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KOREA June Junghye Yeum1 and Saemee Kim2

A. LEGISLATION, TRENDS AND TENDENCIES

A.1 Impending Amendments to the Korean Arbitration Act

Last year, we reported that a task force had been established by the Ministry of Justice in Korea in 2012 to consider amendments to the Korean Arbitration Act (the Arbitration Act). The task force has since evolved into a special committee encompassing arbitration practitioners, officials and academia. A draft bill amending the Arbitration Act is likely to be introduced in 2014. To date, committee discussions have centered on the extent to which the Arbitration Act should embrace the UNCITRAL Model Laws 2006 amendments. It appears that an amended Arbitration Act will adopt in whole or in part Option I (as opposed to Option II) of Article 7 of the UNCITRAL Model Law.3 The requirement that a duly authenticated or duly

1 June Junghye Yeum is a Partner and co-head of the International Dispute

Resolution Practice Group at Lee & Ko in Seoul, Korea. Prior to joining Lee & Ko, she was a Partner at Baker & McKenzies New York office and has extensive experience handling cross-border disputes and international arbitrations. She is also an arbitrator/neutral on the panel of the KCAB, SIAC and WIPO and is ranked as one of the Leading Individuals for the Dispute Resolution in Korea (Legal 500).

2 Saemee Kim is an Associate of Lee & Kos International Dispute Resolution Practice Group. She holds an LL.B from Korea University and completed her legal training at the Judicial Research and Training Institute of the Supreme Court of Korea.

3 Presently, Article 8 of the Arbitration Act provides that an arbitration agreement shall be in writing, and shall be contained in either a signed document, letters, telegrams, telex, or other means of telecommunications. By contrast, an arbitration agreement in writing under Option 1 of Article 7 of the UNCITRAL Model Law can have its content recorded in any form, whether or not the arbitration agreement or contract was concluded orally, by conduct, or by any other means. This can include information that is accessible by electronic communication.

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certified copy of the award be submitted to the enforcing court, which the UNCITRAL Model Law did away with in its 2006 amendments, may also be removed from the Arbitration Act.4 However, there are more divergent views within the special committee as to the extent to which Korea should adopt such 2006 amendments of the UNCITRAL Model Law as Articles 17.H and 17.I. These involve recognition and enforcement of tribunal-issued interim measures, including an expanded mandate for interim measures and the Korean courts discretion and power to reformulate such measures.5 Separate potential revisions to the Arbitration Act include whether to expand the scope of arbitrable disputes beyond commercial disputes, and whether to mandate protective measures for consumers or employees who agree to arbitration clauses.

A.2 Koreas Efforts to Promote International Arbitration

In May 2013, the Seoul International Dispute Resolution Centre (the Seoul IDRC) opened for business and hosted its first hearing at its new, state-of-the-art facilities with real-time transcribing and document-sharing technologies. The Seoul IDRC seeks to emulate the success of Singapores primary hearing facility, Maxwell Chambers. As of January 2014, a number of major arbitral institutions (including HKIAC, ICDR,

4 Compare Article 37(2) of the Arbitration Act with Article 35(2) of the

UNCITRAL Model Law. 5 Article 18 of the Arbitration Act, entitled Interim Measures, provides: (1) Unless

otherwise agreed by the parties, the arbitral tribunal may, at a request of a party, order any party to take such interim measure of the subject-matter [sic] of the dispute. The arbitral tribunal may determine an amount of security to be provided by the respondent in lieu of such measure; (2) The arbitral tribunal may order the party requesting the interim measure to provide appropriate security. The 2006 amendments removed the UNCITRAL Model Laws previous subject matter of the dispute language, which thus may be deleted from a revised Arbitration Act.

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ICC, LCIA, SIAC and WIPO) have entered into cooperation agreements with, and/or dispatched a representative to, the Seoul IDRC. The latter part of 2013 witnessed a large number of international arbitration events hosted in Seoul, including those organized by the LCIA, ICDR, SIAC, UNCITRAL, WIPO and the Korean Commercial Arbitration Board (the KCAB).

