ADR

ADR stands for alternative dispute resolution (재판외 분쟁해결/裁判外紛爭解決) such as arbitration, mediation or conciliation. Recently, an increasing number of disputes are resolved by ADR. It's because ADR provides speed, convenience, comparatively low cost and consensual resolution.

Of course, most disputes arising out of private transactions have been resolved by the court. If ADR mechanisms are proved not to be effective to both parties, the party unsatisfied with the ADR award would go to the court.

Key words
ADR, arbitration, dispute mediation, court, litigation, e-Commerce, data protection, consumer protection

Arbitration
The Korean Arbitration Act (the "Act") was revised in 1999 to substantially adopt the UNCITRAL Model Law, albeit with some variations. The Act applies to all cases in Korea regardless of the nature of the dispute. Article 27(3) of the Act permits the parties to challenge experts appointed by the tribunal, a provision that is not found in the Model Law. In addition, the Act omits Article 34(4) of the Model Law, which provides that the court may suspend its proceedings in an action challenging the award to allow the tribunal to resume its proceedings or to take measures to eliminate the grounds for setting aside the award.

Arbitration agreements
The Act requires that an arbitration agreement be in writing. The agreement to arbitrate may be included in the underlying contract or as a separate document, such as a document signed by the parties or an exchange of written communications between the parties.

An arbitration agreement is also in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement to arbitrate is alleged by one party and not denied by the other. However, this is not permitted under the New York Convention, to which Korea is a signatory, and the Korean Supreme Court has held that, where the New York Convention applies, this may not be the basis for holding that the parties have entered into a written agreement to arbitrate (Supreme Court Case No. 2004Da20180, 10 December 2004). Finally, a reference in the contract to another document that contains an arbitration clause constitutes a written arbitration agreement, provided the reference is such as to incorporate that clause into the contract.

Apart from the requirement that the arbitration agreement must be in writing, there are no other formal requirements for an enforceable arbitration agreement under the Act.

Choice of Arbitrator
Pursuant to Article 12 of the Act, the parties are free to agree on a procedure to appoint the arbitrators. If the arbitration agreement is silent, the default number of arbitrators under the Act is three. If the parties have agreed to a have a sole arbitrator but are unable to agree upon an arbitrator within 30 days of a request to initiate the appointment procedures, the arbitrator will be appointed by the court of competence at the request of either party. If the parties have agreed to three arbitrators (or not agreed on the number of arbitrators), each party shall appoint one arbitrator, and the two party-appointed arbitrators shall appoint the chairperson of the tribunal. If either party fails to appoint an arbitrator within 30 days of a request to initiate the appointment procedures, or if the two arbitrators fail to appoint a third arbitrator within 30 days of their appointment, the court shall appoint the arbitrator upon the request of either party.

With respect to challenging an arbitrator, Article 13 of the Act provides that an arbitrator may be challenged only if there are circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence, or if the arbitrator does not possess the qualifications agreed to by the parties. However, a party may challenge the arbitrator it has appointed only for reasons of which the appointing party becomes aware after the appointment has been made.

A party may also request the court to terminate the mandate of an arbitrator pursuant to Article 14 of the Act if the arbitrator becomes unable to perform his or her functions or fails to act without undue delay.

Arbitral procedure
The parties are free to agree upon the arbitration procedures. However, certain mandatory provisions of the Act will apply notwithstanding any agreement by the parties. Article 19, for example, provides that the parties shall be treated equally in the proceedings and each party given a full opportunity to present its case. Article 28 provides that the tribunal may request assistance from the competent court in the taking of evidence. Article 31 requires the tribunal to terminate the arbitral proceedings if the parties reach a settlement, but provides that the tribunal may record the settlement in the form of an award if so requested by the parties.

Court intervention
Article 6 of the Act states that a court may not intervene in arbitral proceedings except as provided in the Act. Where the Act provides for mandatory intervention of the competent court, the parties may not override the court’s powers by agreement.

As noted above, Article 28 of the Act permits the tribunal to request assistance from the courts in the taking of evidence. The Act also provides for the courts to perform several additional functions in relation to arbitral proceedings. Pursuant to Article 12, the court shall appoint the arbitrators where the parties or party-appointed arbitrators cannot agree or otherwise fail to do so within the prescribed time periods. Under Article 15, the court must decide on a request to terminate the mandate of an arbitrator. Finally, the court also has the power to decide, on appeal from the tribunal, on a challenge to an arbitrator (Article 14), the jurisdiction of the tribunal (Article 17) and a challenge to an expert appointed by the tribunal (Article 27). Additionally, the courts have jurisdiction to rule on applications for setting aside an arbitration award or for recognition or enforcement of an award.

Interim relief
Pursuant to Article 18 of the Act, unless otherwise agreed by the parties, the tribunal may, at the request of a party, order any party to take interim measures of protection as the tribunal may deem necessary with respect to the subject matter of the dispute. The tribunal is also empowered to require the parties to provide security in lieu of such interim measures.

However, as the tribunal lacks the authority to enforce such orders, the Act also provides at Article 10 that a party may request interim relief from a competent court either before or during the arbitral proceedings. Korean courts routinely grant injunctive relief such as preliminary injunctions and attachments in support of arbitral proceedings in Korea.

Award
The Act is silent as to the deadline for the tribunal to deliver the award. Pursuant to Article 32 of the Act, the award must be in writing and signed by all of the arbitrators (provided that if one arbitrator does not sign the award, it will take effect by the signatures of the other two). The award must state the reasons upon which it is based, unless the parties have agreed otherwise. Finally, the award must state the date of the award and the place of arbitration. An authenticated copy of the award must be delivered to each party, and the original of the award must be deposited with the competent court.

