SOUTH KOREA Law and Practice Contributed by: Junu Kim, Woojae Kim, Hangil Lee and Sarthak Malhotra, Bae, Kim & Lee LLC
8.4 Mitigation of Damages Under international investment law, treaties rarely impose an express obligation on investors to mitigate losses. Nonetheless, arbitral tribunals apply the princi- ple by examining the investor’s conduct and assess- ing whether a failure to take reasonable steps inflated the loss, thereby warranting a reduction or rejection of the claim.
remedies in investment arbitration are not limited to monetary relief, this remains the most commonly sought and awarded form of reparation against Korea. 8.2 Methodologies for Quantum Assessment In investor–state cases involving Korea, damages are assessed in line with international practice rather than by reference to any domestic statute. Korean law does not prescribe a valuation methodology. Instead, tribunals have followed the remedial standard of full reparation with methodology determined by the nature of the investment and the availability of reliable data. Discounted cash flow (DCF) analysis is com- monly advanced, but tribunals apply it only where the investment has a proven record of profitability. Market value approaches, based on comparable transactions or stock exchange prices, have also been used where sufficient benchmarks exist. The selection of meth- odology in practice, therefore, turns on the type of investment, its performance history, and the eviden- tiary record, rather than on any rule under Korean law. Monetary compensation remains the principal form of relief, with tribunals exercising discretion to adopt the method best suited to restoring the investor to its pre-loss position. 8.3 Recovering Interest and Legal Costs Parties to arbitrations seated in Korea are entitled to recover both interest and costs, including legal and expert fees as well as institutional and tribunal costs. The Arbitration Act empowers tribunals to determine the allocation of the costs of the arbitration, “consider- ing all circumstances of the relevant arbitration case” (Article 34 (2)). The KCAB International Arbitration Rules follow a similar approach, providing that recov- erable costs include attorneys’ fees, expert fees, and expenses necessary for the conduct of the arbitration. In practice, Korea-seated tribunals adopt an approach consistent with international norms. On cost allocation, tribunals seated in Korea generally apply the “costs follow the event” principle in interna- tional cases. That is, the unsuccessful party typically bears the costs of the proceedings, though tribunals may adjust allocations in light of the parties’ conduct and/or relative success on merits. The prevailing trend is towards awarding a substantial portion of the suc- cessful party’s costs, including legal and expert fees.
9. Enforcement of Awards 9.1 Enforcement Procedure
ICSID awards are directly enforceable in Korea under the Washington Convention, without requiring fur- ther judicial review. Non-ICSID awards are enforced under the Arbitration Act and the New York Conven- tion. When ratifying the New York Convention, Korea made a commercial reservation, meaning enforcement applies only to disputes deemed “commercial” under Korean law. The enforceability of non-ICSID treaty- based awards is open to argument, as they may not always be characterised as commercial. No Korean court has yet ruled on this issue. Korean courts adopt a generally pro-enforcement approach. Enforcement proceedings are initiated by submitting an application to a Korean court, along with an authentic or certified copy of the award and, if necessary, a Korean translation. The court issues a decision rather than a judgment, which streamlines the process and allows for immedi- ate execution, even if the decision is appealed. The grounds for refusal of enforcement mirror those under Article V of the New York Convention and are inter- preted narrowly by Korean courts. Korean courts have confirmed that they do not have jurisdiction to set aside awards rendered outside Korea. As of now, there have been no reported cases in Korea enforcing an award that has been set aside at the seat. The Arbitration Act and the New York Con- vention provide that enforcement may be refused if the award has been annulled by a competent author- ity at the seat. Korean courts are expected to adhere strictly to this provision, although the absence of prec- edent leaves room for future judicial interpretation.
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