Enforcement of Judgments 2022

Last Updated August 02, 2022

South Korea

Law and Practice

Authors



Yoon & Yang LLC is one of the largest full-service law firms to have its headquarters in Seoul. It has more than 480 lawyers and other professionals, including more than 40 foreign-qualified lawyers from the US, the UK, Germany, Russia, Vietnam, China, Canada, Spain and Australia. Its main office in Seoul is supported by overseas offices in Ho Chi Minh, Hanoi, Jakarta and Tashkent. Yoon & Yang’s dispute resolution practice is nationally and globally recognised for its ability to handle the most difficult, high-stakes commercial disputes successfully. The team consists of more than 100 litigators, including a former Supreme Court Justice of South Korea and a former Constitutional Court Justice of South Korea, as well as former judges and former prosecutors at the trial and appellate level.

There is some public information available before a judgment is rendered if one party wishes to identify the asset position of another, but in most cases parties will require a judgment in order to identify the extent of the opposing party’s assets.

Publicly Available Information

Real estate registration

The Republic of Korea (“South Korea”) implements a registry system for real estate, including information on the owner of the property, previous transactions and mortgages. Although the registration can be accessed by anyone who applies for a copy, it is not possible to search based on the owner of the property. Checking real estate registration is not a practical option for identifying another party’s assets for this reason, because it would require having prior knowledge of what assets that party has.

The registry system applies to automobiles, vessels, construction machinery and aircrafts in addition to real estate.

Options Available After a Judgment has Been Rendered

Request for specification of property

A creditor entitled to commence compulsory execution may file a request for specification of the debtor’s property with the court in the location of the debtor’s general forum, in accordance with Article 61 of the Civil Execution Act. However, this does not apply to judgments that have a declaration of a provisional execution.

The court will then rule on whether the request for specification of property is justifiably well grounded (eg, whether the property may be easily detected) and may order the creditor to comply with the request by submitting a property catalogue that specifies his or her status of property.

If ordered by the court to submit such a catalogue, the debtor may file a demurrer with the court, which if rejected or not filed will impel the debtor to submit a property catalogue and take an oath that it is truthful. Should the debtor fail to comply with the order, the court may punish the debtor by court-ordered confinement for up to 20 days. Submitting a false catalogue may be punished by up to 3 years’ imprisonment or a fine of up to KRW5 million.

Request for entry in the defaulters’ list

According to Article 70 of the Civil Execution Act, if the debtor fails to fulfil their obligations within six months of the executive titles ordering payment being finalised or refuses to comply with an order to specify property, creditors may indirectly pressure the debtor into fulfilling their obligations by requesting the court to enter the debtor into the defaulters’ list. This defaulters’ list is issued to various financial institutions and is publicly available.

Inquiry about property

If the debtor refuses to comply with an order to submit a property catalogue, or if the property stated in said catalogue is insufficient to cover the debtor’s debts, the court in the location of the debtor’s general forum may – at the creditor’s request – inquire about the debtor’s properties via public agencies, financial institutions, organisations, etc. The agencies, institutions and organisations cannot, without sufficient reason, refuse to comply with the court’s inquiries.

As soon as the court order instructing the debtor to specify assets has been received, the creditor may search and view the assets owned by the debtor for up to two years preceding the order to prevent wilful dissipation of any assets.

Final Judgments

There are three types of final judgment in civil cases.

Judgment for performance

This is the most common type of judgment, ordering the defendant to perform certain obligations (eg, making payments, eviction or delivery from and of real estate, or delivery of movable goods).

Declaratory judgment

This type of judgment is a declaration on whether certain rights or obligations exist between the plaintiff and the defendant. Unlike the judgment for performance, the judgment itself does not order the defendant to carry out any obligations, so by nature it is not something that can be enforced.

Declaratory judgments are common for aspects of law that are not monetary in nature – for example, actions demanding confirmation of denial or existence of paternity – or to avoid further potential legal disputes.

Formative judgment

The purpose of this type of judgment is to create and form rights and obligations or legal relationships between the plaintiff and the defendant. Formative judgments are rare and require legal basis in order to be made. Examples include divorce proceedings and certain cancellations of company decisions (eg, the issuance of new shares or shareholders' meeting resolutions).

Interlocutory Judgment

Interlocutory judgments, as defined in Article 201 of the Civil Procedure Act, are allowed if a trial on the means of an independent offence or defence or on any other intermediate contests is conducted. Only final judgments are subject to enforcement under South Korean law, so interlocutory judgments cannot be enforced.

Injunctions (Provisional Dispositions)

Injunctions may be granted, in accordance with Article 300 of the Civil Execution Act, where a change in current circumstances results in parties being unable to exercise their rights or there is a concern that there will be substantial difficulty in exercising their rights.

Injunctions are essentially part of a civil procedure, so there must be a specific claim that requires protection and said claim must be something that can be enforced. As a result, claims that cannot be made in court – or claims where there are specific agreements not to enforce – do not constitute grounds to request injunctions.

Despite these limitations, in practice requests for injunction are quite common and – as they are not limited to monetary claims – are often used in situations such as preventing the signing of contracts or sale of shares.

