The Evolving Relationship between the Korean Courts and the Korean Commercial Arbitration Board : An Examination of Optional Arbitration Decisions in South Korea

Since its inception in 1966, the Korean Commercial Arbitration Board (“KCAB”) has grown moderately as the officially authorized arbitration institution in South Korea (“Korea”). From 2000 to 2010, the number of KCAB arbitrations has risen steadily with an average of 178 domestic cases and 52 international cases per year. As a non-profit organization, the KCAB has had to rely on considerable government funding and receives subsidies from the Ministry of Knowledge and Economy critical to its daily operations as provided under Article 40 of the Arbitration Act of Korea (“Arbitration Act”). While the courts only intervene in arbitral proceedings in limited circumstances as the Arbitration Act allows, two Supreme Court decisions in the 2003 and 2004 domestic arbitration cases concerning the validity of optional arbitration clauses held that a party could not be compelled to arbitrate in cases where arbitration was agreed to an option to litigation in the written agreement between the parties. These decisions arguably negatively affected KCAB arbitration as they resulted in an immediate 20 % decrease in KCAB domestic arbitration from 173 cases in 2003 to 139cases in 2004, even though international arbitration cases increased from 38 to 46 cases during that same period. This article first explores the role of the courts in arbitration in Korea and then analyzes the Supreme Court's decisions regarding arbitrability in commercial contracts and how such decisions have affected arbitration practice in Korea today.