1. (p. 404) 1.  The following facts were recognized by the lower court.

   1. A.  In 1994, Donghae Pulp Co. Ltd. (‘Donghae Pulp’) entered into a long-term supply contract with Defendant that was established under the law of the State of Louisiana in the US for Defendant to supply Donghae Pulp woodchips they produced in the US that were used as raw material for paper pulp. The contract provided that any dispute related to the contract would be resolved by Korean law and arbitration under the Rules of Conciliation and Arbitration of the ICC (‘ICC Rules’).

   2. B.  When a dispute arose between Defendant and Donghae Pulp relating to the performance of the contract, Defendant and its domestic distributor, TKT Corp., referred the matter to arbitration at the ICC on 28 March 1996. On 4 August 1996, the ICC International Court of Arbitration appointed Neil Kaplan who resided in Hong Kong as the arbitrator and determined Singapore as the place of arbitration. The arbitrator prepared a Terms of Reference that the parties signed that, among other things, allowed the arbitrator himself to change the place of arbitration and provided that the arbitration procedures would follow the mandatory rules of the place of arbitration and the ICC Rules that were amended on 1 January 1988. Subsequently, the arbitrator changed the place of arbitration to Hong Kong. After conducting the arbitral proceedings in Hong Kong on 14 July 1998, he confirmed that Donghae Pulp violated the contract and rendered an award that they should pay damages to Defendant.

2. 2.  According to the facts as found by the lower court, the arbitral award herein was a dispute that arose out of commercial legal relations, was rendered in Hong Kong and did not constitute a domestic award under the Arbitration Act. The lower court found that the New York Convention, under which Korea and the US were both contracting parties, applied to the recognition and enforcement of the arbitral award.

   At the same time, Article V(1)(e) of the New York Convention provides that recognition and enforcement of awards may be refused when the award has been set aside. The provision provides that only the ‘competent authority’ of ‘the country in which … that award was made’ or ‘the country under the law of which that award was made’ may set aside the arbitral award. ‘The law of which that award was made’ refers to the applicable law of the arbitral procedures and not the substantive law that the arbitrator should apply to the merits of the case.

   In this case, Donghae Pulp and Defendant agreed that disputes under the contract would be settled by arbitration but did not clearly agree to the applicable law of the arbitral procedures. They only agreed that it would follow Korean law and the ICC Rules. Under Article 11 of the ICC Rules, the arbitrator with approval of the parties decided the governing law to apply to the arbitral proceedings would be the mandatory laws and regulations of the place of arbitration and the ICC Rules. As a result, the laws and regulations of Hong Kong and the ICC Rules applied. The lower court held that Korea was not the place of arbitration and was not the country of the applicable law of the arbitral procedures. Hence, Korean courts were not a ‘competent authority’ that could set aside the arbitral award.

   We hold that the lower court’s determination that the legal action in this case was inappropriate was correct and there was no mistake as argued on final appeal.

1. 2.  Defence Before Addressing the Merits

   1. A.  Plaintiff’s Assertions (omitted)

   2. B.  Determination Concerning the Defence Before Addressing the Merits for Violation of Jurisdiction

      We observe that according to Article V(1)(e) of the New York Convention an arbitral award may be set aside by competent authority ‘of the country in which … that award was made’ or ‘of the country … under the law of which, that award was made’. The text ‘of the country … under the law of which, that award was made’ means the applicable law of the arbitral proceedings.³

      The Arbitral Award herein is subject to the New York Convention,⁴ the country where the Award was made was France, and the arbitral proceedings applied the mandatory law of France and the Conciliation and Arbitration Rules of the International Chamber of Commerce. The courts of Korea thus could not be considered the competent national authority that could set aside the Arbitral Award. Korea was not the country where the award was made and was not the country of the applicable law of the arbitral proceedings.

      Notwithstanding, we also find that Plaintiff Whanin’s action does not seek a set aside of the Arbitral Award but seeks to confirm the obligations listed in Annex 1.⁵ Hence, we hold Defendant Merck’s defence before addressing the merits that is based on a different premise is unwarranted.

1. 3.  Decision Concerning Counterclaim

   As the cause of action for its counterclaim, Plaintiff argues that the foregoing arbitral award should be set aside under Article 13(1)(5) of the Arbitration Act and Article 422(6) and Article 422(7) of the Civil Procedure Act, because it was rendered based on documentary evidence that, among other things, was forged and altered by Plaintiff⁶ and false statements by, among others, the witnesses.

   The New York Convention that governs the recognition and enforcement of a foreign arbitral award provides in Article V(1)(e) that one of the grounds to refuse enforcement is ‘the award … has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made’.⁷ We find that this provision is interpreted as presuming that the country where the arbitral award was rendered or the court of the country under the law of which the award was made has the exclusive right, or exclusive jurisdiction, to set aside or suspend the arbitral award. Thus, we find that a party should not be allowed to seek the set aside of a foreign arbitral award at the court of the country that has received a request to enforce such an award. We find Defendant’s counterclaim is unlawful because it seeks to set aside the foregoing foreign arbitral award in the Korean court that has received a request to enforce such award and not at a court in the US, the country in which, or under the law of which, the award was made.

1. 2.  Determination on Whether the Counterclaim Would Be Contrary to Jurisdiction

   Plaintiff argues that Defendant’s counterclaim is an action to set aside the arbitral award so that the court with competence is the Seoul District Court that has jurisdiction over Seoul, the place of arbitration, and Gwangju District Court does not have jurisdiction. Article 7(3) of the 1999 Arbitration Act provides that the competent court over an action to set aside an arbitral award shall be ‘[t]he court designated in the arbitration agreement, and when such a designation has not been made the court that has competence over the place of arbitration’. Yet, this provision does not provide the exclusive basis for jurisdiction. Defendant can bring a counterclaim in the Gwangju Courts where Plaintiff’s main claim is pending. We thus find Plaintiff’s foregoing argument unwarranted.

1. 1.  According to the reasons of the lower court, based on the accepted evidence, Defendant filed a request for arbitration seeking payment for damages incurred by the non-payment of the additional costs.

2. 2.  We determine ex officio before deciding on the grounds for Final Appeal.

   An action to set aside an arbitral award is an action for the modification of legal rights⁸ whose purpose is to set aside an arbitral award to retroactively make it invalid. If an arbitral award fulfils the formal statutory requirements and reaches a final determination on the merits, a set aside action can only be brought when one of the subparagraphs in Article 36(2)⁹ of the Arbitration Act is met. If an arbitrator herself renders an arbitral award dismissing a request for arbitration because she finds she does not have competence to render an award on the requested subject matter, such an award cannot be subject to a set aside action.

   As the lower court has recognized, the arbitral award that Defendant seeks to set aside was a dismissal by the arbitrator herself because she found that she did not have competence to render an award on the requested subject matter. In light of the foregoing legal principles, it cannot be subject to a set aside action.

   Despite this, the lower court made a determination regarding the counteraction premised on the lawfulness of the counteraction. As a result, the lower court judgment cannot be maintained.

   (p. 408) [The court reversed the lower court’s judgment on the counteraction and dismissed the counteraction.]

1. 1.  Summary of the Case and Subject of Ruling

2. 2.  Petitioner’s Claim and the Opinion of Relevant Institutions

   1. A.  Petitioner’s Argument

      Article 27(1) of the Constitution of Korea provides that ‘All citizens shall have the right to be tried in conformity with the law by judges qualified under the Constitution and the law’. To settle a commercial dispute by arbitral proceedings instead of a court judgment, the arbitrator must be selected according to the intention of the parties. Article 4(3) of the 1993 Arbitration Act presumes that a KCAB arbitrator will be selected if the intention of the parties is not clear. By providing that the presumption will be reversed by circumstances proven otherwise, this results in coercing KCAB arbitration and infringes the petitioner’s right for a court judgment.