A compulsory execution may be made in accordance with the Civil Execution Act by an exemplification of the judgment with an execution clause, which shall be additionally entered at the bottom of an exemplification of the judgment.

This execution clause must contain the following statement: “This exemplification shall be delivered to the plaintiff [insert name] or the defendant [insert name] in order to execute the compulsory execution against the defendant [insert name] or the plaintiff [insert name].”

The junior administrative officer of the court shall then affix their name and seal thereon. The enforcement process varies depending on whether the judgment is for a monetary claim or a non-monetary claim and the type of assets involved.

For Monetary Claims

The judgment creditor may collect the amount set forth in the judgment from any assets owned by the debtor, with some exceptions (further explained in 2.6 Unenforceable Domestic Judgments).

For receivables, compulsory execution against a debtor’s monetary claim against a third party begins with an order of seizure issued by the court of execution, which is the district court in the location of the debtor’s general forum. The court will also issue an order prohibiting the third party from repaying the receivables to the debtor.

Although technically separate processes, it is common practice when seizing a monetary claim to also apply for either a collection order or an assignment order. Collection orders enable the execution creditor to collect the seized claim without following the subrogation procedure defined in the Civil Act, whereas assignment orders mean the seized collectible is directly transferred to the creditor. However, if another creditor has made a request for seizure or provisional seizure, or a demand for a distribution not later than the time when an assignment order is served on a garnishee, the assignment order shall be null and void.

For immovables, in accordance with Article 80 of the Civil Execution Act, the creditor must apply for compulsory action, specifying the creditor, debtor and court of execution, the assets to be auctioned, and the basis for the monetary claim as well as the basis for enforcement. The court will then decide whether to rule to commence the auction procedure and, if it rules to do so, will also simultaneously order the seizure of the immovables.

The court will commence the auction following an appraisal of the immovables and a determination of the minimum sale price. If immovables are sold at a government auction, all mortgages will be extinguished and superficies, servitude, leases on deposit basis and registered right of lease shall be extinguished by the sale, where they are ineligible to oppose the mortgage, garnished claim and provisional seizure claim.

The above rights, if they have priority over the judgment creditor, will be able to collect their receivables before the judgment creditor. Because of this, if the court finds that the proceeds from sale of the immovable will not be able to cover the receivables with priority, the immovables may not be sold.

For Non-monetary Claims

If the judgment is for delivery or eviction from a particular building, address or other property, an execution officer will physically remove the property from the debtor’s possession. For a delivery of movables, the execution officer will physically take possession of the movables.

Other obligations may include obligations to carry out certain obligations. If these obligations can be carried out by a third party – for instance, removal of obstacles – the execution officer could carry out the obligations then charge the debtor with the relevant fees for doing so.

For obligations specific to the debtor, in accordance with Article 261 of the Civil Execution Act, indirect compulsory performances are possible. The court may order an indirect compulsory performance, clarifying an obligation to perform an obligation within a certain period or else – if the obligations are not carried out within that period – certain specific reimbursements will be required as compensation.

Costs and time taken to enforce domestic judgments depends greatly on the type of enforcement and the object of the enforcement. Enforcement of receivables may take a few weeks and requires only a minimal fee, but enforcement of real estate or other immovable properties requires a complex procedure.

Unless the judgment directly rules that real estate be transferred to the creditor, enforcement of real estate requires that it is sold at a government auction (as explained in 2.2 Enforcement of Domestic Judgments). This process may take several months or longer as this requires prior investigation and valuation. Additionally, if the property is encumbered by mortgages or liens, there is no guarantee there will be bidders.

There are no post-judgment procedures under South Korean law to determine what assets the defendant holds and where they are located. The creditor will have to identify which assets the defendant holds when applying for execution. Possible methods for identifying which assets can be executed are explained in 1.1 Options to Identify Another Party’s Asset Position.

If the domestic judgment is final and irrevocable, the debtor cannot challenge the judgment itself, except by a retrial as defined in Article 451 of the Civil Procedure Act. A retrial is only possible under said Act if one of eleven criteria have been met, which include cases where:

  • the court that made the decision was improperly constituted;
  • the presiding judge committed a crime in terms of their duty to the case;
  • the judgment was made based on a forced confession or the criminal acts of another person caused a similar obstruction of justice; and
  • the judgment was based on delivery to a false address or residence.

If the above-mentioned issues were pointed out during the course of the trial/appeals, or were acknowledged but ignored, a retrial will not be allowed. Overall, retrials are rare and are rarely considered an option when challenging enforcement.

There are some methods of challenging the execution of finalised domestic judgments. However, most of the procedures discussed here are interim and will not directly challenge the validity of the domestic judgment being enforced.

Lawsuit of Demurrer Against Claims

According to Article 44 of the Civil Execution Act, a debtor may file a lawsuit of demurrer against the claims before the court of the first instance that rendered the judgment to be enforced. The grounds for this lawsuit must have arisen after the closure of pleadings. Thus, this would be limited to reasons such as repayment of the debt in question or the statute of limitations.

