- -------------------------------------- INTRODUCTION --------------------------------------
- 1. What is arbitration?
Arbitration is an alternative form of dispute resolution that parties can choose instead of litigating a dispute in public courts. In arbitration, parties present their arguments and evidence to one or more arbitrators, who are private individuals appointed on a case-by-case basis. The arbitrator or arbitrators then consider the arguments and evidence and make a final decision that is binding on the parties.
- 2. How is litigation different from arbitration?
Litigation and arbitration are both adversarial dispute resolution processes with a binding decision. But there are differences. Litigation takes place in public courts, whereas international arbitration is a private mode of settling disputes by party agreement. Another key distinction is in enforcement powers. A state court holds the power to directly enforce its own orders, which arbitrators do not have. However, under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), awards issued by arbitrators can be enforced through the state courts of most countries, making enforcement of arbitral awards in other countries even easier than state court judgments. This international enforcement scheme makes arbitration an attractive option for resolving cross-border disputes.
- 3. What is the difference between arbitration and mediation?
Arbitration is an adversarial dispute resolution process, akin to litigation, with a binding result issued by impartial arbitrator(s), while mediation is a non-binding process in which a mediator attempts to help the parties reach a mutually agreed settlement.
- 4. What are the potential disadvantages of arbitration?
Arbitration is inherently limited to parties who have agreed to it. As a result, it can be difficult or impossible to involve third parties who may be important to the dispute. A second inherent limitation in arbitration is the lack of direct enforcement power that a court has. However, final awards are generally enforceable in court under the New York Convention and other treaties. Further, parties usually comply voluntarily with orders from the arbitral tribunal in order to avoid upsetting the tribunal.
A number of other features of arbitration might be considered advantages or disadvantages depending on one’s perspective, or the circumstances of a given case. For instance, rules and procedures for taking and presenting evidence are not fixed but are generally determined by party agreement or by order of the arbitral tribunal. This flexibility is often considered a positive feature, but the quality of that process is dependent on the quality of the arbitrator which introduces a certain amount of unpredictability. In addition, there is no opportunity to appeal an adverse decision in arbitration as there usually is in litigation, although parties can seek to annul or set aside an award on limited grounds. Again, this may be considered a disadvantage by some, but many view this positively as it provides more certainty and can shorten the time required to finally resolve a dispute. One disadvantage that the arbitration system continues to struggle with, however, is its inability to handle third parties who may be non-signatories to the arbitration agreement. Adding third parties to arbitral proceedings may prove problematic for an Arbitral Tribunal, in addition to its lack of coercive powers to compel non-signatories to do or not to do something.
- 5. What are the main advantages of arbitration?
Arbitration has three principle advantages: flexibility, neutrality, and enforceability. Arbitration has the flexibility to allow freedom of choice in the place of arbitration, the arbitrator, the procedural and evidentiary rules, the schedule, and other factors, case by case. Neutrality means that parties need not depend on the courts and judges of either party’s state, but can instead choose a place and a tribunal to resolve their dispute that is neutral to both (or all) parties involved. One of the greatest benefits of arbitration is the relative ease of enforcing arbitral awards internationally, thanks to the enforcement scheme established under the New York Convention.
- 6. Is arbitration more efficient and less expensive than litigation?
The length and cost of arbitration varies significantly depending on the complexity of the case and the amount the parties choose to spend on attorneys, witnesses, and experts. While it is not always the case, arbitration is often faster and cheaper than litigation in many jurisdictions for several reasons, including the fact that (1) procedures can be tailor-fit to each case (2) there is no appeals process, as such, for arbitral awards like there is for court decisions and (3) parties can choose arbitrators who have more control over their schedule than a court judge who is subject to his or her docket demands.
- 7. What are ‘institutional’ and ‘ad hoc’ arbitration? What are their respective advantages?
An ‘institutional arbitration’ is one that is administered by an arbitral institution (such as the KCAB), usually under its own rules of arbitration. In an ‘ad hoc’ arbitration, there is no administering institution. All administrative, logistical, and procedural issues are decided by the parties or the arbitral tribunal. Even in ad hoc arbitration, parties must be treated with equality and have a reasonable opportunity of presenting their case or any resulting award may not be enforceable.
The main advantage for institutional arbitration is that the rules laid down by an established arbitral institution will usually have been proven to work well in practice and early-stage procedural difficulties—including appointment of the tribunal—can be minimized. Institutional rules will also generally have undergone periodic revision in consultation with experienced practitioners, to take account of new developments in the law and practice of international arbitration. In ad-hoc arbitrations, on the other hand, the procedures can be fully shaped to meet the needs of the parties in light of the facts of the particular dispute. Ad hoc arbitration is sometimes popular where a particular form of procedure has taken hold in a certain region or industry and the parties generally feel no need for institutional involvement.
- 8. Why choose to arbitrate in Seoul?
Seoul is the capital of the Republic of Korea (Korea), a country with a pro-arbitration legal regime, arbitration-friendly public courts, and a judiciary that is relatively knowledgeable on arbitration matters. Korea was the first nation in East Asia to adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration of 1985 (‘Model Law’). The Arbitration Act of Korea has since been updated continuously to stay abreast of ongoing changes in the field, most recently in 2016 by incorporating many of the amendments made to the UNCITRAL Model Law in 2006. In the same year, the Korean Commercial Arbitration Board (KCAB), the only institution in Korea authorized by the Ministry of Justice to administer arbitrations, updated its International Arbitration Rules to reflect current best practices. Korea has been one of the most active jurisdictions in Asia for international arbitration in the last 20 years.
In addition, Seoul is conveniently placed amidst the larger East Asian economies of China and Japan, while also being relatively easy to access from Southeast Asia, providing a neutral venue that has all the conveniences and support one would hope for, including a state-of-the-art hearing venue in the Seoul International Arbitration Center.
- 9. What is the legislative/legal history of the Korean Commercial Arbitration Board (KCAB)?
The KCAB was established in conjunction with the promulgation of the Arbitration Act of Korea in 1966 (then named the Korean Commercial Arbitration Committee under the Chamber of Commerce of Korea). The KCAB established its International Arbitration Rules in 2007 and the International Arbitration Rules have since been amended in 2011 and 2016, to stay abreast of market developments and best practices.