KCAB INTERNATIONAL was established on 20 April 2018 as an independent division for the management of international arbitration cases by the Korean Commercial Arbitration Board (KCAB). In the same year, the KCAB and the Seoul International Dispute Resolution Center (SIDRC) were consolidated. This chapter reflects on the growth and challenges faced by Korea, the KCAB and its arbitration community in the past two years. It also discusses key areas of focus that KCAB INTERNATIONAL is likely to devote its resources to in the coming years.
- Korea as a major economic player in the Asia-Pacific region.
- Prominent players in the legal service area.
- Continued support towards arbitration from both government and the private sector.
- KCAB’s growing caseload.
- Arbitrator appointments.
- Collaboration with other arbitral institutions.
- Engagement with arbitration community.
Referenced in this article
- The Arbitration Industry Promotion Act.
- KCAB International Arbitration Rules.
- KCAB International Arbitration Committee.
- KCAB Next.
Key among recent developments in global and regional arbitral institutions were the significant changes that happened at the Korean Commercial Arbitration Board (KCAB). In April 2018 the KCAB – the only arbitral institution in Korea since 1966 – and the Seoul International Dispute Resolution Center (SIDRC) – a hearing centre and education facility dedicated to international arbitration that opened in 2013 – consolidated into a single entity, opening up a new era of international arbitration in Korea. The consolidation led to two significant changes. First, a separate and newly formed division named KCAB INTERNATIONAL was launched, headed by the former SIDRC chairman Professor Hi-Taek Shin and staffed by a new group of legally trained case managers, which took over the case management work for all matters under the KCAB International Arbitration Rules. Second, the operations of SIDRC’s hearing facilities were relocated, expanded and transferred to the care of KCAB’s facilities operation team.
The first of these changes meant that all existing and newly filed cases under the KCAB International Arbitration Rules were to be managed by a team of newly recruited legal professionals with international and multilingual backgrounds. A new structure called the KCAB INTERNATIONAL Secretariat was formed – which operates independently from the pre-existing KCAB organisation – and a new position of secretary general was created. Another significant result of the consolidation was the relocation and expansion of the SIDRC facilities. The SIDRC moved from its original Jong-gak location to the Gangnam business district, at three times its previous size, fully refurbished with new equipment and facilities. The SIDRC brand name is still maintained in order to continue with the goodwill that it has created among international users since it opened in 2013. The relocation, expansion and further modernisation of the SIDRC, together with the revamping of the professional staff of KCAB INTERNATIONAL, has offered a unique opportunity for growth of the KCAB and the arbitration community that calls Korea its legal home.
Almost two years have passed since the consolidation of the two entities and the creation of KCAB INTERNATIONAL. This chapter reflects on the growth accomplished and challenges faced by Korea, the KCAB and its arbitration community since. The chapter will also share the key areas of focus that KCAB INTERNATIONAL will likely be devoting its resources to in the coming years.
Korea – a major economic player in the Asia-Pacific region
Regardless of the global economic slowdown of the past few years, Korea remains an economic powerhouse in the Asia-Pacific region, backed by political and societal stability, sophisticated legal infrastructure, technological advances and a highly skilled and educated workforce. Economic statistics show that while inbound direct foreign investment into Korea has been slowing, Korean companies have increasingly been exporting their capital overseas and expanding their business in overseas markets. Outbound direct investment gained 22 per cent, up to US$41.8 billion as of September 2019, and is projected to exceed the previous year’s record high of US$49.7 billion.
Korea is also a large market populated by an affluent society. Its population is estimated to be approximately 51 million (as of 2017) and its per capita income has already surpassed the US$30,000 mark in 2018, making it one of the seven 30-50 club countries in the world. This, in turn, translates to an abundance of business opportunities for multinational businesses in Korea. Korea’s close ties – geographically and economically – with China also marks another area of potential growth, as China is the largest destination of Korean exports at US$149 billion. From China’s perspective, Korea is the fifth-largest buyer of Chinese goods, reaching an estimated total value of US$98 billion in recent years.