Article 46(1) of the Civil Execution Act allows that the lawsuit of demurrer does not affect the continuation of compulsory execution. However, if the court rules that the lawsuit of demurrer has merit, it may issue an order to stay compulsory execution of the judgment pending action to oppose execution (with or without requiring a security deposit) or order a cancellation of the execution.

Lawsuit of Demurrer by Third Party

Similar to the above-mentioned lawsuit of demurrer, which is brought by the debtor, a third party may also file a lawsuit of demurrer on the grounds that they have ownership of the object of compulsory execution or rights that prevent the transfer or delivery of the object in question. If the debtor denies the rights of the third party, the debtor may become a co-defendant in the case. Article 46(1) also applies to lawsuits of demurrer filed by third parties.

Mandatory Suspension or Restriction of Execution

Compulsory execution must be suspended or restricted, in accordance with Article 49 of the Civil Execution Act, if any of the following documents are submitted:

  • an exemplification of a judgment revoking the judgment to be executed or suspending/revoking/disallowing compulsory execution;
  • a document attesting that a security has been furnished in order to avert an execution;
  • a deed stating the creditor has been repaid or allowed to defer the performance of obligations;
  • a certified copy of protocol or a certificate prepared by the junior administrative officer of a court where the judgment has become void; or
  • a notarial deed stating that the request for compulsory execution has been withdrawn.

Objections Against Execution

Article 16 of the Civil Execution Act allows objections to be raised before the court against the execution disposition and other execution procedures to be observed by the execution officer. If such an objection is raised, the court will make a judgment and may order the suspension of the procedures (and possibly request the debtor furnish a security) in the meantime. The court may also order the procedure to continue (and possibly request the creditor furnish a security).

There are some limits to enforcement under South Korean law, mainly pertaining to the type of judgment (as explained in 2.1 Types of Domestic Judgments) and other regulations regarding properties or collectibles that are not subject to enforcement.

For types of judgment, declaratory judgments and formative judgments are not subject to enforcement.

For monetary claims, Article 246 of the Civil Execution Act provides that certain collectibles cannot be seized, including:

  • supporting allowance and relief allowance for the bereaved family as defined by law;
  • half of wages/pension/salary or other wage claims; and
  • savings required for one month’s living expenses.

There is no central register of all judgments in South Korea. The courts publish some judgments they find significant, with certain redactions where necessary. Judgments of civil cases may be viewed via submitting a request and paying a small fee.

As mentioned in 1.1 Options to Identify Another Party’s Asset Position, there exists a defaulters’ list that is publicly available. Parties placed on this list can request to be removed by showing that they have carried out their obligations.

A South Korean court judgment is in itself grounds for execution under South Korean law and, upon receiving a judgment, the creditor can immediately apply for execution. However, foreign judgments require additional steps; the relevant court in South Korea must recognise the foreign judgment and rule that it may be executed.

Regarding the recognition and enforcement of foreign judgments, Article 217 of the Civil Procedure Act and Articles 26 and 27 of the Civil Execution Act are the key pieces of legislation.

Recognition of Foreign Judgments

As outlined in Article 217 of the Civil Procedure Act, a final and conclusive judgment rendered by a foreign court or a judgment acknowledged to have the same force shall be recognised, if all of the following requirements are met.

  • The international jurisdiction of such foreign court is recognised under South Korean law or treaty.
  • The defeated defendant is served, by a lawful method, a written complaint or document corresponding thereto – or the defendant responds to the lawsuit even without having been served such a document.
  • The approval of such final judgment does not violate South Korean public policy.
  • Mutual guarantee exists, or the requirements for recognition of final judgment in South Korea and the country to which the foreign court belongs are not far off balance and do not difference on important points.

The court shall also investigate ex officio whether the above requirements are satisfied.

Enforcement of Foreign Judgments

Article 26 of the Civil Execution Act provides that compulsory execution of a foreign judgment requires the judgment of a South Korean court to conduct the execution. The lawsuit seeking the judgment of execution is under the jurisdiction of the district court located at the debtor’s general forum. If there exists no general forum, the court located in the place of the executable properties has jurisdiction.

Concerning the above judgment of execution, in accordance with Article 27(1) of the Civil Execution Act, the judgment of execution must be made without examining whether the judgment is right or wrong. However, when it comes to foreign judgments, in accordance with Article 27(2) of the same Act, the lawsuit seeking judgment of execution is to be dismissed without prejudice if:

  • it has not been proved that the foreign judgment has become final and conclusive; or
  • when the foreign judgment fails to fulfil the above-mentioned conditions under Article 217 of the Civil Procedure Act.

The approach to enforcing foreign judgments under South Korean law does not vary for different types of judgments.

As mentioned in 3.1 Legal Issues concerning Enforcement of Foreign Judgments, Article 217 of the Civil Procedure Acts specifies the necessary requirements for a foreign judgment to be recognised and foreign judgments may be refused enforcement in accordance with Article 27(2) of the Civil Execution Act.

Although requirements for the recognition of foreign judgments seem relatively straightforward, there exist several Supreme Court decisions on whether these requirements have been met.

