Recent Developments

Recently, the International Arbitration Center of the Korean Commercial Arbitration Board (KCAB International) completed a comprehensive revision of its International Arbitration Rules, which will take effect on and from 1 January 2026. Unless otherwise agreed by the parties, the revised Rules shall apply to all arbitrations that commence on or after 1 January 2026 where the parties have agreed in writing to refer their dispute to arbitration before KCAB International or to conduct the proceedings under the KCAB International Arbitration Rules (Article 1.9). This amendment, the first in ten years since the 2016 Rules, aims to enhance transparency and efficiency. It carries particular significance because the rules revision committee, established in 2022, undertook a structural overhaul of the procedures by drawing on input from global practitioners, arbitrators, and users. This newsletter provides an overview of the major amendments newly reflected or modified under the revised Rules. 1. Introduction of the International Arbitration Court     The most notable change in this revision is the establishment of the International Arbitration Court (KCAB Court), an independent body that performs key case-administrative functions (Article 1.3). Unlike the Secretariat, which conducts day-to-day case management under the direction and supervision of the Secretary-General, the KCAB Court has been introduced to ensure transparency and to clarify the decision-making in major procedural decisions, including arbitrator appointment, challenges and replacement of arbitrators, joinder of additional parties or consolidation of arbitrations prior to the constitution of an arbitral tribunal, and decisions on arbitration costs.     The establishment of the KCAB Court, composed of international arbitration practitioners familiar to parties and their representatives, enhances user confidence in the institution’s decision-making process and strengthens the KCAB’s international competitiveness. 2. The Fast-Track Procedure and the Reorganization of the Expedited Procedure     To enhance procedural speed and cost-efficiency, the existing Expedited Procedure has been reorganized, and a separate Fast-Track Procedure has been established. The Fast-Track Procedure (Article 50) applies to cases where the amount in dispute does not exceed KRW 500 million or where the parties agree to be subject to the Fast-Track Procedure. Under the Fast-Track Procedure, an award must be rendered within three months from the constitution of an arbitral Tribunal (Article 53.1). In case of the existing Expedited Procedure, its applicable scope has also been expanded to cases where the amount in dispute exceeds KRW 500 million but does not exceed KRW 4 billion (Article 45.1). The increase aligns the KCAB International Rules with other major institutions and ensures that the Expedited Rules will apply in more cases. 3. Shortened Timelines for Tribunal Formation and Enhanced Diversity     To prevent early-stage procedural delay, time limits for nomination and constitution of an arbitral tribunal have been shortened. If the KCAB Court decides to refer the dispute to a sole arbitrator, and the parties fail to nominate an arbitrator within 15 days, the KCAB Court shall appoint the sole arbitrator (Article 12.2). Where the KCAB Court decides to refer the dispute to three arbitrators, the Claimant shall nominate an arbitrator within 15 days of receiving notice of such decision and the Respondent shall nominate an arbitrator within 15 days of receiving notice of the nomination made by the Claimant (Article 12.4). If the presiding arbitrator is not nominated within 15 days of receipt by the Secretariat of a procedure for the nomination of the presiding arbitrator agreed between the parties, the KCAB Court shall appoint the presiding arbitrator (Article 12.5).     The revised Rules also introduce diverse procedural improvements on the appointment of arbitrators. The Rules encourage parties, co-arbitrators, and any third parties or bodies nominating arbitrators to give due regard to considerations of diversity (Article 12.7). When appointing arbitrators, the KCAB Court must consider not only experience, nationality, residence, availability, ability to conduct the arbitration, but also diversity (Article 12.8).     In addition, beyond the existing grounds relating to impartiality and independence, *de jure* or *de facto* inability to perform functions and undue delay now constitute grounds for challenging arbitrators (Article 14.1). Prospective arbitrators must also submit, in addition to the existing Statement of Acceptance and Statement of Impartiality and Independence, a Statement of Availability confirming that they have sufficient time to conduct the arbitration (Article 10.2). 