SOUTH KOREA Law and Practice Contributed by: Choon Won Lee and Dahee Kim, Jipyong LLC
7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies Certain special tax reliefs are granted to ship - ping companies for incomes earned from ship - ping business (such as charter hire or freight) under the Act on Restriction on Special Cases concerning Taxation of Korea. Notably, the ton - nage tax system is applied. 8. Implications of Non- Performance, the IMO 2020, Trade Sanctions and the War in Ukraine 8.1 Force Majeure and Frustration It is generally understood that South Korean law adopts a civil law system, and there is no clear jurisprudence on frustration. As regards force majeure, it is generally under - stood that two following provisions in the Civil Act of Korea may be applied. Firstly, when an obligor fails to perform its obli - gation, the obligee may claim damages against the obligor. However, this shall not apply, and the obligor shall not be liable to compensate dam - ages, if the performance of the obligation has become impossible and where this is not due to the obligor’s attributable fault, ie, intention or negligence (Article 390). Further, when the performance of an obligation of one party to a bilateral contract becomes impossible by any cause for which neither of the parties is responsible, that party may not be enti - tled to claim counter-performance by the other party (Article 537).
As for a claim that is subject to arbitration, whether foreign or domestic, due to an arbitra - tion clause in the relevant contract or bill of lad - ing or charterparty, a pre-judgment attachment and a judicial auction sale for enforcement of a claim shall be granted. However, a judicial auc - tion sale based on a security right, particularly a maritime lien, can be disputed. There are several judgments from South Korean courts where the court found that, if the debtor/respondent were to raise an objection, the judicial auction sale based on a maritime lien would be cancelled if the claim had not been adjudged and confirmed in the arbitration, as it would be in breach of the parties’ arbitration agreement. It may be noted, however, that these judgments have been heav - ily criticised by a number of scholars and prac - titioners. 6.5 Domestic Arbitration Institutes The Korean Commercial Arbitration Board is South Korea’s sole permanent commercial arbi - tral institution. There is a body of the Korean Commercial Arbitration Board, namely, the Asia- Pacific Maritime Arbitration Center, which is in exclusive charge of maritime arbitrations. 6.6 Remedies Where Proceedings Are Commenced in Breach of Foreign Jurisdiction or Arbitration Clauses Where proceedings are commenced before the South Korean courts in breach of a foreign juris - diction or arbitration clause, the party may raise a defence to that effect. When the court finds that the parties have a valid and effective agree - ment on a foreign jurisdiction or arbitration, and the proceeding is in breach of that agreement, the court will dismiss the proceeding.
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