Shipping 2024 Comparisons

Under the South Korean legal system, there are no maritime and shipping courts. It may be noted that there are a number of maritime lawyers and scholars who have been running the campaign for maritime-specialised courts in South Korea, which has been noted by the congress and the courts. That said, as of January 2024, there are no maritime courts in South Korea.

Instead, subject to the nature of the claim, the parties may file suit before the pertinent district court that has jurisdiction over the underlying matter. In some district courts, notably in the Seoul Central District Court and the Busan District Court, there are tribunals specialised in maritime and shipping matters.

Cargo claims (such as loss, damage and delay) and casualty claims (such as grounding, collision, allision, fire, and personal injury during carriage or at the port) are the most common maritime and shipping claims in South Korea. The district court that has jurisdiction over the underlying matter (eg, over the parties’ addresses, or over the place of the incident) would be the respective competent court.

South Korea is a signatory member state to various international conventions that apply to marine casualties (including seafarers’ casualties) and pollution, such as the International Convention for the Safety of Life at Sea, 1974 (SOLAS), the International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL), the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978 (STCW), and the Maritime Labour Convention, 2006. Further, South Korea has enacted domestic legislations reflecting the contents of those international conventions, such as the Ship Safety Act, the Maritime Safety Act, the Marine Environment Management Act, the Seafarers Act, among others.

In line with international conventions and under domestic acts, the Ministry of Ocean and Fisheries (MOF) of Korea, and the regional offices and port authorities subordinate to the MOF, watch over the vessels that enter into South Korea and investigate whether those vessels are in compliance with the international standards. If non-compliance is found, the MOF may order that the non-compliance be corrected, and, if that correction is not made in time, the MOF may impose certain restraints/punishments, including detention of the vessel until correction of the non-compliance has been effected. In the case of marine casualties, the MOF may order that relevant response measures be taken, including wreck- and bunker-removal, and pollution prevention.

For a vessel to be registered in South Korea, it must be registered under two systems:

• administrative registration, which is related to issuance of ship-nationality certificates and is handled by the Ministry of Ocean and Fisheries (and the regional offices and port authorities subordinate to the MOF); and
• legal registration, which is handled by the district courts (and the registration offices subordinate to courts).

The Ship Act of Korea stipulates provisions on administrative registration, while the Ship Registry Act of Korea stipulates provisions on legal registration.

In principle, under the Ship Act of Korea, only a vessel owned by (i) South Korean citizens (ie, South Korean individuals or companies incorporated in accordance with South Korean law), or (ii) companies of which the principal office is located in South Korea and all of their representatives (ie, the CEO, the president, the managing director, etc) are South Korean citizens, may be registered in South Korea as a “Korean vessel”. Further, under the International Ship Registration Act of Korea, a vessel which is owned by a shipping company that has registered its shipping business in South Korea and is under a bareboat-charter hire purchase (BBCHP) to be South Korean-flagged can be registered in South Korea as an “international vessel”.

Under the Ship Registry Act of Korea, it is possible to register a mortgage over a vessel that is still under construction. However, registering the vessel’s ownership is only possible upon construction.

Temporary registration and dual registration are not permitted in South Korea. Issuance of a temporary nationality certificate is possible when the ship-owner has acquired the ownership of the vessel abroad and thus it may take some time to achieve permanent registration in Korea.

Registration of mortgages is maintained and handled by the district courts (and the registration offices subordinate to courts).

In order to register a mortgage over a vessel, the applicant shall be required to submit documents demonstrating (i) details regarding the secured claim, including the amount, the repayment due date, interests, etc (usually the mortgage agreement), and (ii) details regarding the debtor (and the ship-owner, if different from the debtor).

The legal and administrative registrations of ships are available to the public. However, the party who applies for a copy of the registry record shall be required to confirm certain details of the vessel – usually, it is possible to obtain a copy of the registry record by confirming (i) the name and (ii) the port of registry of the vessel.

As regards pollution, South Korea is a member state to the International Convention on Civil Liability for Oil Pollution Damage (CLC, 1969) and its 1992 Protocol, as well as the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (FUND, 1971) and its 1992 and 2003 Protocols. South Korea is also a member state to the International Convention on Civil Liability for Bunker Oil Pollution Damage. There are also domestic laws (namely, the Compensation for Oil Pollution Damage Guarantee Act of Korea) reflecting these conventions.