   2. B.  The Minister of Justice presented his view on the constitutionality of the provisions.

3. (p. 409) 3.  Determination

   1. A.  On 25 September 1998, the Seoul High Court issued a judgment dismissing Petitioner’s case herein concerning the commercial arbitral award, and, on 23 June 2000, the Supreme Court also issued a judgment dismissing the final appeal. The case was essentially dismissed because Petitioner’s claim was an unlawful claim that was not based on a reason provided under the grounds of Article 15¹³ that sought to set aside the arbitral award after a court’s enforcement judgment (Article 14(1)).

   2. B.  In this petition, the Petitioner in essence argues that grounds exist for an error exist under Article 13(1)(1) that provides ‘when the selection of the arbitrator … does not conform to … the arbitration agreement’. For Article 4(3) (Selection of Arbitrators) that is the subject of review in this case to meet the prerequisites for a trial, we need to determine whether Article 15, which does not allow set aside actions against an arbitral award under Article 13(1)(1) after an enforcement judgment, infringes the petitioner’s right to trial.

      A party (or both parties) that incurs a disadvantage due to an arbitral award may argue that grounds exist to set aside the award (Article 13(1)(1)–(5)) either by instituting a set aside action against the award (Article 13(1)) or by way of a defence in an action for an enforcement judgment (Article 14(2)).¹⁴ Compulsory execution of an arbitration award can only occur when a court declares the award lawful through an enforcement judgment (Article 14(1)). The subject of examination in an enforcement judgment is whether a lawful arbitral award exists and whether grounds to set aside the award exist (Article 14(2)).

      Given that a party could argue for a set aside of an arbitral award during the enforcement judgment proceedings, if the opportunity to overturn the award was not restricted and after the enforcement judgment one could later reargue the identical set aside grounds again during a set aside action, effective dispute resolution could not be achieved. Thus, Article 15 provides that once an enforcement judgment has been rendered, as provided under Article 13(1)(5), a set aside action can only be instituted when a party can prove that during the enforcement judgment proceedings, through no fault of their own, they could not raise the set aside grounds under Article 422(1)(4)–(9) of the Civil Procedure Act.¹⁵

      Article 15 does not allow a set aside action to be brought against an arbitral award based upon Article 13(1)(1)–(4) because an opportunity for a judge to review these set aside grounds is already guaranteed during the enforcement judgment action. We find Article 15 to be law-making for the public welfare because, among other things, it prevents uncertainty in a party’s status based upon a counterparty’s inattention and forestalls the waste of judicial economy from repeated court reviews. (p. 410) Thus, Article 15 does not exceed the limits of fundamental rights because we recognize its constitutional justification and rationality.

   3. C.  Therefore, since Article 15 does not infringe the petitioner’s right to trial, we find that the petition regarding Article 4(3) does not meet the prerequisites for a trial and can only be viewed as an unlawful claim.

1. 1.  Plaintiff’s Arguments for Set Aside under Article 36(2)(1)(c) of the Arbitration Act

   Plaintiff asserts that Defendant’s request for arbitration seeks compensation payment, but commissions do not exist under the agency agreement. Therefore, the ‘award deals with a dispute not contemplated not falling within the terms of the submission to arbitration, or (p. 412) contains decisions on matters beyond the scope of the submission to arbitration’ such that grounds to set aside exist under Article 36(2)(1)(c) of the Arbitration Act.

2. 2.  Determination on Set Aside Grounds under Article 36(2)(1)(c) of the Arbitration Act

   We observe that when the fundamental facts, Plaintiff Exhibit No. 5 and the overall oral arguments are considered together the following can be noted:

   1. (1)  On 30 July 2012, Defendant filed a request for arbitration against Plaintiff with the KCAB that provided ‘[o]n 18 June 2012, Defendant signed a 10-year agency agreement with Plaintiff for a 3 per cent commission. Even though negotiations were ongoing with the Chinese exporter White-Dove to import 120,000 products monthly, Plaintiff unilaterally terminated the agreement. We seek payment of USD 79,692, the sum of USD 78,624 in agency commissions, which is 3 per cent of one year’s import amount based on 120,000 products (USD 1.82 per product) a month as stipulated under the Memorandum, and USD 1,068 in unpaid commissions’; and,

   2. (2)  The KCAB recognized the entire USD 1,068 in unpaid agency commissions, but did not recognize the foregoing transactional relationship based on the Memorandum for the other agency commissions. They found ‘the Memorandum was a document that arose during the mutual negotiation stage. As a result, we cannot view it as the mutual consent or agreement of Claimant and Respondent. Furthermore, when Respondent terminated the contract, it was difficult to predict how the future transactional relationship would transpire.’¹⁷

      When we consider all of the following circumstances we confirm that the arbitral award found that Plaintiff only had to pay Defendant USD 39,312 in agency commissions, which was half of Claimant’s original request for USD 76,624: ‘(i) the claim for the commission arose because of Respondent’s unilateral notice that terminated the agreement; (ii) the negotiations regarding the quantity occurred before the execution of the contract; (iii) the agreement period was for 10 years; and, (4) if the agency agreement was terminated by Respondent, the agent had the right to receive compensation for their bona fide loss of motivation.’¹⁸

      According to the foregoing recognized facts, we find it reasonable to conclude that the arbitral tribunal rendered an award regarding the agency commissions between Plaintiff and Defendant. Based solely upon the evidence that Plaintiff submitted, we do not find it convincing that the award can be overturned. It was not beyond Defendant’s request for arbitration and did not dealt with a dispute not falling within the terms of the submission to arbitration or contain decisions on matters beyond the scope of the submission to arbitration. Therefore, we find this part of Plaintiff’s argument groundless.

1. D.  Whether the Arbitrator Exceeded His Authority

   1. 1)  As provided above, the arbitrator determined that (i) E had rights concerning the OEM business before the 2004 contract, and (ii) Plaintiff allowed Entekhab to sell its products with a special label so Defendant’s exclusive distributorship rights under the contract were infringed. The arbitrator found that Plaintiff infringed Defendant’s ‘rights regarding Plaintiff’s labelled product’ as stipulated under the contract, not that they infringed Defendant’s ‘OEM business rights’. Moreover, even if the arbitrator had found that Plaintiff infringed the OEM business rights, the parties agreed to resolve any dispute arising out of the contract according to an arbitration agreement. During the arbitration process, the parties also did not contest whether the OEM business rights were included in the contract. We find that this was within the sphere of finding of fact and interpreting the contract and statutes. It should not be considered as the arbitrator making a determination concerning matters outside the scope of the arbitration agreement.

      Furthermore, according to the facts established above, in determining Defendant’s lost profits, the arbitrator compared the profits that Entekhab gained to confirm their credibility. Entekhab’s profits were only mentioned during the process of examining the feasibility prediction of Defendant’s expert witness after the arbitrator calculated the damages Defendant incurred from the termination of the contract. We do not find that the arbitrator recognized the right to claim damages relating to the OEM business that Defendant did not even claim. We hold that this part of Plaintiff’s assertion groundless.