B. CASES In 2013, Korean courts heard nine cases involving enforcement of international arbitration awards,6 and declined to enforce the awards in four of those cases.7

B.1 Refusal to Enforce under Article V(1)(b) of the New York Convention8

In a decision issued on December 11, 2013, the Seoul Central District Court rejected enforcement of an arbitral award rendered in New York. The demand for arbitration and the ICDRs

6 See Seongnam Branch of Suwon District Court Judgment 2012GaHap202020, 29

March 2013; Seoul Central District Court Judgment 2013GaHap1407, 5 July 2013; Seoul Central District Court Judgment 2012GaDan348225, 26 September 2013; Anyang Branch of Suwon District Court Judgment 2012GaDan104395, 21 May 2013; Seoul Central District Court Judgment 2011GaDan132508, 11 December 2013; Seoul High Court Judgment 2012Na88930, 16 August 2013; Seoul Southern District Court Judgment 2012GaHap15979, 31 January 2013; Seoul Central District Court Judgment 2012GaHap70260, 31 May 2013; Seoul Central District Court Judgment 2012GaDan348089, 20 August 2013.

7 See Seoul High Court Judgment 2012Na88930, 16 August 2013, Seoul Southern District Court Judgment 2012GaHap15979, 31 January 2013, Anyang Branch of Suwon District Court Judgment 2012GaDan104395, 21 May 2013 and Seoul Central District Court Judgment 2011GaDan132508, 11 December 2013.

8 See Seoul Central District Court Judgment 2011GaDan132508, 11 December 2013.

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correspondence advising the respondent of the filing of the case and applicable arbitral rules were sent to the respondent by mail, but the subsequent correspondence from the ICDR, including letters notifying the respondent of the due date for objecting to arbitral appointment or the claimants submission, were only delivered to the respondent at his email address. The Seoul Central District Court held that such practice was not in compliance with the operative arbitration rules agreed to by the parties, namely Article 2(1) of the UNCITRAL Rules and Article 1 of the AAA Rules for Arbitrations Administered under the UNCITRAL Rules, nor with the arbitration law of the enforcing country, i.e., Article 4 of the Arbitration Act. Accordingly, the Seoul Central District Court held that the award was unenforceable pursuant to Article V(1)(b) of the New York Convention.9

B.2 Refusal to Enforce under Articles V(1)(a) of the New York Convention10

In a highly publicized decision issued on August 16, 2013, the Seoul High Court found a foreign arbitral award unenforceable under Article V(1)(a) of the New York Convention on the ground that there was no valid arbitration agreement. This case involved a dispute arising out of a commitment letter (the Commitment Letter) that did not contain an arbitration clause. The claimant sought the return of the distributed amount pursuant to the Commitment Letter, claiming that the ICC clause providing for arbitration in Japan contained in the shareholders agreement (the Shareholders Agreement, to which the claimant was a party) covered this dispute. The tribunal ordered

9 See Seoul Central District Court Judgment, 2011GaDan132508, 11 December,

2013. 10 See Seoul High Court Judgment 2012Na88930, 16 August 2013.

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the respondent to perform its repayment obligation under the Commitment Letter.

The Seoul High Court held that the claimant had no right to resort to the arbitration clause in the Shareholders Agreement, which conferred arbitrator appointing authority upon the shareholders and not the claimant. The Seoul High Court also found that the principle of one-stop adjudication espoused by the tribunal was unavailing because the dispute arose out of the Commitment Letter, which contained its own dispute resolution terms. This case is currently on appeal before the Supreme Court of Korea.

B.3 Refusal to Enforce under Article V(2)(b) of the New York Convention11

In a May 21, 2013 decision, the Suwon District Court (Anyang Branch) declined the plaintiffs request to enforce an amount representing VAT and corporate taxes on a settlement award rendered by the tribunal in a SIAC arbitration.12 The Suwon District Court reasoned that under Article V(2)(b) of the New York Convention, it is against public policy to require the award debtor to pay beyond the amount awarded in the settlement award stipulated among the parties and rendered by the arbitrator. This case is currently on appeal.

11 See Anyang Branch of Suwon District Court Judgment 2012GaDan104395, 21

May 2013. 12 See Anyang Branch of Suwon District Court Judgment 2012GaDan104395, 21

May 2013.

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B.4 Refusal to Enforce for Lack of Specificity in the Relief Sought13

In January 2013, in another widely reported decision, the Seoul Southern District Court refused to enforce an arbitral award rendered in Seoul in an UNCITRAL arbitration because the relevant specific performance relief was not clear or specific enough to be converted into a Korean judgment and carried out under Korean laws.