As regards wreck removal, South Korea is not a member state to the Nairobi International Convention on the Removal of Wrecks. Instead, there are a number of domestic laws that stipulate provisions on wreck-removal liability of owners and interested parties, such as the Maritime Safety Act, the Marine Environment Management Act, and the Public Waters Management and Reclamation Act.

South Korea is a member state to the Convention on the International Regulation for Preventing Collisions at Sea (COLREG, 1972), and the Maritime Safety Act has provisions on the conduct of vessels reflecting the COLREG. The Commercial Act of Korea has provisions on the liability of owners and interested parties in the event of collision.

South Korea is not a member state to the International Convention on Salvage. Instead, the Commercial Act of Korea has provisions on salvage reflecting the Convention.

While South Korea is not a member state to the 1976 Convention on Limitation of Liability for Maritime Claims, the Commercial Act of Korea has provisions on limitation of liability reflecting the Convention. The Act on the Procedure for Limiting the Liability of Ship-owners stipulates on the procedure matters for limitation of liability.

The party who intends to limit liability should file an application to the court for commencement of the liability-limitation proceeding within one year upon receipt of the written demand(s) exceeding the limitation amount from the creditor(s).

The ship-owners, in addition to the interested parties of the vessel, such as charterers, managers, Master and crew members, pilots, managers, may file an application.

Upon the review of the application documents, when the court finds that the total sum of claims subject to limitation exceeds the limitation amount, the court will commence the liability-limitation proceeding and order the applicant to make a deposit corresponding to the limitation amount for establishing the limitation fund. Generally, a protection and indemnity (P&I) club’s letter of undertaking (LOU) are accepted by the court in lieu of a cash deposit.

The limitation amounts for each type of claim are stipulated in the Commercial Act of Korea, which is in line with the 1976 Convention on Limitation of Liability for Maritime Claims.

South Korea is a party to the Maritime Labour Convention, 2006, and the Convention has been effective in South Korea since 9 January 2015. The Seafarers Act of Korea is the domestic legislation in regards to seafarers’ rights and safety, which reflects the Convention.

South Korea is not a member state to the international conventions concerning bills of lading, such as the Hague–Visby Rules, and the Rotterdam Rules. Instead, the Commercial Act of Korea stipulates provisions on carriage by sea and bills of lading, which are generally understood to reflect the contents of the Hague–Visby Rules.

Under the Commercial Act of Korea, where the bill of lading-holder has acquired the bill of lading in good faith (meaning without knowing the inaccuracy between the contents of the bill of lading and the actual circumstances regarding the cargo, eg, type, quantity, number of packages/units, quality, etc), the carrier (meaning the issuer of the bill of lading or the party who is stated as carrier in the bill of lading) shall bear liabilities in accordance with the contents of the bill of lading. Thus, any such lawful bill of lading-holder shall have the title to sue on the bill of lading.

As discussed in 3.1 Bills of Lading, the Commercial Act of Korea has provisions reflecting the Hague–Visby Rules. Accordingly, under South Korean law, the carrier shall be liable for loss or damage to the cargo, and/or delay in carriage of the cargo, unless the carrier can prove that they have not breached their duty of seaworthiness and due care for carriage of the cargo.

Liability exemptions are available under Korean law, including fire and navigation/ship management error exemption, similarly to those provided under Article IV Rules 2(a) and (b) of the Hague–Visby Rules. Package/weight limitations are also available, similarly to those provided under Article IV Rule 5(a) of the Hague–Visby Rules.

The provisions on the carrier’s liability shall apply to both contract and tort. Therefore, there would not be any significant difference if the ship-owner is the actual carrier or the contractual carrier.

There is no clear jurisprudence on misdeclaration of cargo yet in South Korean law or judgments. That said, the prevailing view is that the issues regarding misdeclaration of cargo would be dealt with in accordance with general principles.

Under the Commercial Act of Korea, it is deemed that the shipper has guaranteed the accuracy of the cargo details (type, quantity, etc) that they have provided to the carrier (Article 853 Subsection 3). Then, if the shipper has misdeclared the cargo details to the carrier, it would constitute a breach of the shipper’s obligation under the contract of carriage, and the shipper would be liable to compensate any damage sustained to the carrier arising from that breach.

Under the Commercial Act of Korea, the time bar, for both the carrier’s liability and its claim against the cargo interests, which encompasses the cargo interests’ claim for damaged or lost cargo against the carrier, is one year from the date when the cargo was delivered or would have been delivered to the consignee, either for breach of contract or liability in tort. This one-year time bar can be extended by the parties’ agreement.

