea, whereas the arbitration agreement stated that “[t]he site for such arbitration proceeding shall be … Seoul, Republic of Korea”. The respondent argued that this discrepancy constituted a breach of the arbitration agreement and Korean law. The lower court upheld enforcement of the award and the respondent appealed to the Supreme Court.
B.2.2 The court’s reasoning
The Supreme Court dismissed the respondent’s appeal and upheld the lower court’s decision to enforce the award. The Supreme Court clarified the distinction between the place of arbitration, the venue of arbitration and the seat of the arbitral institution under the Arbitration Act. The court explained that “place of arbitration” refers to the legal location of the arbitration, which determines the procedural law applicable to the arbitration and serves as the basis for distinguishing between domestic and foreign arbitral awards. In contrast, “venue of arbitration” refers to the physical location where hearings and other arbitral proceedings take place, and “seat of the arbitral institution” refers to the location of the institution administering the arbitration. The court emphasized that these terms are distinct and do not necessarily have to be the same.
The Supreme Court then held that the arbitration agreement’s designation of the “site of arbitration” as Seoul, Republic of Korea, was correctly interpreted by the arbitral tribunal as the “place of arbitration” rather than the “venue of arbitration”. The court found that the arbitral tribunal had correctly applied Korean law as the procedural law of arbitration and that the award itself identified Seoul as the place of arbitration. Therefore, the court concluded that there was no breach of the arbitration agreement or Korean law with respect to the designation of the place of arbitration.
B.2.3 Significance of the case
This Supreme Court decision provides important guidance on the interpretation of seat clauses in arbitration agreements. It clarifies that the designation of a particular place as the “site” of arbitration in an arbitration agreement will generally be interpreted as designating the “place” of arbitration, unless there is clear evidence to the contrary. The decision also underscores the Korean court’s pro-enforcement stance towards arbitral awards and its willingness to interpret arbitration agreements in a commercially reasonable manner, giving effect to the parties’ intention to arbitrate. This case is particularly important for parties drafting arbitration agreements that designate a specific place for arbitration, as it clarifies the legal implications of such clauses under Korean law.
B.3 Supreme Court clarifies interpretation of arbitral award and public policy exception in enforcement proceedings
B.3.1 Summary of the facts
In its Decision 2023Ma6248 dated 28 November 2024, the Supreme Court considered a challenge to the enforcement of a foreign arbitral award. The claimants sought enforcement of an arbitral award against the respondents. The respondents opposed enforcement, arguing that the award was unclear, ambiguous and contrary to Korean public policy. The lower court granted enforcement of the award and the respondents appealed to the Supreme Court.
The key issue was the interpretation of the operative part of the award, which ordered the respondents to pay a certain amount of damages to the claimants. The respondents argued that this clause was ambiguous as to which respondent was liable to which claimant and for what amount. The respondents also argued that the award violated Korean public policy by imposing joint and several liability, which they claimed was excessive and unfair.
B.3.2 The court’s reasoning
The Supreme Court dismissed the respondents’ appeal and upheld the lower court’s decision to enforce the award. The court emphasized that although enforcement courts should not re-examine the merits of the award, they have the power to interpret the operative part and the reasoning of the award to determine its meaning and enforceability. The court stated that if the operative part of an award is unclear or ambiguous, enforcement courts may refer to the reasoning section of the award to clarify its meaning, as long as the interpretation remains within the scope of the award itself and does not constitute a re-examination of the merits.
In this case, the Supreme Court found that although the operative part of the award was somewhat ambiguous on its face, its meaning could be clarified by reference to the reasoning section of the award. The court interpreted the award as imposing joint and several liability on all respondents for the total amount of damages, meaning that each respondent could be held liable for the full amount, but payment by one respondent would discharge the liability of the other respondents up to the amount paid.
The Supreme Court further held that this interpretation was not contrary to Korean public policy, as joint and several liability is a recognized legal concept in Korean law. The court emphasized that the public policy exception to enforcement should be narrowly construed and applied only in cases where enforcement of the award would clearly violate fundamental principles of Korean law or morality.
B.3.3 Significance of the case
This Supreme Court decision provides important guidance on the interpretation of arbitral awards in enforcement proceedings and the application of the public policy exception under Korean law. It clarifies that enforcement courts have the power to interpret arbitral awards to ensure their enforceability, but that such interpretation must be based on the award itself and should not amount to a review of the merits. The decision also reinforces the narrow scope of the public policy exception and highlights the strong pro-enforcement bias of Korean courts towards both domestic and foreign arbitral awards. This case is particularly relevant for arbitral awards with complex or potentially ambiguous operative parts, as it clarifies the approach that Korean courts will take in interpreting and enforcing such awards.
B.4 Seoul High Court addresses scope of arbitration clause in contract-tort claim
B.4.1 Summary of the facts
In its Judgment 2023Na2050708 dated 25 April 2024, the Seoul High Court considered a case concerning the scope of an arbitration clause in a tort claim for breach of contract. The plaintiff filed a lawsuit against the defendants (“Company A” and “Mr B“) seeking damages for tortious acts committed by Mr B, the representative director of Company A, during the negotiation and execution of a sale and purchase agreement between the plaintiff and Company A. Company A argued that the dispute should be submitted to arbitration based on an arbitration clause in the agreement and that the lawsuit against Company A should be dismissed. The lower court rejected this defense and ruled in favor of the plaintiff against both defendants. The defendants appealed to the Seoul High Court.
