SOUTH KOREA Law and Practice Contributed by: Junu Kim, Woojae Kim, Hangil Lee and Sarthak Malhotra, Bae, Kim & Lee LLC
5.3 Security for Costs Korean law permits both arbitral tribunals and domes- tic courts to order security in connection with arbitral proceedings. Under the Arbitration Act, an arbitral tribunal may, when granting interim measures, require the request- ing party to provide “appropriate security” (Article 18-4). Similarly, when a court is asked to recognise or enforce an interim measure, it may order the request- ing party to provide security if the tribunal has not already done so, or where such an order is needed to protect third-party rights (Article 18-7 (3)). Although the statute does not expressly refer to “security for costs,” this mechanism is regarded as covering such relief when cost-related measures are sought in the form of interim protection. Korean courts also retain general powers under the Civil Execution Act, which applies mutatis mutandis to the enforcement of arbitral interim measures (Article 18-7 (4)), to order security in connection with con- servatory measures such as provisional attachments or injunctions. In practice, applications for security for costs in inter- national arbitrations in Korea are uncommon. 6. Third-Party Funding 6.1 Prevalence of Third-Party Funding Korean law does not expressly regulate third-party funding, and there is no statutory prohibition on fund- ing investor–state claims. Unlike some common law jurisdictions, Korea has no doctrines of champerty or maintenance. We are not aware of any reported Korean court decision directly addressing the validity of third-party funding agreements in either commercial or investment arbitration. Nor is there any statutory guidance specific to investment treaty claims. However, related legislation raises interpretive ques- tions. Commentators have noted that certain Korean laws could indirectly limit the design of funding arrange- ments. For example, the Lawyers Act prohibits law-
yers from sharing fees with non-lawyers, while the Trust Act bars transferring litigation to a trustee. With the regulatory permissibility of third-party funding remaining ambiguous, its use is not yet prevalent in practice. However, the awareness is increasing, espe- cially as the Hong Kong SAR and Singapore have per- mitted third-party funding. 6.2 Third-Party Funding Case Law As noted in 6.1 Prevalence of Third-Party Funding , there appear to be no reported decisions from Korean courts directly addressing the validity of third-party funding agreements in either commercial or invest- ment arbitration. 6.3 Disclosure and Security for Costs There are no provisions in Korean law requiring par- ties to disclose the existence or terms of a third-party funding arrangement. Similarly, there appear to be no reported Korean court decisions that have consid- ered third-party funding in the context of arbitration, whether for investment treaty claims or commercial disputes. As a result, there is no judicial guidance on whether the existence of third-party funding, in itself, would justify ordering security for costs. In practice, because Korea has not yet developed case law or institutional practice in this area, parties and tribunals seated in Korea generally rely on com- parative international practice or the IBA Guidelines on Conflicts of Interest. The issue remains largely untested in Korea, although it is increasingly discussed in practice. The KCAB is also revising its International Arbitration Rules to introduce disclosure obligations for third-party fund- ing arrangements. 7. Other Procedural and Evidentiary Issues 7.1 Notice of Dispute and Consultation Period Most of Korea’s FTAs and BITs require investors to engage in mandatory consultations or observe a cool- ing-off period before commencing arbitration. Under the Korea–US FTA (2007), an investor must deliver
215 CHAMBERS.COM
Powered by FlippingBook