Recent Developments in Korean Maritime Law: Improved Shipowner's Remedy in Wrongful Arrest
Dong Hee Suh1
I. Introduction
Recently, there have been some significant developments in the realm of maritime law in Korea, specifically in the area of wrongful arrest of a vessel. Not so long ago, it was virtually impossible for a shipowner to recover damages for loss of use when a claimant wrongfully arrested a vessel. A shipowner's bargain ing power, once the claimants successfully arrested his vessel, diminished quite dramatically. In such event, shipowners had to post a cash deposit to release their vessels under certain circumstances. Moreover, the shipowners were reluctant to proceed with the action seeking damages arising from the arrest even if the arrest was believed to be wrongful. Until 1998, few loss of use cases had been brought to a final judgment. Accordingly, the shipowners could hardly assess whether they would be adjudged to be entitled to the claim for damages for wrongful arrest. Even if they were regarded as being entitled to such damages, there was a question as to how much the Court would award in their favor, as there were no precedents that could guide them.
The wrongful arrest of a vessel involved some unique issues such as flag of convenience (i.e., ownership of the vessel) and how much damage resulted from the detention. For these reasons, the precedents dealing with the wrongful arrest (or attachment) of real estate or movable assets were not very helpful. Therefore, the shipowners, not infrequently, had to make settlement agreements, whereby they had to pay a substantial amount of money to the arresting party. Moreover, the shipowners had to waive any potential wrongful arrest claim, believing that this sort of settlement would enable the vessel to be released without further damage. Consequently, any action seeking damages arising from the wrongful arrest of a vessel, were rarely carried to a final judgment by a Korean court prior to 1998.
Modern Korean jurisprudence traces its origin to the civil law tradition, thus judgments rendered by Korean courts do not have stare decisis effect. Nevertheless, two recent decisions rendered by an international tribunal of the Seoul District Court and one by an international tribunal of the Seoul High Court (Appellate Division) will undoubtedly change the direction which the courts will take in the future with respect to wrongful arrest of vessel cases. This is especially true in light of the fact that the tribunals rendering the above judgments are the fora to which all of the cases that are international in nature are usually assigned, so long as a case is pending before Seoul District Court. In other words, any subsequent cases that are internationally related, i.e., involving such issues as the arrest of foreign vessels, are likely to be assigned to the same tribunals. Further, even if future cases are to be handled in the Pusan District Court or other district courts, the above judgments would offer persuasive authority substantially influencing their determination of the same issues. For these reasons, the safe conclusion is that Korean law regarding the wrongful arrest of vessels has been clarified by the three cases discussed in this article.
II. Two Ways in which an Arrest can be effected on a Vessel under Korean Law
The process of arresting a vessel in Korea is not much different from arresting a vessel in a common law jurisdiction, although there are few differences. The proceeding concerning arrest of a vessel can be conducted ex parte. There are two ways in which a claimant can arrest a vessel: one is based on pre-judgment attachment and the other, on the basis of a maritime lien or mortgage (under which the claimant is entitled to proceed with a sale by auction).
1. Arrest based on Pre-Judgment Attachment (sunbak-ga-aplieu)
A pre-judgment attachment order sought against a vessel must be based on claims owed by her registered owner. The pre-judgment attachment is a measure for the creditor to provisionally preserve the assets owned by the debtor. By the pre-judgment attachment, a creditor can arrest any assets owned by the debtor. Thus, pre-judgment attachment is not a unique feature only found in Korean maritime law. In many ways, pre-judgment attachment under Korean law, corresponds to saisie conservatoire under French law.2 Under Korean law, three requirements must be satisfied for the arrest of a vessel: (1) there must exist a claim on the merits; (2) the arrest must be necessary to secure the claim; and, (3) the "target vessel" must be owned by the debtor.
