KCAB: The Rise of a New Arbitration Hub in East Asia

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Author: Woohyung (Mark) Choe*

South Korea
International Institutions and Rules

South Korea has one of the biggest economies in Asia. Its economy is the 12th largest in the world with active foreign capital transfers and trades.[1] As a small country—smaller than the state of Florida—with limited natural resources, South Korea has historically depended heavily on trade and export throughout the globalization era.

Naturally, international arbitration cases involving Korean parties have increased steadily. The Korea Commercial Arbitration Board (KCAB), as the only arbitral institution in South Korea, has been hosting increasing numbers of international arbitration cases, and the country as a whole is determined to support KCAB’s growth in the international stage to become a new arbitration hub in the region.[2]

KCAB was established in 1966, but its effort to establish itself as an international arbitral institution began in earnest in 2007 when it adopted its International Arbitration Rules, which have since been amended and updated regularly to incorporate the UNCITRAL Model Law.[3]

To address the growing demand for international dispute resolution, KCAB INTERNATIONAL was established in 2018 as a separate division of KCAB. KCAB INTERNATIONAL aggressively recruited legal professionals and arbitrators with international and multilingual backgrounds with a goal to “further enhance the standing of Korea as a premier international dispute resolution center in Asia and beyond.”[4]

This objective of KCAB is a national goal, with the Korean government and the private sector buttressing the expansion of KCAB. The Arbitration Industry Promotion Act allows the Korean government to support KCAB through proposing initiatives and directing resources.[5] For example, the Seoul International Dispute Resolution Center is located in the middle of Seoul—in the Gangnam district—and boasts quality multi-purpose hearing facilities.[6] It is worth noting that “hosting more international cases” is one of the main objectives proposed by the South Korean government as part of carrying out the act, which was enacted in 2016.[7] Additionally, the Korean courts’ tendency to reliably enforce arbitration awards also contribute to making Korea a very arbitration-friendly jurisdiction.[8] Such determination and support from the country as a whole to establish a fair and efficient arbitral institution will encourage more foreign parties to bring their cases to KCAB.

KCAB’s most direct regional competitors are the Singapore International Arbitration Centre and the Hong Kong International Arbitration Centre. While it is still in the early stages, the recent National Security Act passed in Hong Kong might have international companies increasingly avoid Hong Kong for a center for dispute resolution, especially knowing that China’s influence over Hong Kong is growing and that China has been reluctant in enforcing foreign arbitration awards.

Regardless of the situation in Hong Kong, international cases for KCAB has been growing steadily. Out of the total 443 arbitration cases handled by KCAB in 2019, 70 cases were international cases, which is a 12.9% growth from the previous year. The diversity of the nationality of the KCAB users is noticeable as well. 30 different countries were represented in KCAB in 2019. 15.1% of the international cases were filed by parties from the United States. The U.S. ranked first in this category for two consecutive years, while also ranking first in the dispute amounts with KRW 28.3 billion (approximately USD 24 million).[9]

South Korea has been an economic powerhouse, especially in Asia, for the last couple decades. Along with its economic growth, South Korea’s historical reliance on international trade and commerce further highlight the importance of South Korea being a hospitable country for foreign investment and trade. The establishment of KCAB INTERNATIONAL came as part of that effort.

KCAB can also play an important role for Korean companies seeking outbound investment in foreign countries. As the economic growth in Korea stagnates, more Korean companies are turning their heads to outbound investment opportunities. And more often than not, arbitration clauses are included in the investment contracts. Companies unfamiliar with foreign arbitral institutions and limited multilingual resources will prefer KCAB as their arbitral institution. This assurance can induce smaller companies adventure foreign investment opportunities and open up possibilities for the Korean economy.

Growing outbound direct investment and increasing use of international arbitration by Korean companies are some of the reasons behind the emphasis on KCAB by the Korean government and private sector. With national interest relying on the growth of KCAB, KCAB will be endeavoring to meet the high standards of companies seeking quick, less costly, and efficient dispute resolutions to establish itself as a prominent international arbitration hub in East Asia.

[1] Lim Jeong-yeo, Korea ranks 12th in world GDP ranking: World Bank, The Korea Herald (July 7, 2019), http://www.theinvestor.co.kr/view.php?ud=20190707000187

[2] Beomsu Kim, Young Suk Park & Keewoong Lee, Korea, The Asia-Pac. Arb. Rev. 2020 (May 24, 2019),https://globalarbitrationreview.com/insight/the-asia-pacific-arbitration-review-2020/1193379/korea

[3]KCAB INTERNATIONAL, http://www.kcabinternational.or.kr/main.do (follow “Contact Us” hyperlink; then follow “FAQ” hyperlink) (last visited Sept. 20, 2020).

[4]KCAB INTERNATIONAL, http://www.kcabinternational.or.kr/main.do (follow “About” hyperlink) (last visited Sept. 20, 2020).

[5] Kim, supra note 2.

[6] Id.

[7] David MacArthur & Mino Han, South Korea ups the ante with the Arbitration Industry Promotion Act, Int’l Bar Ass’n (Sept. 4, 2019),https://www.ibanet.org/Article/NewDetail.aspx?ArticleUid=146A7563-A0C4-4723-A055-F6623D537D88

[8] Kim, supra note 2.

[9] 2019 KCAB Annual Report, KCAB INTERNATIONAL 11 (May 8, 2020), https://globalarbitrationnews.com/wp-content/uploads/2020/07/2019-KCAB-ANNUAL-REPORT_FINAL.pdf.

*J.D. Candidate 2022, Columbia Law School