   2. 2)  No evidence exists that the arbitral award regarded PEGK’s¹⁹ profits as Defendant’s profits in determining Defendant’s lost profits. (Yet, when determining Defendant’s lost profits, the award did include the profit that Defendant would have gained by trading with the PEGK as a lower level distributor). As provided above, according to the fact recognized above, Defendant held the rights to PESC’s²⁰ profits related to the sales of Plaintiff’s products. The arbitrator viewed PESC as a legal person established to represent Defendant in relation to the contract and that Defendant held rights in the PESC’s profits from selling Plaintiff’s products. We find that the arbitrator determined that the profit that Defendant earned through PESC was also the same as the profit that they would have earned as Plaintiff’s exclusive distributor. We conclude that this was within the sphere of finding of fact and interpreting the contract. It should not be considered as the arbitrator making a determination concerning matters outside of the scope of the arbitration agreement. We hold this part of Claimant’s arguments groundless.

1. 3.  Determination

Unless grounds to set aside exist under Article 36(2) of the Arbitration Act, compulsory execution based on an arbitral award should be granted. We shall consider in the following order whether the arbitral award has grounds to be set aside as argued by Defendant:

• 1. A.  Whether the Prohibition on Acquiring Treasury Shares under the Commercial Act was Violated

     1. 1)  Defendant’s claim

        Defendant claims that to perform their obligations under the arbitral award they must acquire their treasury shares and transfer them to Plaintiff. This would violate Article 341 of the former Commercial Act²³ that was a mandatory law and regulation in force at the time. The act ordered under the arbitral award compels performance that is premised upon Defendant acquiring their treasury shares in violation of a mandatory law and regulation that should be considered as contravening the social order of Korea.

     2. 2)  Determination

        1. A)  As provided above, the disposition of the arbitral award does not specifically provide a method for the transfer of shares. We do not find that Defendant absolutely had to acquire their treasury shares to perform the obligations under the award. Therefore, we find that Defendant’s assertion, which is based upon a different premise, is unwarranted.

        2. B)  Furthermore, even if we found that Defendant had to acquire treasury shares to transfer them to Plaintiff, based upon the following, we are not convinced that this could serve as a ground to set aside the arbitral award:

           • (1)  A corporation’s acquisition of treasury shares is clearly invalid. A corporation’s acquisition of its own shares at its own account would endanger the company’s capital foundation and would harm the interests of the company, shareholders, and creditors and would also harm the principle of equality of shareholders. It could also lead to various other (p. 418) harmful consequences such as the unfair domination of the company by the representative director and others. The Commercial Act therefore in principle uniformly prohibits acquisition of treasury shares for general preventative purposes. Yet, the Act does classify the categories under which it may be permitted as an exception. Articles 341, 341(2), and 342(2) of the Commercial Act, or the Securities and Exchange Act and other laws, for example, explicitly permit the acquisition of treasury shares. In addition, acquisition of treasury shares will be permitted as an exception in those situations where a company’s capital foundation will not be endangered or the interest of shareholders and others will clearly not be damaged such as when a company acquires treasury shares without consideration or through payment by a third party.²⁴ As provided above, Defendant had already received from Plaintiff KRW 2 billion (USD 1.74 million) as purchase payment for the shares and even if Defendant accordingly acquired treasury shares to transfer to Plaintiff they would only be temporarily acquiring the treasury shares with the payment they receive from Plaintiff. Therefore, we are not convinced that Defendant’s acquisition of treasury shares would have endangered the capital foundation of Defendant and that one could conclude that it violated Article 341 of the old Commercial Act.

           • (2)  Even if Defendant’s temporary acquisition of the shares to transfer to Plaintiff violated Article 341 of the old Commercial Act, a violation of a compulsory law and regulation under Korean substantive law will not constitute grounds to automatically refuse enforcement. Enforcement can be refused only when the specific result of recognizing the arbitral award would be contrary to Korean public policy.²⁵ As demonstrated above, Defendant already received KRW 2 billion (USD 1.74 million) nominally as purchase payment that contributed to the capital adequacy of Defendant. We find it difficult to conclude that the temporary acquisition of its shares to perform its reciprocal obligation would be contrary to Korea’s public policy. We therefore hold that Defendant’s assertion in this regard is groundless.

  2. B.  Argument of Breach of the Foreign Investment Promotion Act

     1. 1)  Defendant’s Argument

        As a Korean–American, Plaintiff had to notify the Minister of Knowledge Economy²⁶ to invest in a domestic legal person by acquiring, among other things, shares or a stake. Since Plaintiff entered into a contract to acquire Defendant’s shares and remitted payment thereof to Defendant, this constituted a violation or circumvention of Articles 6 and 21 of the Foreign Investment Promotion Act. Pursuant to Article 37(1)(1)²⁷ of the same law, a fine should be imposed on Plaintiff. (p. 419) The arbitral award in this case orders performance of a wrongful act that violates the provisions of the same law.

     2. 2)  Determination

        We observe that Article 6 of the Foreign Investment Promotion Act (‘FIPA’) provides that foreigners must notify in advance when they make an investment by means of acquiring shares in companies managed by Koreans. The parties do not contest that Plaintiff as a US citizen should be considered a foreigner. Considering together the foregoing facts, Defendant Exhibit Nos. 2 and 7 and the overall oral arguments, Plaintiff paid to Defendant USD 1 million on 4 July 2008 and an additional USD 1 million on 28 August 2008. Plaintiff drafted Loan Agreements on 4 June 2008 and 28 August 2008²⁸ to lend Defendant USD 1 million each at an annual interest rate of 5 per cent and notified the Minister of Strategy and Finance²⁹ thereof. Yet, we recognize the fact that Plaintiff did not notify the Minister of Trade, Industry and Energy³⁰ pursuant to Article 6 of FIPA. In light of the following, among other things, we do not find that a violation of the above provisions would lead to an invalidation of the award’s effect under the law: (i) Plaintiff only had to complete the notification procedure pursuant to Article 6 of the FIPA prior to the acquisition of shares based on its investment; it is not convincing that they violated FIPA (Article 21 of FIPA provides that registration must occur under the premise that the shares were acquired; it does not apply since Plaintiff had not yet acquired the shares); and, (ii) [f]urthermore, FIPA was promulgated to promote foreign investments by supporting and providing convenience for foreign investment and a violation of Article 6 is only subject to imposition of a fine. We find this part of Defendant’s argument is groundless.

1. 4.  Fourth Issue in the Final Appeal

   Article 36(2)(2)(b) provides that a ground for which a court ex officio may set aside an arbitral award is when ‘the recognition or enforcement of the arbitral award would be contrary to the public policy of Korea’. The provision does not apply to all cases where the arbitral award can be viewed as being unreasonable simply because the arbitrator’s finding of fact contained a mistake or the arbitrator’s legal determination violated a statute. Instead, it concerns when the arbitral award orders an outcome that contravenes Korea’s public policy.

   From the same perspective, we find that the lower court’s determination is justified when it found that the enforcement of the arbitration award could not be considered as contravening the public policy of Korea based on the foregoing legal principles.

   We hold the lower court judgment did not commit an error of law regarding the grounds to set aside an arbitration award under Article 36(2)(2)(b) as argued on final appeal.

   Furthermore, we find that just because the arbitral award makes a different interpretation and reaches a different conclusion concerning statutes and contracts compared to Supreme Court precedents concerning the same type of cases, we cannot consider this a circumstance where the ‘enforcement of the arbitration award would be contrary to the public policy of Korea’.

   Therefore, we also hold we cannot accept this argument in the final appeal.

