Arbitration

Arbitration (중재/仲裁), a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts. It is a resolution technique in which a third party reviews the evidence in the case and imposes a decision that is legally binding for both sides and enforceable.

Arbitration is preferred by the parties to a dispute who refer it to one or more persons - the "arbitrators" (중재인), "arbiters" or "arbitral tribunal" (중재판정부) - by whose decision called the "arbitral award" (중재판정/仲裁判定) they agree to be bound.

Key words
international commercial arbitration, ADR, arbitration tribunal, arbitral award, UNCITRAL Model Law

Governing law
Initially the Arbitration Act (중재법/仲裁法) was enacted in 1966.

To meet the increasing needs for international commercial arbitration, the Act was wholly amended by Act No. 6083 on December 31, 1999 and came into force on the same day. Actually the 1999 Amendment was legislated after the model of UNCITRAL Model Law on International Commercial Arbitration. The partial amendment in 2010 was on account of the changes of difficult terminology and corrections based on the Korean grammar.

The main points of the Act are:
 * This Act is applicable in principle to cases where the venue of arbitration is in the Republic of Korea. Art. 2.
 * In matters governed by this Act, no court shall intervene except otherwise provided in this Act. Art. 6.
 * Arbitration agreement may be in the form separate agreement or an arbitration clause in a contract. Art. 8.
 * The number of arbitrators, appointment process, arbitral proceedings and venue of arbitration shall be subject to the agreement of both parties. Failing such agreement, the arbitral tribunal may conduct arbitration in such a manner as it considers appropriate, and determine the venue in consideration of the convenience of the parties. 11, 12, 20 and 21.
 * Recourse against an arbitral award may be raised only by an action for setting aside such arbitral ward (중재판정취소의 소) to a court within three months. It is limited to such cases as prescribed by the Act. Art. 36.
 * The recognition and enforcement of arbitral awards shall be made by the recognition or judgment by a court. Domestic arbitral awards shall be recognized or enforced unless any justifiable ground exists. Arts. 37 and 38.
 * The recognition and enforcement of foreign arbitral awards which is subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") shall be governed by that Convention.
 * The Korean Commercial Arbitration Board shall be deemed to have been designated by this Act and supported by the government. Its arbitration rules shall obtain approval by the Chief Justice of the Supreme Court. Arts. 40 and 41. Art. 3 of 1999 Addenda.

Investor-State Dispute
The investor-state dispute (ISD, 투자자-국가 소송) is resolved to protect foreign investors against political risks that are associated with foreign investment. By allowing the investor to recover damages directly from the host state in a neutral international forum, such provisions could alleviate unnecessary tensions between the host state and the home state of the investor.

In the past, the mode of dispute resolution was state-to-state where the states dealt directly with each other on the basis of diplomatic protection under public international law, which could exacerbate tensions in a much bigger scale than what is actually required in settling an investment dispute.

Nowadays the number of cases filed by investors from developing countries against developed countries or other developing countries is on a steady increase. This means that investor-state arbitration is being established as an option for many investors, and not just for investors from the developed world. The UNCTAD and ICSID statistics shows that states win some 40 percent of the cases, while investors win a lesser percentage of about 30 percent of the cases, with a large portion of that 30 percent being only partial victories.

Considering that ISD resolution is generally accepted by most of FTAs, the more strategic way to manage risks associated with such FTAs is to prepare for future investment disputes by increasing our knowledge and our capabilities to respond to such claims, as well as preempt possible disputes; thereby enhancing our investment climate in general and not hindering a good reputation that we have built among global investors.

Arbitration institution
In Korea, the Korean Commercial Arbitration Board (KCAB, 대한상사중재원) was established to assist international parties resolve disputes encountered in the course of their commercial activities. The KCAB recognizes the paramount need to be neutral, independent and internationally minded administrator in order to deliver the most reliable, efficient and world class dispute resolution services.

On May 27, 2013, the Seoul International Dispute Resolution Center (IDRC, 서울국제중재센터) started its operation being supported by the Ministry of Justice, the Seoul Metropolitan Government, Korean Bar Association and KCAB. Unlike KCAB and London Court of International Arbitration (LCIA), IDRC is a mere dispute resolution facility established in order to promote Seoul as a legal venue for arbitrations.

At the initial stage, it is expected to host international arbitration cases involving Korean parties. But in the mid-to-long term, it is desirable to attract even those international arbitration cases between parties from non-Korean, third countries. An ideal client could include Japanese or Chinese parties who have international commercial disputes between themselves or with parties of third countries.