SOUTH KOREA Law and Practice Contributed by: Eun Young Park, Zac Sharpe, Joon Won Lee and Yoo Lim Oh, Lee & Ko
KAA, together with any restrictions under other appli - cable statutes. Article 3 (1) of the KAA defines arbitration as a pro - cedure to resolve, by arbitral award rather than court judgment, “disputes over property rights or disputes based on non-property rights that the parties can resolve through settlement”. This wording was intro - duced by the 2016 amendment; the previous version referred more broadly to “private law disputes”. Under the current wording, property-right disputes are gen - erally arbitrable, while non-property-right disputes are arbitrable only where the parties have the power to dispose of or settle the matter. The KAA does not fur - ther define the scope of such non-property disputes. Matters generally regarded as non-arbitrable include criminal liability, certain family-law matters concerning personal status, and disputes concerning administra - tive acts or sanctions, as these are not matters that the parties may freely resolve by settlement. Arbitrabil - ity may be less clear in regulated areas such as com - petition law, intellectual property, securities, labour and employment, and insolvency. Their treatment is not always straightforward and may depend on the relief sought, the statutory framework, case law and practice, as well as academic commentary. Accordingly, where an arbitration clause is included in a contract involving potentially sensitive or regulated subject matter, it is necessary to consider the specific circumstances of the dispute, applicable statutes, rel - evant case law and practice, and academic commen - tary. In general, Korean law takes a relatively broad approach to the arbitrability of commercial disputes, but matters involving such issues may be subject to limitations. 3.3 National Courts’ Approach Korean courts take an arbitration-friendly approach to arbitration agreements and give effect to the parties’ intention to arbitrate where that intention can reason - ably be ascertained. With respect to the law govern - ing the arbitration agreement, the Supreme Court has held, in the context of enforcement proceedings, that the formation and validity of an arbitration agreement are governed by the law chosen by the parties and, in the absence of such a choice, by the law of the seat
of arbitration, pursuant to Article V(1)(a) of the New York Convention (see Supreme Court Judgment No 2017Da225084 dated 26 July 2018). As to the enforcement of arbitration agreements, Arti - cle 9 of the KAA requires a Korean court to dismiss an action where the dispute is subject to a valid arbitra - tion agreement, provided that the defendant raises the arbitration agreement as a defence before making submissions on the merits. The court may proceed with the action only where it finds that the arbitration agreement is void, inoperative or incapable of being performed. Accordingly, arbitration agreements are enforced by Korean courts if they are valid and prop - erly invoked. Korean courts also tend to interpret the scope of arbitration agreements broadly. The Supreme Court has held that, where the parties agreed to resolve “future disputes” by arbitration, all disputes arising out of the relevant legal relationship should generally be regarded as falling within the scope of the arbi - tration agreement, absent special circumstances lim - iting that scope (see Supreme Court Judgment No 2010Da76573 dated 22 December 2011). Korean courts have also shown a willingness to uphold arbitration clauses despite defects or ambiguities. Recently, the Supreme Court held that a court should not deny the validity of an arbitration agreement mere - ly because it referred to a non-existent arbitral institu - tion, omitted the seat and language of arbitration, and contained inconsistencies between the Korean and English versions of the contract. The court stressed that, based on a holistic interpretation of the word - ing of the arbitration agreement, the circumstances in which it was included, and other relevant factors, the parties could reasonably be found to have had a genuine intention to arbitrate (see Supreme Court Judgment No 2024Da243172 dated 23 January 2025). That said, Korean courts do distinguish between a binding arbitration agreement and a merely option - al dispute resolution clause. Where a clause simply provides several possible modes of dispute resolu - tion without clearly requiring arbitration, it may raise enforceability issues. In particular, an optional arbitra - tion clause will not necessarily preclude court pro -
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