1. 2.  Determination on the Cause for Action

   [The court first cited Article 35, Article 36(1), Article 36(2), and Article 38 of the Arbitration Act.]

   (p. 421) As found in Section 3 below, as long as we cannot find grounds under Article 36(2), compulsory execution of the arbitral award shall be permitted.

2. 3.  Defendant’s Arguments and Determination

   1. A.  Defendant’s Arguments

      Defendant claims that the arbitral award should be set aside under Article 36 because it contravenes Korea’s public policy. They argue that the award violates Supreme Court cases and the binding terms of CFIC’s Memorandum of Understanding that is mandatory under the old CRPA.

   2. B.  Determination

      1. (1)  Whether the Arbitral Award Should Be Set Aside Because It Contravenes Supreme Court Cases

      Article 36(2)(2)(b) of the Arbitration Act stipulates that an arbitral award may be set aside when ‘recognition and enforcement of the arbitral award would be contrary to the public policy of Korea’. This provision does not apply to all cases where the award could be viewed as unreasonable simply because the arbitrator’s findings of fact contained a mistake or the arbitrator’s legal determination violated a statute. Instead, it concerns when the arbitral award orders an outcome that contravenes Korea’s public policy. Just because the arbitral award makes a different interpretation and reaches a different conclusion concerning statutes and contracts compared to Supreme Court precedents concerning the same type of cases, it does not mean that we cannot consider this a circumstance where the ‘enforcement of the arbitration award would be contrary to the public policy of Korea’.³²

      Defendant’s argument with respect to the arbitral award basically asserts that the arbitrator’s findings of fact or legal determinations were mistaken. However, the outcome the award orders mainly concerns financial payment pursuant to the agreement between the parties and should not be deemed as contravening public policy. Therefore, Defendant’s foregoing argument is difficult to accept.

      {Furthermore, we do not find Defendant’s argument convincing that the Supreme Court determined that the essence of an obligation to complete construction was not an ‘action obligation’ but a guarantee obligation concerning a financial obligation.³³ According to Plaintiff Exhibit No. 1, we recognize that the arbitral tribunal determined Defendant’s counterpart to which it owes the obligation to complete construction was not confined to the lender Shinhan Bank based on the following: (1) the project contract and the loan agreements did not limit the parties that had an obligation to complete construction; (2) when a party’s breach of the contract causes damages to another party, they bear the responsibility to compensate for such damages; and, (3) the constructor’s obligation to complete construction calls for them to perform the construction within the construction period regardless of, (p. 422) among other things, the non-payment of the construction costs or a dispute between the parties to the construction contract. This serves to secure the repayment of the principal loan and interest to the lender and also serves to reduce the burden of paying the construction costs for the contractor while allowing them to expect completion of the construction. We find that the arbitrator may be viewed as having total authority to interpret the contract between the parties within the confines of the arbitral agreement. Practical re-examination of an arbitral award should be only allowed in a narrow manner. To the extent possible, the arbitrator’s interpretation should be respected. Even if it is possible to have a different perspective on the arbitrator’s foregoing determination, we find it difficult to conclude that the award would then be automatically unjust and contravene Korea’s public policy.}

      1. (2)  Whether the Arbitral Award Should Be Set Aside Because It Breaches Compulsory Laws and Regulations

      We observe that the old CRPA (Article 1) provided that its goal was to promote continuous corporate restructuring according to market functions by establishing the necessary particulars for corporate restructuring to be pursued in an expeditious and uninterrupted manner. Also, a vast number of parties’ interests are intertwined in the corporate restructuring process. In light of these points, it is possible to view the old CRPA as a compulsory law and regulation.

      Yet, at the same time, Article 21(1) of the old CRPA stipulates that creditor financial institutions are liable to compensate damages that other creditor financial institutions suffer when they do not comply with the decisions of the CFIC. Paragraph 2 of the same Article then adds that these liabilities for damages may be exempted by payment of a cancellation penalty. The other sanctions under the old CRPA are only limited to corrective measures by the Financial Services Commission (Article 26). In light of these points, we do not find it convincing that it was anticipated that a contract contrary to the old CRPA would become invalid. Furthermore, just because an arbitral award violated compulsory laws and regulations, a court cannot find that there exist grounds to set aside the award. Only when the specific result of recognizing the award is contrary to Korea’s public policy may recognition and enforcement be refused.³⁴ Therefore, as provided in (1) above, even if the arbitral award is contrary to the old CRPA, it is not sufficient to find that the arbitral award is contrary to public policy. Since no evidence exists otherwise, Defendant’s foregoing argument is difficult to accept.

1. E.  Whether the Arbitral Award Contravened Public Policy

   1. 1)  Article 36(2)(2)(b) of Arbitration Act provides that a ground for a court ex officio to set aside an arbitral award is when ‘the recognition or enforcement of the arbitral award would be contrary to the public policy of Korea’. The provision does not apply to all cases where the arbitral award could be viewed as being unreasonable simply because the arbitrator’s finding of fact contained a mistake or the arbitrator’s legal determination violated a statute. Instead, it concerns when the arbitral award orders an outcome that contravenes Korea’s public policy.³⁵

   2. 2)  Whether the Arbitrator’s Calculation of Defendant’s Net Income Ratio was Excessive

      No evidence exists to substantiate the assertion that the arbitrator viewed the net income ratio of Defendant’s sales as 40 per cent or greater. We hold that this part of Plaintiff’s argument groundless. (Plaintiff made this argument based on the premise that the arbitrator established that Defendant’s lost profits were USD 93.7 million. But as provided above, the arbitral award viewed Defendant’s lost profits as USD 62.5 million. Even if we agreed with Plaintiff’s arguments, we find that arbitral award established that the net income ratio of Defendant’s sales was less than 40 per cent.)

   3. 3)  Whether the Arbitrator Contravened the Principle of Private Autonomy Regarding the Warranty Provision

      As provided above, the arbitrator took into consideration the principle of good faith and the contract’s fundamental purpose. He interpreted the warranty provision as providing Defendant an additional means of recourse because it did not exempt Plaintiff from their basic obligation of providing products of reasonable quality. The arbitrator did not disregard the existence of the warranty provision but just made an interpretation as an arbitrator after both parties argued different interpretations of the provision. We cannot find that the arbitrator contravened the principle of party autonomy just because he did not recognize the effect of the warranty provision based on Plaintiff’s asserted interpretation.

      Yet, we must consider whether the arbitrator’s foregoing interpretation of the contract manifestly contravened the principle of party autonomy because, among other things, it conflicted with the contract’s objective and the intentions of the parties at the time of contract. We must also consider whether the results of the arbitral award therefore contravened public policy.

      Based on the above established facts and the following circumstances that can be derived accordingly, we find that the arbitrator’s interpretation of the warranty provision did not contravene the principle of party autonomy making the arbitral award contrary to Korea’s public policy:

      1. (1)  We find the arbitrator has complete authority concerning contract interpretation within the scope of the arbitration agreement. Re-examination in essence of an arbitral award is only recognized in a limited manner. In principle, an arbitrator’s contract interpretation needs to be respected. Even if a contract could be interpreted differently or the interpretation could be considered a so-called exceptional interpretation, as long it could not be considered an arbitrary interpretation manifestly lacking in fairness or reasonableness, we cannot conclude that (p. 424) it was an unjust interpretation and that the arbitral award rendered accordingly contravened Korea’s public policy.

      2. (2)  During the proceedings for the arbitral award, both parties were guaranteed sufficient opportunity to express their opinions, argue and provide proof related to the interpretation of the warranty provision.