This dispute arose between a UK-based software provider and a Korean broadcaster in relation to a software supply agreement (the Supply Agreement). The broadcaster filed a request for arbitration, claiming that it had a right to use the software under the Supply Agreement. The tribunal found that the Supply Agreement had been terminated and ordered the broadcaster to perform its termination obligation in the Supply Agreement, without giving further details. The District Court found that, under Korean laws, the execution title must be specific and complete enough to enable the enforcement agency to carry out execution of the converted Korean judgment without having to review other supplementary documents.

Subsequently, in a January 17, 2014 decision, the Seoul High Court overturned the District Courts ruling and confirmed the award, but noted that execution was not feasible. The Court explained that it was impossible to identify the items that the broadcaster was required to return or destroy without a new trial, which would fall outside the courts limited powers of review.

13 See Seoul Southern District Court Judgment 2012GaHap15979, 31 January 2013.

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C. REGULATION OF COUNSEL CONDUCT IN INTERNATIONAL ARBITRATION

C.1 Potential Impact of the New IBA Guidelines on Party Representation

It is too soon to predict to what extent the Guidelines will be embraced by the arbitration community in Korea. The Guidelines may prove useful in arbitration matters involving counsel and/or tribunal members trained in legal systems different from Koreas, as they address uncertainties surrounding document production and other ethical norms. On the other hand, an increasing number of international arbitration disputes between a Korean party and foreign party are governed by Korean laws and/or venued in Korea, in which case each party is often represented by Korean counsel. In those cases, the Guidelines are much less likely to be embraced unless the tribunal takes the initiative and insists otherwise.

C.2 Counsels Conduct with Arbitrators

Prohibition of Ex Parte Communication

It is traditionally not uncommon for counsel in litigation matters in Korea to communicate ex parte with the judge(s) assigned to the case. In arbitration matters in Korea, however, the Arbitrator Ethics Code, promulgated by the Korean Arbitrators Association, provides that the arbitrator shall not have ex parte communications with a party during arbitration proceedings and, in the event such communications nonetheless take place, the arbitrator shall disclose the content of the communications to the other party and its counsel.14 Article 3(7) of the Arbitrator Ethics Code prohibits an arbitrator from disclosing any decision made

14 Article 3(6) of the Arbitrator Ethics Code.

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by the arbitrator to a party before such a decision is disclosed to all parties.15 Article 8(2) also states that the arbitrator shall not discuss settlement conditions with a party in the absence of the other party when the arbitrator is charged with helping the parties settle the dispute.16 It is unclear if, or to what extent, the Arbitrator Ethics Code applies to ex parte communications with potential arbitrators.17

The Arbitrator Ethics Code is not a mandatory regulation binding Korean lawyers, but rather is said to serve as a set of guidelines for arbitrators in Korea. In practice, it is unclear to what extent counsel and arbitrators in Korea refrain from having ex parte communications. The Supreme Court of Korea has stated that when an attorney serves as an arbitrator, the attorney should seek to refrain from having ex parte communications with a party (or its counsel) involved in the arbitration,18 but there have been no reported cases where a Korean court has penalized the parties or counsel on the basis of ex parte communications with an arbitrator.

Interplay between the Guidelines and Counsels Duty of Loyalty

The suggested Guidelines as to the conduct of parties counsel vis--vis a tribunal do not appear to contradict the duty of loyalty of counsel to the client imposed by the ethics codes and regulations governing Korean lawyers. Counsel who make false

15 Article 3(7) of the Arbitrator Ethics Code. 16 Article 8(2) of the Arbitrator Ethics Code. 17 In comparison, Guideline 8 of the IBA Guidelines provides that ex parte

communications with potential arbitrators are to be limited to discussions of expertise, experience, ability, availability, willingness and the existence of potential conflicts of interest.

18 See Supreme Court Judgment 2003Da21995, 12 March 2004. Note that the Supreme Court fell short of using mandatory language.

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factual statements have been sanctioned in Korea. In a disciplinary proceeding before the Korean Bar Association, for example, an attorney was fined KRW2,000,000 (approximately USD20,000) on the ground that he counseled the client to make a fake assignment of a monetary claim and then subsequently misrepresented to the Korean court that a genuine assignment had taken place.19 The Supreme Court of Korea has rejected an argument that false statements to a court were made out of the counsels duty of loyalty and confidentiality to the client and thus justified.20

The ethics code and regulations governing Korean lawyers do not provide a duty for counsel to take remedial measures when they later discover evidence to be false. There have been no reported cases addressing this issue.

