Broadly, Korea supports investor–state arbitration as part of its foreign investment policy, but has adopted a more cautious posture in recent years. Debate intensified during the negotiation of the Korea–United States Free Trade Agreement and after several high-profile cases against the state (eg, Lone Star, Elliott, Mason). Rather than retreating from ISDS (investor–state dispute settlement), Korea has continued to conclude investment treaties that include it, typically with more detailed safeguards (eg, express linkage of fair and equitable treatment to customary international law, fork-in-the-road and waiver provisions, denial-of-benefits clauses, and regulatory carve-outs).

Korea has not announced a blanket policy to exclude ISDS or to terminate its treaties. Instead, it has selectively modernised and consolidated instruments, allowing a number of older bilateral investment treaties (BITs) to be replaced by comprehensive free trade agreements (FTAs) or newer frameworks. Examples include the replacement of several Central American BITs by the Korea–Republics of Central America FTA, the replacement of the Switzerland BIT within the EFTA–Korea FTA framework, the replacement of the Israel BIT by the Israel–Korea FTA, and the replacement of the India BIT by the Korea–India CEPA. Some legacy BITs have been terminated (eg, Guatemala), but this reflects modernisation rather than a wholesale withdrawal from ISDS.

Korea remains open to new agreements: several BITs are signed but not yet in force (including with Brazil, Colombia, DR Congo, Tanzania and Serbia). Overall, Korea’s policy is one of continued engagement with ISDS, tempered by tighter drafting and institutional co-ordination on dispute management.

Korea is a party to the significant arbitration conventions. It signed the Washington Convention on 18 April 1966, ratified it on 21 February 1967, and the Convention came into force for Korea on 23 March 1967. Additionally, Korea signed and ratified the New York Convention on 8 February 1973. When ratifying the New York Convention, Korea made a commercial reservation, limiting its application to disputes considered commercial under Korean law, which may arguably affect the enforceability of certain non-ICSID (International Centre for Settlement of Investment Disputes) investment awards. Korea does not require separate implementing legislation for these conventions to take effect domestically, so they have the force of law without additional enactment.

Investor–state arbitration is the dominant method of resolving treaty-based disputes involving Korea, consistent with Korea’s extensive treaty network and its adherence to the ICSID and New York Conventions. The majority of disputes involving Korea have been handled under the rules of ICSID or UNCITRAL (United Nations Commission on International Trade Law), with institutions such as the PCA (Permanent Court of Arbitration) administering them. This demonstrates a clear preference among investors for international arbitration over domestic litigation.

That said, arbitration is not the exclusive route. Some of Korea’s older BITs do not contain ISDS provisions, or limit investors to state–state dispute settlement. A small number of treaties allow or require recourse to local courts for a defined period before arbitration can be commenced. In practice, domestic litigation is sometimes pursued in parallel for contractual disputes with state-owned entities, or as a strategic complement to arbitration.

Investor–state arbitration activity involving Korea has concentrated in a few sectors, most notably financial services, banking and investment management. The highest-profile cases against Korea – Lone Star v Korea, Elliott v Korea and Mason v Korea – all arose from state measures affecting foreign shareholders in Korean banks and large corporate groups. These disputes reflected government regulatory intervention in sensitive areas such as bank recapitalisation, merger approvals, and corporate governance.

A smaller number of cases have emerged in the energy and infrastructure sector, particularly involving Korean investors abroad. For example, Korean construction and power companies have brought claims against states such as Oman, Libya, Saudi Arabia and Vietnam under construction or concession-related treaties. These cases highlight the global footprint of Korean contractors in large-scale projects and the political and regulatory risks they encounter overseas.

The high number of disputes in the finance and infrastructure sectors can be attributed to the critical importance of these industries. Financial services in Korea are subject to extensive regulation and are politically sensitive, while international infrastructure projects expose Korean investors to unpredictable political and economic conditions. These factors create an environment where disputes are likely to arise, especially due to government actions or contractual issues.

The most legally significant arbitrations have included both claims against Korea and claims initiated by Korean investors abroad.