      3. (3)  Based on the objectives of the contract, Plaintiff clearly had an obligation to provide Defendant with products of reasonable quality.

      4. (4)  Defendant was responsible for fulfilling a minimum purchase amount under the contract; on the other side, Plaintiff’s obligations as provided in the warranty provision were rather limited in time and scope.

      5. (5)  If Defendant incurred damages that were in some manner caused by defects in the products that Plaintiff supplied, but Plaintiff could be exempted from all compensation obligations that exceeded ‘the obligation to replace components of, and repair, within 12 months of shipping those products that exceeded 3 per cent of the total supplied products’ because of the warranty provision, then this would itself be contrary to principles of fairness.

      6. (6)  It is a matter of course that a transacting party gains the right to claim compensatory damages when the opposing party causes damages due to fault attributable to their non-performance. The warranty provision does not include any stipulation that Defendant waived their right to claim compensatory damages for any damages that did not fall under the scope of the warranty provision.

   [See also para. 8.52 for a challenge on public policy grounds for the ordering of lost profits and the way the lost profits were calculated, and also for the amount of the award.]

1. 2.  Plaintiff’s Arguments for Set Aside under Article 36(2)(2)(b) of the Arbitration Act

   Under the arbitral award, as long as an agent receives an email regarding the quantity of the product from the foreign exporter, an importer may have to pay the agent’s commission even though they did not approve the purchase. If an agent and an exporter can force an importer to purchase a product in this manner, the importer would be unable to raise a challenge. The award should be set aside because under the Arbitration Act recognition or enforcement of the award would be contrary to the public policy of Korea.

2. 3.  Determination

   1. A.  Determination on Existence of Set Aside Grounds under Article 36(2)(2)(b) of the Arbitration Act

      We observe that, according to the foregoing facts, the arbitral award considered the various circumstances that arose during the arbitration case to determine the amount of the agency commission that Plaintiff should bear. We do not find Plaintiff’s argument convincing that the award established USD 39,312 as the agency commission because it found 120,000 products per month (USD 1.82 per product) as stipulated under the Memorandum were actually transacted. Therefore, we conclude that this part of Plaintiff’s arguments that is based upon the foregoing premise is also groundless.

      [After the conclusion of oral arguments, Plaintiff submitted a memorial dated 24 May 2013³⁷ that claimed Defendant altered the 1 February 2012 email (Defendant Exhibit No. 8) and submitted it to the KCAB and made a false statement in its 16 March 2012 email. The KCAB tribunal considered the figure ‘annually 500,000’ stated in the Memorandum and the altered 1 February 2012 email as the key basis for reaching its determination in the arbitral award. Plaintiff argues that from this perspective grounds to set aside exist.

      Yet, we find that by itself the evidence that Plaintiff submitted is not sufficient to establish that the 16 March 2012 email was a false statement or that the 1 February 2012 email was altered and used, and evidence to prove otherwise does not exist. Instead, in light of the fact that, among other things, Defendant voluntarily submitted the entire original 1 February 2012 mail as Defendant Exhibit No. 8, we find it reasonable to (p. 426) conclude that when they submitted to the KCAB a part of the 1 February 2012 email that was an attachment to Defendant Exhibit No. 3-2 they simply screen-captured that part out of convenience.]

1. 1.  The parties do not contend that Plaintiff and Defendant agreed to resolve a dispute regarding a wireless phone sales contract through arbitration at the KCAB. Based upon this agreement, on 20 October 1984, Plaintiff requested arbitration with the KCAB and on 19 April 1985 an award arbitral was rendered thereof.

2. 2.  Plaintiff argues that the award should be set aside because ‘decision has been omitted regarding an important matter that would affect[ed] the judgment’ as provided under Article 13(1)(5) of the Arbitration Act and Article 442.1(9) of the Civil Procedure Act.⁴⁰ During the arbitral proceeding, Defendant requested compensation for USD 419,362.75 in damages because 11,316 of the 38,220 wireless phones that they purchased and sold across the United States were returned due to defects. In response, Plaintiff raised various reasons why Defendant did not have a right to claim compensation and that even if such a right arose they relinquished it. According to Plaintiff, the arbitral award, however, only made a determination regarding Defendant’s lack of a right to compensation and did not make any determination concerning their relinquishment argument. Plaintiff therefore argues that the arbitral award cannot avoid being set aside because a decision was omitted regarding a important matter that affected the judgment.

   We therefore consider together the uncontested Plaintiff Exhibit No. 1-1 (Original Copy of Arbitral Award), No. 1-2 (Arbitral Award), No. 2-1 (Cover of the Arbitration Record), No. 3-1 (Request for Arbitration), No 3-2 and 3-3 (Answers), No. 3-4 (Written submissions) and No. 4-1 (Examination Record) and the overall oral arguments. According to the arbitration proceeding, Defendant, a specialized electronic products import and sales company incorporated in the state of California, US, entered into an international sales agreement for wireless phones with Plaintiff, a company incorporated in Korea. Starting from 25 July 1983, Defendant received a total of 38,220 wireless phones through five shipments from Plaintiff and sold them across the US. After December 1983, due to claimed defects, a substantial number of the wireless phones started to be returned and eventually 11,316 were returned as defective products. Defendant had no choice but to hire a repairperson to fix the phones and, among other things, repackage and resell them. Some of the repaired phones were sold at a discount and some remained unsold. As a result, Defendant claimed they incurred UDD 419,632.75 in damages and accordingly sought compensation from Plaintiff.

   Plaintiff acknowledged that they sold the wireless phones to Defendant. They contended that they were not liable for the following reasons:

   1. (1)  The sales contract for wireless phones was between Defendant and non-litigant third party D Electronics; Plaintiff was merely an export agent for the non-litigant and not a party to the contract;

   2. (2)  The wireless phones were not defective and they were not liable for compensation damages for the following reasons:

      1. (A)  Defendant personally visited the non-litigant, conducted strict quality tests in advance and only accepted qualified products; products passed the quality test of a government institution called the Korean Electrical and Electronic Test Center;

      2. (p. 428) (B)  Defendant notified Plaintiff concerning the defects of the products on 24 January 1984 and requested compensation on 5 April 1984, but from 31 January 1984 through 28 September 1984 on four occasions paid Plaintiff the entire remaining balance due for the products. This amounted to an indirect acknowledgement that Plaintiff was not liable to Defendant for compensation, or, if not so, that Defendant relinquished the right to claim compensation; and,

      3. (C)  The wireless phones in this case were returned due to a decline in market demand;

   3. (3)  Even if one assumes that the wireless phones were defective, Defendant did not fulfil their duty of inspection and notification because they were supposed to immediately inspect the products and notify any defects after receiving the products; and,

   4. (4)  Plaintiff wanted to send a technician to Defendant to repair the defective wireless phones, but Defendant did not respond to this attempt.

      We find that the arbitral award included a determination concerning Plaintiff’s arguments in (1), (2)(A), 2(C), (3), and (4) above that rejected (1), (2)(A), (3), and (4), and partially accepted (2)(C). In the end, the award partially found Plaintiff liable to Defendant for the defects in the wireless phones, but did not explicitly include a determination regarding (2)(B).