International Conventions and Domestic Laws

South Korea is not a member state to the International Convention for the Unification of Certain Rules relating to Arrest of Sea-going Ships (Brussels, 1952) or the International Convention on Arrest of Ships (Geneva, 1999).

Ship arrests are generally dealt with and stipulated in the Civil Enforcement Act, along with attachment of and enforcement over other properties, such as real estate.

Types of Ship Arrests in South Korea

Generally speaking, there are three types of ship arrest that are available under South Korean law (under South Korean law, three types of attachment of property are available and this is also applied to attachment of ship).

Firstly:

• Pre-judgment attachment of a vessel – it is required for this type of ship arrest that:
1. the applicant/creditor have a pecuniary claim against the debtor;
2. the debtor/respondent be the owner of the ship to be arrested; and
3. there be a need for the applicant/creditor to obtain security for their claim by pre-judgment attachment of the ship.

The applicant/creditor’s claim against the debtor/respondent need not be maritime claims or related to the ship, in so far as the aforementioned requirements are satisfied.

Secondly:

• A judicial auction sale of a ship based on security rights such as a mortgage or maritime lien – it is required for this type of ship arrest that the applicant/creditor have a claim that is secured by a mortgage or maritime lien established over the vessel. For claims that establish a maritime lien over a vessel, see 4.2 Maritime Liens.

Thirdly:

• A judicial auction sale of a ship for enforcement of a claim that has been confirmed and is enforceable by the court’s judgment or the arbitration award – it is required for this type of ship arrest that the debtor/respondent be the owner of the ship to be arrested.

Under the Commercial Act of Korea (Article 777 subsection 1), the following claims constitute maritime liens over the pertinent vessel:

• (i) the cost of litigation for common interests of creditors, taxes imposed on the ship concerning the voyage, pilotage dues, towing fees, maintenance charges and inspection charges of the ship and its appurtenances after final entry into a port;
• (ii) a claim arising out of an employment contract for a crewperson or any other employee of the ship;
• (iii) a salvage charge due to rescue operations at sea and a claim concerning a share in general average; and
• (iv) claims for damages for any loss and damage incurred due to collision of the ship and other navigation accidents, loss of or damage to navigation facilities, port facilities and routes, and personal injury of a crewperson or a passenger.

The claim arising out of an employment contract for a seafarer or any employee of the ship shall include indemnities for injuries of crew, insofar as the employment contract provides for such indemnities.

Theoretically speaking, liabilities resulting from contracts for chartering a vessel may provide grounds for a maritime lien insofar as such claim falls under one of the above four categories of claims which constitute maritime liens over the vessel, although practically speaking, liabilities resulting from contracts for chartering a vessel may likely not fall under such categories of claims.

As discussed in 4.1 Ship Arrests, ship arrests in South Korea are possible, subject to the satisfaction of the requirements for each type of ship arrest. Except for ship arrest based on a maritime lien (which can be established only for certain types of claims that are relevant to the underlying vessel, as previously discussed), ship arrests for other types, eg, a pre-judgment attachment or a judicial auction sale based on the mortgage of the vessel, are available for pecuniary claims that are not maritime claims or ship-related claims.

As discussed in 4.1 Ship Arrests, ship arrests in South Korea are possible, subject to the satisfaction of requirements for each type of ship arrest. For (i) a pre-judgment attachment and (ii) a judicial auction sale for enforcement of a claim under the judgment or arbitration award, it would be required that the debtor/respondent be the owner of the ship to be arrested.

However, for a judicial auction sale based on a security right, such as a mortgage or maritime lien, it would be sufficient that the security right had been duly established over the vessel.

In particular, in the case of claims that constitute maritime liens over a ship (as discussed in 4.2 Maritime Liens), while generally it would be the ship-owner who is liable for such a claim, it is not necessarily required that the ship-owner be liable. The key point would be the pertinent ship with regard to which the claim has arisen, and a maritime lien would be established over that ship, and that ship would be subject to ship arrest.