International Jurisdiction of the Foreign Court is Recognised

Parties have the autonomy in principle to agree upon which court has jurisdiction over a case. However, in Case No 2001Da53349 dated 25 March 2004, the Supreme Court set forth criteria for judging whether an agreement for a foreign court to have exclusive jurisdiction over a case is valid.

The Supreme Court ruled that, in order for a foreign court to have exclusive jurisdiction over a case, the following criteria must be met.

  • The case in question is not subject to the exclusive jurisdiction of South Korean courts.
  • The designated foreign court must have jurisdiction.
  • The case in question must have reasonable relevance with the designated foreign court.
  • The agreement on jurisdiction must not be notably unjust or unreasonable.

The Supreme Court ruled that an agreement for the courts of Japan to have exclusive jurisdiction over a case involving a South Korean importer of products designated for South Korea – with a defendant of South Korean nationality and all important exhibits or witnesses originating in South Korea – lacked relevance and was notably unjust, unreasonable and thus void.

There is No Violation of Public Policy

The court, in principle, cannot review the merits of the foreign judgment. However, unlike criteria that can be ascertained in a more objective manner, the question of whether recognising and enforcing a foreign judgment constitutes a violation of public policy cannot be answered without at least a minimal review of the foreign judgment and its procedure.

The Supreme Court ruled in Case No 84Daka1003 (dated 9 February 1988) that, although the court does not have the authority to review the merits of a foreign judgment, it may conduct its own minimal investigations to determine whether there is a violation of public policy,

Unlike common law jurisdictions, the law in South Korea does not allow punitive or exemplary damages except in very rare cases (for example, the Product Liability Act expressly allows for such damages, up to a threshold). As a result, several district courts have ruled that foreign judgments granting high punitive damages are in violation of South Korea’s public policy.

Although courts in South Korea do not automatically deem violations of mandatory provisions to be violations of public policy, judgments based on systems or laws that have no equivalent in South Korean law are often subject to scrutiny on whether they are in violation of public policies. Examples include the above-mentioned punitive damages, as well as loan agreements with compound interest.

As mentioned in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments, foreign judgments must be recognised by a court in South Korea and a motion for a judgment of execution must be made.

If the above judgment is rendered, then the actual execution process is identical to the process described in 2.2 Enforcement of Domestic Judgments.

The costs and time taken to enforce foreign judgments varies greatly from case to case. If the opposing party challenges recognition or enforcement, the execution decision process mentioned in 3.4 Process of Enforcing Foreign Judgments may take several months.

If, however, there is an execution decision for a foreign judgment, the costs and time taken to enforce said award will be akin to those of enforcing a domestic judgment. For more details, see 2.3 Costs and Time Taken to Enforce Domestic Judgments.

Should they wish to challenge the enforcement of a foreign judgment, the debtor must argue that it has not met the necessary criteria for recognition and enforcement at the judgment of execution hearing (see 3.4 Process of Enforcing Foreign Judgments). As discussed previously, the judgment of execution cannot judge the merits of the case, so the arguments to be made must address the criteria set forth by Article 217 of the Civil Procedure Act.

Although arguments regarding a violation of public policy are most common, as mentioned in 3.3 Categories of Foreign Judgments Not Enforced, courts in South Korea are reluctant to refuse recognition or enforcement on such grounds.

South Korea is a signatory of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), although this only applied to commercial disputes and with a reservation of reciprocity.

The enforcement of arbitral awards is conducted in accordance with the Arbitration Act. Therefore, in accordance with Article 35 of said Act, an arbitral award has the same effect on the parties as a final and conclusive judgment of the court unless the recognition and enforcement of an arbitral award has been denied.

Article 37 of the Arbitration Act provides that an arbitral award is recognised unless a ground to deny recognition under Articles 38 and 39 of the Act exist and may be enforced only by a court’s decision to enforce it upon the request of the parties. Article 38 sets out grounds to deny recognition and enforcement of domestic awards, whereas Article 39 sets out ground to deny recognition and enforcement of foreign awards.

Grounds to Refuse Recognition and Enforcement of Domestic Awards

Article 38 of the Arbitration Act states that a domestic award will be refused recognition and enforcement in the following circumstances.

  • A party to the arbitration agreement was under some incapacity under applicable law, or the said agreement is not valid under the relevant law.
  • The party making the action for setting aside was not given proper notice of the appointment of the arbitrator or arbitrators or of the arbitral proceedings or was otherwise unable to present his or her case.
  • The arbitral award deals with a dispute not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.
  • The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.
  • The arbitral award has no binding power over a party.
  • The arbitral award has been set aside by a court.

A domestic award will also be refused if the court finds that:

  • the subject matter of the dispute is not capable of settlement by arbitration under the law of South Korea; and/or
  • the award is in conflict with the good morals and other forms of the social order of South Korea.

Thus, although the Arbitration Act separately lists causes for refusal of recognition and enforcement of domestic awards, these causes do not substantially differ from the causes specified in Article 36 of the UNCITRAL Model Law or Article 5 of the New York Convention.

