1. (2)  According to the reasoning of the lower court, ① Plaintiff filed a declaratory action against Defendant at the Seoul District Court, East Branch, 84 Gahap 398, seeking nullification of the sanction. The court dismissed the action on 7 June 1984 and finalized (p. 273) it around the same time. Plaintiff then filed an administration action against Defendant at the Seoul High Court, 83 Gu 1152, seeking a declaration to nullify the sanction. The court rendered a judgment dismissing the action on 30 August 1984 because the sanction was not subject to an administrative action. Plaintiff did not accept this and filed a final appeal to the Supreme Court, 84 Nu 647. The court also dismissed the final appeal on 22 January 1985. ② In the arbitration proceeding, Defendant raised a defence that Plaintiff’s request for arbitration conflicted with the res judicata effect of the foregoing three judgments. Concerning this defence, the arbitral award determined that in the Supreme Court case Plaintiff sought a declaration to nullify the sanction. The court rejected the argument and dismissed the request. Nevertheless, the award rejected this defence because the principle of res judicata under the Civil Procedure Act only applies to the disposition part of a judgment and does not affect the reasoning behind the determination. ③ On 26 November 1990, the KCAB decided to correct the arbitral award that stated ‘84 Nu 647 (Supreme Court) Case’ to ‘84 Nu 647 (Supreme Court) Case, etc.’.

   Based on the above finding of facts, the lower court rejected Defendant’s argument to set aside the arbitral award due to a failure to make a determination. They found it reasonable to conclude that the arbitral award included a determination on Defendant’s res judicata defence based on the Seoul District Court Eastern Branch’s judgment. They noted that the award was corrected as provided above and among the three judgments only the Seoul District Court Eastern Branch judgment made a determination on the merits, but the award stated ‘even if we presume that the claim was dismissed’.

   According to Article 54 of the KCAB Commercial Arbitration Rules (‘Rules’), we find that an arbitral award may be corrected by a decision when an obvious misprint or error is discovered based upon a numerical calculation error or negligence of a clerk or a typist or other similar situation. This article seeks to only correct obvious errors in expressions within the boundaries of not affecting the results of the merits. Something amounting to changing the contents cannot be a subject of correction. As in the case herein, if ‘etc’ is inserted in the award after the case number, externally the scope of determination is being widened and such a correction is similar to a change of the content of the award in terms of an omission to decide.¹ Therefore, we hold that the correction in this case does not meet the correction conditions set forth in the Rules and is invalid.

   With regard to Defendant’s res judicata defence based on all three foregoing judgments, we find the arbitral award did quote and explain Defendant’s arguments but also partially omitted certain parts. Nevertheless, the award did use a comprehensive expression when making its determination to reject the res judicata argument. Such expression may be viewed as a determination concerning Defendant’s entire res judicata argument including the omitted parts.

   Additionally, among Defendant’s arguments that the arbitral award quotes, the part ‘the argument is rejected and the claim is dismissed’ and the expression ‘the principle of res judicata applies regarding the error or unreasonableness of the above measure’ are premised on the existence of a judgment on the merits. We find it reasonable to view that the arbitral award included a determination on the res judicata effect of the Seoul District Court East Branch judgment, the only judgment on the merits among the foregoing judgments. (p. 274) Furthermore, we hold that as long as the award contains a determination on Defendant’s res judicata argument, we find no ground to set aside the arbitral award for an omission to decide just because the basis for rejecting the argument was not explained in detail or the content of the determination was incomplete or incorrect.²

   Although the lower court’s explanation on the above matter is rather incomplete, their conclusion of rejecting Defendant’s argument on an omission to decide was justified and they did not commit an error of law in the determination regarding the above argument.

An arbitral award under the Arbitration Act confirms, based on res judicata, the right thereof to bring a claim. An arbitral award also assumes real enforceability, when an enforcement judgment therein becomes final and conclusive. Thus, for enforcement of an arbitral award to constitute a tort, special circumstances must exist such as when an award with terms that differ from the substantive legal relations is obtained and enforced through wrongful means. Examples include when a party interferes with the other party’s participation in the proceedings with the intention to harm their rights or seeks to deceive the arbitral tribunal through false assertions. Without such special circumstances, enforcement of an arbitral award would not constitute a tort, even if the contents of the arbitral award were simply unjustified because they conflicted with the substantive legal relations or the enforcement creditor of the award was aware thereof.