Claims Against Korea

Lone Star v Republic of Korea (ICSID Case No ARB/12/37)

• Facts: Lone Star, a US private equity fund, alleged that Korean regulators unfairly delayed approval for the sale of its controlling stake in Korea Exchange Bank and imposed excessive taxation.
• Key issues: Scope of FET, definition of indirect expropriation, and valuation of damages in regulated financial markets.
• Outcome: In 2022, the tribunal awarded USD216.5 million (well below the claimed amount). The case is under ICSID annulment review.

Mohammad Reza Dayyani v Republic of Korea (PCA Case No 2015-38)

• Facts: The acquisition of Daewoo Electronics by an Iranian investor was blocked by Korean authorities.
• Key issues: Definition of investment, denial of justice, and Korea’s treaty obligations vis-à-vis political considerations.
• Outcome: In 2018, the tribunal ruled in favour of the claimant. Payment was delayed due to sanctions. Follow-on arbitration is pending.

Elliott Associates v Republic of Korea (PCA Case No 2018-51)

• Facts: Elliott alleged that Korea pressured the National Pension Service to support a merger between Samsung affiliates, harming minority shareholders.
• Key issues: Fair and equitable treatment and alleged state interference in corporate governance.
• Outcome: In 2023, the tribunal ordered Korea to pay USD54 million. Korea has applied to the UK courts (the courts of the seat) to set aside the award, and the action is pending.

Mason Capital v Republic of Korea (PCA Case No 2018-55)

• Facts: Mason challenged the same Samsung merger, which was also challenged in Elliot Associates v Korea.
• Key issues: Whether indirect shareholders qualified as protected investors under the treaty; scope of investment.
• Outcome: In 2024, the tribunal awarded USD43 million. Following the dismissal of a set-aside action in Singapore, Korea has complied with the award.

Fengzen Min v Republic of Korea (ICSID Case No ARB/20/26)

• Facts: A Chinese investor alleged discriminatory treatment under the Korea–China BIT.
• Key issues: Early dismissal of manifestly unmeritorious claims (ICSID Rule 41(5)).
• Outcome: In 2024, the tribunal dismissed the claims in favour of Korea.

Korea’s overall attitude has been to comply with investment treaty awards, but it has also exercised its right to challenge them where appropriate. The adverse awards to date are in Dayyani v Korea, Lone Star v Korea, Elliott v Korea and Mason v Korea.

In Dayyani v Korea, enforcement was complicated by international sanctions against Iran, rather than by Korea’s unwillingness to pay. Korea subsequently obtained a licence from the US government to transfer the award amount, and the payment process is ongoing. A follow-on arbitration is also pending.

In Lone Star v Korea, Elliott v Korea and Mason v Korea, Korea has pursued annulment or set-aside proceedings. The grounds raised have included a lack of jurisdiction and an excess of authority by the tribunal. For example, in Mason, Korea announced its intention to seek annulment in Singapore on jurisdictional grounds. In Elliott, Korea initiated set-aside proceedings before the UK courts (the seat of arbitration). In Mason, however, the government eventually complied with the award.

Korea’s approach, therefore, demonstrates a willingness to respect adverse awards, while simultaneously actively testing their validity through annulment or set-aside proceedings where it considers there are serious jurisdictional or procedural defects.

Korea has ratified more than 85 BITs and a wide range of FTAs that include investment chapters. Its treaty partners cover all major regions.

• Asia: China, Japan (including the China–Japan–Korea Trilateral Investment Treaty), India (replaced by the Korea–India CEPA), Indonesia (including the 2023 CEPA), Vietnam (BIT and FTA), the Philippines, Thailand, Malaysia, Myanmar, Laos, Cambodia, Bangladesh, Pakistan, Sri Lanka, Kazakhstan, Kyrgyzstan, Uzbekistan, Armenia.
• Europe: United Kingdom, France, Germany, Italy, Spain, Portugal, the Netherlands, Belgium–Luxembourg (terminated), Switzerland (replaced by the EFTA FTA), Austria, Denmark, Finland, Sweden, Norway, Iceland, Czech Republic, Slovak Republic, Poland, Hungary, Lithuania, Latvia, Romania, Bulgaria, Croatia, Greece.
• Middle East and North Africa: Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman, Iran, Israel (replaced by the Korea–Israel FTA), Jordan, Egypt, Libya, Lebanon, Tunisia, Algeria, Morocco, Mauritania.
• Sub-Saharan Africa: Nigeria, Kenya, South Africa, Cameroon, Senegal, Burkina Faso, Rwanda, Zimbabwe, Tanzania (not yet in force), Democratic Republic of Congo (not yet in force).
• Latin America and the Caribbean: Argentina, Brazil (signed but not yet in force), Mexico, Chile, Peru, Uruguay, Paraguay, Bolivia (terminated), Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Dominican Republic, Panama, Colombia (signed but not yet in force), Guyana, Jamaica, Trinidad and Tobago.
• North America and Oceania: United States (KORUS FTA), Canada, Australia, New Zealand, Brunei, Singapore.
• Multilateral agreements: ASEAN–Korea Investment Agreement, EFTA–Korea FTA (Iceland, Liechtenstein, Switzerland), Korea–US FTA (KORUS), Korea–EU FTA, Korea–Central America FTA, Regional Comprehensive Economic Partnership (RCEP), Korea–Israel FTA, Korea–China FTA, Korea–Colombia FTA, and others.