4. Award Scrutiny     A scrutiny "light" process for draft awards has been introduced to improve the quality of awards (Article 39.2). Under the revised Rules, an arbitral tribunal must submit a draft award to the Secretary-General for scrutiny within 60 days from the later of the last hearing or the filing of the last written submission. The arbitral tribunal shall sign the award within 15 days following scrutiny by the Secretary-General or the KCAB Court (Article 39.2).     Once the arbitral tribunal submits the draft award to the Secretary-General within the above mentioned time limit, the Secretary-General may suggest modifications as to form of the award and, in certain cases, draw the tribunal’s attention to points of substance. If necessary, the Secretary-General may refer the draft award to the KCAB Court for scrutiny, taking into account of circumstances such as the complexity of the case or presence of a dissenting opinion. 5. Codification of Mediation Procedures     The revised Rules formally introduce a mediation mechanism that allows parties to resolve all or part of their dispute through mediation even during the arbitration proceedings (Article 16.6). Mediation may proceed concurrently with the arbitration unless the parties agree otherwise. To preserve the independence of the two processes, the Rules make clear that an arbitrator may not serve as mediator unless otherwise agreed by the parties. 6. Introduction of Early Determination     Under the revised Rules, where a claim or defense is manifestly unsustainable or without legal merit, an arbitral tribunal may, upon a party’s application, commence an early determination procedure (Article 36). After giving the parties a reasonable opportunity to be heard, the tribunal may grant the application and issue an order or award, possibly in summary form, stating its reasons. This mechanism strengthens the system for the early disposal of unmeritorious disputes. 7. Technological Innovation     The revised Rules expressly reflect digital-transformation practices by codifying electronic procedures. Written submissions by parties and communications from the Secretariat or an arbitral tribunal may be made by electronic means, including email (Article 4.1(a)), and hard copies are not required unless requested by a party.     The revised Rules further encourage the use of technology such as electronic communications, e-filings, and electronic presentation of evidence to enhance efficiency and reduce environmental impact (Article 16.4). New provisions also address information security (Article 60) and encourage discussion of the use of information technology tools, including those powered by or embodying artificial intelligence (Article 16.5). 8. Refinement of Procedures for Complex Disputes     To reduce procedural uncertainty in cases involving multiple parties or contracts, the revised Rules clarify and reorganize provisions on Joinder of Additional Parties (Article 21), Single Arbitration under Multiple Contracts (Article 22), Consolidation of Arbitrations (Article 23), and Concurrent Proceedings (Article 24). These refinements are expected to enhance procedural consistency and efficiency in complex disputes. 9. Updated Cost Structure    The revised Rules redesign the overall system of arbitration costs. Authority to determine advances on costs and the total amount of arbitration costs has been transferred from the Secretariat to the Secretary-General and the KCAB Court. The revised Rules also allow separate advances on costs for claims and counterclaims, facilitating more efficient management of large multi-claim disputes (Article 54.6).     The revised Rules also expressly require tribunals to consider “the parties’ respective conduct during the arbitration proceedings” when allocating costs (Article 55.2). In high-value cases, arbitrators’ fees may now be calculated on an hourly basis (Appendix 2).     Additionally, a disclosure obligation regarding third-party funding has been added: parties now must notify the Secretariat, the arbitral tribunal, and the other parties of the existence and identity of any third-party funder promptly after a funding arrangement is concluded (Article 10.5). Lee & Ko’s International Arbitration Team provides top-tier legal services in a wide range of international disputes including international arbitration, drawing on its extensive experience and specialized expertise. We formulate optimal strategies and respond seamlessly at every stage of the proceedings, starting from the commencement of a dispute to the enforcement phase. If you require advice on any international dispute, please feel free to contact the International Arbitration Team at Lee & Ko. Our team stands ready to assist with the most suitable legal services and strategic advice tailored to your dispute.  