Prominent players in legal services
The strong fundamentals of the economy, bolstered by the activities in its vibrant business community, have led to Korean parties becoming prominent buyers of legal services, including the international disputes sector.
In 2019, the International Chamber of Commerce (ICC) Statistics reported that among the parties of the 842 newly filed cases in 2018, 54 were of Korean nationality. Among the Asia-Pacific countries, this was second only to China (including Hong Kong), which recorded 59 parties.  Of the 402 cases newly filed at the SIAC in 2018, 41 parties were of Korean nationality – making Korea one of the top 10 nationalities. 
Another interesting development is the movement of people within the market. While previously the key players in the Korean arbitration industry were associated with a handful of leading law firms and movement between firms was rare, recent years have witnessed well-known arbitration partners moving to competitor firms or leaving their long-time partnership to set up boutique firms specialising in international dispute. While not directly correlated, these changes coincide with the gradual but steady growth of the Korean legal industry, which has been increasing in size and in the scale of revenue earned from overseas clients.
The frequency of Korea being selected as the arbitral seat in cases administered by institutions other than the KCAB remains steady, as seen in 2017 and 2018 ICC Statistics, which recorded six and five cases respectively., 
In terms of hosting hearings in Seoul, 2019 was a busy year for the SIDRC. Leaving aside the domestic cases, there were 55 hearings for KCAB international cases and seven evidentiary hearings in 2019 administered by institutions other than the KCAB, including an evidentiary hearing for an ad hoc investment arbitration case administered by the HKIAC. The successful logistical operations of this hearing have led the HKIAC and the KCAB to agree on a separate cooperation agreement, where the two institutions have agreed to cross-promote the use of each other’s hearing facilities for cases administered by the two respective institutions.
Diversity and inclusivity within Korea’s legal market
Korea has also seen a rise in its cultural influence as a soft power among the youth in Asia and around the world. Koreans, along with their culture, have been gaining prominence and fans at a global level through food, music, television and film. Some noted examples are director Bong Joon-ho’s film Parasite, which became the first non-English language film to win an Oscar for best picture at the 92nd Academy Awards, and BTS, a Korean boy band, that ranked number one on Billboard’s Social 50 chart as they topped the list for 164 consecutive weeks, setting a new record in the music industry. These events have had a positive impact on Korea’s profile around the world.
Whether this backdrop acts as a positive factor regarding the growth of Korea’s legal industry is yet to be seen, but hopes have been expressed that in the long run it will contribute to Korea’s attractiveness as a diverse and vibrant legal market as more international lawyers without any prior ties to Korea are drawn to the country to develop or expand their legal careers. According to the Ministry of Justice statistics for 2019, there are 31 foreign firms operating in Korea. At least three or four of these have international arbitration specialists on the ground. While official statistics are not readily available, it is estimated that there are several hundreds of foreign-qualified lawyers working at large law firms with international legal practice teams. Members of the Korean Bar have also become increasingly internationalised, with many dual or multi-qualified in jurisdictions outside Korea.
Continued support towards arbitration from both government and private sector
Recognising the significance of arbitration as an important industry sector, the government enacted the Arbitration Industry Promotion Act in December 2016, which came into force on 28 June 2017. The Act requires the Minister of Justice to establish and implement a master plan every five years for the promotion of the arbitration industry. Pursuant to the mandate of the Arbitration Promotion Act, the Ministry of Justice released an initial master plan for 2019 to 2023. The plan highlights four strategies to promote Korea as a regional arbitration hub:
- to strengthen the fundamentals of the Korean arbitration industry;
- to promote domestic arbitration;
- to enhance the competitiveness of the arbitration industry; and
- to host more international arbitration cases in Korea.
This plan provides a legal foundation for the Korean government to propose initiatives and direct further resources to the arbitration industry engaging KCAB INTERNATIONAL in the process.
Enforcement in and out of Korea
The judiciary in Korea continues to be a very pro-arbitration regime, and the increasing pro-arbitration stance around the region adds to the promotion of arbitration in Korea.
