Seoul: Asia's Next Arbitration Hub?

The competition to be the leading center for international arbitration in Asia has long been between Hong Kong and Singapore.

But now Seoul thinks it could be a contender too.
 

Last week the Seoul International Dispute Resolution Center opened its doors. Financed by the city’s municipal government and the Korean Bar Association, the SIDRC is a state-of-the-art facility modeled after Singapore’s Maxwell Chambers. It already has deals to host arbitrations under the rules of the International Chamber of Commerce, American Arbitration Association, London Court of International Arbitration, Singapore International Arbitration Center, and Hong Kong International Arbitration Centre.
 

Hi-Taek Shin, a Seoul National University law professor who chairs the SIDRC’s executive committee, says the center will likely start as a physical venue for arbitrations seated elsewhere, but he hopes that, in a few years’ time, Seoul will increasingly be the designated seat for arbitrations under Korean Commercial Arbitration Board rules.
 

“In the south [of Asia], it could be Hong Kong or Singapore,” says Shin. “In the north, it could be Seoul.”
 

That’s the dream, but getting there will be harder than just opening a new center. Advocates for Seoul as an arbitral center point to its close proximity to Beijing and Tokyo, suggesting that it could be a natural destination for China-Japan commercial disputes. But Seoul has a troubled history and occasionally political flare-ups with both countries. Those issues, plus the fact that Korea’s biggest companies are major economic competitors of those in Japan and China, may make it hard for Seoul to tout itself as neutral ground.
 

Shin doesn’t think the historical or political issues will weigh too much against Seoul as an arbitration center. “Certainly we do have some historic issues,” he says. “But in a real commercial arbitrating setting, those people in those businesses are not so emotional or prejudiced against each other.”
 

A bigger question, in his view, is whether international parties will regard Seoul as a viable alternative in terms of legal infrastructure and human capital to Hong Kong and Singapore.
 

That’s where Seoul will likely fall short, says Denis Brock, a Hong Kong disputes partner with King & Wood Mallesons. Hong Kong and Singapore courts, he notes, have long enjoyed a strong reputation in the international arbitration community.
 

“In arbitration, if things go the wrong way, you need to go to the courts,” says Brock. “The courts in Hong Kong and Singapore are known as the best in Asia. I don’t think people know Korean courts as well.”
 

James Kwan, a Hong Kong arbitration partner with Baker & McKenzie, points out that a decision earlier this year in which a Seoul court declined to enforce an arbitration award against state-owned broadcaster KT Skylife set off alarm bells among international practitioners. “It raised questions about whether Korean courts can be objective in cases involving state-owned companies,” says Kwan.
 

He notes that concerns about Korean courts are compounded by the language barrier–Korean courts conduct proceedings in Korean as opposed to the English used in Hong Kong and Singapore–making it hard for international parties to follow what’s happening in Korean courts.
 

Shin says the Korean government and legal profession are well aware of such concerns, and that he was involved in a task force assigned to recommend revisions to the existing arbitration regime. “Those points are known and well taken,” he says. “Our next challenge is to upgrade our arbitration laws and to persuade Korean courts to be more arbitration-friendly.”
 

Brock does think Seoul will do well in situations where Korean companies have the upper hand in negotiations and can insist on a Seoul-seated arbitration or when most of the evidence and assets in a dispute are located in Korea. But he thinks it will be a challenge for the SIDRC to attract matters without a Korean nexus.
 

John Rhie, a former foreign attorney with Seoul’s Kim & Chang recently recruited to launch a Hong Kong–based international arbitration practice for Quinn Emanuel Urquhart & Sullivan, agrees that the SIDRC will probably initially hear mainly disputes involving at least one Korean party. But he thinks that could prove to be plenty of work.
 

“There’s a lot of work coming out of Korean companies,” says Rhie, who had an advisory role in the SIDRC’s creation. “They’ve gone from being the underdog or lesser light in lots of negotiations to having power.”
 

But Rhie is worried that many Korean companies won’t use their power and will continue to go along with default arbitration clauses specifying Hong Kong or Singapore, or even London or Paris. “There needs to be an understanding among Korean companies that this is an option,” he says. “Some Korean clients are becoming more aware, but many still don’t specify venue.”
 

With regard to non-Korean parties, Rhie thinks Korea may prove appealing to European companies because it’s a civil law jurisdiction, though a great many practitioners have studied abroad in common law jurisdictions, especially the United States.
 

But both Kwan and Brock point out that, while the top practitioners and arbitrators in Seoul have excellent reputations, there are fewer of them than in Hong Kong or Singapore. Moreover, the latter cities have larger collections of other international experts often needed in arbitrations, like forensic accountants.
 

Shin says there is no question there is an “internationalization” gap between Seoul on the one hand and Singapore and Hong Kong on the other. But he thinks it is starting to close, especially with the opening of the Korean legal market and the arrival of some 20 international law firms in Seoul.
 

But the Foreign Legal Consultant act that governs lawyers in international firm offices explicitly prohibits them from participating in arbitrations in Seoul if they involve Korean law. Benjamin Hughes, an independent arbitrator in Seoul who serves as a director at the SIDRC, points out that the law creates an odd situation in which Seoul-based lawyers are more restricted than those who fly in from other jurisdictions.
 

“If Korea wants to have more arbitrations, it should make it as easy as possible,” says Hughes. “It has to be made very clear that there’s no restriction on who can appear in an arbitration.”
 

Rhie says there’s no question that many issues still need to be sorted out and that it will take time for peoples’ perceptions to change. He figures it will probably take three to five years before Seoul becomes a strong alternative to Singapore and Hong Kong, or not.
 

From his new Hong Kong perch, though, Rhie hopes to be able to help out a bit. “I wouldn’t hesitate to recommend Seoul for arbitration if everything else made sense,” he says.

 

Souce: AmericanLawyer