Arbitration

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

In keeping with article 7 (option I) of the 2006 UNCITRAL Model Law, article 8 of the Korean Arbitration Act requires that an arbitration agreement be in writing, either as an arbitration clause in a contract or as a separate agreement.

A written arbitration agreement will be deemed to exist if such agreement is made orally or through any other means as long as the substance of the agreement is recorded in any form. An arbitration agreement may be contained in a document signed by the parties, in an exchange of written (including electronic) communications, or in an exchange of statements of claim and defence if the existence of an arbitration agreement is alleged by one party and not denied by the other. A reference in a contract to a document containing an arbitration clause constitutes a binding arbitration agreement, provided that the reference is such as to make that clause a part of the contract. An arbitration agreement may be general in its terms and may appear under the general terms and conditions of the contract.

The New York Convention does not permit the finding of an agreement to arbitrate on the basis of an exchange of statements of claim and defence in which the existence of an arbitration agreement is alleged by one party and not denied by the other. Therefore, the Korean Supreme Court has held that, notwithstanding the provisions of the Korean Arbitration Act, such an exchange may not be the basis for a finding that the parties have agreed to arbitration for purposes of an enforcement action under the New York Convention.

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

The procedural provisions of the Korean Arbitration Act are generally default provisions, applicable in the absence of an agreement between the parties regarding procedural rules. The parties have significant freedom to agree upon particular procedural rules, and arbitrators also have wide discretion to determine how the arbitration should proceed.

However, there are certain mandatory provisions in the act. Article 19 of the Korean Arbitration Act requires that the parties receive equal treatment and that each party be given a full opportunity to present its case. Article 13 of the Korean Arbitration Act requires potential arbitrators to disclose all circumstances likely to give rise to justifiable doubts as to their impartiality or independence, and the Korean Supreme Court has ruled that parties cannot waive this requirement. Article 7 of the Korean Arbitration Act confers jurisdiction on Korean courts to set aside domestic awards and to hear applications for recognition or execution of international arbitral awards.

Award

When and in what form must the award be delivered?

Article 32 of the Korean Arbitration Act requires that an award be in writing and signed by all of the arbitrators; if one of the arbitrators is unable or refuses to sign the award, the other arbitrators must sign the award and explain the reasons for the absence of an arbitrator’s signature. An award must state its date, the place of the arbitration and, unless the parties have agreed otherwise or the award is a consent award based on the settlement of the parties, the reasons on which the award is based. The award may be issued in a language other than Korean, but to enforce any such award through a Korean court, a Korean translation of the award must be submitted to the court. The KCAB Domestic and International Rules include the same requirements. The Domestic KCAB Rules additionally require that an award state the full names and addresses of the parties and their representatives.

The Korean Arbitration Act does not specify a time limit within which an arbitral award needs to be rendered, but the KCAB Rules do set time limits. Unless otherwise agreed by the parties, an award must be rendered no later than 30 days after the close of the hearings under the KCAB Domestic Rules, and 45 days after the close of the hearings (or 45 days after the final submissions are made, whichever is later) under the KCAB International Rules. Under the International Rules, the KCAB secretariat may extend the time limit pursuant to a reasoned request from the arbitral tribunal or on the secretariat’s own initiative. Both the Domestic and International Rules have introduced expedited procedures that apply to cases where claim amounts in dispute fall below a specified threshold.

Appeal

On what grounds can an award be appealed to the court?

Pursuant to article 36 of the Korean Arbitration Act, recourse against an arbitral award may be made only by an application to a court to set aside the award. Any such application must be made within three months of the date on which the party making such an application received a duly authenticated copy of the award.

An arbitral award may be set aside by the court only if the party making the application provides proof that:

  • a party to the arbitration agreement lacked capacity under the law applicable to such party, or the arbitration agreement is not valid under the law selected by the parties to govern the agreement (or, failing any such indication, under Korean law);
  • the party making the application was not given proper notice of the appointment of the arbitrators or of the arbitral proceedings, or was otherwise unable to present its case;
  • the award deals with a dispute not contemplated by or subject to the arbitration agreement, or contains decisions on matters beyond the scope of the arbitration agreement; or
  • the composition of the arbitral tribunal or the arbitral procedure were not in accordance with the agreement of the parties or the Act.

The court may also set aside the award if it finds on its own initiative that the subject matter of the dispute is not capable of settlement by arbitration under Korean law, or that the recognition and enforcement of the award is in conflict with the good morals or other public policy of Korea.

Korean courts are, however, generally open to arbitration, and it is not common for a Korean court to set aside a domestic arbitral award or refuse enforcement of an international arbitral award.

An application to set aside an arbitral award is filed at a district court. Thereafter, an appeal of the district court’s decision may be pursued at the High Court, followed by the Supreme Court. However, an enforcement order issued by the district court will generally be provisionally enforceable during the pendency of any appeals.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

A party may apply to the court for recognition and enforcement of the arbitration award. The party must submit a copy of the arbitral award. If the award is in a foreign language, there needs to be an accompanying Korean translation.

Under article 39 of the Act, where the New York Convention applies, recognition and enforcement of the foreign arbitral award shall be granted in accordance with the Convention.

Where it does not apply, foreign arbitral awards are reviewed in the same manner as foreign court judgments, pursuant to article 217 of the Civil Procedure Act and articles 26(1) and 27 of the Civil Execution Act. Under those provisions, a Korean court will recognise and enforce a foreign award not subject to the New York Convention if:

  • the award is final and conclusive;
  • the jurisdiction of the arbitral tribunal is consistent with Korean law and treaties to which Korea is a party;
  • the losing party received adequate notice of the arbitration and sufficient time to defend its case;
  • the award is not in conflict with the good morals or other public policy of Korea; and
  • the country in which the arbitral award was issued provides reciprocity to Korean judicial decisions and arbitral awards.

Generally speaking, Korean courts are considered ‘arbitration friendly’. For example, they have adopted a narrow interpretation of the limits on the enforceability of arbitral awards on public policy grounds. The Korean Supreme Court has ruled that under the New York Convention, considerations of public policy must take into account not only Korea’s domestic situation, but also the need for foreseeability and stability in international business transactions.