South Korea

Case updates

Supreme Court Decision 2018DA231550, dated 11 March 2022

On 11 March 2022, the Korean Supreme Court issued a landmark decision which may allow enforcement of arbitral awards granting exemplary or punitive damages in Korea in certain circumstances.

Previously, Article 217 of the Korean Civil Procedure Act provided that a Court may refuse to enforce or make a partial recognition of a foreign judgment if the compensation for damages awarded in the judgment is against Korean law. As Korea is a member State of the New York Convention, the Korean Courts are required to recognise and enforce arbitral awards issued in other member jurisdictions but the award will not be recognised if it is “in conflict with the good morals and other forms of social order” in Korea. Historically, the Korean civil law system only recognised awards of actual and compensatory damages and as such the Korean Courts may refuse to recognise an arbitral award which grants exemplary or punitive damages on the basis that such damages may be against the public policy in Korea.

The Supreme Court decision concerned the enforcement of a judgment by the Hawaii Court which awarded the plaintiffs treble damages under the Hawaii State Legislature on Unfair or Deceptive Acts or Practices. In deciding to allow the enforcement of the full award, the Korean Supreme Court noted that the amended Monopoly Regulation and Fair Trade Act in Korea now also allows for damages in an amount not exceeding three times the actual damages (i.e. treble damages) and in the circumstances, the award of treble damages in the Hawaii Court judgment would not be contrary to Korean law or public policy.

A number of legislations in Korea now provide and allow for punitive damages including the Personal Information Protection Act, Product Liability Act, Fair Trade Act, Unfair Competition Prevention and Trade Secret Protection Act, Trademark Act, Patent Act, Design Protection Act etc.

Based on the Supreme Court decision, it is likely that enforcement of an arbitral award granting exemplary or punitive damages will be allowed if such exemplary or punitive damages are allowed under the relevant laws and regulations in Korea.

Supreme Court Order 2020MA7667, dated 15 october 2021

In a recent Supreme Court order, the calculation of attorney’s fees for enforcement proceedings under the Arbitration Act was clarified.

Upon the amendment of the Arbitration Act in 2016, an arbitral award is required to be enforced only by a court’s “order”. A court’s “decision” required before the amendment of the Arbitration Act is no longer necessary and seeking a court’s “order” is a more simplified process.

However, the Rules on the Stamps Attached for Civil Litigation (“Stamp Rules”) only provided for the calculation of the “value of the object of litigation” in proceedings seeking a “decision” for enforcement of an arbitral award. The “value of the object of litigation” is used for calculating an attorney’s fees in enforcement proceedings for arbitral awards.

Considering that the amendment to the Arbitration Act made no meaningful changes to the standard of enforcement of an arbitral award and that the parties are still required to plead and provide evidence for the enforcement proceedings, the Supreme Court decision held that the Stamp Rules apply the same way to proceedings seeking for an “order” for enforcement of an arbitral award.

Arbitration on nuclear reactor technology by the Korean state utility

On 21 October 2022, a Pittsburgh-based Energy Company (“W”) sued a Korean state utility and its subsidiary (collectively, the “Korean entities”) in the US District Court for the District of Columbia and claimed that the reactor designs are derivative of the technology that W previously licensed to the Korean entities under the 10-year licensing agreement – which granted the Korean entities a 10-year license for its pressurised water reactor technology used in electricity generation. W argued that the delivery of the reactor design by the Korean entities to bid for overseas project would amount to a “retransfer” of technology subject to export control rules under the US Atomic Energy Act and requested the US Court to block the Korean entities from delivering technical information for bidding overseas projects.

The Korean entities, in turn, filed an arbitration against W before the Korean Commercial Arbitration Board (KCAB) on 25 October 2022 claiming for losses resulting from the interferences by W for bidding overseas projects. The arbitration was brought under the licensing agreement mentioned above.

 

Other key developments

KCAB kicked off review of its arbitration rules

On 28 September 2022, KCAB announced that KCAB International, the international division of the KCAB, has kicked off a review of its international arbitration rules to address the recent changes in the arbitration ecosystem and to better reflect the astute requests of arbitration clients. The review will be an evaluation and update of its arbitration rules since 2016 and aims to ensure that the KCAB arbitrations are carried out in a more timely and effective manner.

A public consultation will be conducted following an internal review process by a revision committee.