In August 2019, an appellate court in Seoul ordered the enforcement of an ICC award in favour of a foreign investment company fund against a government-funded corporation following a remand by the Supreme Court in 2016 that the relevant arbitration agreement was valid. This marks the final outcome of a lower-court decision in 2013, which had initially raised concerns that the Korean judiciary was backing away from its pro-arbitration stance, only to be remanded by the Supreme Court in 2015, which ruled in favour of the enforcement. Subsequent proceedings ensued to handle the applications by the plaintiff (the investment company) seeking an upward adjustment of the interest amount ordered in a previous judgment.
Meanwhile, in March 2019, a district court in Tianjin, China enforced a KCAB award after finding that the KCAB-appointed sole arbitrator in that case rightly exercised its authority of Kompetenz-Kompetenz when deciding its own jurisdiction under the Korean Arbitration Act. This was a welcome development, reinforcing the enforceability track record of KCAB awards overseas.
Signing the Singapore Mediation Convention
In August 2019, the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention) – which grants executory force of settlement agreement resulting from mediation – was signed by 46 countries including the United States, China, India and South Korea.
Following this signature ceremony, a memorandum of understanding (MoU) was concluded between the Singapore International Mediation Centre (SIMC) and the KCAB in Singapore. Efforts under this MoU were first displayed through a seminar, co-hosted by the SIMC and KCAB, Winning at Mediation: Mastering the Essential Skills for International Disputes, in September 2019. Around the same time, the KCAB sponsored another seminar, Settlement of International Trade Disputes by Commercial Mediation, co-hosted by the Korea In-house Counsel Association (KICA) and the Korean Council for International Arbitration (KOCIA).
While the Singapore Convention will have legal effect in Korea after ratification and adoption of the attendant legislation, it signals a serious interest in the field of international mediation and promises to be an area to watch out for in the coming years.
The KCAB’s growing caseload
Allocation of cases within the KCAB
Administration of cases within the KCAB is directed to either the Domestic Arbitration Team or the KCAB INTERNATIONAL Secretariat. Cases where the parties agreed to the application of the KCAB International Arbitration Rules are assigned to the international arm. Even in cases where there is no mention of the KCAB International Rules, if one or more of the parties are incorporated outside of Korea, or the seat of arbitration is outside of Korea, and as long as the arbitration clause does not explicitly call for the domestic rules to apply, the matter is transferred to KCAB INTERNATIONAL without further action from the parties. This administrative division is an internal operation factor only and does not raise potential jurisdiction issues (as opposed to a situation where there is a new, competing arbitral institution using a similar name) thereby preserving the enforceability of a pre-existing arbitration clause as long as the arbitration clause designates the KCAB as the arbitral institution.
The immediate, visible difference between the domestic arm and the international arm is that the default language of communication from the secretariat is English, unless agreed otherwise by the parties. Appointment of arbitrators in the international arm is through party nomination, while the domestic arm follows a listing system. Arbitrators’ remuneration scale is also different between the two rules; as an illustration, for a sole arbitrator case handling a case valued at 1 billion won (approximately US$910,000), the fee calculated under the domestic rules would be 3.32 million won, while under the international rules, it would be 18.75 million won.
Perhaps the most significant difference between the two is found in the international background and professional qualifications of the KCAB INTERNATIONAL Secretariat members that administer the international cases. Through the launch of KCAB INTERNATIONAL, the Korean Commercial Arbitration Board was able to bring meaningful changes to the make-up of its human resources. Before the launch of the international arm, the KCAB was almost exclusively comprised of non-lawyer administrative employees specialised in domestic arbitration, which largely mirrored Korean domestic litigation practices, and only a few members had enough experience to adequately handle international matters in line with global standards as was expected by the international users.
At present, the staffing, supervision and other decisions that shape the course of the international proceedings at the KCAB – most notably the decisions on arbitrator appointments and remuneration, are conducted by KCAB INTERNATIONAL independently from any of the other divisions within the KCAB. All of the case counsel currently working at KCAB INTERNATIONAL are qualified to practise law in common law jurisdictions, and are working to guarantee that the institution’s practices meet the expectation of the international users under the experienced guidance of the chairman (a renowned international arbitrator), the secretary general (former arbitration partner at a major law firm) and the members of the International Arbitration Committee.
