Shipping & International Trade Law

Shipping & International Trade Law Jurisdictional comparisons First edition 2011 Foreword David Lucas Hill Dickinson LLP Preface Norman Hay Cargill International SA Argentina Fernando Ramón Ray & Alejandro José Ray Edye, Roche, De La Vega & Ray Canada Douglas G. Schmitt Alexander Holburn Beaudin & Lang LLP China Wang Hongyu & Jade Neame Wang Jing & Co Denmark Johannes Grove Nielsen Bech-Bruun England & Wales David Lucas, Jeff Isaacs, Andrew Meads, David Pitlarge & Andrew Buchmann Hill Dickinson LLP Finland Ulla von Weissenberg & Johanna Fagervik Borenius Attorneys at law France Laurent Garrabos BCW & Associés Germany Jobst von Werder & Ingo Gercke REMÉ Rechtsanwälte Greece John Markianos-Daniolos KGDI Hong Kong William Potts Crump & Co India Zarir P Bharucha & Bimal Rajasekhar Bharucha & Associates Italy Michele Mordiglia & Paolo Manica Studio Legale Mordiglia Japan Tetsuro Nakamura, Tomoi Sawaki & Chinyere Ezeoke Yoshida & Partners Mexico Enrique Garza, Roger Rodriguez & Ramiro Besil Garza Tello & Asociados SC Netherlands Wilbert ten Braak, Rene van Leeuwen, Hans Posthumus Meyjes & Elisabeth T A Naaykens Hampe Meyjes advocaten Nigeria Emmanuel Achukwu The Campbell Law Firm Russia Elena Popova Sokolov Maslov & Partners South Africa Shane Dwyer & Jennifer Finnigan Shepstone & Wylie South Korea Byung-Suk Chung Kim & Chang Spain Verónica Meana Larrucea & Jose Antonio Dominguez Castro Meana Green Maura & Co Switzerland Prof Dr Alexander von Ziegler Schellenberg Wittmer Turkey Ergun Ersoy, Zihni Bilgehan & Mr Semih Sander Ersoy Bilgehan Lawyers and Consultants United Arab Emirates Bashir Ahmed & Chatura Randeniya Afridi & Angell Ukraine Alexander Kifak & Artyom Volkov ANK United States Peter Gutowski & Ed Carlson Freehill Hogan & Mahar LLP General Editor: David Lucas Hill Dickinson LLP

South Korea Kim & Chang Byung-Suk Chung 1. CONTRACTS OF CARRIAGE 1.1 Jurisdiction/proper law South Korean courts will consider all of the factors and circumstances surrounding the matter in question to determine which law has the closest connection to the bill of lading or charterparty. Article 26 (Objective Connection to Determine the Applicable Law) of the Conflict of Laws Act provides that in cases where the parties to a contract do not choose the applicable law, the contract shall be governed by the law of the country which is most closely connected with the contract. In the case of bills of lading, the Supreme Court has ruled that the law of the place where the bill of lading was issued is to apply (see Supreme Court decision dated 10 January 2003, case number 2000da70064). Recognising a foreign jurisdiction or arbitration clause In the case of a foreign arbitration clause, South Korean courts will recognise the parties agreement to arbitrate the matter in the foreign jurisdiction, provided that the agreement to arbitrate is evidenced in writing (article 8 of the Arbitration Act). In such a case, the court will dismiss any proceedings instituted to review the merits of the matter. In the case of clauses giving jurisdiction to a foreign court, South Korean courts will recognise the jurisdiction clause if the jurisdiction clause meets the criteria set forth in Article 2 (International Jurisdiction) of the Conflict of Laws Act, which provides: In cases where a party or the case in dispute is substantively related to the Republic of Korea, a South Korean court shall have international jurisdiction. In such an event, the court shall follow reasonable principles, compatible with the ideology of the allocation of international jurisdiction, in determining the existence of substantive relations. In line with the above provision, the South Korean Supreme Court had set (even prior to the enactment of the said provision) certain requirements for an exclusive international jurisdiction clause to be found valid under South Korean law: South Korean courts must not have exclusive jurisdiction over the matter pursuant to South Korean law (eg, South Korean courts have exclusive jurisdiction over disputes regarding real property situated in South Korea); the jurisdiction chosen by the parties must have jurisdiction over the matter; the elected jurisdiction must have a substantive connection with the subject matter; and european lawyer reference series 303

