SOUTH KOREA Law and Practice Contributed by: Junu Kim, Woojae Kim, Hangil Lee and Sarthak Malhotra, Bae, Kim & Lee LLC
Denial of Benefits Increasingly common, particularly after the Lonestar case, is the denial of benefits. It allows Korea to deny treaty protection to investors with no substantial busi- ness operations in the counterparty state or that are controlled by nationals of a third state. Fork-in-the-Road and Waiver Provisions Now standard in newer treaties, fork-in-the-road and waivers provisions require investors to choose between domestic courts and arbitration, and often mandating a waiver of other proceedings when initiat- ing arbitration. Exceptions and Carve-Outs Many treaties include exceptions for taxation, subsi- dies, government procurement, and measures neces- sary to protect essential security interests or maintain public order. 2.3 Free Trade Agreements Korea is party to a number of FTAs that incorporate investment protection and, in most cases, ISDS. These agreements include bilateral FTAs with the United States, Canada, Australia, Chile, Peru, Colombia, Chi- na, India, Indonesia, Israel, New Zealand, Singapore, Turkey and Vietnam, as well as regional agreements such as the ASEAN–Korea FTA, the EFTA–Korea FTA, the Korea–EU FTA, the Korea–Republics of Central America FTA and the Regional Comprehensive Eco- nomic Partnership (RCEP). The investor protection standards in these FTAs gen- erally mirror those found in bilateral investment trea - ties, including fair and equitable treatment, protection against unlawful expropriation, national treatment, most-favoured-nation treatment, full protection and security, and guarantees of the free transfer of pay- ments. However, the FTAs often include more detailed language than older BITs, such as: • linking FET to customary international law; • explicit carve-outs for regulatory measures taken in the public interest (eg, environment, health, safety); • exclusions for taxation, subsidies and government procurement; and • denial-of-benefits clauses targeting investors with no substantive business operations.
ship (RCEP), Korea–Israel FTA, Korea–China FTA, Korea–Colombia FTA, and others. Korea continues to modernise its treaty network. Sev- eral older BITs have been terminated and replaced by FTAs, and new agreements with Brazil, Colombia, DR Congo, Tanzania and Serbia have been signed but are not yet in force. Given Korea’s role as both a capital exporter and host economy, further treaty negotiations remain likely. 2.2 Model Bilateral Investment Treaty Korea does not have an official Model BIT. However, its treaties reflect a consistent practice. Over time, these provisions have been refined to reflect lessons from arbitral experience and policy debates. Some examples of these features – which could be consid- ered as the hallmarks of Korea’s treaty practice, akin to a model approach – have been outlined below. Fair and Equitable Treatment (FET) In Korea’s more recent BITs and FTAs, the FET stand- ard is expressly tied to customary international law and the minimum standard of treatment, narrowing its scope compared to earlier treaties that provided an unqualified FET clause. Expropriation Several treaties recognise both direct and indirect expropriation, with compensation generally based on fair market value. More recent treaties also include regulatory carve-outs clarifying that non-discriminato- ry public welfare measures (eg, health, safety, environ- ment) do not constitute indirect expropriation. Most-Favoured-Nation (MFN) and National Treatment MFN treatment is generally limited to post-establish- ment rights, though some FTAs extend protection to the establishment and expansion phase. Many newer treaties exclude dispute settlement provisions from
the scope of MFN. Umbrella Clauses
A provision known as an “umbrella clause” was com- mon in Korea’s older BITs but absent from most recent agreements.
211 CHAMBERS.COM
Powered by FlippingBook