B.4.2 The court’s reasoning
The Seoul High Court partially reversed the lower court’s decision, dismissing the claim against Company A but upholding the judgment against Mr B. The court held that the arbitration clause in the sale and purchase agreement, which provided for arbitration of “disputes arising between the parties”, was broad enough to cover not only contractual claims but also tort claims directly related to the contract.
The court reasoned that the plaintiff’s tort claim against Company A, based on the alleged wrongful acts of its director during the negotiation and performance of the contract, was sufficiently related to the sale and purchase agreement to fall within the scope of the arbitration clause. The court distinguished the claim against Company A from the claim against Mr B and held that the arbitration clause did not extend to Mr B personally as he was not a party to the agreement. Therefore, the court dismissed the claim against Company A as subject to arbitration, but upheld the tort judgment against Mr B, holding that the arbitration clause did not apply to him.
B.4.3 Significance of the case
This Seoul High Court decision provides useful guidance on the scope of arbitration clauses in Korea, particularly in the context of contractual tort claims. It confirms that arbitration clauses in Korea are generally interpreted broadly to cover not only contractual claims, but also related tort claims directly connected to the underlying contract. The decision highlights the importance of examining the wording of the arbitration clause and the nature of the dispute to determine whether a tort claim falls within the scope of the arbitration clause. This case is important for parties to commercial contracts containing arbitration clauses, as it clarifies that such clauses may extend to tortious claims arising out of the contractual relationship, even if the tortfeasor is not a party to the contract, provided that the claim is sufficiently related to the contract and involves a party to the contract.
B.5 Supreme Court affirms validity of pathological arbitration agreement
B.5.1 Summary of the facts
In its Judgment 2024Da243172 dated 23 January 2025, the Supreme Court considered a case concerning the validity of a pathological arbitration clause. A supply contract between a plaintiff and a defendant contained a clause stating that “[a]ll disputes … shall be finally settled by Korean Law or in accordance with the Commercial Arbitration Committee of International Commercial Law”. When a dispute arose, the plaintiff filed a lawsuit and the defendant objected, arguing that the dispute should be settled by arbitration. The lower court overruled the objection, interpreting the clause as optional and requiring both parties to agree to arbitration again after a dispute had arisen (which was not the case as the plaintiff maintained the lawsuit). The defendant appealed to the Supreme Court.
B.5.2 The court’s reasoning
The Supreme Court reversed the lower court and held that the clause was a valid arbitration clause. The Supreme Court reasoned that despite the clause’s ambiguous wording, the parties’ intention to resolve disputes by arbitration was clear. The court noted that the English title of the clause was “Arbitration” and that the English text expressly stated that “disputes shall be finally settled by … [a]rbitration”, indicating an agreement to arbitrate. The phrase “settled by Korean law” was interpreted as designating Korean law as the governing law of the supply contract, not as the mechanism for dispute resolution. The reference to a non-existent arbitral institution, the “Commercial Arbitration Committee of International Commercial Law”, was not held to invalidate the arbitration agreement as the overriding intention to arbitrate was clear.
B.5.3 Significance of the case
This Supreme Court decision underscores the pro-arbitration stance of the Korean courts and demonstrates their willingness to uphold the validity of arbitration agreements even if they contain pathological elements. It clarifies that Korean courts will focus on discerning the parties’ intention to arbitrate and give effect to that intention, even if the arbitration clause is poorly drafted, contains ambiguities or contradictions, or refers to a non-existent arbitral institution. This case provides important guidance on the interpretation of unclear arbitration clauses and highlights the Korean courts’ commitment to supporting arbitration as a dispute resolution mechanism.
[1] Arbitration Act, article 4 (Notice of Written Communication) (1) Unless otherwise agreed by the parties, a written communication shall be delivered to the addressee in question personally. (2) If a notice cannot be personally delivered as provided under paragraph (1), the written communication shall be deemed to have been notified to the addressee when it is duly delivered to the addressee’s domicile, place of business or mailing address. (3) In applying paragraph (2), if the addressee’s domicile, place of business or mailing address cannot be found even after making a reasonable inquiry, a written communication shall be deemed to have been notified to the addressee when it is sent to his or her last-known domicile, place of business or mailing address by registered mail or any other postal service which provides a record of the delivery. (4) The provisions of paragraphs (1) through (3) do not apply to communications in court proceedings.
[2] Arbitration Act, article 36 (Action for Setting Aside Award) (2) An arbitration award may be set aside by the court only if it falls under one of the following subparagraphs:
(i) The party seeking the setting aside of the award furnishes proof that it falls under one of the following items:
(b) The party making the action for setting aside was not given proper notice of the appointment of the arbitrator or arbitrators or of the arbitral proceedings or was otherwise unable to present his or her case.
