SOUTH KOREA Law and Practice Contributed by: Yun Jae Baek, Jeonghye Sophie Ahn, Hyunah Park and Seyoung Choe, Yulchon LLC
3.2 Arbitrability The KAA does not provide specific rules for deter - mining the arbitrability of claims. However, the 2016 amendments to the KAA extended the definition of “arbitration” to include a procedure to settle a dispute over “non-property rights” (non-monetary), which can be resolved by settlement of the parties, as well as “property rights” (monetary). As is the case in many other jurisdictions, matters of criminal law, family law and administrative law are not arbitrable in South Korea. To date, there is no clear South Korean court prec - edent on whether claims related to economic regula - tory laws (eg, antitrust and insolvency regulations or IP rights) are arbitrable. Legal commentators, however, have noted a trend in international arbitration favour- ing the arbitrability of disputes in such areas, and at least one South Korean court has enforced a foreign arbitral award (in 1995) based on a licensing agree - ment that allegedly violated South Korean fair trade laws. 3.3 National Courts’ Approach South Korean courts generally respect the parties’ agreement to arbitrate. Pursuant to Article 9 of the KAA, if one party brings an action in court against another party when there is a valid arbitration agree - ment between the parties and the other party raises a defence based upon the existence of an arbitration agreement before making any defence on the merit of the case, the court is required to dismiss the action – unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. South Korean courts tend to interpret arbitration agreements broadly. They are also considered gener - ally friendly toward arbitration. However, what is com - monly referred to as an “optional” arbitration clause, which merely gives parties an option to pursue arbi - tration in lieu of court litigation, will not be deemed a valid agreement to arbitrate by the South Korean courts. The South Korean Supreme Court held that an optional arbitration clause stating that “the dispute shall be referred to adjudication/arbitration in accord - ance with the laws of the purchaser’s country” cannot be regarded as a valid arbitration agreement if a party,
in response to the other party’s request for arbitra - tion, asserts that there is no agreement to arbitrate and opposes arbitration to resolve a dispute (Supreme Court Decision 2003Da318, rendered on 22 August 2003). Furthermore, the Seoul District Court determined that a dispute resolution clause that states “if a dispute cannot be resolved by settlement, it will be resolved by the KCAB arbitration. If any party objects to the arbitral award, the dispute will be finally resolved at the national court” is not a valid arbitration agreement because it simply allows re-examination of the arbitral award by the national court (Seoul District Court Deci - sion 2002Gahap8808, rendered on 24 October 2002). However, recently, on 23 January 2025, the South Korean Supreme Court reaffirmed its pro-arbitra - tion stance in Supreme Court Judgment Case No 2024Da243172. In this decision, the Supreme Court addressed the validity of an arbitration agreement that was challenged due to significant ambiguities. These included the reference to a non-existent arbi - tral institution, the omission of a designated seat and language of arbitration, and inconsistencies between the Korean and English versions of the clause. Despite these defects, the Supreme Court emphasised that where the clause, when read as a whole, demon - strates a reasonable basis to infer a mutual intention to arbitrate, courts should favour giving effect to that intent, even if certain parts of the clause are flawed. Therefore, this decision further solidifies the Korean judiciary’s broader commitment to promoting an arbi - tration-friendly legal framework. Regarding the question of the governing law of arbi - tration agreements, the South Korean Supreme Court held that the validity of an arbitration agreement shall be determined by the substantive governing law of the underlying contract if the parties have designated one. Otherwise, it will be determined by the law of the seat of arbitration if the parties have not designated the governing law in the contract, pursuant to Article 5 (1) of the New York Convention (Supreme Court Decision 2017Da225084, rendered on 26 July 2018).
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