In Brief: Arbitration Agreements in South Korea

Arbitration agreement

Arbitrability

Are there any types of disputes that are not arbitrable?

To date, there is no clear Korean judicial precedent as to whether claims related to economic regulatory laws, such as antitrust, competition, securities and environmental regulations, are arbitrable. Korean legal commentators have, however, noted the tendency of international arbitration to favor arbitrability of disputes in these areas, and at least one Korean court enforced a foreign arbitral award in 1995 based on a license agreement that allegedly violates Korea’s fair trade laws. . As part of its reasoning, the enforcement jurisdiction emphasized the need to promote international business relations.

As in most other jurisdictions, matters of criminal law, family law, and administrative law are not arbitrable in Korea.

The amended Korean Arbitration Law expanded the scope of arbitration to expressly include disputes over non-property rights that can be resolved by reconciliation of the parties, thus allowing arbitration of disputes arising under public law, such as intellectual property disputes. in Korea as long as the nature of the disputes would allow the parties to settle.

Terms

What formal and other requirements exist for an arbitration agreement?

According to Article 7 (Option I) of the 2006 UNCITRAL Model Law, Article 8 of the Korean Arbitration Law requires that an arbitration agreement be in writing, either in the form of a arbitration clause in a contract or in the form of a separate agreement.

A written arbitration agreement shall be deemed to exist whether the agreement is made orally or by any other means, provided that 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 communications (including electronic) or in an exchange of request for arbitration and response if the existence of an arbitration agreement is alleged by one party and not denied by the other (Article 8(3)). A reference in a contract to a document containing an arbitration clause also constitutes a binding arbitration agreement, provided that the reference is such as to make that clause part of the contract (Article 8(4)). An arbitration agreement may be included in the general conditions of the contract.

The New York Convention does not allow for the recognition of an arbitration agreement on the basis of an exchange of request for arbitration and answer in which the existence of an arbitration agreement is alleged by a party and not denied. by the other. Therefore, the Supreme Court held that, notwithstanding the provisions of Korean Arbitration Law, such an exchange cannot form the basis of a finding that the parties have agreed to arbitration for the purposes of a enforcement action under the New York Convention.

Applicability

Under what circumstances is an arbitration agreement no longer enforceable?

An arbitration agreement is unenforceable where it is proven that a party to the agreement was under any incapacity under applicable law while performing the agreement, or that the arbitration agreement is null and void, of no effect or incapable of being enforced under applicable law. In such a case, a Korean court would not dismiss a lawsuit on the grounds that the dispute is the subject of an arbitration agreement under Article 9 of the Korean Arbitration Law and would set aside an award. arbitration under Article 36 of the Korean Arbitration Act.

Where a party to arbitration enters into court-supervised bankruptcy or reorganization proceedings, the relevant insolvency laws apply. Under applicable Korean laws, creditors must report their claims to the bankruptcy court to preserve those claims. Failure to report a claim within the time limit set by the court may cause the claim to lapse. If the receiver refuses to recognize a declared debt, the plaintiff must file an action in the bankruptcy court to obtain confirmation of the debt. If the plaintiff does not request this confirmation, or if the bankruptcy court confirms the receiver’s denial of the request, the request lapses. Where there is an arbitration agreement between a creditor and a debtor who is subject to bankruptcy or reorganization proceedings, there is no clear legal provision or judicial precedent as to whether the court or an arbitral tribunal is competent to hear the dispute relating to the claim. In such circumstances, it is prudent to file the demand and confirmation action with the bankruptcy or reorganization court within the time allowed to maintain the enforceability of the arbitration agreement.

Separability

Are there provisions on severability of arbitration agreements from the main agreement?

Article 17(1) of the Korean Arbitration Law states that “[t]The arbitral tribunal may rule on its own jurisdiction, including any objection to the existence or validity of the arbitration agreement. In this case, an arbitration clause forming part of a contract is considered as an agreement independent of the other clauses of the contract”. This article purports to state that an arbitration agreement is severable from the rest of the contract.

Third parties – bound by an arbitration agreement

In which cases can third parties or non-signatories be bound by an arbitration agreement?

In some cases, a third party may be bound by an arbitration agreement as a successor, for example, the heir or assignee of a contracting party, or as a fiduciary of a contracting party who is so bound. Third parties may also be bound to an arbitration agreement by their subsequent consent, either by affirmative written consent at the request of a party, or by default of objection to the jurisdiction of the arbitral tribunal. Pursuant to Article 17 of the Korean Arbitration Law, an objection to the arbitral tribunal’s jurisdiction over a party must be raised no later than the filing of the defendant’s first written submission on the merits. of the dispute.

Third party – participation

Does your national arbitration law have provisions regarding third party participation in arbitration, such as joinder or third party notice?

There are no specific provisions in Korean Arbitration Law that specifically prohibit or permit third party participation in arbitration in Korea.

Under Article 21 of the KCAB International Rules 2016, the arbitral tribunal may allow third parties to join an existing arbitration at the request of a party, provided that:

  • all parties and the third party have each agreed in writing to the third party’s participation in the arbitration; Where
  • the third party is party to the same arbitration agreement with the parties, and the third party has agreed in writing to be associated with the arbitration.

However, the arbitral tribunal may refuse the participation of a third party even if these conditions are met when there are reasonable grounds to do so, such as the delay of the arbitration proceedings.

Business groups

Do courts and arbitral tribunals in your jurisdiction extend an arbitration agreement to non-signatory parent companies or subsidiaries of a signatory company, provided that the non-signatory was involved in some way in the conclusion, performance or termination of the contract in dispute, under the ‘corporate group doctrine?

To date, there is no clear precedent in which courts have extended the application of an arbitration agreement to a non-signatory parent or subsidiary company of one of the signatory companies on the basis of the doctrine of the group of companies.

Multi-Party Arbitration Agreements

What are the requirements for a valid multi-party arbitration agreement?

There are no specific provisions in Korean Arbitration Law or KCAB Arbitration Rules and no court rulings setting forth the requirements of a valid multi-party arbitration agreement. To date, courts have not encountered issues involving multiparty arbitrations, the consolidation of multiple arbitral proceedings, or the joining or intervention of additional interested parties. Nevertheless, the authors are aware of previous international arbitration cases in Korea involving multiparty arbitration agreements. In addition, the 2016 KCAB International Rules provide for the joinder of third parties to existing arbitral proceedings under a multi-party arbitration agreement.

Consolidation

Can an arbitral tribunal in your jurisdiction consolidate separate arbitral proceedings? In which circumstances?

The Korean Arbitration Law does not contain specific provisions regarding the consolidation of arbitral proceedings.

The KCAB International Arbitration Rules contain provisions relating to the consolidation of arbitral proceedings. Specifically, Article 23 of the KCAB International Arbitration Rules states that “the arbitral tribunal may, at the request of a party, consolidate claims made in a separate but ongoing arbitration if that arbitration is also governed by the Rules and between the same parties. However, the arbitral tribunal may not do so if any of the arbitrators of an arbitral tribunal have been appointed in such separate arbitration proceedings”.

Therefore, in a KCAB international arbitration, if the arbitral tribunal is not formed in the other KCAB international arbitration, at the request of a party, the arbitral tribunal may consolidate the proceedings taking into account the agreement(s) of arbitration, the nature of the claims and any other relevant circumstances.

In contrast, the KCAB’s internal arbitration rules do not contain any provisions regarding the consolidation of arbitral proceedings.

Date declared by law

Correct on:

Indicate the date the above information is accurate.

November 30, 2021

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