Furthermore, even if compulsory execution of a fraudulently obtained arbitration award could constitute a tort, formation of a tort will not be easily recognized in light of the following factors: (1) for the legal stability of the parties, the legislative intent of Article 35 of the Arbitration Act recognizes among other things the same formal finality and conclusiveness or res judicata to an arbitral award and (2) to deny the validity of an arbitral award, in principle, one must seek a set aside through a set aside action where set aside grounds exist. Therefore, we find that compulsory execution of an arbitral award would constitute a tort in the limited circumstances when respecting the validity of the award would be manifestly contrary to justice and could not be ignored. Such situations would include where an award was rendered even though the procedural basic rights of the parties were fundamentally infringed or where an award contains grounds for a set aside.

(p. 275) The lower court below rejected all of Plaintiff’s arguments on the grounds, among other things, that they all lacked sufficient credible evidence. Plaintiff had argued that their procedural basic rights were fundamentally infringed due to such factors as (i) the bankrupt company and second Defendant submitted, among other things, documentary evidence that was forged or prepared with false information; (ii) the non-party was instigated to falsely testify; (iii) Plaintiff’s presentation of arguments and defences were hindered by providing bribes to, or exerting influence upon, the investigative authorities and at the same time by inciting residents of the apartment; and, (iv) wrongful influence over the selection of the arbitrator. Although the measure taken by the lower court herein did not lack a degree of inappropriateness in explaining the reasons behind it, we find it convincing in light of the legal principles and the record herein. As Plaintiff argues on final appeal, we do not find the court committed error that would have affected the its conclusions such as an error of fact in contravention of the rules of evidence or an error of law concerning the fraud and enforcement of an arbitral award and formation of a tortious act.

1. 2.  Parties’ Arguments

   With regard to Plaintiff’s request for an enforcement judgment of Paragraph 3 of the Arbitral Award, Defendant argues that the request either lacks a legitimate interest to bring a legal action or that grounds to refuse the enforcement judgment exist as follows:

   • ①  Paragraph 3 of the Order of the Arbitral Award lacks sufficient specificity for execution, and therefore cannot serve as a legitimate interest to bring a legal action for an enforcement judgment.

   • ②  Although Defendant, during the arbitral proceedings, argued that Plaintiff’s relief regarding Paragraph 3 of the Order of the Arbitral Award was unclear, the arbitral tribunal rendered the Arbitral Award without examining the issue. This violated Article 19 of the Arbitration Act, which provides that the parties shall be given an opportunity to be heard, and thus constitutes grounds for setting aside the arbitral award as provided under Article 36(2)(1)(d) of the Arbitration Act. Therefore, a ground to refuse enforcement of an award exists as provided under Article 38 of the Arbitration Act.

   • ③  If an enforcement judgment is granted for Paragraph 3 of the Order of the Arbitral Award, this would amount to allowing arbitrary execution by the execution agency that would contravene Korea’s public policy, constituting grounds for setting aside the award as prescribed in Article 36(2)(1)(b) of the Arbitration Act. Therefore, another ground to refuse enforcement of an award exists as provided under Article 38 of the Arbitration Act.

2. 3.  Determination

   1. A.  Whether a Legitimate Interest to Bring a Legal Action Does Not Exist

      1. (p. 277) 1)  The Arbitration Act Provisions

         The Arbitration Act provides that an arbitral award shall have the same effect on the parties as a final and binding court judgment (Article 35), that recognition or enforcement of an award shall be granted by a recognition or enforcement judgment of a court (Article 37(1)), and that an arbitral award made within the territory of Korea shall be recognized or enforced unless a ground under Article 36(2) exists (Article 38). The grounds to set aside an award are stipulated in Article 36(2) of the Arbitration Act.⁸

      2. 2)  As provided above, the Arbitral Award constitutes a domestic award as provided under Article 38 of the Arbitration Act since it was rendered in an arbitration seated in Seoul, Korea. The object of the enforcement judgment itself is specific since it requests that ‘compulsory execution of Paragraph 3 of the Order of the Arbitral Award shall be allowed’. However, when the court confers enforceability through an enforcement judgment, the arbitral award and the enforcement judgment together as a whole form an enforceable legal right. Therefore, an arbitral award that is the subject of an enforcement judgment, in principle, must demand a sufficient level of specificity for its compulsory realization such as performance of specific obligations.