Appeal
For awards rendered in Korea, a party may make an application to set aside the award to a competent Korean court under article 36 of the Act. No such application may be made after three months have elapsed from the time the party has received the duly authenticated copy of the award from the tribunal. There is no procedure available to request a Korean court to set aside a foreign arbitral award.

In practice it is uncommon for Korean courts to set arbitral awards aside. An award may be set aside by the court only if a party proves that: the law to which the parties have subjected it;
 * a party making the arbitration agreement was under some legal incapacity, or that the arbitration agreement is not valid under
 * the party was not given proper notice of the appointment of the arbitrators or the arbitral proceedings or was otherwise unable to present its case;
 * the award deals with a dispute not contemplated by the parties or beyond the scope of the agreement to arbitrate; or
 * the composition of the tribunal or the arbitral proceedings were not in accordance with the agreement of the parties or the mandatory provisions of the Act.

The award may also be set aside if the court finds on its own initiative that the subject matter of the dispute is not capable of settlement by arbitration under Korean law, or the award is in conflict with Korean public policy (good morals and social order). There are no other grounds for setting aside an arbitral award in Korea.

An action to set aside an award may be appealed from the district court (court of first instance) to the high (appellate) court and ultimately to the Supreme Court. However, an application for setting aside an award may not be made after the judgment for recognition or enforcement of the award rendered by the court becomes final and conclusive.

Enforcement
Both domestic and foreign arbitral awards are enforced by a judgment of a Korean court. The procedural requirements for an enforcement action are minimal, however. A party applying for the recognition or enforcement of an award must submit to the court the duly authenticated original or a certified copy of the award and the arbitration agreement. These must be accompanied by duly certified translations into Korean if they are in another language. There are no other procedural requirements for the recognition or enforcement of an arbitral award under the Act.

Article 38 of the Act provides that domestic arbitral awards shall be recognised and enforced unless there are any grounds to set aside the award under article 36, as described above. For foreign arbitral awards, article 39 of the Act distinguishes between those subject to the New York Convention and those from jurisdictions that are not signatories thereto. Awards subject to the New York Convention shall be governed by the Convention. Awards from other jurisdictions will be recognised and enforced in the same manner as foreign court judgments.

Costs
There are no provisions under the Act with respect to the allocation or recovery of costs incurred in arbitral proceedings. However, there are no restrictions under the Act upon an arbitral tribunal’s discretion to award costs to a prevailing party.

Other types of ADR
Court-supervised mediation is commonly used in Korea and is encouraged by the court. Such mediations are governed by the Judicial Conciliation of Civil Disputes Act and are conducted either by a single judge or a mediation committee, which may include lay persons who are industry experts. While court-supervised mediations are strongly encouraged by the courts, there is no requirement that a party agree to attempt to mediate or otherwise resolve a dispute prior to commencing litigation or arbitration in Korea, unless the parties have so agreed in writing.

Outside the courts’ supervision, private mediation and conciliation proceedings are available as alternatives to litigation and arbitration. Although their use is growing, these methods are much less common than arbitration and court-supervised mediation in Korea.

Disputes settled by ADR
The court has already employed civil mediation procedures according to the Civil Mediation Act 1990. ADR is frequently used in cases of medical disputes, labor strifes, consumer claims and so on. One thing is common: professional expertise is necessary to solve this kind of disputes.

Such ADR mechanism as well as the civil mediation might contribute to the public, administrative or specific nature of the disputes in the area of periodical registration, broadcasting, equal opportunity by sex, environment, construction, copyright, sub-contract, etc.

e-Commerce consumer protection
In this regard, it is noteworthy that the Framework Act on Electronic Transaction, effective from July 1, 2002, has established the E-Commerce Mediation Committee (ECMC, 전자문서·전자거래분쟁조정위원회). Originally the Act provided for only the process, not the body, of dispute resolution because other remedies were easily available in line with the "slim government" principle without any specific subject on its merits.

However, as an increasing number of consumers were hurt in the course of e-trading and all-around efforts were called upon for the prevention of such occurrence, the ECMC set sail in the premise of the Korea Institute for Electronic Commerce (KIEC, now NIPA since 2009) on April 12, 2000.

Accordingly, any kind of disputes arising from the electronic commerce has been resolved by such a mediation system.

Data protection
With respect to the data protection, there is another dispute settlement body under the new Personal Information Protection Act, which existed under the old Data Protection Act. It was because any disputes related with data protection or privacy could not be settled like e-commerce or consumer protection issues. Under the new Act, anyone suffered for data protection infringements may report his/her complaint to the Personal Data Protection Center in the Korea Internet & Security Agency (KISA).

If the suffering goes beyond endurance, the injured party may file a petition with the Personal Information Dispute Mediation Committee (PIDMC or Pico, 개인정보분쟁조정위원회) under the Personal Information Protection Act. Pico was established to facilitate a prompt, convenient and appropriate settlement of disputes arising from personal data or privacy infringement.

See the PIDMC cases in the year of 2007, 2008, 2009, 2010, 2011 and 2012, respectively.

Domain name dispute resolution
Any domain name dispute shall be resolved by the Internet address Dispute Resolution Committee (IDRC, 인터넷주소분쟁조정위원회) under the Korea Internet & Security Agency of Korea in accordance with the Act on the Internet Address Resources (인터넷주소자원에 관한 법률).

Financial consumer protection
Financial disputes arising out of banking transactios, securities trading or insurance relations are resolved primarily by the Financial Disputes Mediation Committee (FDMC, 금융분쟁조정위원회) established in the Financial Supervisory Service (FSS).

Since FSS are closely related with financial companies, some argues that financial consumer protection issues should be separated from business regulation and prudential requirement issues. It's matter of financial supervisory system as well as banking system of the nation.