Heehwan KWON: Application of New York Convention in Korea

 Keynote Speech on the 60th Anniversary of New York Convention and “One Belt and One Road” Conference

Mr. Heehwan KWON

Acting Secretary General of KCAB International

Good afternoon, ladies and gentlemen.

It is with special thanks to the directors and the head of the Shenzhen Court of International Arbitration, and its judiciary members, that I speak to you today. As the acting Secretary General of KCAB, it is my great privilege to give a presentation on the Korean Commercial Arbitration Board. I would first like to briefly introduce my organization; the only authorized institution in Korea. The Korean Commercial Arbitration Board International is a newly launched arbitration division with a sole focus on international arbitration case management and promotion. This speech is the first official speech presented by any member of the KCAB in Shenzhen. I would also like to thank all personnel and members of the SCIA, it must have been difficult to prepare for this wonderful event within such a short space of time.

I was offered by the Shenzhen Court of International Arbitration to discuss and present the issue of enforcement in Korea. From this, two things came to mind. First, what should I do? This is because, in Korea, enforcement and recognition of arbitral awards, especially foreign arbitral awards, has been continually upheld to bridge the gap. Thus, no serious issues are left in terms of the practical experience within Korea, but I digress.

The second is, this year - as all of you are aware - marks the sixty-year anniversary of the New York Convention, as presented by my colleague Minjung, whom gave a wonderful presentation this morning. Minjung and I worked together to prepare the flagship event in November—the Korean version of the Hong Kong Arbitration Week or Dubai Arbitration Week, to create a wonderful program. So, what should I do? This idea came to me very seriously, and I started to research all the relevant documents, court decisions and arbitral awards by KCAB. I then found out, that actually, there is a lot that I'd like to share with you.

I would like to briefly introduce the article of setting aside an arbitral award according to the Arbitration Act of Korea. At first glance, this is quite similar to what is found in article V of the New York Convention. The Korean Arbitration Act was revised just last year, following the key concept of the arbitration law 2016. Korea adopted the Model Law, 1999; making it one of the first country to adopt this model in Asia.

With this in mind, I would like to introduce three significant cases rendered. The first of which is a very stereotypical type of judgment heard by the Korean court. Actually, the reason why I brought this case to speak about is very simple: the claim in this case is less than 50,000 dollars.. One may easily ignore the importance of enforcement and recognition, according to what is mentioned in this small case. However, this foreign party is seriously sought their enforcement against the Korean party; and they successfully upheld the award within a short time.. The involved the plaintiff, a Singaporean buyer whom provided assistance for the application and training of a pilot, against a standard Korean party. Unfortunately, the Korean party lost. With the seat of arbitration being Singapore, the Singaporean party attempted to seek the enforcement of the arbitral award by hiring a Korean lawyer. It must be noted that at this time, the Korean party would not have imagined truly that the plaintiff would come to Korea seeking less than 50,000 dollars; but they did. Thus, the defendant argued the enforcement must be refused as they claimed the arbitration process did not follow proper procedure. In the alternative, the second issue submitted by the defendant was a refusal of the enforcement due to the criminal action of the plaintiff. The court, the defendants argued, must refuse recognition and enforcement of the award under articles IV and V of the New York Convention.

In the first instance, the court dismissed the defendant's argument that there was improper proceeding in this case. In normal circumstances, if the respondent had received a notice of commencement or request for arbitration with very small amount of claim, they tend to ignore such a request. This is due to the notion that going to a different jurisdiction to seek an arbitral award, by paying excess amounts of money in the process, is burdensome. The arbitral award and arbitral procedure exists to be enforced in any country where it is a signatory. So everything from the start to the finish, enforceability is a top priority. Even though one may have a tough situation, I gave my full guidance to my colleague that one must prepare, by using all relevant assets and resources to attend the proceeding. Sometimes it may cost, but you have to hire an  excellent lawyer to defend your claim in the event you do not. Thus, in this case, in the initial stage, the Korean party -- it was conducted in English -- did not. At the time, initially at the enforcement stage, the party may argued they did not have the opportunity to attend the hearing or proceeding. Even though a delayed tactic can be played, the secretariat can give careful thought to this. The tribunal requested the defendant to submit a statement to extend in order to provide a more equal opportunity for both parties. In this case, the Korean court actually just dismisses this. The defendant argued the contract was concluded with fraud. In endorsing the New York Convention, due to the extremity of the seriousness, it was regarded carefully by the Korean court. This differs to normal cases where the Korean court renders an award enforcement and recognition in favor of the party seeking the award in Korea.

I joined KCAB back in 2002, so it has been sixteen years. In such a time, I never saw any single case set aside in the Korean court where there is a ground of public policy. This case highlights the Korean court show a pro-arbitration stance, consolidating a precedent of a high threshold for meeting the public policy ground for refusing recognition and enforcement of the arbitral award.

A further key case appears, where the court conferred further interpretation in regard to the public policy ground of refusing recognition and enforcement of the award under New York Convention. In this case, the defendant argued that damage attributable to plaintiff occurred as that company was FIFO, (free in, free out). The defendant argued the responsibility for packing was attributed to plaintiff. However, the tribunal took a different approach to this view. The arbitral tribunal rendered in favor of the claimant, and so the claimant brought this case to the Korean court. In this case, the Korean court decided that the defendant had a duty to confirm that packing was done according to practice and regulation. So in conclusion, it seems as if the final responsibility done in the respondent, defendant in this case. However, the defendant was fully aware of how serious it was in connection with their duty under this contract, and so the Korean court upheld the arbitral tribunal decision.

The last case is a very significant case regarding enforcement of the arbitral award in Korea. The NDS - the plaintiff - provides a broadcasting service based in Europe, and the defendant - based on Korea -provides a broadcasting satellite system. In the district court, in Korea, there was claimant and respondent. The claimant was dismissed, and it was unclear whether the ruling could be enforced according to a violation of the public policy. Right after issuing that case, many criticisms arose, predominantly stemming from foreign jurisdictions, as the defendant’s status is an affiliate of a Korea government entity. Thus, perhaps the Korean court has a tendency to protect Korean agencies or companies. However, in the higher court, that was overturned. The Court found that the arbitral award rendered by the tribunal was not specific enough to be executed. However, the court distinguished between executing an arbitral award, court negotiation, and the enforcement of an arbitral award, as, according to the Arbitration Act of Korea, if it is to be set aside, then it is not possible to be executed. So executing an award requires the tribunal to be adequately sufficient so that it can be carried out. This is part of the domestic procedure. It is a separate point.

Based on the court distinguishing on the recognition and enforcement of the award, having been recognized by the court, the court held that the plaintiff had the legal interest and right seeking the enforcement of the arbitral award. The lack of specificity did not take away the fact that the plaintiff had the legal right to seek recognition and enforcement of the arbitration award.

In conclusion, even if the arbitral award is not so specific to be executed, the Korean court declared there is a certain interest in seeking the execution of the arbitration award. This case gives the signal to the arbitration community in Korea that one is thinking of arbitral awards, one must contemplate the New York Convention and the court's attitude to interpreting the relevant items stipulated in the contract and relevant documents.

The full version of the cases referred to today can be found if you visit the website, where they can be downloaded. If there is anything left unclear through my presentation, you may just refer to this one and you may ask me later. Actually, as I told you, our arbitration week will be starting from 5 November to 9 November. So I think that all of you or most of you are welcome to come to Seoul to enjoy wonderful seminar and wonderful food and the wonderful atmosphere in Seoul in the second half of this year.

Thank you.