the elected jurisdiction must not render any unfairness to the parties or run contrary to public policy. In one case involving a bill of lading issued by a Japanese party, which included a clause giving the Tokyo District Court exclusive jurisdiction, the court did not recognise the jurisdiction clause due to the lack of a substantive connection with the Japanese court. Apart from the fact that the bill of lading was issued by a Japanese company, the matter had no other connection with Japan. Rather, the court found the matter more substantively connected with Korea, as all of the other parties were South Korean and the shipment was destined for Korea. On such basis, the court found jurisdiction over the dispute and proceeded to review the case (Supreme Court decision dated 25 March 2004, case number 2000da53349). Recognising injunctions/orders to prevent proceedings It is unlikely that South Korean courts would recognise an injunction or court order obtained in an agreed jurisdiction. The court would review the issue of jurisdiction at its discretion and determine whether or not the South Korean court s jurisdiction may be found. Arbitration clauses The issue of whether or not an arbitration or jurisdiction clause set out in another document has been duly incorporated is to be determined under the governing law of the incorporating document. If South Korean law is applicable to the document in question, a South Korean court may recognise the arbitration or jurisdiction clause intended to be incorporated, provided, in principle, that (a) specific reference of the arbitration clause is made in the incorporating document and (b) the document to be incorporated can be specifically identified (eg, by the date of the document and the parties names) (Supreme Court decision dated 10 January 2003, case number 2000da70064, also referenced in 1.1.5 below). The provisions to be incorporated do not need to be set out in full. Recognising incorporation of an unsigned arbitration agreement in a contract This is left to the discretion of South Korean courts, but an arbitration agreement does not necessarily have to be signed by the parties, although it must be evidenced in writing. Paragraph 3 of Article 8 (Forms of Arbitration Agreement) of the Arbitration Act provides that agreements falling under any of the following subparagraphs shall be deemed a written arbitration agreement: (i) where a document exchanged by means of letters, telex, telegrams, fax or other means of communication contains an arbitration agreement; (ii) where one party alleges that statements of the document exchanged between the parties contain an arbitration agreement, and the other party does not deny it. If the arbitration agreement to be incorporated is not signed but falls within the above categories, it may still be recognised. 304 european lawyer reference series

Recognising provisions of a charterparty incorporated into a bill of lading Under South Korean law, if a bill of lading incorporates the provisions of an identified charterparty, all of the charterparty provisions (save the arbitration clause) would be deemed so incorporated. In order for the arbitration clause to be incorporated as well, an express reference to the arbitration clause of the charter is required (Supreme Court decision dated 10 January 2003, case number 2000da70064). However, if English law (or any other foreign law) is the governing law of the bill of lading, the South Korean court would apply English law to determine whether or not the charterparty terms, including the arbitration clause, have been duly incorporated into the bill of lading. Bill of lading referring to terms of a charterparty without identifying it As stated above, the Supreme Court has ruled that the terms of the charterparty to be incorporated must be identified (eg, by the document s date, parties names). However, in the absence of such identification, the charterparty may still be deemed incorporated, if the holder of the bill of lading knew, or arguably should have known, of the existence of the relevant charterparty and the arbitration clause contained therein. (See the same Supreme Court decision dated 10 January 2003, case number 2000da70064, as discussed in 1.1.5 above). If there is only one charterparty to which the bill of lading could refer, that charterparty may be deemed incorporated, even though the charterparty is not identified. If there is more than one charterparty to which the bill of lading may refer, South Korean courts may determine which charterparty, if any, is to be incorporated based on the surrounding facts and circumstances. 1.2 Parties to the bill of lading contract Identifying the carrier Korean courts will look to both the face and reverse sides of the bill of lading to determine whom the carrier is. However, in the event that the terms on the reverse side are not entirely consistent with the face of the bill, the court may favour relying on the statements appearing on the face (Supreme Court decision dated 10 July 2001, case number 99da58327). Suing for loss or damage A bona fide holder of the original bill of lading is entitled to sue the carrier for the loss of or damage to cargo. This is not limited to the holder of the bill of lading at the time of the damage arising. Rights under the bill of lading are transferable under South Korean law by delivering the bill of lading, together with endorsement (if applicable), and the notice formalities normally required for the assignment or transfer of the rights are obviated (eg, in Korea, any transfer or assignment of rights must be notified to third parties in order for it to be effective against those third parties). Accordingly, a holder of the bill of lading who came into possession of the bill of lading after the loss or damage arose may still be entitled to sue the carrier for such loss or damage (Supreme Court decision dated 10 December 1991, case number 91da14123). european lawyer reference series 305