Grounds to Refuse Recognition and Enforcement of Foreign Awards

Article 39(1) of the Arbitration Act provides that the recognition and enforcement of foreign awards subject to the New York Convention is conducted in accordance with the same Convention.

For foreign awards not subject to the New York Convention, recognition and enforcement is conducted akin to a foreign judgment (see 3.4 Process of Enforcing Foreign Judgments).

The law in South Korea does not differentiate categories of arbitral awards – rather, only whether they are domestic or foreign and, if the latter, whether the award is subject to the New York Convention.

In accordance with Article 2(2) of the Arbitration Act, the Act does not have priority over other acts or treaties signed by South Korea that refer to arbitration – so, if another act or signed treaty states different procedures or criteria regarding enforcement, those provisions will apply.

Although foreign awards not subject to the New York Convention are recognised and enforced akin to foreign judgments (see 4.1 Legal Issues Concerning Enforcement of Arbitral Awards), if other treaties specify other procedures for recognition and enforcement, those take precedence over the procedures specified in the Arbitration Act.

The ICSID Convention, for example, was signed by South Korea on 18 April 1966 and was entered into force on 23 March 1967. According to Articles 53 and 54 thereof, courts in South Korea will treat arbitral awards subject to the ICSID Convention as though they were final judgments of South Korean courts.

As mentioned in 4.2 Variations in Approach to Enforcement of Arbitral Awards, the law in South Korea does not differentiate categories of arbitral awards. Therefore, unless there is reason to deny the recognition or enforcement of the award (see 4.6 Challenging Enforcement of Arbitral Awards), all categories of arbitral awards will be enforced.

Concerning the reasons for denial of recognition or enforcement of the arbitral award, case law has shed more light on what constitutes such reasons for denial.

Incapacity Under Relevant Law

Article 13 of the Act on Private International Law provides that the capacity of a person is determined by the law of nationality of the person. As a result, the capacity of citizens of South Korea is decided by the Civil Act.

Invalid Notification or Other Inability to Present Case

According to the Supreme Court’s decision in Case No 89Daka20252 (dated 10 April 1990), for an invalid notification or other breach of the right to proper defence to qualify as a reason to deny recognition or enforcement, the breach must be so severe that enforcing the award would be a violation of public policy. Additionally, if it cannot be shown that the invalid notification or inability to present the case affected the final award, the arbitral award will not be denied recognition or enforcement.

Violation of Public Policy

Courts in South Korea tend to be reluctant to deny recognition or enforcement on grounds of a violation of public policy. The Supreme Court has ruled that, when determining whether there is a violation of public policy, violations of South Korean mandatory provisions do not in themselves constitute a violation of public policy (Supreme Court Case No 93Da53054, dated 14 February 1995) and the court must consider a balance between the international trade order (Supreme Court Case No 2001Da20134, dated 11 April 2003).

A party must file a petition with the court for an enforcement decision, according to Article 37 of the Arbitration Act. As part of this petition, the party wishing to enforce the award must provide an authentic or plain copy of it – and, if in a foreign language, a Korean translation is also required. Prior to 2016, the enforcement process involved a full judgment (pangyul) as opposed to a court decision (gyuljung), but the process has since been simplified.

The court sets a pleading date or examination date where both parties can participate and notifies the parties when such a petition is filed. No oral arguments are necessary and, if none are provided, the decision can simply state a summary of the reasons for the decision. Either party may file an immediate complaint against the decision rendered by the court, but this complaint does not have the effect of suspending the enforcement.

The actual process of enforcement is identical to the process of enforcing a domestic judgment once an enforcement decision has been made. For more details, see 2.2 Enforcement of Domestic Judgments.

The costs and time taken to enforce arbitral awards differ depending on the case. Should the opposing party challenge recognition or enforcement, the enforcement decision mentioned in 4.4 Process of Enforcing Arbitral Awards can take several months.

If, however, there is an enforcement decision for an arbitral award, the costs and time taken to enforce said award will be identical to those of enforcing a domestic judgment. For more details, see 2.3 Costs and Time Taken to Enforce Domestic Judgments.

According to Article 36 of the Arbitration Act, recourse to a court against an arbitral award may only be made only through an action for setting aside the arbitral award. Article 7(3) of the Arbitration Act states that the court designated by the arbitration agreement (or, if not designated, the court having jurisdiction over the place of arbitration) will have jurisdiction over actions for setting aside the arbitral award.

When directly challenging the recognition or enforcement of an arbitral award, the grounds for doing so are essentially the same as those set forth in Article 36 of the UNCITRAL Model Law and Article 5 of the New York Convention (see 4.1 Legal Issues Concerning Enforcement of Arbitral Awards and 4.3 Categories of Arbitral Awards Not Enforced).

