Founded in 1966, the Korean Commercial Arbitration Board (KCAB) is an arbitral institution in South Korea. It is the only institution statutorily authorised to settle disputes under the Korean Arbitration Act.[1] The KCAB was established to facilitate the resolution of commercial disputes and evolved to become a prominent player in both domestic and international arbitration. International disputes are handled by KCAB International, which was established on 20 April 2018 as an independent division within the KCAB and is dedicated to managing cross-border disputes brought under the KCAB International Arbitration Rules. It also serves to promote Korea as a seat of arbitration.[2]
According to the Secretary-General of KCAB International, KCAB managed approximately 400 cases annually as of October 2023.[3] Most of the disputes referred to it come from the construction, IT, and commercial transaction sectors. In 2020, the total amount of disputes referred to KCAB Arbitration was over USD 540 million.[4]
KCAB International Arbitration Rules
The KCAB operates under a comprehensive set of rules designed to ensure fair and efficient arbitration proceedings. These rules have been periodically updated to reflect the evolving needs of the arbitration community and to align with international best practices. The KCAB International Arbitration Rules (the “KCAB Rules”), originally adopted in 2011 and updated on 1 June 2016, are tailored to handle international disputes.[5] These rules encompass various aspects of the arbitration process, including the appointment of arbitrators, the conduct of the proceedings, the issuance of awards, etc. The rules emphasize the importance of the impartiality and independence of arbitrators, ensuring that the arbitration process is fair and unbiased.
Jurisdiction and Scope
The KCAB Rules stipulate in Article 3 that arbitration can be conducted under its auspices if the parties have agreed in writing to refer their disputes to arbitration under the KCAB Rules or before the KCAB and the arbitration is international.[6] Article 2(c) of the KCAB Rules defines the term “International Arbitration” as an arbitration where (i) at least one of the parties to the arbitration agreement, at the time of entering into it, had its place of business in any state other than Korea; or (ii) the place of arbitration set out under the arbitration clause is in any State other than Korea.
Article 3 of the KCAB Rules further states that “the Rules shall be deemed to be part of the arbitration agreement, subject to any modifications the parties have agreed in writing”.
Confidentiality of KCAB Arbitrations
While KCAB arbitrations maintain the confidentiality of arbitration proceedings (“except where disclosure is consented to by the parties, required by law, or required in court proceedings”),[7] it allows for the publication of awards in a redacted form, provided the parties do not object to such publication.[8] This creates a balance between transparency and confidentiality.
Arbitrators
KCAB arbitration disputes can be heard by either one or three arbitrators based on the parties’ agreement.[9] The default rule under the KCAB Rules is that disputes are heard by a sole arbitrator.[10] This serves to reduce costs.
In case the dispute is to be referred to three arbitrators, according to Article 12 of the KCAB Rules, the claimant nominates an arbitrator in the request for arbitration or within such additional period of time as fixed by the Secretariat. The respondent nominates an arbitrator in the answer to the request for arbitration or within such additional period of time as fixed by the Secretariat. If either party fails to nominate an arbitrator within the applicable time limit, the Secretariat appoints such arbitrator(s). Upon appointment of the first two arbitrators, the two arbitrators jointly nominate the third one, who acts as chair of the arbitral tribunal.
Pursuant to Article 13 of the KCAB Rules, the nomination of any arbitrator by the parties or of the third arbitrator by the other arbitrators must be confirmed by the Secretariat. If the Secretariat determines, in its discretion, that a nomination is clearly inappropriate, it may refuse to confirm the nomination after giving the parties and the arbitrator(s) an opportunity to comment.[11]
In case circumstances give rise to justifiable doubts as to an arbitrator’s impartiality or independence, a party can challenge said arbitrator. A party that nominates an arbitrator may challenge such arbitrator only for reasons of which the party becomes aware after the nomination of the arbitrator.[12]
According to Article 14(3) of the KCAB Rules, a challenge is considered valid only if it is made within 15 days of either of the following:
a) the date of receipt of the confirmation if the parties nominated the arbitrator, or the date of receipt of the appointment if the Secretariat appointed the arbitrator; or
b) the date on which the party making the challenge becomes aware of the facts and circumstances giving rise to such challenge.