The transfer of rights under the bill of lading would not affect the liability of the original shipper. 1.3 Liability regimes Cargo conventions Korea is not a party to any of the cargo conventions. However, Korea has adopted by and large the provisions of the Hague-Visby Rules in its Commercial Code (Chapter V Maritime). Rotterdam Rules South Korean delegates have been actively participating in the drafting process, but it is not yet clear whether Korea will ratify the Rotterdam Rules. Hague/Hague-Visby Rules In contrast to English law, South Korean law does not distinguish straight bills of lading from other bills of lading, and the Commercial Code provisions, which are enacted based on the Hague-Visby Rules, shall equally apply to straight bills of lading as well. Compulsory rules applicable to shipments Whether a certain statute or provision is applicable to a shipment to or from our jurisdiction will be determined by the terms of the contract and also according to the provisions of the Conflict of Laws Act. 1.4 Lien rights Recognising a lien on cargo Liens arising out of obligations under the bill of lading contract be enforceable as against the receiver (for eg, freight, deadfreight, demurrage, General Average and any shipper s liabilities in respect of the cargo) subject to the terms of the bill of lading and the law governing the bill of lading. If South Korean law is applicable to the bill of lading, liens may be enforced against the cargo by withholding the cargo (ie, refusing to deliver it) for unpaid freight, deadfreight, expenses, demurrage, General Average and salvage, subject to the terms of the bill of lading (article 807, paragraph 2 of the Commercial Code). Additionally, as one method of exercising a lien on cargo, the carrier may also have the right to sell the cargo through auction proceedings with the approval of the court in order to receive the unpaid amounts (article 808 of the Commercial Code). Owners lien on cargo for time charter hire The owners may be able to lien cargo for outstanding time charter hire. However, the owners may not lien cargo against the holder of the bill of lading if the holder acquired in good faith the bill of lading issued by the time charterers (article 844 of the Commercial Code). 306 european lawyer reference series

Registration of owners right to lien sub-freights as a charge against a charterer There is no system in Korea for the registration of liens against freight or subfreight. However, in order for the owners to sell any cargo for unpaid freight, etc, as part of exercising a lien on the cargo, court approval is required. 2. COLLISIONS 2.1 Collision Conventions Korea is not a party to the 1910 Collision Convention, but adopts the provisions thereof, which are contained in the Commercial Code. Korea has ratified the International Regulations for Preventing Collisions at Sea 1972, which are also enacted in the Marine Traffic Safety Act. The Collision Regulations serve as the basis for the court and the Maritime Safety Tribunal in determining collision liability. 2.2 Founding jurisdiction South Korean courts will find jurisdiction over the claims related to the collision or incident in question based on, inter alia, any of the following grounds (the cited provisions are from the Code of Civil Procedure): where the defendant party is situated (article 2) or has its principal office or place of business (article 5); the location of the defendant party s assets, including any sister vessels (article 11); where the opponent ship is registered (article 13); the physical location of the opponent ship (article 14); the place where the tortious act occurred (article 18); or a written agreement by the parties. 2.3 Claim for pure economic loss in the event of a collision While South Korean jurisprudence does not recognise the concept of pure economic loss, it is possible for a party to claim for pure economic loss if causation can be shown. (Please see the discussion of ordinary damages and special damages provided below.) 3. SALVAGE 3.1 Salvage conventions The statutory provisions under South Korean law concerning salvage, which are contained in the Commercial Code, are enacted based on the provisions of the 1989 Salvage Convention. In cases of non-contractual salvage, the salvage-related provisions of the Commercial Code shall apply. For instance, if there is no agreement on the salvage remuneration, the court may, at the request of the parties, determine the amount of the salvage remuneration, taking into consideration the value of the salved ship and property, the seriousness of the peril, the efforts and expenses undertaken by the salvor, the results of the salvage efforts, etc, (article 883 of the Commercial Code). european lawyer reference series 307