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Trends and Developments


Authors



Bae, Kim & Lee LLC (BKL) was founded in 1980 and is one of the premier law firms in South Korea. The Seoul-based firm provides market-leading legal services in every practice area it covers, including funds and asset management, corporate/M&A, capital markets, finance, dispute resolution, antitrust, tax, IP, employment, real estate, TMT, maritime and insurance. BKL has a diverse mix of more than 700 South Korean attorneys, foreign attorneys, tax advisers, industry analysts, former government officials and other specialists in various practice areas working out of offices in Seoul, Beijing, Hong Kong, Shanghai, Hanoi, Ho Chi Minh City, Yangon and Dubai. The firm advises a broad range of clients, including South Korean conglomerates and government organisations, major international financial institutions and multinational corporations, and has headquarters in the USA, Europe and throughout Asia. BKL is a member of the World Law Group, which is a global network of more than 50 law firms, and has strong relationships with financial, tax and accounting advisers in various jurisdictions throughout the world.

Introduction

The Supreme Court of Korea has recently issued a series of decisions that have major implications for the enforcement of foreign judgments and arbitral awards in South Korea.

By way of illustration, a foreign judgment awarding punitive damages can now be enforced in South Korea (Supreme Court Decision 2018Da231550 dated 11 March 2022) and the court now allows for a more lenient interpretation of the service of process as a requirement for the enforcement of foreign judgments (Supreme Court Decision 2017Da257746 dated 23 December 2021).

Additionally, practical matters – such as the courts’ authority to order indirect compulsory performance at the merits stage (Supreme Court en banc Decision 2020Da248124 dated 22 July 2021) and issues relating to attorneys’ fees (Supreme Court Order 2020Ma7667 dated 15 October 2021) – have also been determined, with further implications for the relevant parties and counsel.

Such trends and developments in court decisions will inspire any interested party to keep an attentive eye on changes in jurisprudence and relevant procedures for the prospective enforcement of foreign judgments or arbitral awards in South Korea. This article outlines a number of key recent Supreme Court decisions that concern the enforcement of foreign judgments in South Korea.

Enforceability of Foreign Judgments Awarding Punitive Damages

Article 217-2(1) of the Civil Procedure Act grants the South Korean courts authority to make a partial recognition of a foreign judgment awarding punitive damages that exceed the scope of compensatory damages. Likewise, lower courts have previously held that the award of punitive damages “may be against the Korean public policy”, especially in the “Korean civil law system, which only allows compensatory damages as a result of torts” (Seoul District Court Eastern Branch Decision 93Gahap19069 dated 10 February 1995).

However, the Supreme Court of Korea recently noted that the amended Monopoly Regulation and Fair Trade Act (the “Fair Trade Act”) allows for damages in an amount not exceeding three times the actual damages (so-called “treble damages”).

Based on this legislation, the court held that it can no longer be deemed impermissible to recognise a Hawaiian court judgment awarding treble damages for an act that corresponds to an unfair trade practice in South Korea “in light of the principles, purpose, and structure of the compensation systems in Korea” (Supreme Court Decision 2018Da231550 dated 11 March 2022). The court essentially found that should the act for which the punitive damages were awarded fall “under any area of regulation by a respective legislation that allows damages in excess of compensation damages in Korea”, the recognition of a foreign court’s judgment awarding treble damages cannot be deemed against South Korean public policy.

“Any area of regulation by a respective legislation that allows damages in excess of compensation damages in Korea” refers to any area of regulation where punitive damages are allowed under South Korean law. Therefore, the court effectively decided that an enforcement of a foreign judgment awarding punitive damages can also be allowed if punitive damages are allowed in the specific area under South Korean law.

The South Korean legislations that provide for punitive damages are as follows:

  • Article 35(2) of the Fair Transactions in Subcontracting Act;
  • Article 13(2) of the Act on the Protection of Fixed-term and Part-time Employees;
  • Article 21(3) of the Act on the Protection of Temporary Agency Workers;
  • Article 39(3) of the Personal Information Protection Act;
  • Article 3(2) of the Product Liability Act;
  • Article 128(8) of the Patent Act;
  • Article 115(7) of the Design Protection Act;
  • Article 14-2(6) of the Unfair Competition Prevention and Trade Secret Protection Act;
  • Article 110(7) of the Trademark Act; and
  • Article 109(2) of the Fair Trade Act.

It is likely that more legislations will be added to the list in the future as public attention to punitive damages increases. 

Therefore, when an issue arises concerning the enforcement of a foreign judgment awarding punitive damages, it must be established whether punitive damages are permitted under South Korean law for the act in question before investigating the extent of punitive damages allowed under the relevant laws and regulations.

Service of Process and the Enforcement of Foreign Judgments

Pursuant to the Civil Procedure Act, in order for a foreign court’s final and conclusive judgment (or any judgment to that effect) to be recognised in South Korea, a defeated defendant must be served by a lawful method. This means a written complaint or corresponding document, plus a notice of date or a written order allowing them sufficient time to defend (excluding cases of service by public notice or similar). If a defeated defendant has not been served such documents, the defendant must have participated in litigation processes in order for the judgment to be recognised in South Korea.

The Supreme Court of Korea has not permitted the enforcement of foreign judgments where service was made by a public notice (as stipulated by the law). Previously, the court also disallowed the enforcement of foreign judgments where service was made by a supplementary service.

