SOUTH KOREA Trends and Developments Contributed by: Yun Jae Baek, Jeonghye Sophie Ahn, Jae Hyong Woo and Seyoung Choe, Yulchon LLC
Introduction On 23 January 2025, the Korean Supreme Court ren - dered a significant decision (Supreme Court Judg - ment No 2024Da243172), in which it affirmed the enforceability of an arbitration clause, notwithstand - ing numerous substantive defects in its drafting. The arbitration agreement at issue was challenged due to several ambiguities, including the designation of a non-existent arbitral institution, the absence of key procedural elements such as the seat of arbitration, the number of arbitrators, and the language of arbitra - tion, as well as inconsistencies between the Korean and English versions of the clause. While the lower courts diverged in their interpreta - tion – with the appellate court, for example, treating the clause as an optional arbitration agreement – the Supreme Court adopted a more purposive approach. It emphasised that the validity of an arbitration agree - ment must be assessed by reasonably interpreting the parties’ true intent in light of the specific factual and contractual context. Nevertheless, this decision reflects the Korean Supreme Court’s continued pro-arbitration stance and its willingness to uphold arbitration agreements, even where they contain notable imperfections. Indeed, recent jurisprudence increasingly reveals the Korean judiciary’s consistent efforts to support and promote international arbitration, a trend that will be explored in further detail in this article. Recent Decision on the Difficult Enforcement of a Foreign Arbitral Award In the recent Supreme Court Judgment No 2023Ma6248, rendered on 28 November 2024, the Korean Supreme Court considered the enforceability of a foreign arbitral award. The underlying dispute, which was first submitted to international arbitration, arose out of a share purchase agreement (SPA) between Claimant 1, a foreign entity, and Respondents 1 through 5, under which Claimant 1 agreed to acquire shares in Company D, a Korean corporation, for approximately KRW1.1658 trillion. The SPA contained standard provisions addressing the representations, warranties, and covenants of the
respondents. Subsequently, Claimant 1 assigned all of its rights and obligations under the SPA to Claimant 2, who then entered into an escrow agreement with the respondents. Under this arrangement, approxi - mately 10% of the purchase price was deposited into an escrow account. Notably, the SPA stipulated that the agreement would be governed by English law, and that any disputes arising thereunder would be resolved by arbitration seated in Hong Kong, administered under the Rules of Arbitration of the International Chamber of Com - merce (ICC). However, Claimant 2, alleging breaches of the rep - resentations, warranties, and covenants set forth in the SPA, requested the escrow agent to withhold dis - bursement of the remaining funds held in the escrow account. In response, the respondents initiated arbitration proceedings before the ICC, seeking the release of the escrowed funds. The claimants, in turn, filed a counterclaim in the arbitration, seeking dam - ages arising from the alleged breaches of the SPA. The arbitral tribunal ultimately issued a final award granting substantial relief to the claimants. Specifi - cally: • The respondents (ie, the sellers) were ordered to pay KRW166.6 billion in damages for breaches of the SPA, pursuant to Articles 7.1 and 7.5 of the agreement. • The respondents were ordered to reimburse the claimants for their legal and expert fees, as well as the portion of arbitration costs borne by the claim - ants. • The respondents were further ordered to pay pre- award interest on the KRW166.6 billion, calculated on a simple interest basis from 22 December 2017 to the date of the award, at the pre-judgment inter - est rate under Hong Kong law (ie, the prime rate plus 1%). • The respondents were also ordered to pay post- award interest, again on a simple interest basis, at the judgment interest rate under Hong Kong law, applicable to both the principal and the awarded costs, commencing 60 days after the claimants’
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