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Amid growing concerns that international arbitration has become too slow, too expensive, non-transparent and increasingly vulnerable to geopolitical tensions, Korea is a formidable proponent of international arbitration. Korean courts continue to render decisions that make the country one of Asia’s most arbitration-friendly jurisdictions and the government is actively promoting Seoul as a destination for international commercial disputes. In a similar vein, recent academic discourse and expert commentary increasingly underscore the strategic advantages of choosing Seoul as the seat of arbitration.

Korea offers a robust legal framework based on civil law traditions but is keen to incorporate the advantages of common law procedures. The country’s technological advancements are well reflected and practised in court systems and litigation practice nationwide.

The Korean economy thrives on international trade, foreign investment and cross-border transactions, and every year an increasing number of Korean companies are embroiled in legal disputes with foreign counterparties. Korea’s economic stature attracts leading arbitrators, arbitration practitioners and a support system to the Korean legal market, making its arbitration community diverse, dynamic and highly competitive.

Below are some of the key developments shaping Korea’s international arbitration practice.

International rule reforms

After overhauling its domestic arbitration rules effective 1 March 2025, the Korean Commercial Arbitration Board (KCAB) is preparing substantial revisions to its international arbitration rules – the first major update since 2016. These reforms, scheduled to take effect in the coming year, aim to modernise the arbitral procedures in closer alignment with global best practices. Anticipated changes include establishing a new KCAB Court to oversee arbitrator challenges and consolidation; enhancing efficiency through digital case management, e-filing and virtual hearings; introducing new procedures such as early determination to screen out claims that are manifestly without merit or outside the KCAB’s jurisdiction; and improving transparency by mandating broader arbitrator disclosure concerning impartiality and independence.

In parallel, the KCAB recently introduced its International Mediation Rules effective January 2024. The rules enable parties to convert mediated settlements into arbitral awards enforceable under the Singapore Convention on Mediation.

Arbitrability boundaries

Indirect compulsory damages under Korean law are court-imposed penalties to compel a non-compliant debtor to perform an obligation, typically in the form of a specific amount for each day of non-performance. Such discretionary relief vested in the court of first instance is founded in article 261(1) of Korea’s Civil Execution Act.

There has been a debate over whether article 261(1) vests the power to award indirect compulsory damages exclusively to the first instance courts of Korea or allows arbitral tribunals to order such relief as appropriate. In a 2018 decision, the Supreme Court of Korea sided with the latter view, holding that an award by a foreign arbitral tribunal (seated at The Hague, Netherlands) imposing indirect compulsory damages did not contravene Korea’s good morals and social order.

It is not clear, however, whether Korea’s highest court struck down all potential grounds based on indirect compulsory damages as a basis to set aside foreign arbitral awards in South Korea. In December 2024, an ICC tribunal ordered the respondent to perform an appraisal of the shares in question or pay indirect compulsory damages of USD200,000 per day of non-performance. In April this year, the Seoul Central District Court held that the tribunal’s order of indirect compulsory damages was unenforceable because such a relief could only be ordered by Korean courts. The decision, which has not been made available to the public, is currently on appeal. It remains to be seen whether future rulings may provide categorial clarity on this long-debated issue.

Pathological arbitration clauses

Can a contract drafted in English and Korean, with both languages appearing side-by-side – which

1. 1. does not specify the prevailing language in case of discrepancies and
   2. refers to a non-existent arbitral institution – still be deemed to contain a valid arbitration agreement?

The Supreme Court of Korea considered this question in a recent decision on 23 January 2025). In that case,

1. 1. the English version and the Korean version of the arbitration clause differed,
   2. neither the text nor the context of the contract provided any clue as to which language should prevail, and
   3. the arbitration clause referred to a non-existent organisation (the Commercial Arbitration Committee of International Commercial Law).

The Supreme Court saw beyond the obvious flaws in the language of the arbitration clause and read the contract as a whole to find that the parties intended their dispute to be resolved through arbitration. According to the Supreme Court, courts must lean in favour of giving effect to the parties’ discernible intent to arbitrate, notwithstanding drafting deficiencies. This latest decision reinforces Korean courts’ pro-arbitration inclination. Korean courts look past formalistic pathologies (such as misnaming the arbitral institution) in favour of compelling arbitration where there is a clear mutual intent to arbitrate.

Enforcing against non-signatory

In November 2024, the Supreme Court issued a judgment holding that an ICC arbitral award may, in certain circumstances, be enforced against a party that was not a signatory to the arbitration agreement.

In rejecting the appellant’s argument that recognition and enforcement should be refused under article V1(a) of the New York Convention because the appellant had never executed the arbitration agreement, the court held that, if a party participates in the arbitration proceedings without timely objecting to the existence or validity of the arbitration agreement, a new arbitration agreement may be deemed to have been formed. The court held that the new arbitration agreement had in fact been formed in this case because the appellant not only signed the terms of reference but also actively participated in the arbitration without raising jurisdictional objections.

Practical tips

For parties and practitioners contemplating or debating Korea as the seat of arbitration, the following points are worth considering:

1. 1. Be on the lookout for the KCAB’s latest revisions to its international arbitration rules. Its new streamlined procedures may truly expedite the resolution of the parties’ dispute in the most efficient manner.
   2. Draft arbitration clauses carefully but when in doubt, choose a forum that would not vitiate an arbitration agreement based on formalistic defects, such as Korea. Seoul is a particularly attractive seat for disputes governed by Korean law, claims that need to be enforced against companies or individuals residing in Korea, claims that need to be enforced in countries where Korea has reciprocally recognised foreign judgments, and disputes that can most benefit from the use of technologically advanced procedural tools.
   3. Consult local counsel on recent court decisions, and their approaches to recognition and enforcement of foreign arbitral awards. An early consultation may provide helpful insights on formulating relief that is uniquely available before, or difficult to obtain from, Korean courts.
   4. Where settlement is a priority or preference, consider taking advantage of the KCAB’s new international mediation rules.

Korea’s arbitration landscape is evolving, creating new opportunities for parties seeking efficient and reliable dispute resolution.

While challenges remain, corporations and individuals may find practical advantages in pursuing arbitration under Seoul’s modernised framework and its steadfast judicial support for arbitration.

JIPYONG LLC
26F, Grand Central A, 14 Sejong-daero
Jung-gu, Seoul 04527, Korea
Tel: +82 2 6200 1600
Email: master@jipyong.com