A bunker supplier can arrest a vessel subject to satisfaction of requirements for each type of ship arrest, as set out in 4.1 Ship Arrests. For a pre-judgment attachment, it is required that the applicant/claimant have a pecuniary claim against the debtor/respondent. This means that when there are different and separate contractual and actual suppliers, unless the actual supplier is entitled to raise a claim directly against the debtor/respondent, the actual supplier would not be able to apply for a pre-judgment attachment. Further, it is required that the debtor/respondent be the owner of the vessel to be arrested. Accordingly, if the debtor/respondent is the charterer of the vessel to be arrested, the bunker supplier would not be able to apply for a pre-judgment attachment. Here, one possibility may be that the charterer has been authorised by the ship owner to purchase the bunkers in the name of the ship owner and thus the ship owner is directly liable to pay the bunkers to the supplier. In such case, the ship owner would be the debtor/respondent and the bunker supplier would be able to apply for a pre-judgment attachment. This said, considering the chartering practice, it would not be very common that the ship owner grants the charterer with such authority.

For a judicial auction sale based on security rights, such as a mortgage or maritime lien, it would hardly be a case where the bunker supplier is the mortgagee of the vessel. As for a maritime lien, as discussed in 4.2 Maritime Liens, the claim for unpaid bunkers would not constitute a maritime lien over a ship under South Korean law (the only possibility may be the claim for bunker supplied to the vessel for the purpose of maintenance after the final entry into a port). Thus, in the case of a South Korean vessel, the bunker supplier may not apply for a judicial auction sale based on maritime lien.

However, it should be noted that, under the Act on Private International Law of Korea, the law of the vessel’s nationality shall apply to the issues regarding a maritime lien. In other words, under South Korean law and before the South Korean courts, the issue of what claims constitute a maritime lien over a ship shall be determined in accordance with the law of the vessel’s nationality. Therefore, in the case of ships of a nationality for which the law provides that the claim for unpaid bunkers constitutes a maritime lien over a ship, maritime liens may be established over that vessel for unpaid bunker claims and thus a judicial auction sale based on a maritime lien may be available in Korea. Indeed, there are a number of cases where ships of a nationality for which the law provides that the claim for unpaid bunkers constitutes a maritime lien over a ship, notably Panama, have been arrested by way of a judicial auction sale based on a maritime lien.

Document Preparation

For all types of ship arrest, (i) a power of attorney and (ii) evidence materials corroborating the requirements of each type would be required. Generally, notarised and apostilled/legalised copies would suffice, and in the case of urgency (which is frequently the case in ship arrest), the court may be persuaded to accept notarised copies (and not apostilled/legalised), but admittedly this may be determined on a case-by-case basis. The court will require the documents to be translated, although, again, in the case of urgency, the applicant/creditor may submit a translation of relevant parts only (not the complete documents) and supplement the translation at a later stage as necessary.

Counter-Security

For a judicial auction sale based on security rights, such as a mortgage or maritime lien, and a judicial auction sale for enforcement of a claim under the judgment or arbitration award, a counter-security deposit is not required (the applicant/claimant may be required to pay and deposit the enforcement costs in advance).

For a pre-judgment attachment, considering that the applicant/creditor’s claim has not been confirmed yet by the court’s judgment or arbitration award, and no security right has been established for that claim, the court will generally require the applicant/creditor to deposit counter-security which will work as a security for the debtor/respondent’s claim for damages in the case of wrongful arrest.

Preservation and Maintenance of a Vessel

Lastly, under South Korean law and practice, for all types of ship arrest, the applicant/creditor shall be required to appoint a local ship-preservation and maintenance company, which will embark and watch over the vessel during the ship arrest on the applicant’s/creditor’s behalf.

As briefly mentioned in 4.1 Ship Arrests, generally speaking, under South Korean law, three types of attachment of property are available:

• a pre-judgment attachment;
• an attachment based on a security right such as a mortgage, pledge or lien; and
• an attachment for enforcement of a claim under the judgment or arbitration award.

As for the arrest/attachment of bunkers, technically speaking, it might be possible to arrest bunkers upon the satisfaction of the requirements for the relevant type of attachment. That said, however, in practice the arrest of bunkers aboard a ship is not allowed. The court’s position seems to be that the arrest of bunkers aboard a ship essentially has the same effect as the arrest of the ship itself, which goes beyond the applicant’s/creditor’s entitlement. Thus, unless the bunker has been discharged from the vessel and can be arrested on its own, the South Korean court will not allow the arrest of bunkers aboard a ship.