“Supplementary service” refers to a method of service in which documents are delivered to a recipient, who is unavailable at the place of service, through their clerk, employee or cohabitant, as defined under Article 186(1) of the Civil Procedure Act. The South Korean courts have interpreted “service” within the meaning of Article 217(1)-2 of the Civil Procedure Act to be limited to “an ordinary method of service, not a supplementary service or service by mail”.

The Supreme Court of Korea has previously determined that any foreign judgments of which service to the defendant was made by a supplementary service cannot, for this reason, be enforced in the South Korean courts (for example, Supreme Court Decision 92Da2585 dated 14 July 1992 and Supreme Court Decision 2008Da65815 dated 30 January 2009).

This was a particularly problematic issue prior to the recent Supreme Court decision, given that the threshold for service of process was higher for foreign judgments. Specifically, in contrast to South Korean judgments and/or decisions, which were enforced when a service to the defendant was made by a supplementary service, service requirements for a foreign judgment could only have been met if the litigation documents were delivered directly to the defendant. As a natural consequence, such a narrow interpretation of “service” meant more stringent requirements for the enforcement of foreign judgments compared with South Korean judgments.

Notably, on 23 December 2021 the Supreme Court of Korea rendered an en banc decision to overturn this unreasonable practice (Supreme Court Decision 2017Da257746 dated 23 December 2021), holding that “even a supplementary service (not to the defendant but to his/her spouse) during the foreign trial should be deemed as a lawful service under the aforementioned provision, if the service was lawfully made, providing the defendant with sufficient time to defend”.

The Supreme Court of Korea expressly “overturn[ed] all of its previous rulings, which provided that a supplementary service does not fall under the category of an ordinary service prescribed by the Civil Procedure Act” and declared that supplementary service is confirmed as a “lawful service of process” under the Civil Procedure Act.

The decision is expected to have a positive impact on the enforcement of foreign judgments in South Korea in that it overturned the restrictive approaches taken by the previous Supreme Court decisions. The decision also has significance in fostering the foreign parties’ trust in South Korean judicial proceedings.

Indirect Compulsory Performance at the Merits Stage

The Korean Supreme Court dealt with the issue of whether a court can indirectly compel the performance of nonfeasance or non-substitutable feasance obligations (that is, compelling an obligor’s voluntary performance by ordering payment of damages to the obligee in case the obligor fails to perform) at the merits stage (Supreme Court en banc Decision 2020Da248124 dated 22 July 2021).

The majority opinion of the Supreme Court held that “an indirect compulsory performance can be ordered to a party in default in the merits stage as well” if certain requirements are met. Previous Supreme Court precedents have also allowed indirect compulsory performance of nonfeasance and non-substitutable feasance under certain requirements (regarding indirect compulsory performance of nonfeasance, see Supreme Court Decision 93Da40614, 40621 dated 12 April 1996 and 2011Da31225 dated 29 May 2014; regarding that of non-substitutable feasance, see Supreme Court Decision 2013Da50367 dated 28 November 2013).

However, the recent Supreme Court en banc Decision is significant in that it was a full-bench decision that clarified the Supreme Court’s position on the issue after a comprehensive review on whether an indirect compulsory performance can be ordered at the merits stage.

The Supreme Court permitted indirect compulsory performance at the merits stage in this case on the following grounds.

  • There is no statutory provision that expressly prohibits a decision on indirect compulsion at the merits stage. Certain provisions expressly permit the courts to issue an indirect compulsory performance at the merits stage, such as:
    1. Article 26(3) of the Act on Media Arbitration and Damage Relief; and
    2. Article 48(3) of the Act on the Prohibition of Discrimination against Persons with Disabilities and Relief of Rights.
  • An indirect compulsory performance ensures efficient enforcement of decisions and fills the potential future enforcement gap.
  • Ordering an indirect compulsory performance at the merits stage is not necessarily unfavourable to the obligor, as the obligor has sufficient opportunities to plead.
  • Ordering an indirect compulsory performance at the merits stage, based on the requirements set out by the Supreme Court’s jurisprudence, contributes to the ultimate resolution of the dispute as well.

Calculation of Attorneys’ Fees in an Enforcement Proceeding for an Arbitral Award under the Amended Arbitration Act

The Arbitration Act, as amended on 29 May 2016, requires an arbitral award to be enforced by a court’s “order (gyeol-jeong)” process, rather than the “decision (pan-gyeol)” process previously required before the amendment (Article 37[2] of the Arbitration Act). Order proceedings are seen as more simplified than decision proceedings.

However, Article 16(1)(a) of the Rules on the Stamps Attached for Civil Litigation (the “Stamp Rules”) outlines how to calculate the value of the object of litigation (that is, half the value of the arbitral award) in proceedings seeking “a decision for the enforcement of an arbitral award”, which was a requirement under the Arbitration Act prior to the amendment.

The method by which the object of litigation’s value in proceedings seeking “an order for the enforcement of an arbitral award” under the amended Arbitration Act is calculated was left uncertain.