As with other civil law countries, the claim is not limited to a "maritime claim" as defined in the International Convention on Arrest of Ships of 1999.3 As a practical matter, the necessity element in the second requirement is easily met. Notably, if a maritime lien is available, the arrest of a vessel is deemed to have been unnecessary. For instance, the Korean Supreme Court held that the arrest of a vessel based on the pre-judgment was illegal where a maritime lien was available.4 Although the judgment is sometimes criticized, it is very likely to be followed by the lower courts. This approach is, in the author's view, very unique. Thus, Korean maritime lawyers must confirm the non-availability of a maritime lien for the specific claim under the law of the vessel's flag country, before proceeding with the arrest based on pre-judgment attachment.
Contrary to the 1952 International Convention for the
Unification of Certain Rules relating to the Arrest of Sea-Going Ships,
under Korean law, a claimant may not arrest a particular ship in which
a claim arose, if the ship is not owned by the debtor.5 On the other hand,
a claimant may arrest any vessel that is owned by the debtor at the time
the vessel is arrested. This issue is frequently related to the flag of
convenience registration issue, and, therefore, often problematic for
the arresting party's search for the actual owner of the target vessel.
In any event, nearly all of the disputes on the legitimacy of the arrest
are focused on whether or not a meritorious claim existed at the time
of the arrest and whether the arrested vessel is owned by the debtor.
In the case of an arrest based on a pre-judgment attachment, the claimant
must post approximately one-eighth to one-tenth of the amount of claim
(not the value of the vessel to be arrested) with the court, in cash or
by surety bond, as counter security before the Court will issue a prejudgment
attachment order.6 The surety bond is available even to foreign creditors
and, normally, it takes one to two days from the application for the arrest
until the arrest order is effected. Accordingly, the arrest of a vessel
may be made promptly, at a relatively low cost.
2. Arrest based on Maritime Lien/Mortgage (sunbak-im-ui-gyungmae)
Under the Korean rules on conflict of laws, in order to arrest a vessel based on a maritime lien or mortgage, the claim must give rise to a maritime lien under the law of the flag country of the vessel. For the arrest based on maritime lien, the claimant must prove: (i) the existence of a claim on its merits; and, (ii) the availability of a maritime lien for the claim under the law of the vessel's flag country. With regard to requirement (ii), the arresting party usually submits an affidavit or a photocopy of the book stating the maritime lien is under the concerned flag country. One of the significant differences between the arrest based on pre-judgment attachment and the arrest based on maritime lien is whether the arrest of a vessel leads automatically to the appraisal and sale of the vessel.
In the case where the arrest is based on the pre-judgment attachment, the vessel remains arrested until a final judgment is issued. However, in the case of an arrest based on a maritime lien or mortgage, a vessel does not usually remain arrested because the arrest based on the maritime lien or mortgage is to compel the owner to post a bond in order to secure payment of any judgment and allow release of the vessel. In the case of an arrest based on a maritime lien or mortgage, no security deposit is required; however, auction fees and appraisal costs, etc., must be paid to the court at the time of the application, since an arrest under a maritime lien aims at proceeding with a sale by auction. Moreover, there is no filing fee to be paid to the court. The auction costs are recoverable with first priority from the sale proceeds of the vessel before distribution to other claimants..
III. Claim for Wrongful Arrest and its Amount
For shipowners to assert damages for wrongful arrest,
they should prove that: (i) any one of the above three (in the case of
pre-judgment attachment) or two (in the case of maritime lien) requirements
were not met; and, (ii) negligence or intent was involved in the arrest
on the part of the claimant. If any one of the above requirements is lacking,
the arrest can be cancelled by a motion for objection. In Korea, once
the lack of merit is found, there is an automatic presumption of negligence
or intent. If such presumption is established, then the burden transfers
to the defendant to rebut, which, as a practical matter, has been extremely
difficult. Thus, the shipowner will likely obtain recovery for reasonable
damages causally connected to the wrongful arrest. The author understands
that winning a wrongful arrest action in a common law jurisdiction was,
and still is, quite difficult due to the stringent requirement imposed
upon the plaintiff to prove that the defendant had actual malice, or was
grossly negligent in forming the belief that the arrest was necessary.