Korea continues to modernise its treaty network. Several older BITs have been terminated and replaced by FTAs, and new agreements with Brazil, Colombia, DR Congo, Tanzania and Serbia have been signed but are not yet in force. Given Korea’s role as both a capital exporter and host economy, further treaty negotiations remain likely.

Korea does not have an official Model BIT. However, its treaties reflect a consistent practice. Over time, these provisions have been refined to reflect lessons from arbitral experience and policy debates. Some examples of these features – which could be considered as the hallmarks of Korea’s treaty practice, akin to a model approach – have been outlined below.

Fair and Equitable Treatment (FET)

In Korea’s more recent BITs and FTAs, the FET standard is expressly tied to customary international law and the minimum standard of treatment, narrowing its scope compared to earlier treaties that provided an unqualified FET clause.

Expropriation

Several treaties recognise both direct and indirect expropriation, with compensation generally based on fair market value. More recent treaties also include regulatory carve-outs clarifying that non-discriminatory public welfare measures (eg, health, safety, environment) do not constitute indirect expropriation.

Most-Favoured-Nation (MFN) and National Treatment

MFN treatment is generally limited to post-establishment rights, though some FTAs extend protection to the establishment and expansion phase. Many newer treaties exclude dispute settlement provisions from the scope of MFN.

Umbrella Clauses

A provision known as an “umbrella clause” was common in Korea’s older BITs but absent from most recent agreements.

Denial of Benefits

Increasingly common, particularly after the Lonestar case, is the denial of benefits. It allows Korea to deny treaty protection to investors with no substantial business operations in the counterparty state or that are controlled by nationals of a third state.

Fork-in-the-Road and Waiver Provisions

Now standard in newer treaties, fork-in-the-road and waivers provisions require investors to choose between domestic courts and arbitration, and often mandating a waiver of other proceedings when initiating arbitration.

Exceptions and Carve-Outs

Many treaties include exceptions for taxation, subsidies, government procurement, and measures necessary to protect essential security interests or maintain public order.

Korea is party to a number of FTAs that incorporate investment protection and, in most cases, ISDS. These agreements include bilateral FTAs with the United States, Canada, Australia, Chile, Peru, Colombia, China, India, Indonesia, Israel, New Zealand, Singapore, Turkey and Vietnam, as well as regional agreements such as the ASEAN–Korea FTA, the EFTA–Korea FTA, the Korea–EU FTA, the Korea–Republics of Central America FTA and the Regional Comprehensive Economic Partnership (RCEP).

The investor protection standards in these FTAs generally mirror those found in bilateral investment treaties, including fair and equitable treatment, protection against unlawful expropriation, national treatment, most-favoured-nation treatment, full protection and security, and guarantees of the free transfer of payments. However, the FTAs often include more detailed language than older BITs, such as:

• linking FET to customary international law;
• explicit carve-outs for regulatory measures taken in the public interest (eg, environment, health, safety);
• exclusions for taxation, subsidies and government procurement; and
• denial-of-benefits clauses targeting investors with no substantive business operations.

On dispute settlement, most FTAs provide for ISDS alongside state–state mechanisms. Recent agreements include safeguards such as fork-in-the-road clauses, waiver requirements, and cooling-off periods. A few, however, diverge; for instance, RCEP does not include ISDS, providing only for state–state dispute settlement in respect of investment chapters.