As for the arrest/attachment of freight, it would be possible to attach freight, in other words, the debtor’s/respondent’s claim against another third party (such as a subcharterer), upon the satisfaction of the requirements for the relevant type of attachment. In this case, with regard to an attachment based on a security right such as a mortgage, pledge or lien, it may be noted that South Korean law does not recognise the effect of a contractual lien, at least against another third party (such as a subcharterer) who has not agreed to that contractual lien. Therefore, subject to the applicable governing law, if South Korean law should apply, the effect of a contractual subfreight lien will not be recognised, and an attachment of freight based on a contractual lien would not be available.

Ship arrest would be possible upon satisfaction of the requirements for the relevant type of arrest, and, generally speaking, sister-ship arrest would not be possible in South Korea.

The only possibility would be a pre-judgment attachment of the ship by piercing the corporate veil between the debtor against whom the applicant/creditor holds the claim and the ship-owner. The South Korean courts may acknowledge and allow the piercing of the corporate veil between two companies where a company is found to be practically the same as the other company, or where a company is found to be only a façade or sham for the purpose of avoiding liability by the other company. However, it should be noted that the South Korean courts will apply strict standards in acknowledging and allowing the piercing of the corporate veil between two separate and different companies, and thus a pre-judgment attachment of the sister-ship by piercing the corporate veil would seldom be possible.

As previously discussed, under South Korean law, three types of attachment of property are available. In so far as the requirements for the relevant type of attachment are satisfied, the applicant/creditor may attach the property of the debtor/respondent in order to obtain security.

The debtor/respondent may release an arrested vessel by:

• reaching a settlement with the applicant/creditor and that applicant/creditor withdrawing their application for ship arrest;
• making a deposit with the court for the applicant’s/creditor’s alleged claim;
• filing an objection to the ship arrest and obtaining the court’s decision to cancel the ship arrest; or
• frequently, the combination of the latter two points, ie, filing an objection to the ship arrest and, at the same time, considering the time for the objection proceeding, making a deposit with the court in order to release the vessel promptly.

The South Korean court will not accept a club LOI or a foreign bank’s bank guarantee. Under South Korean law and practice, only a cash deposit, or the surety bond issued by the Seoul Guarantee Insurance, is acceptable for releasing an arrested vessel.

Judicial Sale Procedure

In the case of a pre-judgment attachment, the judicial auction sale proceeding of the vessel shall not commence unless and until the applicant/creditor obtains the enforceable court judgment or arbitration award for their claim against the debtor/respondent. When that judgment or award is obtained, the attachment proceeding shall be transferred to a judicial auction sale for enforcement of a claim.

In the case of a judicial auction sale based on security rights, such as a mortgage or maritime lien and, for the enforcement of a claim under the judgment or arbitration award, the judicial auction sale proceeding of the vessel shall commence.

Maintaining the Vessel During Arrest

As briefly discussed in 4.5 Arresting a Vessel, for all types of ship arrest, the applicant/creditor shall be required to appoint a local ship-preservation and maintenance company, which will embark and watch over the vessel during the ship arrest on behalf of the applicant/creditor. The costs for this preservation and maintenance shall be recovered from the sale proceeds of the vessel if the judicial auction sale proceeding is progressed.

Priority Ranking of Claims

Under South Korean law, claims that are secured by a maritime lien (see 4.2 Maritime Liens) have priority over claims that are secured by a mortgage, and thus shall be distributed with priority over the sale proceeds of the vessel.

Among the claims secured by maritime liens which arise from the same voyage, the priority will be in the order of the provisions, from (i) to (iv). If the claims secured by maritime liens arise from different voyages, the claims from the last voyage will have priority.

One thing to be noted is that, under the Act on Private International Law of Korea, the priority ranking of claims that are secured by security rights (such as a mortgage, pledge or lien) over a vessel shall be determined in accordance with the law of the vessel’s nationality. Thus, even if the judicial auction sale proceeding of a ship is progressed in South Korea, in so far as the vessel’s nationality is not South Korean, the law of the nationality of the ship will need to be checked for priority ranking of claims.

A rehabilitation proceeding under the Debtor Rehabilitation and Bankruptcy Act of Korea is generally understood to be similar to Chapter 11 of the United States Bankruptcy Code.

When the rehabilitation proceeding has been commenced, the enforcement of claims against the debtor company’s assets is not allowed, including the arrest and judicial auction sale of a vessel owned by the debtor company.