Even if there is in place a salvage agreement, the salvage-related provisions, as contained in the Commercial Code, will also apply to contractual salvage, unless such provisions contradict the terms of the salvage contract (article 887, paragraph 1 of the Commercial Code). With respect to the salvage remuneration, the court may increase or decrease the agreed amount if such an agreement is manifestly unreasonable in view of article 883 of the Commercial Code, as noted above (article 887, paragraph 2 of the Commercial Code). 3.2 Limitation period for enforcing salvage claims Salvage claims must be brought within two years from the date of the completion of the salvage operations by way of instituting legal proceedings, unless this period is extended by mutual agreement (article 895 of the Commercial Code). 3.3 Enforcing the salvor s lien prior to the redelivery of ship/cargo The salvor may exercise its lien prior to the redelivery of the ship/cargo as a possessory lien holder, provided that the salvage remuneration in question is due and payable (article 320 of the Civil Code). This lien is only available while the salvor has possession of the ship/cargo. In addition, the salvor may have a maritime lien on the salved ship/cargo (articles 777 and 893 of the Commercial Code), in which case no possession of the ship/cargo is required. In the case of exercising a maritime lien against cargo, however, the salvor cannot enforce its maritime lien against the cargo after it is delivered to a bona fide third party (article 893, paragraph 1 of the Commercial Code). 4. GENERAL AVERAGE (GA) 4.1 Terms South Korean courts would apply the terms of any agreement regarding General Average, including any incorporation of the York Antwerp Rules (YAR). 4.2 Time bars The Commercial Code (article 875) provides that claims related to General Average must be brought within one year from the date on which the General Average adjustment is completed, unless there is an extension by agreement. While a General Average adjustment is not legally binding on the court, in the absence of any agreement to such effect the court is likely to rely on the General Average adjustment unless there is a good reason not to do so. 5. LIMITATION 5.1 Tonnage limitation South Korea is not a party to any of the limitation conventions (except for the Civil Liability and Fund conventions noted in 6.1 below), but essentially adopts the provisions of the 1976 Limitation Convention in the Commercial Code, including the tonnage limitation regime. However, the compensation limits for the death of or injury to passengers have been increased in line with the 1996 Protocol. 308 european lawyer reference series

In determining the limitation issues for claims against the vessel, South Korean courts would apply the law of the vessel s port of registry, pursuant to the Conflict of Laws Act. 5.2 Parties seeking to limit The owners, charterers (which include voyage charterers and arguably slot charterers), managers (who are appointed by joint owners, when the vessel is owned by more than one owner) and operators of the vessel, the employees or agents of the said parties, such as the crew or pilot, salvors (article 774, paragraph 1 of the Commercial Code), and possibly their respective liability insurers (article 744 of the Commercial Code). 5.3 Test for breaking the limitation Adopting the test stipulated in the 1976 Limitation Convention, under South Korean law, limitation is broken when the loss in question resulted from the personal act or omission of the party invoking limitation, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result (article 769 of the Commercial Code). 5.4 Limitation provisions establishing jurisdiction for the substantive claim In Korea, in order to invoke tonnage limitation, the party invoking limitation (the applicant ) must commence limitation proceedings with the court and establish the limitation fund (article 766 of the Commercial Code). Under South Korean law, such limitation proceedings can be commenced with the court that has jurisdiction over any of the following places: (a) the port of registry of the vessel; (b) the applicant s address; (c) the place where the accident occurred; (d) the first port of call after the accident; and/or (e) the place where the applicant s assets are attached based on the claims subject to limitation (article 3 of the Act on the Procedures of the Limitation of the Shipowners Liability). In the limitation proceedings, if there is any objection to the filed claims, the limitation court will review the claims and issue an adjustment judgment for the purpose of distributing the limitation fund. If there is then any objection to the adjustment judgment, separate legal proceedings are thereby commenced with the civil court (different from the limitation court), and the court will issue a judgment on the substance of the claim in question. Therefore, the commencement of limitation proceedings will lead to a decision on the merits of the disputed claims, and the court would thereby, in effect, have jurisdiction over the substantive claims against the party invoking limitation, based on the court s jurisdiction over the party s right to commence limitation proceedings. 5.5 Package limitation figures The figure is 666.67 SDRs per package or 2 SDRs per kilogram, whichever is greater (article 797, paragraph 1 of the Commercial Code). The test for breaking this package limitation is the same as that for the shipowners global limitation (see the discussion above). european lawyer reference series 309