Korea is not part of a supranational structure comparable to the European Union, nor a regional framework such as USMCA. Its policy has instead been to conclude an extensive network of bilateral and plurilateral FTAs, thereby ensuring wide investment protection coverage while retaining treaty-by-treaty flexibility on dispute settlement.

Korea does not routinely publish official commentaries or interpretive notes to accompany its investment treaties. Interpretive practice is instead guided by treaty text, travaux préparatoires, where available, and subsequent practice. Academic commentary and government-prepared reference texts, such as the Ministry of Justice’s Commentary on Korea’s Investment Agreements (2018, in Korean), offer practical guidance but lack binding force.

The Ministry of Trade, Industry and Energy also operates a website that provides the status of each agreement, indicating whether it is:

• under preparation;
• in negotiation;
• awaiting signature; or
• in force.

Reference materials and related media reports for each FTA are also accessible through the site.

Korea has a national investment statute, the Foreign Investment Promotion Act (FIPA). It grants national treatment to foreign investors, guarantees free transfer of returns, and provides for limited state or local funding incentives in specific sectors. It also empowers a Foreign Investment Ombudsman to facilitate the resolution of complaints. The protections under FIPA largely mirror those in Korea’s treaties but are narrower, as they do not include fair and equitable treatment or expropriation protections. It also does not provide for investor-state arbitration.

Direct arbitration clauses in contracts between investors and Korean state-owned entities are not uncommon, particularly in infrastructure, energy or construction projects. Such clauses usually provide for commercial arbitration under the KCAB (Korean Commercial Arbitration Board) or other international rules (ICC, SIAC, UNCITRAL), rather than investment treaty arbitration. The protection is narrower: contractual arbitration only covers breaches of the specific agreement, whereas treaty arbitration covers broader standards of protection such as expropriation, fair and equitable treatment and most-favoured-nation treatment.

The most frequently cited complaints by investors have concerned fair and equitable treatment (FET) and indirect expropriation. In high-profile cases such as Lone Star v Korea, Elliott v Korea and Mason v Korea, investors argued that political influence over the regulatory bodies and other forms of state intervention unfairly impaired their rights and reduced the value of their investments. Allegations of expropriation have also been raised, though often framed as indirect expropriation rather than outright seizure. For example, in Dayyani v Korea, the claim was that blocking an acquisition amounted to unlawful deprivation of investment.

Claims based purely on breach of contract are less common in treaty arbitrations against Korea, as such disputes are generally channelled into commercial arbitration under contractual arbitration clauses, especially in state-owned enterprise projects.

Overall, the core complaint has been the scope of FET and indirect expropriation, reflecting investor concerns about regulatory discretion and political influence in sensitive industries.

Under Korean law, party autonomy in the appointment of arbitrators is broadly recognised, but subject to certain mandatory safeguards. The Arbitration Act (modelled on the UNCITRAL Model Law) allows parties to agree freely on the appointment procedure and on the identity of arbitrators. Arbitrators must also be impartial and independent; any agreement that undermines the equal treatment of the parties is unlikely to be upheld. For example, granting one side exclusive appointment rights would not be upheld. If the agreed-upon appointment procedure fails or a party refuses to co-operate, the court may intervene to make the appointment. Nationality is not a statutory restriction unless the parties stipulate otherwise.

In practice, therefore, while Korean law defers to the parties’ choices, this autonomy is constrained by principles of fairness, due process, and statutory requirements designed to preserve the integrity of the arbitral process.

If the agreed procedure for appointing arbitrators fails for any reason, the Arbitration Act allows the competent Korean court to make the appointment if a request is made. The Act does not include specific default rules for multi-party arbitrations; therefore, the general provisions for appointment apply in the same way. In practice, therefore, absent a tailored clause, each side of a multi-party dispute (claimants collectively on one side and respondents collectively on the other) would be expected to jointly designate their arbitrator, failing which the court may intervene.

