SOUTH KOREA: An Introduction to Dispute Resolution: Litigation

South Korea Overview – Dispute Resolution 

Contributor:

Barun Law LLC

Authors:
1. Cheoll Park, Managing Partner
2. Joo Hyoung Jang, Partner
3. Rieu Kim, Senior Foreign Attorney (Partner)
4. Kyung Hun Kim, Foreign Attorney (Associate)

The year 2020 has been a dynamic and unprecedented year for Korea. Here are four key developments and trends in the Korean legal market this year.

Singapore Convention on Mediation 

The Singapore Convention on Mediation (the “Convention”), formally the United Nations Convention on International Settlement Agreements Resulting from Mediation, came into effect on September 12, 2020. 53 countries, including South Korea, the United States, Singapore, China, India, Malaysia and the Philippines have signed the Convention as of September 12, 2020. Under this Convention, businesses can seek to enforce mediated commercial settlements in the countries that have ratified the Convention, by applying to the courts of such countries.

This Convention applies to an agreement resulting from mediation and concluded in writing by parties to resolve a commercial dispute which, at the time of its conclusion, crosses international borders. However, it should be noted that the Convention does not apply to a settlement agreement concluded to resolve a dispute arising from a transaction engaged in by one of the parties (a consumer) for personal, family or household purposes, or relating to family, inheritance or employment law. Furthermore, the Convention also does not apply to a settlement agreement that has been approved by a court or a settlement agreement that has been recorded and is enforceable as an arbitral award.

Since this Convention applies to international and commercial settlement agreements, the Convention is expected to facilitate and simplify the enforcement of mediated outcomes and dispute resolutions, thereby saving the time and legal costs of businesses, among others.

Increase in Labour/Employment-Related Disputes

The COVID-19 outbreak is impacting employee-management relations in Korean industries in various ways. On one hand, in recognising that their job security is contingent on the company's survival, some labour unions, including labour unions of major automobile companies, have agreed to proceed peaceably with wage and welfare negotiations.

On the other hand, we have also seen an increasing number of employees of companies starting to form labour unions or to undertake collective actions to protect their job security and rights in the midst of the economic uncertainties.

It is likely that this trend of increase in the number of collective actions will continue into the foreseeable future, as it is still unpredictable when the COVID-19 pandemic, and its impact on the economy, will be over.

Lease-Related Disputes 

In 2020, we have also seen an increasing number of lease-related disputes between landlords and lessees, particularly involving late payment or non-payment of rents.

The COVID-19 outbreak has had adverse effects on many lessees’ financial conditions, making it difficult for them to pay rents at the agreed rates. Some companies had to go through workforce restructuring or have many of their workforce work from home. These companies would no longer need the rented space and thereby negotiated a rent reduction or rented space reduction with their landlords. However, the Korean laws and regulations are unsettled and unclear on the issue of whether or not the COVID-19 outbreak should be recognised as a force majeure event or other grounds that would release the lessees’ obligations under the respective lease agreement. Accordingly, unless the relevant parties agreed in the lease agreement that the term “force majeure” includes a disease outbreak or the Korean courts start to recognise the COVID-19 outbreak as a force majeure event, we do anticipate many lease-related disputes between landlords and lessees.

Class-Action Litigation and Punitive Damages

On September 28th 2020, the Korean Ministry of Justice proposed two bills that expand class action litigation and award punitive damages to all areas of law. In Korea, class actions are currently only available for certain types of securities claims. However, the new class action proposal would expand it to all incidents with at least 50 claimants. Moreover, the punitive damage system would allow claimants to collect punitive damages up to five times the actual harm caused by the business owner’s intentional conduct. Korea’s business and finance associations have expressed concerns as, according to them, it would increase the number of consumer lawsuits and increase potential award amounts.