6. POLLUTION AND THE ENVIRONMENT South Korea is a party to the 1992 CLC, as well as the 1992 Fund Convention and the 2003 Supplementary Fund Protocol. 7. SECURITY AND ARREST South Korea is not party to any particular arrest convention. 7.1 Claims affording a maritime lien Pursuant to the Conflict of Laws Act, in determining whether a certain claim constitutes a maritime lien, courts in Korea will look to the law of the vessel s port of registry (article 60 of the Conflict of Laws Act). Under South Korean law (article 777 of the Commercial Code), the following types of claims would give rise to a maritime lien against the ship: the cost of litigation for common interests of the creditors, various taxes and dues in relation to the voyage, pilotage, towage, expenses for the preservation and inspection of the vessel and equipment after the last voyage; claims in relation to the employment contracts of the crew; salvage remuneration and general average contribution; and claims for the indemnity of damages arising due to a ship collision, other navigational accidents, damage caused to sea and port facilities, etc, and the life claims of the crew or passengers. In addition, the claims subject to limitation under the CLC shall be recognised as a maritime lien (article 43 of the Oil Pollution Damage Compensation Guarantee Act, which enacts the CLC and the Fund Convention in domestic law). 7.2 Mortgagee s priority over claims for loss/damage Under the Conflict of Laws Act, the priority of the various claims against the vessel is to be determined based on the law of the vessel s port of registry (article 60). If South Korean law were to apply in this respect, the claims secured by a mortgagee shall take priority over other general claims for losses and damages that do not give rise to maritime liens. 7.3 An arrest claim leading to the founding of substantive jurisdiction The arrest of a ship based on a preliminary attachment order (which acts to provide security for the arresting party s claims) may constitute grounds for finding substantive jurisdiction, unless there is a valid exclusive jurisdiction agreement (see 1.1.2 above) or arbitration agreement. On the other hand, the arrest of a ship based on a maritime mortgage or possessory lien, which could lead to the auction sale of the vessel through the court, would also constitute grounds for finding substantive jurisdiction. In the latter respect, the question may arise whether the arrest based on the maritime lien and the ensuing auction sale could be available without the issuance of an arbitral award if there is an arbitration agreement. (In a prior case, the Supreme Court did not allow the arrest in such circumstances; Supreme Court decision dated 5 October 1993, case number 93ma621). 310 european lawyer reference series

7.4 Arrest of sister/associated ships If a sister or associated ship is registered under the ownership of the debtor party, the sister/associated vessel can be arrested by means of a prejudgment attachment to secure the claim against the debtor party. It may also be possible to arrest a ship that is registered under the ownership of a different company, if it can be shown that the debtor party and the registered owner, directly or indirectly (through a common beneficial owner), are in effect one and the same. For instance, if a company creates a Special Purpose Company (SPC) for the sole purpose of owning a vessel and it can be shown that the establishing company is the true owner of the vessel, although it is registered to the SPC, a party can try to pierce the corporate veil and take action against the vessel owned by the SPC to secure a claim against the establishing company (Supreme Court decision dated 26 October 2006, case number 2004da27082). 7.5 Arrest of ships for claims There is no restriction on the type of claims that can be pursued against the owner of the vessel, on which the arrest of the vessel may be based (see also the discussion provided in 7.5 above). Therefore, there may be an arrest of ships arising out of claims for (a) memorandums of agreement; (b) ship repair; or (c) ship construction contracts. 7.6 Lodging security to anticipate/prevent arrest There is no system in Korea by which a caveat against arrest may be lodged in advance of the vessel s arrival and used to prevent a vessel from being arrested. 7.7 Securing the claim To release the vessel through the court (ie, without the agreement of the arresting party), a cash deposit covering the amount of the asserted claim (as well as any costs in the case of an arrest based on maritime lien or mortgage) must be made with the court. A bond will not be accepted by the court. 7.8 Letter of guarantee The court won t accept a letter of guarantee from a protection and indemnity club. But if the arresting party is willing to accept a club letter of guarantee as security for the claim, the club guarantee may be issued in exchange for the arresting party s voluntary withdrawal and cancellation of the vessel arrest. Or, if the ship arrest is to be lifted by commencing limitation proceedings (which may also be possible), the court may accept a club letter of guarantee to establish the limitation fund. 7.9 Guarantees provided by a domestic bank/guarantor This is not applicable, since the South Korean court does not accept guarantees, but only accepts cash deposits. european lawyer reference series 311