      3. 3)  Therefore, we first examine whether Paragraph 3 of the Order of the Arbitral Award has the sufficient level of specificity for execution.

         1. (a)  In light of the contents of the Arbitration Act referred to above, when the requirements for recognizing an arbitral award are fulfilled, the court’s only task involves conferring enforceability to an award and, in principle, they may not supplement or modify the award. Nevertheless, if the contents and the scope of the order of an arbitral award are unclear, the court is allowed to clarify the order by interpreting the order and the reasoning of the award. Even then, supplementation or modification of the arbitral award’s order through new evidence or re-evaluation of the subject matter of the arbitration is not allowed.

         2. (b)  In light of the foregoing evidence, we find that Paragraph 3 of the Order of the Arbitral Award lacks the degree of specificity needed for compulsory execution:

            • ①  First, Paragraph 3 of the Order of the Arbitral Award merely provides that ‘Defendant shall perform its obligation under Article 14(2) of the Agreement’, and does not set forth the content, object and scope of the obligation under Article 14(2) of the Agreement.

            • ②  At the same time, the reasons of the Arbitral Award cite Article 14(2) of the Agreement that provides that ‘[u]pon the termination of the Agreement, Defendant shall i) immediately cease using any part of Plaintiff’s Licensed Software, Intellectual Property Rights and Confidential Information licensed pursuant to this Agreement; ii) return the originals and all copies (in any physical form) of the Licensed Software including the Viewing Card under Defendant’s possession or control; and iii) destroy any records containing Confidential Information relating to Plaintiff including, without (p. 278) limitation, those in machine-readable form’. However, even the reasoning of the Arbitral Award merely recites Article 14(2) of the Agreement and does not specify or explain thereof the scope or object of the obligations herein. Therefore, the precise scope or object of the obligations cannot be specified solely through the above Article.

            • ③  Ultimately, even if the court considers the Order of the Arbitral Award together with Article 14(2) of the Agreement set forth in the reasoning of the Arbitral Award, the object⁹ that Defendant should cease using, return, and destroy cannot be specifically ascertained, and to do so would require not only re-examination of the Arbitral Award but also the Agreement, supplementary documents and related evidence.¹⁰

            • ④  Along with the above circumstances, the Korean legal system differentiates between the granting of enforceable legal rights and the execution by an execution agency. It also demands that enforceable legal rights have the necessary specificity and self-completeness to enable the execution agency to carry out the execution itself without investigating the existence and contents of the performance obligation. Thus, the mere fact that Plaintiff and Defendant were aware of the object of execution is insufficient to deem Paragraph 3 of the Order of the Arbitral Award as having the necessary level of specificity for execution.

      4. 4)  Yet, we find that where execution of an arbitral award’s order is not possible, the legal interest to request an enforcement judgment of an award can still be recognized.

         1. (a)  Enforcement judgments confer enforceability upon an arbitral award to allow the compulsory execution procedures to proceed. The trial determines whether to confer enforceability based upon its status at the conclusion of oral arguments.¹¹ At the same time, Article 36(4) of the Arbitration Act provides that ‘an application for setting aside the award may not be made after the judgment for recognition or enforcement of the award rendered by a court of the Republic of Korea becomes final and conclusive’. Therefore, in addition to (p. 279) granting enforceability, an enforcement judgment also has the legal effect of limiting actions to set aside an arbitral award.

         2. (b)  We find that the law thereof relating to enforcement judgments of arbitral awards seeks to protect the award from a counterparty arguing for its set aside and not merely to confer enforceability to the award to allow compulsory execution.