Under the Korean Arbitration Act, the court can intervene in the appointment of arbitrators, but only in specific situations. If the procedure the parties agreed upon for appointing arbitrators fails, such as when one party does not co-operate, the parties cannot agree on a sole arbitrator, or an appointing authority does not fulfil its responsibilities, the court may appoint the arbitrator at the request of one of the parties. Similarly, if the parties have not agreed on any appointment procedure, the court may appoint the arbitrators to complete the tribunal. In line with international best practices, the court plays a supporting role: it does not select arbitrators on its own initiative and respects any valid agreement between the parties regarding qualifications or other criteria. Its power is therefore confined to ensuring that the tribunal is properly constituted, not to second-guessing the parties’ choices. A court’s decision on the appointment of arbitrator(s) is rendered in a single instance and is not subject to appeal.

The Korean Arbitration Act (modelled on the UNCITRAL Model Law) contains provisions on the challenge and removal of arbitrators. Under Article 13(2), an arbitrator may be challenged if there are justifiable doubts as to their impartiality or independence, or if the arbitrator does not possess the qualifications agreed upon by the parties. A party that has appointed, or participated in the appointment of, an arbitrator may challenge that arbitrator only on grounds that became known after the appointment.

The parties are free to agree on a challenge procedure. In the absence of such an agreement, a party must submit its challenge within 15 days of becoming aware of the tribunal’s constitution or the circumstances giving rise to the challenge (Article 14(2)). If the challenged arbitrator does not withdraw and the other party does not agree, the tribunal decides on the challenge. If the challenge is rejected, the challenging party may (within 30 days) request the court to decide the matter, and the court’s decision is final (Article 14(3)–(4)).

Separately, if an arbitrator becomes unable to perform their functions or fails to act without undue delay, they may be removed by agreement of the parties, or, failing agreement, by court order (Article 15).

The requirements for arbitrator independence, impartiality and disclosure of potential conflicts of interest in Korea reflect international arbitral practice.

Under Korean law, arbitrators are subject to strict standards of independence and impartiality. The Arbitration Act provides that an arbitrator may be challenged if circumstances exist that give rise to “justifiable doubts as to his or her impartiality or independence” (Article 13). The law does not specify what circumstances qualify, but it requires challenges to be raised promptly (within 15 days of learning of the grounds). Arbitrators must disclose any such circumstances without delay from the time of appointment and throughout the proceedings (Article 14).

The KCAB International Arbitration Rules (Article 10) and the KCAB Domestic Arbitration Rules (Article 18) stipulate that arbitrators must be impartial and independent, and they must submit a Statement of Acceptance and a Statement of Impartiality and Independence upon accepting their appointment. In addition, the KCAB Code of Ethics for Arbitrators (2016) provides detailed guidance, identifying specific situations in which impartiality or independence may be questioned.

Korean courts apply an objective “justifiable doubts” standard when assessing an arbitrator’s independence and impartiality. Beyond national law and institutional rules, the IBA Guidelines on Conflicts of Interest are widely referenced in international cases seated in Korea, although no Korean court has yet expressly applied them.

Under the Arbitration Act (Article 18), a tribunal located in Korea may grant interim measures, which are binding on the parties involved and are not merely recommendations. The law identifies four categories of relief:

• measures to preserve assets to ensure satisfaction of a future award;
• measures to prevent imminent or irreparable harm or to maintain the status quo;
• measures to preserve assets subject to the execution of an award; and
• measures to preserve evidence relevant and material to the resolution of the dispute.

The tribunal may also require the applicant to provide security as a condition of the relief (Article 18-5). Enforcement may be sought before Korean courts, which are expressly empowered to recognise and enforce tribunal-ordered interim measures (Article 18-9).

Domestic courts in Korea play a complementary role in relation to interim relief granted in investor–state arbitration. Under the Arbitration Act, they may order interim measures either before the commencement of or during arbitral proceedings (Article 10).

In addition, where an arbitral tribunal seated in Korea grants any interim measures, a party may petition a Korean court either to recognise the measure or to authorise its compulsory execution (Article 18-7(1)). The court may, if necessary, require the applicant to provide security (Article 18-7(3)) and will apply the provisions on preservative measures in the Civil Execution Act mutatis mutandis to execution (Article 18-7(4)). Recognition or enforcement may be refused only on narrow grounds, including absence of required security, termination or suspension of the measure, or conflict with public policy (Article 18-8). Importantly, courts may not review the substance of the tribunal’s reasoning (Article 18-8(2)).