Case statistics in 2019
In 2019, the number of newly filed cases at the KCAB (domestic and international) reached 443 cases, breaking the previous record of 413 cases recorded in 2015. Among these new cases, 70 were administered by KCAB INTERNATIONAL, an increase from the 62 cases filed in 2018. The average dispute value of the cases in the KCAB is around US$2 million, confirming the KCAB’s continued popularity among companies with midcap value cases. In 2019 the dispute value of a single international arbitration matter first surpassed US$1 billion, a hopeful indication that the KCAB might be on its way to becoming an attractive forum for high-value cases that need to be resolved with speed and efficiency.
Under the KCAB International Arbitration Rules, expedited procedures are automatically applied to smaller cases of a dispute amount lower than 500 million won (approximately US$460,000). Among the 70 cases filed in 2019, roughly 50 per cent were under the expedited rules. Disputes involve various industries such as construction, information technology, trade, entertainment and IP disputes.
Articles 12 and 13 – principles of party autonomy and neutrality
Depending on the parties’ intentions, the amount in dispute and the complexity of the dispute, either a sole arbitrator or three arbitrators will form the arbitral tribunal. In the event of a sole arbitrator, the parties jointly nominate an arbitrator. In the event of three arbitrators, the claimant and respondent each nominate an arbitrator. The two appointed arbitrators in turn jointly nominate the third arbitrator who acts as chair of the tribunal. Upon the failure of either the parties or the two arbitrators to appoint their respective arbitrator within 30 days from notice, the secretariat exercises its discretion to appoint the arbitrator. Either party may request that the appointment of a sole arbitrator or the chair of the tribunal be of a third nationality to ensure neutrality. As a rule, KCAB INTERNATIONAL currently maintains a policy of appointing a non-Korean national as a sole arbitrator in disputes between a Korean party and a non-Korean party.
Diversity of nationality and gender
In terms of actual appointment, 52 arbitrators were nominated by the parties and the secretariat during 2019 – 25 per cent were non-Koreans and 15 per cent were women. In addition, 17 per cent of the appointments were ‘first-timers’ to KCAB cases, showing that seasoned arbitrators with experience in other institutions were accepting their first cases to the KCAB.
Diversity and prominence of the pool of KCAB arbitrators has enhanced over the years. In January 2020, KCAB INTERNATIONAL announced the inclusion of 79 new arbitrators into its International Panel of Arbitrators based on applications received during the first half of 2019. Of the newly selected arbitrators, 79 per cent are non-Koreans; arbitration practitioners from both civil and common law jurisdictions representing 23 different jurisdictions including the United States, the United Kingdom, China, France, Germany, Singapore, Hong Kong, Russia, Vietnam, Spain, Japan, Hungary, Poland and Norway, and are associated with globally renowned law firms and universities. Through the recent intake, KCAB INTERNATIONAL now has 489 arbitrators on its international panel. Twenty of the new names are female arbitrators, raising the number of women in the International Panel of Arbitrators to 70. Being a signatory to the Pledge for Equal Representation in Arbitration, KCAB INTERNATIONAL continues to strive for gender equality in all aspects of the arbitral proceedings.
Collaboration with other arbitral institutions
KCAB INTERNATIONAL had perhaps its busiest year in 2019, thanks largely to the IBA (International Bar Association) Annual Conference (IBA Seoul) and the Seoul ADR Festival (2019 SAF).
The IBA Seoul had a record of more than 6,000 registrants representing 130 jurisdictions. This provided a timely opportunity to reaffirm friendships and collaborative relations with various arbitration-related entities. During a two-week period, KCAB INTERNATIONAL hosted, sponsored or had speaker representations across more than 25 events attended by registrants from various parts of the world and legal fields. Collaborative efforts to cross-promote other arbitral institutions included co-hosting events with the ICC, the SIAC, the HKIAC, the Vienna International Arbitration Centre, the Swiss Chambers Arbitration Institution, the Belgian Centre for Arbitration and Mediation, the Club Español de Arbitraje and the Singapore International Mediation Centre, and most of them took place at the SIDRC or IBA conference venues.