         3. (c)  When a counterparty’s application to set aside an arbitral award is dismissed, if the counterparty refiles an application to set aside the award again based on the same grounds, based on the res judicata of the previous action and its binding effect, the court cannot make a contradictory determination. In this regard, the arbitral award is protected from specific issues that were asserted as set aside grounds in a previous action. Furthermore, an action to set aside an arbitral award is not allowed after the passage of the three-month exclusion period starting from the date of receipt of the duly authenticated arbitral award. Whether the period for filing an application to set aside has lapsed, however, differs in every case, and, when such an application is dismissed, the arbitral award is protected only from the specific issues argued in such application. An arbitral award is comprehensively protected only when the enforcement judgment of the award is rendered. Therefore, when an enforcement judgment for an arbitral award is rendered and confirmed, based upon the legal effects of the enforcement judgment thereof, an action to set aside the award shall be understood to be dismissed even if the application for set aside thereof was filed prior to the application for an enforcement judgment.¹²

      5. 5)  Moreover, arbitration is a private dispute settlement procedure to settle by agreement between the parties any dispute thus far, not by the judgment of a court, but by the award of an arbitrator. Thus, parties to an arbitral award have a duty to comply with the award rendered thereof in accordance with the dispute resolution method agreed between them. However, if a court refuses recognition or enforcement of an arbitral award based on set aside grounds as prescribed by law, then a party can bypass the risk of compulsory execution in Korea. On the other hand, even if an arbitral award cannot be executed under the strict requirements of compulsory execution proceedings prescribed under the Civil Execution Act, it will not be deemed automatically null and void. If an arbitral award that cannot be executed has an enforcement judgment, such judgment will constitute the court’s confirmation that the award does not have defects and has satisfied recognition requirements. Parties to the arbitral award will be compelled by the obligation to comply with the award since the court’s recognition and enforcement judgment confirmed its validity. Whether to comply with such obligations will greatly affect the parties’ reputation and credibility such that it will eventually facilitate dispute resolution between the parties by indirectly compelling the parties to voluntarily comply with the obligations provided in the arbitral award. Ultimately, we conclude that arbitral awards that in practice cannot be compulsorily executed also need enforcement judgments.

      6. 6)  Therefore, we hold that even when an order of an arbitral award lacks the requisite specificity for execution, a legal interest to request enforcement judgment of such award shall be recognized regardless of whether it can be executed.

      7. (p. 280) 7)  Therefore, we find that this part of Defendant’s argument unwarranted.

   2. B.  Requirements for the Enforcement of the Arbitral Award

      1. 1)  Article 37(2) of the Arbitration Act provides that the party applying for recognition or enforcement of an arbitral award must submit a duly authenticated award or a duly certified copy thereof, and the original arbitration agreement or a duly certified copy thereof, and if the award or the arbitration agreement is not made in Korean, a duly certified translation thereof into Korean shall be attached. Once the party requesting recognition or enforcement of the arbitral award makes or can be deemed to have made such submissions, it is reasonable to permit compulsory execution based on the award as long as grounds to refuse recognition or enforcement do not exist as prescribed under Article 36(2) of the Arbitration Act.

      2. 2)  In this case, Plaintiff submitted the Agreement that included the arbitration agreement and a copy and translation of the Arbitral Award, and Defendant did not contest the arbitration agreement and the existence and contents of the Arbitral Award. In such a case, the duly authenticated or the duly certified copy and translation thereof shall be deemed to have been submitted under Article 37 of the Arbitration Act.¹³

      3. 3)  Therefore, since the Arbitral Award fulfils all the requirements for enforcement thereof, absent refusal grounds under Article 36(2) of the Arbitration Act, compulsory execution must be permitted based on the Arbitral Award thereof. As seen in paragraph C below, this Arbitral Award cannot be deemed to have any grounds to refuse enforcement.

   3. C.  Whether Refusal Grounds under Article 36(2) Exist

      1. 1)  Whether Grounds to Set Aside the Arbitral Award Exist under Article 36(2)(1)(d)

         1. (a)  Summary of Defendant’s Argument

            During the arbitral proceedings, although Defendant pointed out that Plaintiff’s purpose of the request regarding Paragraph 3 of the Order of the Arbitral Award was unclear, the arbitral tribunal rendered the Arbitral Award without examining this issue. This violates Article 19 of the Arbitration Act that prescribes the parties shall be given a full opportunity to present their case. This amounts to a ground to set aside the arbitral award under Article 36(2)(1)(d) of the Arbitration Act.