Theoretically, the shipowners would be awarded compensation for the damage resulting from the wrongful arrest, provided that the damage is regarded as a damage that is causally connected to the wrongful arrest to a reasonable degree. This standard for the scope of damage is, in the author's view, similar to the foreseeability standard adopted by the common law countries. However, because, as stated earlier, there were no precedents dealing with wrongful arrest in Korea, shipowners could hardly anticipate how much would be awarded in their favor.
IV. Recent Judgments
The following judgments rendered by the Seoul District Court and the Seoul High Court (Appellate Division) expanded the Korean courts' position with regard to wrongful arrest damage claims by shipowners against the claimants.
1. Atlantic Lily Case
In Atlantic Lily (Banchory Shipping Company Limited v. SK Corporation), Banchory Shipping Co., Ltd., ("Banchory Shipping") chartered a vessel to Project Asia Line, Inc., ("PAL") at the daily rate of US$7,500.7 Sometime during the course of the voyage, PAL purchased 198.95 tons of bunker, worth US$27,228 on credit from the defendant, SK Corporation ("SK") in the Port of Balboa, Panama. PAL subsequently became insolvent, and failed to pay SK for the fuel. When the vessel, which was the center of controversy, entered the Port of Pusan, Korea, SK arranged for the arrest of the vessel based on a maritime lien, arguing that the law of Cyprus, the country where the defendants claimed that the vessel was registered, granted claim for bunker supplies with the maritime lien. In applying for the arrest, the lawyers acting for SK submitted an excerpt from the "Maritime Law Handbook" as evidence of Cyprus law, wherein a Cyprus lawyer explained the priority of claims against the proceeds of sale. Banchory Shipping had to post a cash deposit to have the vessel released. Subsequently, Banchory Shipping brought an action claiming that damage arose from the arrest.
In the above case, the Court ruled that although Korean procedural law governed, the substantive law of the country of registry (i.e., Cyprus) applied to the case. The Court found in pages preceding the ones from the "Maritime Law Handbook" that SK had submitted to the Court that Cyprus had chosen to adopt the law of Great Britain regarding maritime liens, and according to British law, bunker supplies are not granted with maritime liens. The Court held that the defendant, SK, was negligent in not carefully researching the law of Great Britain, which was the choice of law for Cyprus on the relevant issue.
The Seoul District Court awarded damages of KW30,224,425 (equivalent to about US$27,000) as compensation for the loss of use, the port fees that were incurred as a result of the detention, attorney's fees, and other related costs. With regard to the loss of use claim, the Court awarded damages in favor of Banchory Shipping based on the time the vessel had been detained during which the vessel could have been hired.
2. Stolt Sapphire Case
A more recent judgment by the Seoul District Court, NYK Stolt Tankers S.A. v. LG Fire & Marine Insurance, which was later affirmed by the Seoul High Court (Appellate Division), indicates that this decision is part of a clear trend.8 M.V. "Stolt Integrity" ("Stolt Integrity") which was owned by SP Integrity, Inc., was entered, along with numerous other vessels, into a pool named "Stolt Pool." After entry, the vessels were uniformly outfited with a yellow hull, red deck, and a big letter "S" on the funnel. All of the entered vessels used the name "Stolt" in transactions with others. The Stolt Pool was managed by Stolt Parcel Tankers, and once a vessel was entered into the pool, the manager handled the everyday affairs of the vessel; the owner only retained a few important rights, such as the right to transfer title of the vessel.
LG Chemical, Inc., ("LG Chemical") imported epichlorohydrin from Dow International B.V. ("Dow Chemical") and Stolt Integrity was chartered to transport the chemical. The insured party, LG Chemical, claimed that during transit the cargo suffered contamination. Therefore, LG Fire & Marine Insurance ("LG F&M"), the insurer for the consignee in the Bill of Lading, paid out on, and became subrogated to, LG Chemical's claim against the carrier. The Bill of Lading was issued in the name of Stolt Tankers and incorporated the Voyage Charter Party made between Dow Chemical and Stolt Parcel Tankers. The Charter Party contained an arbitration clause setting New York as the forum.