Both the challenged arbitrator, the other party and any other member of the arbitral tribunal may submit written comments on the challenge to the Secretariat within 15 days of their receipt of the challenge.[13]
The challenged arbitrator must withdraw if all of the parties so agree. They may also withdraw voluntarily. If all of the parties do not agree to the challenge, and the challenged arbitrator does not withdraw voluntarily, the Secretariat decides upon the challenge.[14]
Conduct of the Proceedings in KCAB Arbitrations
As a general rule, the arbitral tribunal will conduct the arbitration as it considers “appropriate, provided that the parties are treated with equality and that each party is given a fair opportunity to present its case”.[15] In any event, the tribunal acts within the limits of the KCAB Rules and any agreement between the parties.
Rules Governing the Proceedings
The arbitral tribunal must conduct the proceedings in accordance with the KCAB Rules and, where silent, “any rules which the parties or, failing them, the Arbitral Tribunal may settle on.”[16]
Applicable Law
Article 29 of the KCAB Rules provides party autonomy in choosing applicable law. The parties are thus free to decide upon the substantive laws or rules of law that are to be applied by the arbitral tribunal to the merits of the dispute, failing which the arbitral tribunal will apply the substantive laws or rules of law that it deems appropriate.[17]
Pursuant to Article 29(2), the arbitral tribunal must always consider the provisions of the contract agreed between the parties and relevant trade usages.
Place of Arbitration
Under the KCAB Rules, the place of the arbitration is Seoul, the Republic of Korea, unless the parties agree otherwise, or the arbitral tribunal determines that another place is more appropriate in light of the circumstances.[18] The place of arbitration also impacts the law applicable to the arbitration proceedings.
Hearings and meetings can be conducted at any location considered appropriate by the arbitral tribunal,[19] irrespective of the place of arbitration.
Language of the Arbitration
Under Article 28 of the KCAB Rules, the arbitral tribunal determines the language(s) of the arbitration, with due regard to the language of the contract and other relevant circumstances.
Awards and Enforcement
The KCAB Rules also address the issuance and enforcement of arbitral awards. Awards rendered under the KCAB Rules are final and binding on the parties and can be enforced by a court of competent jurisdiction.[20]
Conclusion
The KCAB has established itself as a reliable and efficient forum for resolving commercial disputes. Its comprehensive set of rules ensures that KCAB arbitrations are conducted fairly and efficiently, providing parties with a robust, cost-effective mechanism for dispute resolution. Proceedings are typically decided within 12 months.[21] KCAB International aims to further enhance Korea as a major international dispute resolution centre in Asia and beyond.
[1] About, KCAB International website: http://www.kcabinternational.or.kr/common/index.do?jpath=/contents/sub0402&CURRENT_MENU_CODE=MENU0020&TOP_MENU_CODE=MENU0018 (last accessed: 24 October 2024).
[2] Ibid.
[3] S. Kim, Korean Commercial Arbitration Board (KCAB), Guide to Regional Arbitration (Vol. 11, 2023), 20 October 2023.
[4] Ibid.
[5] Ibid.
[6] KCAB Rules, Article 3.1.(a)-(b); for an application of these criteria, see SMEC Co. LTD. v. Dynamic International INC., KCAB Case No. 18113-0008, Partial Award, 31 August 2018, paras. 53-72. The arbitral tribunal decided it had jurisdiction over a dispute, although the parties’ agreement referred to the “Korea International Economic and Trade Arbitration Committee” instead of the “Korean Commercial Arbitration Board”.
[7] KCAB Rules, Article 57(1)-(2).
[8] KCAB Rules, Article 57(3).
[9] KCAB Rules, Article 11.
[10] KCAB Rules, Article 11.
[11] KCAB Rules, Article 13(3).
[12] KCAB Rules, Article 14(1).
[13] KCAB Rules, Article 14(4).
[14] KCAB Rules, Article 14(5).
[15] KCAB Rules, Article 16(1).
[16] KCAB Rules, Article 17.
[17] For an application of Article 29 of the KCAB Rules and its articulation of other sets of rules/laws applicable, see Esther Marguerita Lima Suarez de VDA de Yang, Brandon Cheol Young Lima and Camila Romina Yang Lima v. Majestic Blue Fisheries, LLC, KCAB Case No. 19113-0013, Final Award, 18 August 2020, paras. 24-29.
[18] KCAB Rules, Article 24(1).
[19] KCAB Rules, Article 24(2).
[20] KCAB Rules, Article 36(3).
[21] S. Kim, Korean Commercial Arbitration Board (KCAB), Guide to Regional Arbitration (Vol. 11, 2023), 20 October 2023.