SOUTH KOREA Law and Practice Contributed by: Woorin Sung and Hee Kyung Jeong, D&A LLC
5.10 Procedure for the Judicial Sale of Arrested Ships Judicial Sale Procedure In South Korea, the sale of an arrested vessel is con - ducted in accordance with the provisions governing the enforcement of security interests under the Civil Execution Act. The procedure consists of the follow - ing steps: • provisional attachment of the vessel; • the court’s decision to commence compulsory execution; • appraisal of the vessel and determination of the sale conditions; • public notice of tender and bidding; • determination of the successful bidder and issu - ance of a sale permission; • payment of the purchase price; and • distribution of the proceeds. South Korean law does not permit the private sale of arrested vessels, and a vessel may be sold only through court-supervised auction procedures. Vessel Maintenance During Arrest A court-appointed administrator or the enforcement authority supervises the maintenance of an arrested vessel until its sale. The costs incurred for such main - tenance are satisfied with priority from the sale pro - ceeds. Priority Ranking of Claims The Civil Execution Act of South Korea sets out the general principles governing the priority ranking of distributions, and these principles apply mutatis mutandis to judicial sales of vessels. Under the Act, distribution priority follows the order of (i) costs of execution, (ii) maritime liens, (iii) ship mortgages and (iv) general claims. Maritime liens themselves are subject to an internal order of priority, which may be briefly summarised as follows. • First priority: Claims arising out of employment contracts of seafarers; tonnage tax, light dues and other public charges imposed on the vessel in con -
nection with navigation; pilotage dues; and salvage claims relating to the vessel, passengers or cargo. • Second priority: Claims for damages arising from death or personal injury caused by the navigation of the vessel. • Third priority: Harbour dues, water dues, pilotage dues, towing fees, anchorage fees, and expenses incurred for the supervision and maintenance of the vessel at ports. • Fourth priority: Claims arising out of employment contracts of the shipmaster, officers and other employees of the vessel. 5.11 Insolvency Laws Applied by Maritime Courts A rehabilitation proceeding under the Debtor Rehabili - tation and Bankruptcy Act of South Korea functionally corresponds to Chapter 11 of the United States Bank - ruptcy Code. Upon commencement of the rehabilita - tion proceeding, all authority over the debtor company is exercised by the court-appointed administrator, and the debtor company is prohibited from disposing of its assets, including vessels, until the rehabilitation proceeding is completed. 5.12 Damages in the Event of Wrongful Arrest of a Vessel There is no separate statutory provision under South Korean law that expressly governs the wrongful arrest of a vessel. Accordingly, where an arrest effected through provisional attachment is found to be wrong - ful, liability is determined in accordance with the gen - eral principles of tort liability, provisional attachment and compulsory execution under the Civil Act of South Korea. Where a creditor who has applied for a preservative measure, such as provisional attachment or provi - sional disposition, loses the action on the merits after the execution of the measure, South Korean courts presume, in the absence of countervailing evidence, that the creditor acted with intent or negligence. In such cases, unless special circumstances exist, the creditor is liable under the Civil Act of South Korea to compensate for damages causally connected to the execution of the preservative measure.
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