      Given that the arbitral award held that Plaintiff was liable for defects in the products and partially accepted Defendant’s right to claim compensation, we find, among other things, no basis not to view that the award implicitly rejected Plaintiff’s opposing argument that Defendant relinquished their right to claim compensation. Furthermore, since no arguments or substantiation were provided during the arbitral proceeding to establish that the sales contract in this case was rescinded, the obligation to pay the remaining balance under the sales contract could by its nature coexist with the liability for compensation due to the defects. We cannot conclude that just because Defendant paid the entire remaining balance that they conceded that liability arising from the defects in the products did not exist or that they relinquished their right to claim compensation. In a similar light, just because the arbitral award did not include an explicit determination regarding Plaintiff’s above argument, we do not believe the result of the award would have been different. We ultimately do not find that the arbitral award omitted a decision regarding an important matter that would have influenced how it was rendered.

1. 3.  Defendant argued in the court of first instance and lower court that the arbitral award should be set aside under Article 13(1)(5) of the Arbitration Act for omitting to decide whether Article 12(F) of the Importing Terms and Conditions of the Invitation to Bid violated (p. 429) Article 13 of the 1993 Act on the Regulations of Terms and Conditions. We do not find that Defendant argued the arbitral award called for an act that was legally prohibited such that it should be set aside under Article 13(1)(3) of the Arbitration Act.

   Furthermore, in light of the record, we do not find that Article 12(F) of the Importing Terms and Conditions of the Invitation to Bid was invalid for violating Article 13 of the Act on the Regulations of Terms and Conditions or that the arbitral award called for an act that was legally prohibited.

   Ultimately, we do not find an error in the lower court’s judgment for omitting to decide as argued on final appeal.

Defendant argues that pursuant to a ship repair contract Plaintiff repaired Defendant’s Korean Wonis One vessel from 19 March 1988 until 2 April 1988. When Plaintiff returned the vessel, they did not close the manhole cover of the double bottom tank located below (p. 430) the fourth hold. As a result, from 3 April until 4 April 1988, while filling the double bottom tank with seawater when cargo was being loaded, seawater leaked into the fourth hold through the manhole. The cargo stored therein suffered water damage. Defendant argues that when the ship repair contract was executed the parties agreed that all disputes arising from the contract would be resolved by arbitration and a so-called arbitration agreement existed. Through KCAB Arbitration Case No. 89-2, Defendant accordingly filed a request for arbitration for the damages. On 27 February 1993, the KCAB rendered an arbitral award.

In this regard, Plaintiff brought an action to set aside the award through Seoul Civil District Court 93 Gahap 43878. On 9 November 1993, the court found that the award erred in making its determination by exceeding the scope of the party’s claim. By constituting an arbitration proceeding that was not pursuant to the Arbitration Act as provided under Article 13(1)(1), the court pronounced a judgment to set aside the award and such judgment was finalized. The parties do not dispute these and other facts.

Plaintiff argues that the general rules for ship repair that they adopted and generally applied to ship repairs should apply to the ship repair contract. The rules provide that Plaintiff is not liable to compensate for water damage to the cargo as Defendant claims so they do not have a compensation obligation because of the water damaged cargo. Furthermore, Defendant remained silent about the water damage to the cargo and later defrauded Plaintiff by having them sign and seal a ship repair outsourcing contract that stated Plaintiff would be liable for such damages. Based on this contract, Defendant demanded compensation for damages and filed the foregoing request for arbitration. To contest the dispute, Plaintiff unavoidably incurred KRW 19,315,800 (USD 16,800) in total damages for revenue stamp, attorney costs and other expenses from the arbitration proceedings and the litigation proceedings to set aside the award that Defendant is basically obligated to compensate. At the time of the ship repair contract and thereafter, the parties did not enter into an arbitration agreement. Even if such an agreement existed, it lapsed with the foregoing arbitral award. Plaintiff argues that they seek confirmation of the non-existence of a compensation obligation and initial payment of KRW 10 million (USD 8,700) out of the damages that they incurred.

In contrast, Defendant argues that at the time of the ship repair contract and thereafter the parties lawfully entered into an arbitration agreement. Furthermore, when an arbitral award based upon an arbitration agreement has been set aside, the arbitration proceedings resume. Only arbitration can again be brought to the KCAB and a court action cannot be directly brought. They thus contend that Plaintiff’s action herein is unlawful and should be dismissed.

Therefore, we observe that when an arbitral award has been set aside through a set aside action the Arbitration Act does not contain any provisions on whether the arbitration proceedings can be resumed or whether new arbitration proceedings can be commenced. When an arbitration proceeding has been conducted based upon an arbitration agreement and an arbitral award has been rendered, we conclude that it correspond with the spirit of the current Arbitration Act and the arbitration system as a supplemental means for dispute resolution to find that the arbitration agreement fulfils its purpose and loses effect. Just because the arbitral award is thereafter set aside, the effect of the arbitration agreement that has already lapsed is not resurrected. As long as an arbitral award existed regarding the dispute herein between the parties and then was set aside, thereafter resolution of the dispute cannot occur again pursuant to arbitration proceedings. To resolve such a dispute, a party can only bring an action to the court. This excludes the situation where a new arbitration agreement is executed between the parties or where an arbitration agreement can be deemed to have been formed (p. 431) afterward through such means as a party requesting resumption of the arbitration, the arbitration resuming and the counterparty acceding thereof. Without a need to debate whether an arbitration agreement existed regarding the foregoing dispute, we hold that Plaintiff’s action herein is lawful so Defendant’s defence above is unwarranted.

Therefore, we find that the lower court’s judgment that accepted Defendant’s defence and dismissed Plaintiff’s action as unlawful was unjust. We accept Plaintiff’s appeal, reverse the lower court judgment and remand the case back to the lower court pursuant to Civil Procedure Act 388 and enter judgment as provided in the disposition.

1. 1.  Final Appeal based on the Appropriateness of a Counterclaim Added in the Lower Court after Remand

   The method of countering a claim seeking enforcement judgment of an arbitral award is limited to arguing and proving a ground for set aside as provided under one of the subparagraphs of Article 13(1) of the 1998 Arbitration Act and then seeking dismissal of the claim.

   A review of the reasons of the lower court judgment in light of the record shows that Plaintiff’s claim sought an enforcement judgment pursuant to the arbitral award herein. (p. 432) Defendant’s counterclaim that was added in the lower court after remand was for monetary payment based on the substantive legal relations that formed the basis of award herein. We find the counterclaim does not correspond with the main claim and the method of countering the main claim and the scope of deliberation thereof. Therefore, we find because a close connection cannot be deemed to exist the counterclaim is unfounded. We find the lower court’s measure to dismiss this portion of the counterclaim convincing. We hold the lower court did not insufficiently deliberate and did not commit an error of law concerning the requirements of counterclaims. The court cannot accept this portion of the final appeal.