The issue is particularly relevant in practice, given that the “value of the object of litigation” serves as a barometer for calculating attorneys’ fees in enforcement proceedings for an arbitral award. More specifically, attorneys’ fees that constitute part of the litigation costs are determined in proportion to the value of the object of litigation in a court proceeding, provided that the amount does not exceed the remuneration that was paid or was due to be paid per the legal fee agreement, as per:

  • Article 109(1) of the Civil Procedure Act;
  • Articles 3(1) and 4(1) of the Rules on the Inclusion of Attorney Fees in Litigation Costs; and
  • Article 2(3) of the Act on the Stamps Attached for Civil Litigation.

A recent Supreme Court decision has provided that “in light of the intent, purpose, structure and provisions of the amendment to the Arbitration Act, Article 16(1)(a) of the Stamp Rules applies mutatis mutandis to the calculation of the value of litigation in proceedings seeking a decision for enforcement of an arbitral award, meaning attorney fees included in litigation costs can be assessed in relation to half of the awarded amount” (Supreme Court Order 2020Ma7667 dated 15 October 2021).

The Supreme Court based the decision on the following points:

  • the economic benefit that a party would enjoy if it prevailed in an enforcement order proceeding equals that which the party would enjoy if it prevailed in a litigation seeking an enforcement decision process;
  • the amendment made no meaningful changes to the standard for enforcement of an arbitral award; and
  • the parties are still required to plead and provide evidence on the day of the hearing, or at least on the day of examination.

The significance of this Supreme Court order lies in that it has removed uncertainties surrounding the issue of calculation of litigation costs in cases dealing with the enforcement of an arbitral award under the amended Arbitration Act. Moreover, the Supreme Court order has practical implications  now that parties can anticipate and calculate the recoverable amount of attorneys’ fees before commencing the enforcement procedures for an arbitral award.

Subject Matter of the Enforcement Decision of Foreign Judgments

The Supreme Court has recently clarified the subject matter of an enforcement of foreign judgments decision in a case where a foreign judgment was revoked after the enforcement decision had been rendered in South Korea and the subsequent execution had been completed (Supreme Court Decision 2017Da224906 dated 23 July 2020).

The Supreme Court decided that if a foreign judgment (ie, a judgment rendered by a Californian court that ordered the division of property among a divorced couple) was revoked after a real estate title transfer had been registered – pursuant to a South Korean court’s decision to enforce the foreign judgment – then the enforcement decision should not preclude a claim seeking deregistration of the title transfer under the principle of res judicata.

The Supreme Court held that a South Korean court’s enforcement decision “grants enforcement of a foreign judgment by simply examining whether the foreign judgment meets the requirements for recognition and enforcement under the Civil Procedure Act” without “assessing the merits of the foreign judgment”. Thus, the subject matter of the dispute in an enforcement proceeding is “a procedural claim seeking enforcement of a foreign judgment in South Korea, not the substantive claim which was the basis of the foreign judgment” (Supreme Court Decision 2017Da224906 dated 23 July 2020).

According to the Supreme Court’s recent decision, a South Korean court’s enforcement decision has no determinative effect on the substantive claim of the foreign judgment but merely renders the foreign judgment enforceable in South Korea. As such, even if a South Korean enforcement decision becomes conclusive and is executed, it can be newly disputed depending on the progress of the substance-based proceedings in the foreign jurisdiction.

Therefore, when the issue of enforcement of a foreign decision arises in South Korea, there are various ways of challenging the enforcement that reach beyond the domestic enforcement proceedings – such as directly challenging the foreign judgment itself.

Bae, Kim & Lee LLC

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bkl@bkl.co.kr www.bkl.co.kr
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Yoon & Yang LLC is one of the largest full-service law firms to have its headquarters in Seoul. It has more than 480 lawyers and other professionals, including more than 40 foreign-qualified lawyers from the US, the UK, Germany, Russia, Vietnam, China, Canada, Spain and Australia. Its main office in Seoul is supported by overseas offices in Ho Chi Minh, Hanoi, Jakarta and Tashkent. Yoon & Yang’s dispute resolution practice is nationally and globally recognised for its ability to handle the most difficult, high-stakes commercial disputes successfully. The team consists of more than 100 litigators, including a former Supreme Court Justice of South Korea and a former Constitutional Court Justice of South Korea, as well as former judges and former prosecutors at the trial and appellate level.

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Bae, Kim & Lee LLC (BKL) was founded in 1980 and is one of the premier law firms in South Korea. The Seoul-based firm provides market-leading legal services in every practice area it covers, including funds and asset management, corporate/M&A, capital markets, finance, dispute resolution, antitrust, tax, IP, employment, real estate, TMT, maritime and insurance. BKL has a diverse mix of more than 700 South Korean attorneys, foreign attorneys, tax advisers, industry analysts, former government officials and other specialists in various practice areas working out of offices in Seoul, Beijing, Hong Kong, Shanghai, Hanoi, Ho Chi Minh City, Yangon and Dubai. The firm advises a broad range of clients, including South Korean conglomerates and government organisations, major international financial institutions and multinational corporations, and has headquarters in the USA, Europe and throughout Asia. BKL is a member of the World Law Group, which is a global network of more than 50 law firms, and has strong relationships with financial, tax and accounting advisers in various jurisdictions throughout the world.

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