In accordance with the arbitration clause, the parties decided to arbitrate the contamination issue in New York. Notwithstanding this, LG F&M tried to change the venue from New York to Korea, believing that New York arbitration would be unfavorable to their case. LG F&M warned Stolt Parcel Tankers that a Letter of Guarantee having Korean jurisdiction should be provided, or they would arrest any vessel belonging to the Stolt Pool. Nonetheless, Stolt Parcel Tankers offered the standard forum in the Letter of Guarantee to LG F&M, and warned against wrongful arrest, saying that the vessels of the Stolt Pool were of different owners. LG F&M rejected this offer, as their intention was not to obtain any security, but to change the forum to a Korean court. Subsequently, LG F&M arrested M.V. "Stolt Sapphire" ("Stolt Sapphire") based on the pre-judgment attachment.
The Stolt Sapphire, which was owned by Sapphire Navigation, Inc., was under a bare boat charter ("BBC") to NYK Stolt S.A. ("NYK Stolt"). The Stolt Parcel Tankers requested LG F&M to withdraw the application for arrest, informing them that the Stolt Integrity and Stolt Sapphire each belonged to different corporations and that the arrest of Stolt Sapphire in Ulsan, Korea, was obviously illegal. Because LG F&M refused the demand, NYK Stolt had to pay a cash deposit in order to release the vessel. Subsequent to the release, both parties settled on the cargo claim; however, the parties stipulated that the wrongful arrest issue was not waived by the settlement.
NYK Stolt brought an action seeking damages arising from the arrest before the Seoul District Court. The threshold issue was whether NYK Stolt ("Plaintiff"), the owner of Stolt Sapphire, and the owner of Stolt Integrity ("Debtor") were one and the same entity. The second issue was whether LG F&M was negligent in having arrested Stolt Sapphire. The first issue is related to the doctrine of "piercing the corporate veil." Although Korean courts are hesitant to perforate the "corporate veil" of a company, even if it is a "paper company," they have held in a few recent cases that the actual owner was forbidden from claiming that the involved companies were different entities. In this case, the Seoul District Court held that Plaintiff, the owner of Stolt Sapphire, and Debtor were not a single entity. With respect to the second issue, the Court held in favor of NYK Stolt. The Court's decision was likely influenced by the fact that LG F&M tried to change the forum from New York arbitration to Korean litigation, which was deviating substantially from the original purpose for the arrest.
As such, the Court awarded LG F&M liable for the damages sustained by Stolt Sapphire with respect to the wrongful arrest. In regard to the quantum of damages, the Court awarded: (i) a loss of earnings (or use) in the amount of US$207,914.31; (ii)
financing costs in the sum of US$3,400; 9 and, (iii) attorney's fees of US$5,000. On the contrary, the Court rejected the claim for fuel costs in the sum of US$12,134.70, reasoning that the fuel costs were reflected in calculating the amount for the loss of earning (use), and the Court rejected the claim for US$42,755.16, allegedly arising from the difference between the currency rate that was applicable at the time of the deposit and the applicable one at the time of receiving the deposit, holding that such currency fluctuation was not foreseeable at the time of arrest.10
3. Tokyo Bay Case
The most recent judgment on this issue was Fuji Shipping Company Limited v. Hanway Shipping Co., Ltd.11 In this case, M.V. "Tokyo Bay" was voyage-chartered by Discovery Navigation, Inc., ("Discovery Navigation") to Hanway Shipping. Fuji Shipping Company, Ltd., ("Fuji Shipping"), the registered owner of the vessel, chartered the vessel to a pool named "Seatrade Pool." The pool agreement between Fuji Shipping and Seatrade Pool in many aspects resembled a BBC agreement. The Seatrade Pool time-chartered the vessel to Discovery Navigation, which later breached the charter party with Hanway Shipping. To secure their claim arising from the breach, Hanway arrested the vessel.