2. 3.  Final Appeal based on the Effectiveness of the 25 February 1992 Second Agreement

   According to the reasons of the lower court judgment, the lower court comprehensively reviewed the evidence adopted in the judgment and recognized the following facts:

   1. (1)  On 29 June 1989, Plaintiff, Defendant, and Mun Hwa Mulsan, a joint defendant in the lower court before the remand, entered into the Joint Venture Contract to obtain funds necessary for the resort area development project herein; Plaintiff agreed to invest into Mun Hwa Mulsan through a substantial capital increase at a nine to one investment ratio between Plaintiff and Defendant;

   2. (2)  On 31 January 1990, Hui-Su Kim, Plaintiff’s representative director, Defendant and Mun Hwa Mulsan entered into the Agreement in connection with the performance of the Joint Venture Contract; among other things, Defendant was responsible for transferring to Mun Hwa Mulsan the ownership of 12,937 pyeong⁴³ of land that was owned by Hyun Ok Shin, Yeong Baek, and Defendant and located in the resort area, including all the trees and surface structures located thereon; in return, Hui-Su Kim was to pay Defendant KRW 8 billion (USD 7 million);

   3. (3)  As a contract deposit and interim payment, Plaintiff then issued to Defendant a promissory note with a face value of KRW 2 billion (USD 1.74 million) that was due on 31 January 1990;

   4. (4)  When Defendant did not perform their obligation of transferring the ownership of the land and other property under the Agreement herein, Plaintiff filed a notice to Defendant, on 14 December 1993, that if they did not perform their obligations within 60 days the Joint Venture Contract would automatically terminate;

   5. (5)  On 14 May 1994, Plaintiff and Mun Hwa Mulsan filed a request for arbitration at the KCAB arguing that the Joint Venture Contract and the Agreement herein had been terminated and that Defendant should pay both Plaintiff and Mun Hwa Mulsan KRW 2 billion (USD 1.74 million) each and related delay damages;

   6. (6)  In response, Defendant noted that the parties agreed that Plaintiff would pay the KRW 6 billion (USD 5.2 million) that was the portion relating to the appraisal value of the land and other property of Defendant and others located in the resort business area in cash and not in shares; the KRW 6 billion (USD 5.2 million) was calculated by deducting the KRW 2 billion (USD 1.74 million) contract deposit and interim payment from the KRW 8 billion (USD 7 million) that Plaintiff had to pay Defendant under the Agreement herein; thus, according to Defendant, their obligation to transfer the ownership of land and other property and Plaintiff’s obligation to pay the foregoing appraisal value had to be performed simultaneously. Defendant argued (p. 433) that Plaintiff’s expressed intention to terminate the agreement was invalid because they did not perform their payment obligation. As a result, Plaintiff and Mun Hwa Mulsan’s request for arbitration concerning the termination of the Joint Venture Contract and the Agreement was unwarranted; and,

   7. (7)  Regarding Defendant’s arguments concerning the method of paying the KRW 6 billion (USD 5.2 million), which was the KRW 8 billion (USD 7 million) that Plaintiff agreed to pay Defendant in a 25 February 1992 Second Agreement deducted by the KRW 20 billion (USD 17.4 million) contract deposit and interim payment, the arbitral tribunal provided in the reasons for its award that the parties did provisionally agree that the portion of KRW 6 billion (USD 5.2 million) relating to the appraisal value would be paid in cash and not shares as argued by Defendant. The provisional agreement was under the condition that both the issue concerning the costs incurred for the transfer of the real property in the name Mun Hwa Mulsan to Defendant, the real owner of the real property, and the issue regarding Defendant’s request to transfer the 500 pyeong-sized gas station property would be resolved. Yet, the tribunal found it proper to deem that the foregoing 25 February 1992 Second Agreement was abrogated on 27 February 1992, two days after it was drafted, when Defendant tore apart the copy he possessed due to differences of opinion over the cost issue and his request to establish a separate company for this business. The arbitral tribunal determined that even if the 25 February 1992 Second Agreement was deemed valid they found it difficult to consider that Defendant’s obligation to transfer the ownership and Plaintiff’s obligation to pay cash corresponding to the appraisal value had to be simultaneously performed. Among other things, the tribunal held that the Second Agreement provided that the 31 January 1990 Agreement should be respected and that Defendant would perform its obligations.

   The phrase ‘no reason is attached to the arbitration award’ found in the latter portion of Article 13(1)(4) of the 1998 Arbitration Act⁴⁴ refers to the situation where an arbitral award states no reasons at all, includes its reasons but they are so unclear that the factual or legal determination upon which they are based cannot be ascertained, or contains contradictory reasons. As long as the arbitral award contains an explanation of its reasons, the determinations made thereto are justified even if based on fairness and not substantive law. The reasons that must be provided in an arbitral award do not require clear and detailed determinations regarding the relationship of rights and obligations that form the basis of the relevant case. The reasons are sufficient if enough has been provided that one could figure out how the arbitrators reached their determination. As long as the arbitrators’ determination is not manifestly lacking in common sense and contradictory, just because aspects of the determination are unjust or incomplete, we would not consider it a situation where the award did not provide its reasons.⁴⁵

   According to the facts found above, with regard to Defendant’s arguments that their ownership transfer obligation and Plaintiffs payment obligation had to be simultaneously performed under the 25 February 1992 Second Agreement, the arbitral tribunal herein determined in the reasons for its award that the Second Agreement was abrogated. They thereby also rejected Defendant’s argument that the Second Agreement (p. 434) survived as a valid agreement. We find that the reasons for the arbitral award sufficiently provided for one to figure out how the arbitrators reached their determination that the Second Agreement was abrogated. We hold that we do not find the February 1992 Second Agreement survived as argued by Defendant.

   Furthermore, as long as we cannot find an error for omission in decision or lack of reasons, even if the lower court did not make a determination on Defendant’s argument that the arbitral award had grounds for set aside due to an omission in decision or lack of reasons, such an error would not have influenced the outcome of the judgment in any way. We also cannot accept this entire portion of the final appeal.

3. 4.  Final Appeal concerning the Effect of Termination of the Joint Venture Contract

   According to the reasons of the lower court’s judgment, the lower court comprehensively reviewed the evidence adopted in the judgment and recognized that Article 20.1 of the Joint Venture Contract that Plaintiff and Defendant and others entered into on 29 June 1989 provided ‘if one party does perform their obligations within a certain time period, the other party may terminate the Joint Venture Contract’. The court also noted that Article 20.2 provided that ‘if the Contract is terminated based on the prior paragraph, then the breaching party must transfer the shares in their possession to the other party or a third party according to the reasonable terms as decided by the board of directors’. According to the facts found above, even if the Joint Venture Contract was terminated based upon a cause attributable to Plaintiff, the Joint Venture Contract was premised on the condition that Mun Hwa Mulsan would not be returned to its state prior to the Joint Venture Contract through a reduction in capital. Therefore, the lower court found that returning Mun Hwa Mulsan to its original state with its original capital and management through a capital reduction could not be permitted. Furthermore, Article 20.2 of the Joint Venture Contract provided that, regardless of who it was, if the defaulting party completely withdrew from Mun Hwa Mulsan, the development rights for the resort area would continue to remain with Mun Hwa Mulsan. The lower court thereby found it could not accept Defendant’s argument to restore matters to their original state by transferring the development rights to the resort area from Mun Hwa Mulsan to Defendant (the lower court also did not believe that the resort area development project that was regulated as an urban planning project could be transferred at will between private parties).

   In the end, Article 20.2 of the Joint Venture Contract should be considered an agreement that Plaintiff would still retain control over Mun Hwa Mulsan that held rights to the development project, even if the Contract was terminated due to a cause attributable to Defendant. The agreement for Plaintiff to pay Defendant an equivalent amount of money in return for Plaintiff acquiring control over Mun Hwa Mulsan that held the development rights also remained valid despite the termination of the Joint Venture Contract. For Plaintiff, as they argue, they could only claim compensation for damages that arose due to Defendant’s non-performance of their obligations. The lower court found that the arbitral tribunal was mistaken in ordering Defendant to return to Plaintiff the consideration they received in return for management control (that was combined with the consideration for Defendant’s land and trees inside the project area). Yet, this mistake did not arise because the tribunal did not make a determination on Defendant’s simultaneous performance defence but only derived from the tribunal erring in its interpretation of the Joint Venture Contract. The lower court found that Defendant’s defence regarding simultaneous performance of the obligation to restore matters to their original state to be unwarranted based on the reasons above. In the end, the lower court held that even if the arbitral tribunal did not make a determination regarding Defendant’s foregoing simultaneous performance (p. 435) defence such an omission of decision would not have influenced the outcome of the arbitral award in any way.