The role of Korean courts is therefore supportive: they ensure that interim relief ordered by a tribunal seated in Korea can be made effective, while retaining discretion to impose conditions to protect third-party rights. However, the Arbitration Act limits enforcement to measures issued in arbitrations seated in Korea (Articles 2(1), 18-7(4)). Interim measures issued by tribunals seated abroad are not enforceable in Korea under the Act. At the same time, Korean courts remain competent to grant conservatory measures directly under the Civil Execution Act, independently of arbitral proceedings.

Korean law permits both arbitral tribunals and domestic courts to order security in connection with arbitral proceedings.

Under the Arbitration Act, an arbitral tribunal may, when granting interim measures, require the requesting party to provide “appropriate security” (Article 18-4). Similarly, when a court is asked to recognise or enforce an interim measure, it may order the requesting party to provide security if the tribunal has not already done so, or where such an order is needed to protect third-party rights (Article 18-7(3)). Although the statute does not expressly refer to “security for costs,” this mechanism is regarded as covering such relief when cost-related measures are sought in the form of interim protection.

Korean courts also retain general powers under the Civil Execution Act, which applies mutatis mutandis to the enforcement of arbitral interim measures (Article 18-7(4)), to order security in connection with conservatory measures such as provisional attachments or injunctions.

In practice, applications for security for costs in international arbitrations in Korea are uncommon.

Korean law does not expressly regulate third-party funding, and there is no statutory prohibition on funding investor–state claims. Unlike some common law jurisdictions, Korea has no doctrines of champerty or maintenance. We are not aware of any reported Korean court decision directly addressing the validity of third-party funding agreements in either commercial or investment arbitration. Nor is there any statutory guidance specific to investment treaty claims.

However, related legislation raises interpretive questions.

Commentators have noted that certain Korean laws could indirectly limit the design of funding arrangements. For example, the Lawyers Act prohibits lawyers from sharing fees with non-lawyers, while the Trust Act bars transferring litigation to a trustee.

With the regulatory permissibility of third-party funding remaining ambiguous, its use is not yet prevalent in practice. However, the awareness is increasing, especially as the Hong Kong SAR and Singapore have permitted third-party funding.

As noted in 6.1 Prevalence of Third-Party Funding, there appear to be no reported decisions from Korean courts directly addressing the validity of third-party funding agreements in either commercial or investment arbitration.

There are no provisions in Korean law requiring parties to disclose the existence or terms of a third-party funding arrangement. Similarly, there appear to be no reported Korean court decisions that have considered third-party funding in the context of arbitration, whether for investment treaty claims or commercial disputes. As a result, there is no judicial guidance on whether the existence of third-party funding, in itself, would justify ordering security for costs.

In practice, because Korea has not yet developed case law or institutional practice in this area, parties and tribunals seated in Korea generally rely on comparative international practice or the IBA Guidelines on Conflicts of Interest.

The issue remains largely untested in Korea, although it is increasingly discussed in practice. The KCAB is also revising its International Arbitration Rules to introduce disclosure obligations for third-party funding arrangements.

Most of Korea’s FTAs and BITs require investors to engage in mandatory consultations or observe a cooling-off period before commencing arbitration. Under the Korea–US FTA (2007), an investor must deliver a written notice of intent at least 90 days prior to filing a claim, outlining the basis of the claim and the relief sought. The claim may be submitted only after six months have elapsed since the events giving rise to it. Similarly, the Korea–Central America FTA (2019) provides that disputes must first be subject to consultations and negotiations. Arbitration may only be initiated once eight months have elapsed since the notice of dispute and at least 90 days have passed since the investor provided a written notice of intent to arbitrate.

The Korea–China BIT (2007) takes a different approach. It provides that international arbitration may be initiated after four months from the date the dispute has been raised for consultation by either party. It also allows the host state to require investors to submit their dispute to any applicable domestic administrative review procedure. This requirement, however, is limited: such procedures cannot exceed four months, after which the investor is entitled to proceed to international arbitration regardless of the outcome.

In summary, advance notice, consultations, and cooling-off periods are standard features across Korea’s treaty network, and investors must comply with them before initiating arbitration.