In Fuji Shipping's action for wrongful arrest damages, the "piercing of the corporate veil" issue arose. The Court found that Fuji Shipping and Discovery Navigation were not the same corporate entity, awarding damages in favor of Fuji Shipping. However, the Court held that Fuji Shipping did not have standing to claim for loss of earnings (use) against Hanway Shipping; instead, it implied that Seatrade Pool should have claimed those damages. Despite the fact that there had been a detention of the vessel due to the arrest, Fuji Shipping could not prove that they suffered any loss of hire due to the arrest. It appeared that Fuji had been paid a profit dividend even for the detention period, on the ground that the detention was not attributable to Fuji Shipping.12
V. Conclusion
Being awarded loss of use damages in wrongful arrest of vessel cases was a virtual impossibility for shipowners in Korea before 1998. Not only did the courts consider such damage too speculative, the plaintiff-shipowners rarely pursued such claims to a final judgment. The recent shift in the Korean courts with regard to this issue has been ground-breaking. A country, whose courts, until recently, were undoubtedly pro-defendant in this type of case, changed its position almost overnight. Today, a party whose vessel was wrongfully arrested within the jurisdiction of Korea, as a result of a defendant-claimant's oversight, can expect to recover loss of use damages, so long as simple negligence on the part of the defendant can be proven.
This trend is very significant
in several respects. For instance, the recent judgments rendered by the
Korean courts are expected to lessen the disparity in bargaining power
between the shipowner-plaintiffs and claimant-defendants in loss of use
claims, resulting from the wrongful arrest of a vessel. In Korea, obtaining
the release to shipowners of an arrested vessel is very burdensome, as
they have no choice but to deposit cash with the court.
1 Founding partner of Suh &
Co, Seoul, Korea, and formerly a partner with the Law Offices of Kim &
Chang. The author has practiced maritime law in Korea for over 15 years.
He earned his LL.B. in 1984 from Seoul National University and his LL.M.
in Admiralty from Tulane University School of Law in 1996. He is admitted
to practice in both Korea and New York State.
2 See generally William Tetley, Q.C.,
Arrest, Attachment and Related Maritime Law Procedures, 73
TUL. L. REV. 1895-1985 (1999).
3 Convention on Arrest of Ships,
March 12, 1999, U.N. I.M.O.
4 Judgment of July 13, 1982, Supreme
Court, 80 Da 2318
5 Convention for the Unification
of Certain Rules relating to the Arrest of Sea-Going Ships, May 10, 1952,
U.N. I.M.O.
6 Surety companies in Korea generally
charge one percent of the secured amount as a premium.
7 Judgment of February 5, 1998,
Seoul District Court, 97 Kahap 60529.
8 Judgment of January 8, 1999,
Seoul District Court, 98 Kahap 18518; Judgment of January 21, 2000, Seoul
High Court, 99 Na 9211.
9 For the release of the vessel,
NYK Stolt was required to pay the release deposit in cash. The statutory
interest rate for civil cases in Korea is five percent per annum. On the
other hand, two percent per annum interest was earned while the deposit
monies were held by the court. The above amount was the difference between
the two rates for the money held in court with some modification arising
from the viewpoint of taxes.
10 In 1998, the Korean won suffered
the most dramatic loss in value against the US dollar. This was a result
of the economic crisis that struck several Asian countries, including
Korea, in late 1997, which required a bailout by the International Monetary
Fund. With IMF bailout, South Korea braces for belt-tightening, CNN, November
22, 1997, at http://www.cnn.com/WORLD/9711/22/s.korea.imf/.
11 Judgment of June 13, 2000,
Seoul High Court, 99 Na 31232.
12 Id. Fuji was paid a dividend for the detention period; therefore, in order to prevent duplicative compensation, the Court refused to award damages.
ARTICLES 2
SILENT REVOLUTION
I. Introduction
The general trend in maritime law has been to hold shipowners, not time charterers, liable, for the tortious conduct of the master and crew. Nonetheless, Korean courts have, until recently, held time charterers liable based upon Article 766 of the Korean Commercial Code("KCC"). Article 766, affords the lessee of a vessel "the same rights and duties as the shipowner . . . ." The KCC fails to address the issues of time charterer's, especially with respect to liability as against cargo owners. Previously, the Korean Supreme Court had likened a time charter to a lease. Therefore, the Supreme Court, arguing by analogy, held time charterers liable as they would lessees for the torts of the master and crew. (See Supreme Court Judgment of Jan. 28, 1994, in re 93 Da 18167; Supreme Court Judgment of Feb. 25, 1992, in re 91 Da 14215.)