Conflicts of Interest Arising out of Relationships between Counsel and Arbitrators

Korea has regulations concerning situations involving a direct conflict of interest. Specifically, Article 31(1)(c) of the Attorney-at-law Act and Article 17(1) of the Attorney Ethics Regulation each provides that an attorney shall not work on a matter as counsel where he or she serves as arbitrator. Notably, the Supreme Court of Korea has set aside an award rendered in a domestic arbitration matter on the ground that the attorney appointed as an arbitrator represented a party during the course of the arbitration in other matters sharing the same legal and factual issues, and thus lacked impartiality and independence.21 However, the Supreme Court of Korea refused to set aside an

19 See Attorneys Disciplinary Action No. 2003-11, 26 April 2004. 20 See Supreme Court Judgment 2012Do6027, 30 August 2012 (citing inter alia

Article 24 of the Attorney-at-Law Act). 21 See Supreme Court Judgment 2003Da21995, 12 March 2004.

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arbitral award in a case where a party was put on notice of a fact that gave rise to justifiable doubts as to the impartiality or independence of the arbitrator, but failed to raise an objection during the arbitration.22

C.3 Counsels Conduct with Parties

Counsels Responsibility Regarding the Production of Documents and/or Information

In prevailing Korean litigation practice, there is no large-scale document production, and a request for document production often requires the courts approval. Unless and until the IBA Guidelines are expressly adopted, Korean lawyers are unlikely to feel ethically bound to advise their clients to preserve documents or information for their own sake.23

Counsel Assisting Witnesses and Experts in the Preparation for the Arbitration

In Korea, there is no ethical code or other rule prohibiting counsel from assisting witnesses or experts in the preparation of their testimonies or reports. Witness statements are routinely prepared under the guidance of counsel for the party which provides the evidence. Such practice is permitted within the parameters of counsels other mandatory duties, such as counsels duty not to aid a client in committing perjury or submitting false evidence.24

22 See Supreme Court Judgment 2004Da47901, 29 April 2005. 23 Obviously, counsel will so advise the client for the sake of preserving evidence to

help the clients own claims and/or defenses. 24 See e.g., Article 15 of the Attorney-at-law Act.

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Issues Regarding Legal Representation and Compensation of Witnesses and Experts

No ethical or other codes and regulations in Korea specifically regulate compensation of witnesses and experts for expenses, time and professional services in connection with giving evidence. However, in at least two cases, the Supreme Court of Korea has held that if a witness has entered into an agreement to testify in exchange for compensation that exceeds a customarily acceptable level, then the agreement violates Article 103 of the Civil Act of Korea, which invalidates contracts that violate good public morals and social order.25

C.4 Remedies for Misconduct by Counsel

To remedy a breach of relevant rules by counsel, the courts in Korea have, inter alia, set aside arbitral awards and made adverse rulings against the party represented by the breaching counsel. The Korean Bar Association is also empowered to take disciplinary measures against counsel. The Attorney-at-law Act and Foreign Legal Consultant Act also provide for disciplinary measures such as permanent disbarment, suspension from practicing for up to three years, fines, and censure.26 It is unclear whether arbitrators seated in Korea are similarly empowered to take disciplinary action. That said, there is no rule or code that prohibits arbitrators from taking account of proven counsel misconduct when apportioning costs.

25 See Supreme Court Judgment 98Da52483, 13 April 1999; Supreme Court

Judgment 2009Da56283, 29 July 2010. 26 See Articles 90-91 of the Korean Attorney-at-law Act; Articles 36-37 of the

Foreign Legal Consultant Act.

00-Title and copyright page01-Table of Contents02-Foreword03-About the Editors04-Yearbook Topics05-Abbreviations06-Introduction07-Argentina08-Australia09-Austria10-Belarus11-Belgium12-Brazil13-Canada14-Chile15-China16-Colombia17-Czech Republic18-France19-Germany20-HongKong21-Hungary22-India23-Indonesia24-Italy25-Japan26-Kazakhstan27-Korea28-Kyrgyzstan29-Malaysia30-Mexico31-Netherlands32-Peru33-Philippines34-Poland35-Russian Federation36-Singapore37-South Africa38-Spain39-Sweden40-Switzerland41-Taiwan42-Turkey43-Ukraine44-United Arab Emirates45-United Kingdom46-United States47-Uzbekistan48-Venezuela49-VietnamAdvert_CSB31825_BTan_GS_short

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