Many of Korea’s treaties align with international trends towards openness. The Korea–US FTA, for example, requires that hearings be open to the public, that key documents (such as pleadings, orders, and awards) be made publicly available, and that submissions from non-disputing parties may be accepted. These provisions mirror UNCITRAL’s Transparency Rules and ICSID’s evolving practice, and have been applied in Korea’s pending investor–state arbitrations. In practice, this means that parties to investor–state disputes will typically be subject to treaty-based transparency obligations even though Korean domestic arbitration law would otherwise protect confidentiality.

Where treaties are silent, investor-state tribunals seated in Korea may still draw on international practices, such as the UNCITRAL Transparency Rules, the Mauritius Convention, and ICSID practice, to accept amicus submissions or permit the disclosure of documents, particularly where disputes implicate significant public policy issues. Thus, in Korea, as elsewhere, confidentiality remains the baseline under arbitration law and institutional rules; however, treaty practice increasingly subjects investor–state disputes to transparency obligations, reflecting the public interest dimension.

In practice, parties can strike this balance through three approaches.

Deference to Treaty Obligations

Where a treaty includes explicit transparency provisions, the parties should comply strictly, ensuring that hearings are open and documents are disclosed in line with the treaty text.

Agreement on Supplementary Transparency Measures

Even where the applicable treaty is silent, parties can adopt procedural orders drawing on the UNCITRAL Transparency Rules or past practice. This allows for the disclosure of awards, redacted pleadings, or the acceptance of non-disputing party submissions while still protecting confidential information.

Use of Protective Orders

To reconcile transparency with commercial sensitivities, tribunals can adopt confidentiality protocols that safeguard trade secrets or sensitive state information while allowing public access to the broader record. This ensures that public accountability does not compromise legitimate private interests.

Korean law does not prescribe limits on the forms of relief that an arbitral tribunal may award. The Arbitration Act also contains no express restrictions on remedies, and the order of specific performance is not uncommon in commercial arbitrations seated in Korea. In investor–state arbitration, however, the scope of relief is determined by Korea’s treaty obligations and international investment law. The principle of full reparation, along with the nature of the loss suffered, determines the remedies available. Although remedies in investment arbitration are not limited to monetary relief, this remains the most commonly sought and awarded form of reparation against Korea.

In investor–state cases involving Korea, damages are assessed in line with international practice rather than by reference to any domestic statute. Korean law does not prescribe a valuation methodology. Instead, tribunals have followed the remedial standard of full reparation with methodology determined by the nature of the investment and the availability of reliable data. Discounted cash flow (DCF) analysis is commonly advanced, but tribunals apply it only where the investment has a proven record of profitability. Market value approaches, based on comparable transactions or stock exchange prices, have also been used where sufficient benchmarks exist. The selection of methodology in practice, therefore, turns on the type of investment, its performance history, and the evidentiary record, rather than on any rule under Korean law. Monetary compensation remains the principal form of relief, with tribunals exercising discretion to adopt the method best suited to restoring the investor to its pre-loss position.

Parties to arbitrations seated in Korea are entitled to recover both interest and costs, including legal and expert fees as well as institutional and tribunal costs. The Arbitration Act empowers tribunals to determine the allocation of the costs of the arbitration, “considering all circumstances of the relevant arbitration case” (Article 34(2)). The KCAB International Arbitration Rules follow a similar approach, providing that recoverable costs include attorneys’ fees, expert fees, and expenses necessary for the conduct of the arbitration. In practice, Korea-seated tribunals adopt an approach consistent with international norms.

On cost allocation, tribunals seated in Korea generally apply the “costs follow the event” principle in international cases. That is, the unsuccessful party typically bears the costs of the proceedings, though tribunals may adjust allocations in light of the parties’ conduct and/or relative success on merits. The prevailing trend is towards awarding a substantial portion of the successful party’s costs, including legal and expert fees.

Under international investment law, treaties rarely impose an express obligation on investors to mitigate losses. Nonetheless, arbitral tribunals apply the principle by examining the investor’s conduct and assessing whether a failure to take reasonable steps inflated the loss, thereby warranting a reduction or rejection of the claim.

ICSID awards are directly enforceable in Korea under the Washington Convention, without requiring further judicial review. Non-ICSID awards are enforced under the Arbitration Act and the New York Convention. When ratifying the New York Convention, Korea made a commercial reservation, meaning enforcement applies only to disputes deemed “commercial” under Korean law. The enforceability of non-ICSID treaty-based awards is open to argument, as they may not always be characterised as commercial. No Korean court has yet ruled on this issue.