II. The Facts of the Case
On July 10, 2001, however, it appears that the Supreme
Court, rejected the time charterer / lessee analogy. Instead, it appears
that the Court executed a dramatic shift in accord with the general trend
to impute liability on the shipowner. In that case, Maruchan Virginia,
Inc., ("Maruchan"), a company in the United States, purchased
2,941 rolls of plastic film for the packaging of food ("Cargo")
from Dae Young Conbulting Co., Ltd., ("Dae Young") in Korea.
Dae Yoo Shipping Co., Ltd., ("Dae Yoo"), the freight forwarder,
issued a House Bill of Lading to Dae Young for the containerized shipment
of the Cargo, appointing Maruchan as the notify party. Dae Yoo, on behalf
of Dae Young, then contracted with Cho Yang Shipping Co., Ltd. ("Cho
Yang") for carriage of the Cargo. Cho Yang had a space charter contract
with the defendant, TSR-Senatore, the carrier who actually transported
the Cargo. Cho Yang issued a Master Bill of Lading to Dae Yoo, naming
Dae Young as the shipper and Container Trade International Corp. as the
receiver. The Master B/L provides Cho Yang as the carrier.
However, TSR-Senatore was using a vessel, MV TOKYO SENATOR, pursuant to
a time charterer with the vessel's owner, Conti Capitano Schiffahrts-GmgH
& Co. KG ("Conti Capitano"). On March 25, 1994, Dae Young
bought a cargo insurance policy from the plaintiff, Daehan Fire &
Marine Insurance Co., Ltd., ("Daehan Fire & Marine") for
the carriage of the Cargo from Pusan to Norfolk. The Cargo was stowed,
trimmed and counted by Dae Young, and it did not belong to the dangerous
goods under the International Maritime Dangerous Goods Code. On March
29, 1994, the vessel departed for Norfolk, Virginia, arriving on April
28, 1994.
After the vessel arrived in Virginia, the crew noticed a heavy smell and smoke from the hold No.2 containing the Cargo. They closed the ventilator and injected the hold with carbon dioxide. Upon opening the container on May 10, 1994, Maruchan discovered that the Cargo had been deformed by heat and contaminated by smoke. Because the Cargo was rendered useless, Maruchan scrapped the entire lot. Maruchan submitted a claim to Daehan Fire & Marine. On August 10, 1994, Daehan Fire & Marine paid USD 192,167.36 to Maruchan for the damage to the Cargo. Daehan Fire & Marine subsequently filed suit against TSR-Senatore because Cho Yang was bankrupt, based on tort and breach of contract. Conti Capitano, the shipowner, was not involved in the litigation.
III. The Supreme Court's Decision
For the breach of contract claim, the Korean Supreme Court held that Daehan Fire & Marine had no standing to pursue the cause of action against TSR-Senatore because they had no contractual privity and the Master Bill of Lading had not created an agency relationship. (Supreme Court Judgment of Jul. 10, 2001, in re 99 Da 58327.) Remember, TSR-Senatore never contracted with Dea Young, Dae Yoo or Maruchan, for the shipment of the Cargo. The only contracts were between the seller, Dae Young, and Dae Yoo, the freight forwarder, and Dae Yoo (or Dae Young, depending on the interpretation of the Master B/L) and the shipping line, Cho Yang. On the other hand, Dae Han Fire & Marine failed in the tort claim as well as they could not satisfy a burden of proof that the concerned damage was caused by intentional act or negligence on the part of the defendant (i.e. the Master or the crew).