   As seen above, an arbitral award’s determinations are justified even if based on fairness and not substantive law. The reasons are sufficient if enough has been provided that one could figure out how the arbitrators reached their determination.⁴⁶ Considering these legal principles in light of the reasons of the lower court and record, the lower court found that Plaintiff’s request for arbitration against Defendant sought payment of the KRW 2 billion (USD 1.74 million) that it already granted in the pretext of a deposit, among other things, as a condition for the transfer of ownership of Defendant’s land and trees inside the resort area development project. The request also included a claim for payment of damages that arose due to Defendant’s failure to perform their obligations. We therefore find that the lower court’s determination that the arbitral tribunal was justified in ordering Defendant to pay KRW 2 billion (USD 1.74 million) in damages to Plaintiff was convincing. We do not find that the lower court committed an error of law concerning a mistaken interpretation of the arbitral award or damages for compensation arising out of termination of a contract, or an error of law regarding lack of reasons or omitted decision that are grounds for setting aside an award. We do not accept this part of the final appeal.

4. 5.  Final Appeal concerning Counterclaim for the Omission of Decision

   According to the record, Defendant argued before the lower court that the arbitral award met the set aside grounds under Article 13(1)(5) of the 1998 Arbitration Act because it omitted to decide Defendant’s counterclaim for the deposit. The lower court, however, did not make a determination regarding this argument.

   But just because grounds for set aside existed regarding the counterclaim does not mean that such grounds existed for the principal claim. Therefore, we find Defendant’s foregoing argument itself is unwarranted. Even if the lower court omitted to decide Defendant’s foregoing argument such a mistake would not have influenced the outcome of the judgment. We hold that the remand judgment clearly did not determine that an error existed because the arbitral award omitted to decide the counterclaim as a basis for dismissing part of the principal claim. We find the lower court’s enforcement judgment of the arbitral award pursuant to the principal clam did not commit an error of law regarding the res judicata principle for remand judgments or enforcement judgments. We hold that we also cannot accept this part of the final appeal.

5. 6.  Final Appeal concerning Errors Concerning of the Contents of the Arbitral Award

   Article 13(1)(3) of the 1998 Arbitration Act provides that ‘when an arbitral award provides that a legally prohibited act must be conducted’. This refers to the circumstance where an obligation imposed on Respondent pursuant to the arbitral award violates mandatory laws and regulations or is contrary to the public order or good morals.

   Upon a review and comparison of the reasons of the lower court with the record, the lower court determined that the arbitral tribunal ordered Defendant to pay Plaintiff KRW 2 billion (USD 1.74 million) because they recognized liability arising out of Defendant’s failure to perform their obligation to transfer ownership rights of their land and trees, among other things, located inside the resort area. The lower court then determined that the tribunal found that this could not be considered a situation ‘when an arbitral award (p. 436) provides that a legally prohibited act must be conducted’ according to Article 13(1)(3) of the 1998 Arbitration Act. We are convinced that the lower court’s determination hereto is justified. We thus do not find they committed an error of law regarding compensation for damages arising from a mistaken interpretation of the arbitral award or termination of the contract or committed an error of law concerning the grounds for set aside of an arbitral award or contradictory reasons. We also do not accept this part of the final appeal.

6. 7.  Final Appeal concerning Indivisible Obligations

   According to the reasons of the lower court judgment, the lower court noted that the arbitral tribunal rendered an award that provided that ‘Respondent (Defendant) should pay Claimants (Plaintiff and Mun Hwa Mulsan) KRW 20 billion (USD 17.4 million) and delay damages thereto’. Yet, Plaintiff and Mun Hwa Mulsan’s request for arbitration sought payment from Defendant of KRW 20 billion (USD 17.4 million) and delay damages thereto to each of them as an indivisible obligation. The reasons for the arbitral award also stated that Plaintiff had the rights to receive KRW 20 billion (USD 17.4 million) from Defendant. Based upon these points, the lower court determined that the arbitral award ordered Defendant to pay Plaintiff and Mun Hwa Mulsan KRW 20 billion (USD 17.4 million) as an indivisible obligation.

   The contents of an arbitral award can be only interpreted pursuant to reasonable supplementary means when the award itself has unclear or incomplete parts. If the contents of the award itself are clear, other materials cannot be used to expand its interpretation or to interpret it by analogy.

   According to the record, the arbitral award herein ordered in paragraph 1 that ‘Defendant shall pay Plaintiff and Mun Hwa Mulsan KRW 20 billion (USD 17.4 million) and delay damages thereto’. The order in the arbitral award itself expressly states Plaintiff and Mun Hwa Mulsan’s rights against Defendant are divided rights and the content of the award cannot be considered unclear or incomplete. Under these circumstances, we rule that the court cannot interpret the arbitral award’s order concerning Plaintiff and Mun Hwa Mulsan rights against Defendant as indivisible rights by invoking at will the purpose of the request for arbitration or the reasons for the arbitral award.

   Nevertheless, the lower court determined it to be indivisible rights and rendered an enforcement judgment of the arbitral award that ordered Defendant to pay Plaintiff KRW 20 billion (USD 17.4 million) and delay damages thereto. We rule that an error existed in the lower court’s determination herein because, contrary to the order of the arbitral award, its enforcement judgment exceeded the scope of the order hereto.

   Furthermore, according to the record, when Plaintiff commenced its claim with Mun Hwa Mulsan as its co-Plaintiff they sought an enforcement judgment that Defendant should pay them each KRW 20 billion (USD 17.4 million) and delay damages thereto. Then, during the fourth oral pleading in the court of first instance, Plaintiff amended their Statement of Claim from ‘Defendant [should pay] Plaintiffs each’ to ‘Defendant [should pay] Plaintiffs’. We thereby find that they amended their Statement of Claim to seek an enforcement judgment that Plaintiff and Mun Hwa Mulsan should be paid KRW 20 billion (USD 17.4 million) and delay damages thereto as divided rights. We find that Plaintiff’s Statement of Claim herein should be considered as having sought an enforcement judgment for payment of KRW 10 billion (USD 8.7 million) and delay damages thereto. We therefore rule that the lower court’s enforcement judgment that exceeded Plaintiff’s Statement of Claim by calling for (p. 437) KRW 20 billion (USD 17.4 million) and delay damages thereto was a mistake that violated the principle of disposition.⁴⁷

   In the end, in every respect, we hold that the lower court’s enforcement judgment concerning to the arbitral award for sums of money that exceeded KRW 10 billion (USD 8.7 million) and delay damages thereto led to an error that influenced the outcome of the judgment. The lower court misinterpreted the overall gist of the arbitral award and committed an error of law concerning the scope of the enforcement judgment pursuant to an arbitral award. We hold that this part of the final appeal was warranted.

7. 9.  Therefore, by unanimous decision of all participating Supreme Court justices, we reverse that part of the lower court’s judgment of Plaintiff’s principal claim that adopted the arbitration award ordering payment against Defendant in excess of KRW 1 billion (USD 8.7 million) and delay damages thereto, and remand to the lower court for re-deliberation and redetermination. We dismiss the remaining part of Defendant’s final appeal against Plaintiff’s principal claim and regarding their counterclaim, and enter judgment as provided in the disposition.