         2. (b)  Determination

            Article 19 of the Arbitration Act provides that both parties shall be equally treated in the arbitral proceedings and each party shall be given a full opportunity to present its case concerning its issues. In this case, however, as Defendant themselves argue, Defendant raised the issue with the arbitral tribunal during the arbitration proceedings that Plaintiff’s counterclaim to the request for arbitration regarding Paragraph 3 of the Order of the Arbitral Award was unclear and that Plaintiff had the opportunity to present their case. Despite this, the arbitral tribunal rendered the Arbitral Award by accepting Plaintiff’s counterclaim, meaning that the tribunal did not accept Defendant’s argument thereof. Moreover, the Arbitral (p. 281) Award accepted Plaintiff’s counterclaim and the arbitral tribunal did not make a determination that exceeded the purpose of the request. In addition, we do not find that Defendant’s right to present was infringed or the Arbitral Award contained a mistake that violated the Arbitration Act.

            We find this part of Plaintiff’s argument unwarranted.

      2. 2)  Whether Ground to Set Aside Award Exists under Article 36(2)(2)(b)

         1. (a)  Summary of Defendant’s Argument

            An enforcement judgment of Paragraph 3 of the Arbitral Award would amount to allowing arbitrary execution by the execution agency that would contravene Korea’s public policy and constitute grounds to set aside the award under Article 36(2)(2)(b).

         2. (b)  Determination

            As determined above, we concluded that although Paragraph 3 of the Arbitral Award lacks the requisite specificity for execution, a legitimate interest exists to bring a legal action for an enforcement judgment of the Arbitral Award that cannot be executed. Moreover, an enforcement judgment confers enforceability upon an arbitral award, and in practice execution of an enforcement judgment is carried out according to the obligations provided in the award pursuant to the compulsory execution proceedings under the Civil Execution Act. When a court renders an enforcement judgment for an arbitral award that lacks the requisite specificity for execution, this does not permit an execution agency to arbitrarily determine execution. The counterparty may seek such remedies as an objection and appeal as provided under the law during the relevant proceedings.

            Therefore, we conclude that Plaintiff bears a legitimate interest to bring a legal action for the enforcement judgment and an enforcement judgment based on Plaintiff’s request cannot constitute allowing arbitrary execution by the execution agency. We find that Defendant’s argument based on a contrary premise is groundless.

3. 4.  Conclusion

   Plaintiff’s claim in this case is warranted and therefore accepted. We find the court of first instance’s judgment is unjustifiable due to its contrary conclusion and accept Plaintiff’s appeal that the judgment should be vacated and uphold their request. We shall not make a provisional execution pronouncement since considerable reason not to do so exists, considering such matters as the contents of Paragraph 3 of the Order of the Arbitral Tribunal and whether the possibility of execution exists. We enter judgment as provided in the Disposition.

   Appendix 1¹⁴

   1. 159.  Based on the reasoning stated in this partial award, the Tribunal orders:

      1. (1)  that the Agreement for the Supply of Conditional Access System and Service dated June 14, 2001 was unlawfully terminated by Claimant on November 4, 2009;

      2. (p. 282) (2)  that the Agreement for the Supply of Conditional Access System and Service dated June 14, 2001 was validly expired on December 30, 2010;

      3. (3)  that Respondent carry out its obligation under Article 14(2) of the Agreement for the Supply of Conditional Access System and Service dated June 14, 2001;

      4. (3)  that the Parties each bear their legal fees and arbitration costs arising out of this arbitral proceeding as stated in the above Paragraph 155 and thereinafter and that therefore, Respondent pay USD 683,919 of Claimant’s legal fees and arbitration costs;¹⁵

      5. (4)  that any remaining claim, counterclaim, or claim for remedy not dealt with in this award is dismissed.

1. 3.  Defendant’s Argument and Determination

   1. A.  [See para. 2.13.]

   2. B.  Argument that ‘Enforcement of the Arbitral Award is contrary to Public Policy’

      1. (1)  Defendant argues that the enforcement of the award is contrary to public policy because the tribunal committed an error of law when they relied upon an attorney’s opinion that retention or auction rights could not be exercised against the freight under Chinese law. Furthermore, Plaintiff had already received USD 590,000 in freight fare from the freight owner and would be paid twice if the arbitral award was enforced.