IV. Conclusion
As stated earlier, the Court's decision is significant because they dispensed with the previous analogy that a time charter was the same as a lease for purposes of liability under Article 766 of the KCC. Additionally, although the Court ostensibly did not hold Conti Capitano liable because the shipowner was not a party to the lawsuit, we believe that the Court actually offered a new interpretation of Article 806 of the KCC, which imputes the liability of a charterer-with no distinction between a demise, time or voyage charterer-to third persons onto the shipowner. Previously, Article 806 was not read to include time charterers. The Supreme Court, in holding a time charterer not liable for the claims of a cargo owner, presumably interpreted Article 806 more in line with the general trend in the major maritime countries. Good news for time charterers, but not a welcome change for owners. Nonetheless, the Korean Supreme Court has rendered Korean law more consistent with general maritime law.
ARTICLES 3
RECENT AMENDMENT ON CIVIL PROCEDURE IN KOREA
On January 26, 2002, the Korean National Assembly enacted
some revolutionary changes to the Korean legal system that will become
effective on July 1, 2002. The Assembly addressed the following issues:
Expediting the Resolution of Civil Suits,
Expansion of Special Tribunals,
Establishment of Discovery Procedures,
Availability of Naming Multiple Defendants, and
Examination of Debtor's Assets.
I. Expediting the Resolution of Civil Suits
The legislature enacted a provision to the Korean Code of Civil Procedure that requires the defendant to reply to the plaintiff's complaint within thirty (30) days of service thereof or the court will render judgment for the plaintiff. While this change can really expedite the resolution of a case, another change will do so with a different approach. The legislature has ordered the courts to reduce the number of hearings on a case. Previously, the court could and would hold numerous hearing on a matter, forcing the parties to make numerous appearances. Now, the courts are encouraged to arrange for the parties to exchange their briefs for only one hearing. While this might sound unusual to non-Korean clients in countries where the court holds one trial which can last for days, weeks, even months, in Korea the concept of a trial refers to a series of hearings which might only last twenty minutes or so. Thus, the impetus for the change in the law is to encourage Korean courts to consolidate the hearings into a more trial-like proceeding.
II. Expansion of Special Tribunals
Currently, only Seoul and Pusan, Korea's first and second largest cities, respectively, have special tribunals devoted to "international transactions," i.e., cases involving foreign elements, including admiralty matters. The advantage of these tribunals is that the judges assigned to them are experts in the relevant areas. The legislature has decided to expand the number of special tribunals so that other judicial regions of Korea have their own expert courts in the areas of international transactions as well as intellectual property.
III. Establishment of Discovery Procedures
The Korean Civil Procedure Code includes no provisions
for discovery procedures, which makes obtaining documents from your opponent
quite difficult. The legislature has now enlarged the scope of discovery
by providing that a litigant can demand documents from their opponent
who must release the requested documents unless they are incriminating,
confidential, shameful, etc.
The Assembly has also enacted some stiff penalties for witnesses called
by the court who fail to appear. After the first non-appearance, the witness
is subject to a KRW 5 million (approximately USD 3850) fine. If the witness
again fails to appear at the appointed time and place, the court can confine
him for up to seven days on a charge of contempt of court. Both of these
new provisions will allow litigants to obtain information from documents
and persons in a more reliable and efficient manner.
IV. Availability of Naming Multiple Defendants
In the past, a plaintiff could not simply name one defendant, alleging
that they were negligent, and simultaneously name another defendant, maintaining
that if the first defendant was not liable then the second defendant was.
The courts disallowed this "in the alternative" argument, forcing
plaintiffs to choose only one defendant. Now, plaintiffs have more flexibility
when naming the defendants because they can use the "in the alternative"
argument.
V. Examination of Debtor's Assets
Without a centralized system for locating the assets of a judgment-debtor, Korea left the creditors who obtained judgments with little recourse. Thanks to the National Assembly, judgment-creditors in Korea can apply to the court for disclosure of the debtor's assets and the debtor must comply. If the debtor does not attend the judgment-debtor examination without just cause for the failure, he is subject to twenty days' confinement. Furthermore, if the debtor refuses to disclose his assets under oath or provides no list of assets at all, he is subject to the same period of incarceration. Moreover, the court can also make inquiries among public and financial institutions in order to locate the debtor's assets.