Attorney-client privilege has once again become a controversial topic in Korean legal practice as there have been reports that in recent criminal investigations, the Korean police and prosecutors have seized confidential attorney-client communications, even those under the custody of attorneys. This newsletter provides an overview of attorney-client privilege in Korea – its scope and limitations – and analyzes the implications of a recent Seoul Southern District Court case in which Lee & Ko successfully protected attorney-client communications from unlawful seizure. 1. An Overview of Attorney-Client Privilege in Korea     Unlike in major common law jurisdictions where attorney-client privilege broadly protects communications between an attorney and a client, the protection of attorney-client communications is not established as an evidentiary privilege under Korean law.     This, however, does not mean that attorney-client communications are entirely unprotected in Korea. Similar to many other civil law jurisdictions, the protection is primarily regarded as a matter governed by the attorney’s confidentiality obligations and the attorney’s right to refuse to testify in court. In civil cases, these two safeguards protect attorney-client communications from witness examinations and document production orders. In criminal cases, however, the attorney’s confidentiality obligations do not prevent the police or prosecutors from searching or seizing such attorney-client communications.     Due to these limitations, a number of Korean practitioners have argued that a common law-style attorney-client privilege should be derived from Article 12(4) of the Korean Constitution, which expressly recognizes a defendant’s right to legal counsel. On such grounds, in 2009, the Seoul High Court attempted to affirm the existence of a common law-style attorney-client privilege, but this was ultimately dismissed by the Korean Supreme Court. The Korean Supreme Court held that a common law-style attorney-client privilege is unnecessary as attorney work product may be sufficiently protected in a criminal proceeding by existing hearsay rules. Even though both the lower court and the Supreme Court found it necessary to protect attorney work product, they diverged on how to achieve such protection.     The protection provided by the hearsay rules is, however, somewhat limited. The protection under the hearsay rules only applies to communications provided by an attorney. This means that any communications from a client to an attorney, unlike that from an attorney to a client, are not protected. In addition, even if an attorney’s communications are not admissible as evidence in court, prosecutors and the police can still seize the communications and use them to assist their investigations before court proceedings take place, which puts a potential defendant at a significant disadvantage. More importantly, the hearsay rules is only an indirect means to protect attorney work product, as the attorney must actively refuse the admission of work product as evidence in court by exercising the attorney’s right to refuse to testify. Likewise, if the attorney chooses to testify and have the work product admitted as the evidence, the client can no longer rely on the hearsay rules. 2. the Korean Courts’ Evolving Position on Attorney-Client Privilege     Despite the Korean practitioners’ continued demand for the adoption of a common law style attorney-client privilege, Korean courts have not substantially deviated from the Supreme Court ruling above over the past twelve years. However, it appears that the Korean courts’ position has begun to change.     ■ Case Overview         This case involved the seizure of a wide range of attorney-client communications kept by an asset management company (the Client). In July 2023, the prosecution initiated an investigation into the executives and employees of the Client for a potential violation of the Korean Financial Investment Services and Capital Markets Act, and seized a large number of electronic attorney-client communications in the Client’s custody.         The materials seized by the prosecutors included not only legal memos prepared by the Client’s attorneys, but also documents, emails, and messages that the Client had exchanged with its attorneys in relation to separate investigations and court proceedings. The Client immediately filed an appeal in objection to the prosecution’s seizure of the attorney-client communications before the Seoul Southern District Court.     ■ Summary of the Seoul Southern District Court’s Ruling         The Seoul Southern District Court ruled in favor of the Client’s appeal and ordered the prosecution to return all seized attorney-client communications.         Citing a Korean Constitutional Court’s ruling that “giving legal advice to a client is one of the core elements of the constitutional right to legal counsel,” the court found that communications made in secret between the attorney and the client for the purpose of obtaining legal advice is protected under Article 12(4) of the Korean Constitution. The court also referred to the attorney’s obligation to maintain confidentiality stipulated in the Korean Criminal Act, the Criminal Procedure Act and the Attorneys-At-Law Act as grounds for such protection. The court reasoned that in order for a client to be fully assisted by an attorney when preparing for a criminal prosecution, there must be a trust between the client and the attorney that their communications, including those communications made by a client to its attorney, will be protected. 3. Implications of the Seoul Southern District Court’s Ruling     The prosecution appealed the Seoul Southern District Court’s ruling, and the case awaits the Korean Supreme Court’s final judgment. If the ruling is confirmed by the Korean Supreme Court, this is expected to significantly enhance a criminal defendant’s right to legal counsel in Korea. Such a ruling by the Korean Supreme Court will also potentially curtail the prosecution from seizing attorney-client communications at the onset of a criminal investigation, preventing the prosecution from using those confidential communications as indicators to unduly broaden the scope of its investigations. Such a ruling is also expected to revitalize public discussions on the enactment of a statutory attorney-client privilege.     A potential adoption of a common law style attorney-client privilege will be welcome news for many foreign businesses operating in Korea, especially those from common law jurisdictions. However, until the Korean Supreme Court confirms the lower court’s ruling or the Korean National Assembly officially enacts legislation on attorney-client privilege, it is important for foreign businesses operating in Korea to be mindful of the limitations of the current protections available to attorney-client communications, such as its one-sided nature. In addition, when facing criminal investigation, foreign businesses should not be quick to assume that their communications with their attorneys will be automatically protected. If their communications are seized by the police or prosecutors, we advise foreign businesses to be proactive in appealing such seizure at court. Lee & Ko’s International Arbitration & Cross-Border Litigation Group has been successfully representing both domestic and foreign clients in some of the most complex and high-value matters in the world, and has been at the forefront of international disputes before major arbitral institutions and domestic courts. If you need our assistance, please contact any of the key members of Lee & Ko’s International Arbitration & Cross-Border Litigation Group.