7.10 Further security options To secure its claim, a party may take action ie, prejudgment attachment against any of the assets of the debtor party, including real property, movables, bank accounts, and account receivables (or debts). In the case of real property (including vessels registered in South Korea), an attachment of the property would not prevent a party s use of the property, but the attachment would be registered on the registry and may, in effect, prevent the transfer of the property to any third parties. In the case of attaching movables (eg, materials, equipment), an attachment could prevent a party s use of the asset. In the case of bank accounts, the relevant bank would be ordered to freeze any funds sitting in the account and prevent the withdrawal and use of those funds (while the making of deposits remains permitted). In the case of account receivables (or debts), the third party that owes sums to the debtor party would be ordered not to pay the debtor party the owed amount. 8 CONTRACTS OF SALE OF GOODS 8.1 Jurisdiction/proper law The South Korean court would first consider if there is an implied agreement. If there is no agreement (express or implied), the court will consider all of the relevant factors and circumstances to determine which law has the closest connection to the matter in question (article 26 of the Conflict of Laws Act). 8.2 Arbitration clauses An agreement to arbitrate must be evidenced in writing, but it does not require the signature of the parties. 8.3 Passing of title/property/risk Unless there is an agreement to the contrary, the passing of title shall be deemed to take effect once the goods are delivered to the receiving party (article 188, paragraph 1 of the Civil Code). Likewise, unless there is an agreement to the contrary, risk is passed with title to the goods. However, prior to the delivery of the goods, the party transferring the goods is under an obligation to preserve and take care of the goods as a good manager, prior to delivery (article 374 of the Civil Code). In relation to the transfer of title, the law of the place where the goods in question were located at the time of such transfer shall be applicable (article 19 of the Conflict of Laws Act). In terms of the passing of risk, if the underlying contract provides for a different governing law, that foreign law shall apply. 8.4 Description and quality There are no specific terms or requirements regarding the description of the goods to be transferred. But with respect to the goods quality, if there is no agreement by the parties, the goods to be delivered are to be of medium quality (article 375 of the Civil Code). 312 european lawyer reference series

8.5 Performance Delivery The delivery of the goods is to be performed in strict accordance with the terms agreed by the parties, both in terms of the method of delivery and timing (article 460 of the Civil Code). Acceptance The buyer is deemed to have accepted the goods once they have been physically delivered to the buyer or their premises/property and the buyer does not refuse to accept them. In the case of any defects in the goods, the buyer is under a duty to examine the goods without delay, and upon the discovery of any defects or deficiency in quantity, the buyer must immediately notify the seller of the same. Otherwise, the buyer could lose the right to rescind the sales contract or to demand a reduction of the price or to seek any damages. In cases where the defects could not have been immediately discovered, the buyer must notify the seller of the defects within six months of the receipt of the goods (article 69 of the Commercial Code). Payment Unless there is an agreement to the contrary, the seller s transfer of the goods to be delivered and the buyer s payment for those goods shall occur at the same time (article 568 of the Civil Code). 8.6 Other terms Classification of terms South Korean law does not make such a distinction between warranties and conditions. In both the case of breaching a warranty or a condition, if the purpose of the contract cannot be achieved as a result, termination of the contract is an available remedy irrespective of whether it is a warranty or a condition (Articles 580 and 575 of the Civil Code). Intermediate or innominate terms In Korea, the concept of intermediate or innominate terms does not exist. In general, the failure to perform the obligations stipulated by such innominate terms could only lead to a party s rights to seek damages due to such failure, unless the consequences of the breach are serious and irreparable. Exemption clauses South Korean courts recognise exemption (ie, exclusion) clauses, such as force majeure. If the performance of the contract or contractual obligations is rendered impossible due to no negligence or intention by the performing party, no recourse shall be available by way of seeking any damages that have ensued (article 390 of the Civil Code). The parties may also agree on the exemption clauses, which the court may consider valid if there is no gross negligence (in contrast to ordinary negligence) or any intention on the part of the debtor. european lawyer reference series 313

