SOUTH KOREA Law and Practice Contributed by: Junu Kim, Woojae Kim, Hangil Lee and Sarthak Malhotra, Bae, Kim & Lee LLC
Sovereign Immunity Regarding sovereign immunity, Korean law does not contain a general statutory provision governing immunity. Sovereign immunity is not recognised as a ground for refusing enforcement under Korean law. Korean government entities also regularly participate in arbitration proceedings and enforcement actions without invoking immunity. 9.3 Asset Tracing and Recovery Given the restricted scope of sovereign immunity in Korea, State assets may be pursued for enforcement once a party obtains a court decision recognising and enforcing an arbitral award. This decision constitutes an enforcement title under the Civil Execution Act. The enforcement process involves the seizure of the debtor’s property, an auction, and the distribution of proceeds. Korean law does not exempt state assets from enforcement per se, but assets used for diplo- matic or sovereign purposes may be protected under customary international law. Enforcement is generally limited to commercial assets not subject to sovereign functions. Korean courts recognise the principle of separate legal personality and will only pierce the corporate veil in exceptional circumstances. Although the Arbi- tration Act and related enforcement provisions do not explicitly address veil-piercing, Korean jurisprudence permits it where a corporate structure is abused to evade legal obligations or perpetrate fraud. Courts in such matters require clear evidence that the cor- porate form was used to frustrate enforcement or improperly shield assets. Factors considered include the commingling of assets, undercapitalisation, lack of corporate formalities, and the use of the entity as a mere instrumentality. The burden of proof lies with the party seeking to pierce the veil, and courts apply a high threshold to ensure that veil-piercing is not used indiscriminately. In arbitration-related enforcement, veil-piercing may be invoked to reach the assets of a parent or affiliated entities where the award debtor is insolvent or has been asset-stripped. However, Korean courts remain cautious and will only grant such relief where the facts clearly justify it.
There is no statutory requirement to await the out- come of foreign annulment proceedings, and courts may proceed with enforcement unless the award is actually set aside. However, courts retain discretion under Article VI of the New York Convention and may consider the status of such proceedings where appro- priate. South Korea adopts a restrictive doctrine of sovereign immunity. There is no general statutory provision gov- erning sovereign immunity, and Korean courts have held that foreign states may be sued in Korea for com- mercial acts. In Supreme Court Judgment 97Da39216, the court exercised jurisdiction over a foreign state in an employment dispute. Sovereign immunity is not a recognised ground for refusing enforcement under the Arbitration Act or the New York Convention. Korean government entities regularly participate in arbitration without invoking immunity, and the courts have con- sistently upheld the enforceability of awards against state entities engaged in commercial activities. 9.2 Approach of the Courts Enforcement proceedings are treated as summary procedures, and courts are reluctant to interfere with the merits of arbitral decisions. Public Policy In terms of public policy, Korean courts apply a restric- tive standard. The public policy ground for refusing enforcement under Article V(2)(b) of the New York Convention is interpreted narrowly and only invoked in exceptional circumstances. Korean courts have clari- fied that this ground applies only when the award con- tradicts the fundamental political or economic order of Korea. Importantly, this assessment is made not only from a domestic perspective but also from the standpoint of international public policy. Courts have consistently held that enforcement will not be refused merely because the award is inconsistent with Korean law or public sentiment. However, the threshold for refusal is high. The courts have held that even if an arbitral award is based on foreign law that diverges from Korean law, this alone does not justify refusal on public policy grounds. The courts will only intervene if the award fundamentally undermines Korea’s legal or moral order.
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