South Korea’s take on international mediation: The next steps going forward

Yulchon LLC’s insight on the Korean Commercial Arbitration Board’s international mediation rules

Among its many endeavours in arduously promoting its many capabilities and qualifications in becoming the next hub for international dispute resolution in North-East Asia, as of 1 January 2024, the Korean Commercial Arbitration Board (KCAB) enacted and enforced its own International Mediation Rules (KCAB Rules or the Rules) with the help of Yulchon’s international dispute resolution team members, namely Mr. Yun Jae Baek, Ms. Hyunah Park and Ms. Seyoung Choe.

The KCAB has been in charge of administering domestic mediation cases in South Korea, including early court-annexed mediations. In fact, ‘early court-annexed mediation’ was introduced by the Korean courts in 2010, allowing the courts to refer a civil dispute to a mediation institution in order to conduct a mediation for a short period of time before the commencement of the main trial. Since 3 May 2010, the KCAB was appointed as one of the mediation institutions in charge of administering domestic early court-annexed mediations. Furthermore, the KCAB established its own domestic mediation rules in 2012, and has been handling mediation cases for domestic users. Given the recent trends in increasing the need to attain friendly and efficient settlements of international disputes via mediation, the KCAB decided to expand its services on a global scale using its expertise, competency, and familiarity in handling mediation cases.

The KCAB prepared its Rules by benchmarking other successful international mediation institutions such as the Singapore International Mediation Centre, as well as by taking into account international trends and practices in handling international mediation cases. Moreover, it has also taken into consideration the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention on Mediation (SCM) for ease of enforcing the settlement agreement reached via KCAB mediation.

In particular, the KCAB Rules comprise 11 articles in total, stipulating the application and procedure of the mediation rules. More precisely, under Article 1(2), the KCAB Rules apply to all mediations when:

there is an explicit agreement in writing between the parties to mediate the dispute under the KCAB Rules;
one of the parties wishes to refer the dispute under the KCAB Rules when there is no prior agreement between the parties; and
the parties have agreed in writing to mediate the dispute at the KCAB without designating any particular mediation rules and at least one of the parties to the dispute at the time of filing the request for mediation has its principal place of business or place of habitual residence in a jurisdiction other than South Korea.

Meanwhile, as a way to encourage parties to consider mediation even after the dispute arises, the KCAB Rules also details the procedure to follow in the commencement of mediation when there is no prior mediation agreement between the parties to mediate under Article 3. Moreover, in order to efficiently conduct the mediation in a cost-effective and expeditious manner while also reflecting the various technological advancements in communications technology, under Article 7(4), the mediator has the option to proceed with the mediation virtually.

It is also important to highlight that settlement agreements obtained through mediation under the KCAB Rules are enforceable. Therefore, in the case the parties reach a settlement agreement during mediation, they can either request the mediator to sign the mediation agreement or to issue an attestation confirming that a settlement was reached pursuant to Article 9(3) of the KCAB Rules. As a result, this attestation ensures the enforcement of the settlement agreement under the SCM.

Furthermore, as a measure to safeguard the impartiality and integrity of the mediation proceedings, the KCAB Rules provide that unless the parties agree otherwise, the mediator cannot act as an arbitrator, representative, counsel, expert, judge, witness or in any other capacity with respect to a dispute that is related to the present or past mediation proceedings. Also, the mediator shall not be involved in any mediation proceedings for which the dispute arises out of or in connection with the same contract or legal relationship nor a related contract or legal relationship in accordance with Article 11(1) of the KCAB Rules.

With respect to the mediation fees and expenses, at the time of filing the request for mediation, the KCAB requires a filing fee of KRW 1,000,000 that must be remitted by the applicant party under Article 1 of Appendix A of the KCAB Rules. In addition, depending on the amount in dispute, Article 2 of Appendix A of the KCAB Rules provides a simple table breaking down the various ranges of administrative expenses, from a minimum of KRW 500,000 to a maximum of KRW 25,000,000. However, if the amount in dispute is undetermined from the commencement of the mediation, then in principle, the administrative expense shall be KRW 3,000,000. As for the mediator’s fees and expenses, pursuant to Article 3 of Appendix A of the KCAB Rules, the mediator’s fees are based on an hourly rate agreed by the parties and the mediator. With respect to the mediator’s expenses, the KCAB will determine and fix what are deemed reasonable expenses incurred by the mediator.

In conclusion, it is important to emphasise that the purpose of the KCAB Rules is to efficiently settle disputes by providing a transparent and reliable framework for mediation that allows parties to focus on addressing and reconciling their respective underlying interests and concerns, with the end goal of facilitating and aiding the parties in mutually devising a practical solution. As such, the KCAB took this great initiative to promote international mediation.

With both arbitration and mediation at its disposal, the KCAB is better equipped with diverse tools to assist businesses resolve commercial disputes in an efficient and effective manner, making it a more attractive dispute resolution forum for both domestic and foreign businesses.

Yulchon LLC is a full-service international law firm headquartered in Seoul, South Korea. It employs more than 600 professionals, including more than 60 licensed in jurisdictions outside of Korea, and has offices in Shanghai, Hanoi, Ho Chi Minh City, Moscow, Jakarta, and Yangon. As one of Korea’s premier law firms, Yulchon maintains its high standards of excellence by valuing a culture of collaborative problem-solving.