8.7 Remedies Seller s remedies If the buyer is in breach of the sales contract, the seller shall have a right of rescission and may seek damages (article 390 of the Civil Code). Alternatively, the seller may deliver or attempt to deliver the goods and demand payment of the contract price. Pending the payment of the contract price, the seller has no obligation to deliver the goods, subject to the terms of the contract. Buyer s remedies The buyer would have a right of rescission and/or may claim damages, including any profit that the buyer could have earned were it not for the seller s breach of contract. General limitations on the remedies available In principle, remedies are limited to the recovery of the ordinary damages incurred as a result of the breach (article 393, paragraph 1 of the Civil Code). Ordinary damages are that which would normally be expected to result for a breach of the type of contract in question, while special damages (ie, damages other than ordinary damages) are compensable only if the breaching party knew of or could have reasonably foreseen the special circumstances that caused such special damages to arise. 8.8 Time limit Statutory limitation period Claims arising in connection with a commercial activity (eg, contracts) must be brought within five years unless a shorter period is provided for in another law (article 64 of the Commercial Code). Shorter contractual limitation periods In principle, courts uphold shorter contractual limitation periods. The parties can agree to a shorter limitation period (though not a longer one). However, in some cases (such as the time bar provided for in Chapter V of the Commercial Code (Maritime)), the parties are not permitted to agree to a shorter time bar. 8.9 Finance Letters of credit are payable on demand. But in cases of fraud (eg, presentation of a forged bill of lading), it is possible to obtain an injunction order from the court to prevent payment. If a performance bond is an on-demand guarantee, the court would only prevent payment in cases of fraud. 8.10 Security Prejudgment attachment A party may obtain a prejudgment attachment of the assets of the debtor party, even if proceedings to review the merits of the claim have not yet been commenced or if the merits of the claim are being disputed in another jurisdiction agreed by the parties. However, upon the issuance of 314 european lawyer reference series

a prejudgment attachment order, the debtor may move the court to order the creditor to commence proceedings to dispute the claim on the merits as well. Security may be obtained by way of a prejudgment attachment before any proceedings are commenced on the merits. Remedies There is no distinction between the remedies available for a claim that is subject to litigation and one that is referred to arbitration. A prejudgment attachment of assets is available in both instances. Tests applied to establish a right to each remedy In order to obtain a prejudgment attachment, the claimant must show two things: (a) a prima facie case that they have a claim against the debtor party and (b) that there is a need to obtain security for the claim by attaching the assets in question. But the above requirements are not difficult to meet, and generally, prejudgment attachments are readily granted by South Korean courts upon the provision of the counter security. There is no need to show a dissipation of assets. Counter security The arresting party is normally required to post counter security, and the amount of the counter security is entirely left to the court s discretion. But the amount is generally based on the type of the asset to be attached and the amount of the asserted claim (one-third to one-tenth of the claim amount). It is also left to the court s discretion whether the counter security is to be posted in cash or with a surety bond or through a combination of both cash and surety bond. (The surety bond mentioned here is readily obtainable from a South Korean surety bond company for a relatively low fee.) Applicant s exposure If an attachment of assets is successfully challenged, the applicant could face a claim for wrongful arrest, unless it can show that there was no negligence on its part. In such a wrongful arrest action, the claiming party would be entitled to seek ordinary damages (see the discussion of ordinary damages provided above). 8.11 Enforcement South Korea is a signatory to the New York Convention. When enforcing a foreign arbitral award rendered in a member state of the New York Convention, South Korean courts have strictly applied the conditions stipulated in the Convention, based on which the court may refuse to recognise and enforce the award. South Korea is not a signatory of the Vienna Convention. european lawyer reference series 315

9. GENERAL FORMALITIES 9.1 Formal Power of Attorney To represent a party before a South Korean court or administrative bodies or in institutional arbitration proceedings (such as those before the South Korean Commercial Arbitration Board), a power of attorney must be submitted authorising the lawyer to act on the party s behalf. 9.2 Notarisation of claim documents and their translation Notarisation of claim documents and their translation is not required. 316 european lawyer reference series