Under South Korean law and practice, when the debtor/respondent files an objection to the ship arrest and it is eventually found that the ship arrest has been made without due grounds and as such is cancelled, and it is also found that the debtor/respondent was at fault in applying for that ship arrest without due grounds (meaning that the debtor/respondent did so with intention or negligence), the applicant/creditor shall be liable to compensate damages sustained to the debtor/respondent due to the groundless ship arrest.

In the case of a pre-judgment attachment, when it is eventually found that the applicant/creditor’s alleged claim against the debtor/respondent does not exist, whether in part or in whole, in the relevant lawsuit or arbitration, the South Korean courts have ruled that the applicant’s/creditor’s fault, for the part of the claim that does not exist, shall be prima facie recognised, and the applicant/creditor will need to prove that they were actually not at fault.

South Korea is not a member state to the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea. The Commercial Act of Korea has provisions on the carrier’s liability with regard to the carriage of passengers.

The time limit for filing passenger claims is not specifically provided in the Commercial Act of Korea, except for luggage claims (a one-year time bar shall apply to luggage claims). Therefore, the time limit shall be in accordance with general principles under South Korean law – in the case of commercial claims, five years; and, in the case of tort claims, three years.

The Commercial Act of Korea does not stipulate the carrier’s liability limitation per passenger. However, a global liability limitation is applicable. The limitation amount shall be similar to those under the 1976 Convention on Limitation of Liability for Maritime Claims, ie, 175,000 SDR (Special Drawing Rights) multiplied by the number of passengers that the ship is authorised to carry, according to the ship’s certificate.

Under South Korean law, a claim for personal injury of a passenger incurred due to collision of the ship and other navigation accident are secured by a maritime lien (see 4.2 Maritime Liens).

Under the Act on Private International Law of Korea, the parties’ autonomy regarding the governing law is granted, and thus a contract shall be governed by the law of the country on which the parties have agreed. Further, the international jurisdiction of a court shall be acknowledged when the underlying case is substantively relevant to the country.

In light of the aforementioned principles, the South Korean courts generally recognise and enforce law and jurisdiction clauses stated in bills of lading.

With regard to the incorporation of an arbitration clause in a charterparty into a bill of lading, the South Korean courts’ position is that certain requirements should be satisfied in order for any such incorporation to be valid and effective. In the case of a general incorporation clause (ie, in a case where the wording of the clause generally incorporates all of the terms of the charterparty into a bill of lading, without pointing out its arbitration clause in particular), the requirements are:

• a holder of the bill of lading must be aware or could have been aware about the existence of such an arbitration clause in the charterparty to be incorporated;
• the arbitration clause should not contradict the other terms and conditions of the bill of lading to be incorporated; and
• the arbitration clause of the charterparty should state comprehensively that the arbitration clause of the charterparty not only covers disputes arising between the parties of the charterparty, but also may apply to another third party, such as the holder of the bill of lading.

As regards the governing law, while there are no clear case precedents of incorporation of the arbitration clause by the Korean Supreme Court, there is a lower instance court case where the court found that the requirements for incorporation into the bill of lading of the governing law clause in the charterparty could be less strict than incorporation of the arbitration clause in light of the underlying circumstances. For instance, considering it is general international practice that the majority of charterparty contracts contain the English governing-law clause, the charterparty’s English governing law may be likely to be applied more easily than the arbitration clause.

South Korea is a member state to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Accordingly, the Arbitration Act of Korea has provisions on the recognition and enforcement of foreign arbitral awards in accordance with the convention.

In so far as the requirements for the relevant type of ship arrest are satisfied, the South Korean courts will grant a ship arrest where the relevant claim is subject to the foreign court’s jurisdiction, due to the jurisdiction clause in the relevant contract or bill of lading or charterparty.

As for the claim that is subject to arbitration, whether foreign or domestic, due to an arbitration clause in the relevant contract or bill of lading or charterparty, a pre-judgment attachment and a judicial auction sale for enforcement of a claim shall be granted. However, a judicial auction sale based on security rights, particularly a maritime lien, can be disputed. There are several judgments from South Korean courts where the court found that, if the debtor/respondent were to raise an objection, the judicial auction sale based on a maritime lien would be cancelled if the claim had not been adjudged and confirmed in the arbitration, as it would be in breach of the parties’ arbitration agreement. It may be noted, however, that these judgments are heavily criticised by a number of scholars and practitioners.

