SOUTH KOREA Law and Practice Contributed by: Eun Young Park, Zac Sharpe, Joon Won Lee and Yoo Lim Oh, Lee & Ko
Accordingly, punitive damages are not categorically unavailable in arbitration; their availability turns prin - cipally on the applicable substantive law, while their recognition and enforcement in Korea may also be subject to public policy. In Supreme Court Judgment No 2018Da231550 dated 11 March 2022, which concerned the recognition and enforcement of a for - eign judgment, the Supreme Court held that dam - ages exceeding actual loss do not necessarily vio - late Korean public policy, taking into account, among other things, whether Korean law provides for such damages in the relevant regulatory area. Although the decision did not concern an arbitral award, its rea - soning may provide guidance on the recognition and enforcement of awards granting similar relief. 10.3 Recovering Interest and Legal Costs The KAA does not prescribe specific criteria for allo - cating arbitration costs. Instead, Article 34-2 provides that, unless otherwise agreed by the parties, the tri - bunal may apportion those costs after considering all relevant circumstances. The 2026 KCAB Rules contain more detailed provi - sions on advances on costs, the allocation of arbitra - tion costs, and the parties’ legal and other expenses (Articles 54–56). Reflecting prevailing international arbitration practice, Article 55.2 provides that the unsuccessful party should, in principle, bear the arbi - tration costs, while preserving the tribunal’s discretion to apportion those costs as it considers appropriate in light of the circumstances, including the parties’ conduct during the proceedings. Article 56 separately empowers the tribunal to allocate all or part of the par - ties’ legal costs and necessary expenses. As to interest, Article 34-3 of the KAA empowers the tribunal to award delay interest at such rate as it con - siders appropriate in light of the circumstances. Where Korean law governs the merits of the dispute, a recurring issue is whether the statutory delay interest rate under Article 3 (1) of the Act on Special Cases Concerning Expedition of Legal Proceedings applies to arbitral awards. The Act provides for interest at 12% per annum from the day following service of the complaint (or an equivalent initiating document)
until payment in respect of monetary claims pursued through court proceedings. KCAB tribunals have reached differing conclusions on this issue. Some have applied the statutory rate muta - tis mutandis, reasoning that the legislative objective of promoting the expeditious resolution of disputes applies equally to arbitration. Others have declined to do so on the basis that arbitration is intended to be more efficient than court litigation and therefore does not require the additional incentive provided by the statutory rate. Although the Korean Supreme Court has not directly resolved the issue, it has held that an arbitral award granting delay interest at the statutory rate does not, by itself, violate Korean public policy so as to justify refusing recognition or enforcement of the award (see Supreme Court Judgment No 99Da13577, 13584 dated 10 April 2001). Under Article 35 of the KAA, an arbitral award has the same effect between the parties as a final and binding judgment of a Korean court. An arbitral award is not subject to appeal before the Korean courts on ques - tions of fact or law. The only recourse against an arbitral award before the Korean courts is an action to set aside the award on the limited grounds set out in Article 36 of the KAA. Based on Article 34 of the UNCITRAL Model Law, these grounds largely mirror those for refusing recog - nition and enforcement under the New York Conven - tion: 11. Review of an Award 11.1 Grounds for Appeal • A party to the arbitration agreement was subject to some incapacity under the applicable law, or the arbitration agreement was not valid under the law designated by the parties or, failing any such designation, under the laws of Korea. • The party seeking to set aside the award was not given proper notice of the appointment of an arbi - trator or of the arbitral proceedings, or was other - wise unable to present its case. • The arbitral award deals with a dispute not falling within the terms of the submission to arbitration or
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