Korean courts adopt a generally pro-enforcement approach. Enforcement proceedings are initiated by submitting an application to a Korean court, along with an authentic or certified copy of the award and, if necessary, a Korean translation.

The court issues a decision rather than a judgment, which streamlines the process and allows for immediate execution, even if the decision is appealed. The grounds for refusal of enforcement mirror those under Article V of the New York Convention and are interpreted narrowly by Korean courts.

Korean courts have confirmed that they do not have jurisdiction to set aside awards rendered outside Korea. As of now, there have been no reported cases in Korea enforcing an award that has been set aside at the seat. The Arbitration Act and the New York Convention provide that enforcement may be refused if the award has been annulled by a competent authority at the seat. Korean courts are expected to adhere strictly to this provision, although the absence of precedent leaves room for future judicial interpretation.

There is no statutory requirement to await the outcome of foreign annulment proceedings, and courts may proceed with enforcement unless the award is actually set aside. However, courts retain discretion under Article VI of the New York Convention and may consider the status of such proceedings where appropriate.

South Korea adopts a restrictive doctrine of sovereign immunity. There is no general statutory provision governing sovereign immunity, and Korean courts have held that foreign states may be sued in Korea for commercial acts. In Supreme Court Judgment 97Da39216, the court exercised jurisdiction over a foreign state in an employment dispute. Sovereign immunity is not a recognised ground for refusing enforcement under the Arbitration Act or the New York Convention. Korean government entities regularly participate in arbitration without invoking immunity, and the courts have consistently upheld the enforceability of awards against state entities engaged in commercial activities.

Enforcement proceedings are treated as summary procedures, and courts are reluctant to interfere with the merits of arbitral decisions.

Public Policy

In terms of public policy, Korean courts apply a restrictive standard. The public policy ground for refusing enforcement under Article V(2)(b) of the New York Convention is interpreted narrowly and only invoked in exceptional circumstances. Korean courts have clarified that this ground applies only when the award contradicts the fundamental political or economic order of Korea. Importantly, this assessment is made not only from a domestic perspective but also from the standpoint of international public policy. Courts have consistently held that enforcement will not be refused merely because the award is inconsistent with Korean law or public sentiment.

However, the threshold for refusal is high. The courts have held that even if an arbitral award is based on foreign law that diverges from Korean law, this alone does not justify refusal on public policy grounds. The courts will only intervene if the award fundamentally undermines Korea’s legal or moral order.

Sovereign Immunity

Regarding sovereign immunity, Korean law does not contain a general statutory provision governing immunity. Sovereign immunity is not recognised as a ground for refusing enforcement under Korean law. Korean government entities also regularly participate in arbitration proceedings and enforcement actions without invoking immunity.

Given the restricted scope of sovereign immunity in Korea, State assets may be pursued for enforcement once a party obtains a court decision recognising and enforcing an arbitral award. This decision constitutes an enforcement title under the Civil Execution Act. The enforcement process involves the seizure of the debtor’s property, an auction, and the distribution of proceeds. Korean law does not exempt state assets from enforcement per se, but assets used for diplomatic or sovereign purposes may be protected under customary international law. Enforcement is generally limited to commercial assets not subject to sovereign functions.

Korean courts recognise the principle of separate legal personality and will only pierce the corporate veil in exceptional circumstances. Although the Arbitration Act and related enforcement provisions do not explicitly address veil-piercing, Korean jurisprudence permits it where a corporate structure is abused to evade legal obligations or perpetrate fraud. Courts in such matters require clear evidence that the corporate form was used to frustrate enforcement or improperly shield assets. Factors considered include the commingling of assets, undercapitalisation, lack of corporate formalities, and the use of the entity as a mere instrumentality. The burden of proof lies with the party seeking to pierce the veil, and courts apply a high threshold to ensure that veil-piercing is not used indiscriminately.

In arbitration-related enforcement, veil-piercing may be invoked to reach the assets of a parent or affiliated entities where the award debtor is insolvent or has been asset-stripped. However, Korean courts remain cautious and will only grant such relief where the facts clearly justify it.