The Korean Commercial Arbitration Board is South Korea’s sole permanent commercial arbitral institution. There is a body of the Korean Commercial Arbitration Board, namely, the Asia-Pacific Maritime Arbitration Centre, which is in exclusive charge of maritime arbitrations.

Where proceedings are commenced before the South Korean courts in breach of a foreign jurisdiction or arbitration clause, the party may raise a defence to that effect. When the court finds that the parties have a valid and effective agreement on a foreign jurisdiction or arbitration, and the proceeding is in breach of that agreement, the court will dismiss the proceeding.

Certain special tax reliefs are granted to shipping companies for incomes earned from shipping business (such as charter hire or freight) under the Restriction of Special Taxation Act of Korea. Notably, the tonnage tax system is applied.

Under the Civil Act of Korea, when an obligor fails to perform their obligation, the obligee may claim damages against the obligor. However, this shall not apply, and the obligor shall not be liable to compensate damages, if the performance of the obligation has become impossible and where this is not due to the obligor’s attributable fault, ie, intention or negligence (Article 390).

Further, when the performance of an obligation of one party to a bilateral contract becomes impossible by any cause for which neither of the parties is responsible, that party may not be entitled to claim counter-performance by the other party (Article 537).

If non-performance of a shipping contract due to the implications of the pandemic – such as late delivery, non-arrival of a chartered vessel, slow ratio of loading or discharging – satisfy the aforementioned criteria, the party/parties may be exonerated from and avoid liability. However, the issue of whether the non-performance was indeed without attributable fault of the non-performing party shall be heavily disputed, and the terms of the relevant contract shall need to be carefully reviewed and considered. Case precedents from the South Korean courts on these issues have yet to be established. (It may be noted that the South Korean courts took a prudent approach and were reluctant to grant liability exoneration in the case of the SARS and MERS virus situations, although admittedly the COVID-19 situation is unprecedented and significantly more severe.)

The Marine Environment Management Act of Korea has been revised reflecting IMO 2020, limiting the sulphur content of fuel oil used on board ships. Further, the Special Act on the Improvement of Air Quality in Port Areas of Korea has been enacted and came into force in 2020, in order to improve the air quality of the port areas.

In the emission-control areas, as designated by the International Maritime Organization (IMO) and also as designated under South Korean law, which encompasses most of the major ports, such as Busan, Incheon and Ulsan, the limit on the sulphur content of fuel oil used by vessels is 0.1% mass by mass (m/m). In the case of other territorial waters, the limit is 0.5% m/m.

The Ministry of Oceans and Fisheries and the Coast Guard are the government authorities responsible for the enforcement of the sulphur-content limitation.

South Korea has been adopting and implementing a number of the UN Security Council resolutions and sanctions (for instance, the UN Security Council resolutions and sanctions against North Korea and Iran), mostly by way of issuing administrative rules by the relevant ministry of the government.

However, there is no general law stipulating the implementation of the UN Security Council resolutions and sanctions. In this regard, there has been a call for just such a general law and, since 2021, the draft bill has been in discussion at the congress. It remains to be seen whether that general law will be enacted.

As regards the Russia–Ukraine war trade sanctions, South Korea has adopted financial sanctions against Russia, including suspension of financial transactions with major banks of Russia, etc. It has also been reported that South Korea may participate in the oil and gas price caps imposed by the US and EU.

While the war in Ukraine has had commercial and economic impacts in South Korea generally (for instance, South Korean companies’ exit of their Russian offices and factories, and the rise of oil and raw materials prices), the legal and/or commercial implications on maritime law and/or trade have not been particularly substantial, compared to other countries in Europe. There have not been court cases dealing with matters relating to non-performance of obligations due to the war in Ukraine.

As discussed in 4. Maritime Liens and Ship Arrests, there are three types of ship arrest in South Korea. A party who intends to consider ship arrest in South Korea would therefore need to review the underlying circumstances and relevant requirements carefully and choose the appropriate and correct option for their claim.

In particular, it should be noted that, under South Korean law and practice, a pre-judgment attachment would not be allowed and can be cancelled upon the counterparty’s objection, where other types of ship arrest, ie, a judicial auction sale based on a security right, such as a mortgage or maritime lien, or a judicial auction sale for the enforcement of a claim by a court judgment or an arbitration award, are available. As the issue of a security right such as a maritime lien shall be determined in accordance with the law of the vessel’s nationality, the position of that law as well as South Korean law may need to be considered.