Engagement with arbitration community
KCAB INTERNATIONAL continues to maintain its advisory board called the International Arbitration Committee (IAC). The establishment of the IAC is mandated under article 1 of the KCAB International Arbitration Rules. The appointment is by invitation of the chair of KCAB INTERNATIONAL. While the IAC is an advisory body with no decision-making powers, it must be consulted with matters related to challenges to arbitrators. There are 19 names in the IAC, half of which are outside of Korea, and all of them well known in the field of international arbitration. The term of the IAC is three years, with the expiry of the current term in June of 2020. One area of focus in the coming years would be to increase the level of engagement by organisations such as the IAC and fill these organisations with actual involvement and input into the strategic growth plan of KCAB INTERNATIONAL.
Creating opportunities for the next generation is another area of focus, and the key among these efforts is the launch and support of KCAB Next. KCAB Next is a voluntary member-driven group launched in November 2018. It serves as an ongoing platform where ideas are exchanged and professional friendships are nurtured among the most active and visible younger members of the arbitration community in Korea. The 13 steering committee members serve a two-year term, with the current term set to end in early 2021. KCAB Next members have been active in staging seminars and outreach programmes, such as the joint events with YSIAC and HK45 in September 2019 and with DIS40 in November 2019. The creation of KCAB Next was nominated in the shortlist of ‘best developments’ by GAR in February 2020.
Education is another front KCAB INTERNATIONAL has been focusing on. KCAB has traditionally supported global moot competitions, including the Vis Moot in both Vienna and Hong Kong, and is gearing up to be the first host organisation in the Asia-Pacific region for global rounds of the FDI Moot Competition, together with the Center for International Legal Studies. Seoul Academy is an annual workshop programme hosted by KCAB INTERNATIONAL. It had its fourth instalment in 2019 and in a jurisdiction where English is not a working language, it has been one of the few arbitration education programmes that allows hands-on experience with actual arbitration skills. Through teamwork preparing for a mock hearing, it allows young practitioners to hone their legal argument skills, conduct oral advocacy in front of seasoned, real-life arbitrators and receive feedback.
The reliability and quality of an arbitral institution starts from the people that are involved in the arbitral rules, appointments, procedural decisions and actual case administration. The introduction of KCAB INTERNATIONAL was first and foremost a mechanism designed to bring about significant improvements to human resources in the KCAB. These changes have been possible through the concerted efforts and sacrifice of the existing members of the KCAB, numerous legal practitioners within the Korean arbitration community and the consistent support of the Korean government. Perhaps more important than the make-up of the institutional workforce is the international quality and diversity of the arbitrators that decide the cases. While 2019 brought clear improvements to the prominence and diversity of the international arbitrators at KCAB INTERNATIONAL, this is an area that requires continued attention. Openness, inclusivity and enhanced engagement with the arbitration community in and outside of Korea should be key in these efforts.
The heightened interest in international mediation along with signing of the Singapore Convention is another area that warrants the focus of KCAB INTERNATIONAL in the coming years. While international arbitration is still an efficient dispute resolution method, the desire for a quicker and less contentious method of resolution has led to an increase of users enquiring about the use of mediation along with arbitration. KCAB INTERNATIONAL will continue with its efforts to explore tools and practices that encourage the promotion of international mediation without adding unexpected expenses and time for the users.
At the time of writing, the covid-19 pandemic is raging in almost every country in the world. Perhaps by the time this article is published, the pandemic will have subsided and normal practice will have resumed. The experience should teach us of the importance of technological advances that enable ‘contactless arbitration’ and the need to establish emergency contingency plans. KCAB has already announced the Seoul Protocol on Videoconferencing as an effort to set an example in remote witness examination. These and others will be new areas of focus that KCAB INTERNATIONAL will invest time and resources on in the coming years.
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