         1. (2)  Relevant Law and Regulations

            • (A)  New York Convention and Its Interpretation

              Article V(2)(b) of the New York Convention provides that ‘recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that … the recognition and enforcement would be contrary to the public policy of that country’. The provision seeks to prevent the recognition and enforcement of the arbitral award from harming the fundamental moral norms and social order of the enforcing country, and to protect these concerns. The determination thereof must together take into consideration not only the perspective of the domestic (p. 283) circumstances but also the stability of the international trading order and must be based on a narrow interpretation.¹⁶ Only when the specific result of recognizing the award is contrary to Korea’s public policy will recognition and enforcement be refused.¹⁷

              Enforcement judgments confer enforceability upon foreign arbitral awards to allow the compulsory execution procedures to proceed under Korean law. The trial determines whether enforceability exists based upon its status at the conclusion of oral argument. After the arbitral award has been rendered, an action objecting to execution could be brought under the Civil Execution Act on such basis as expiration of the obligation. It may then be revealed during the oral arguments of the enforcement trial that permitting the compulsory execution procedures to continue would contravene fundamental principles of Korean law. In this case, the Korean court may refuse enforcement of the arbitral award thereof by finding that it would violate the foregoing provision under the New York Convention.¹⁸

            • (B)  [Discussion on Chinese Maritime Law and the Korean Commercial Act has been excluded.]

         2. (3)  Determination

            • (A)  Determination Regarding the Claim of Error of Law

              We observe that an arbitral award has the same effect as a final and conclusive judgment. Taking this into consideration, a court that receives a request for an enforcement judgment, in principle, should not be permitted to determine the invalidity of an arbitral award by reviewing the correctness of the award’s contents.

              Yet, according to Article V(2)(b) of the New York Convention, recognition and enforcement of an arbitral award may also be refused if it would be contrary to the public policy of Korea. This determination therein, as seen above, must together take into consideration not only the perspective of the domestic circumstances but also the stability of the international trading order and, to the extent possible, must be based on a narrow interpretation.

              First of all, we see no evidence to prove Defendant’s argument that ‘an error of law existed in the Arbitral Award concerning the maritime law of China’. Further, according to the interpretation of the Korean Commercial Act, a carrier’s retention and auction rights over the freight is only a recognized right and not a duty that must be exercised. Even though the above rights were not exercised, a carrier’s rights to claim the fare, among other things, will not disappear. Therefore, even if the Arbitral Award contained an error of law as Defendant asserts, we do not find that recognition and enforcement of the Arbitral Award that held Plaintiff still had the rights to claim such things as the fare would be contrary to public policy of Korea. Hence, we do not accept Defendant’s above argument.

In certain cases, an arbitral award is permitted to make a determination based upon the principle of fairness departing from the positive law. When an arbitral award orders payment of a monetary obligation and also orders payment of delay damages at the statutory rate provided under Article 3(1) of the 2002 Act on Special Cases Concerning Expedition, etc. of Legal Proceedings (hereafter Litigation Expedition Act)¹⁹ in effect at the time of the award, we do not view this as a violation of mandatory law or contravention of public policy. We hold that even if the Constitutional Court declared that the foregoing provision was unconstitutional after the arbitral award, unless special circumstances exist, the foregoing would not be viewed differently.

1. 2.  Determination Concerning Cause of Actions

   We observe that arbitral awards rendered in Korea must be recognized and enforced if none of the set aside grounds under Article 36(2) of the 2010 Arbitration Act exist.²¹ The Arbitral Award does not contain any such set aside grounds so we must grant compulsory execution of the award.

2. 3.  Determination Concerning Defendant’s Argument

   Defendant claims that pursuant to the Arbitral Award their obligation to pay the sales price of the Shares and any delay damages and Plaintiff’s obligation to deliver the Shares to them must be performed simultaneously. Defendant argues that compulsory execution based on the Arbitral Award should not be granted because they did not receive the Shares from Plaintiff.

   We observe that even if an enforcement judgment for an arbitral award has been rendered the arbitral award only gets combined with the enforcement judgment to create an enforceable legal right.²² Under the Arbitral Award, simultaneous performance through performance of the reciprocal obligation or tender of performance still remains a condition for enforcement to commence. We do not find that Defendant’s arguments provide a basis for not permitting an enforcement judgment for the Arbitral Award. Therefore, without need for further review, we find Defendant’s arguments unwarranted. (Furthermore, as provided above, we find that on 8 June 2012 Plaintiff deposited all of the Shares with Defendant as the depositee, so this also renders Defendant’s argument unwarranted.)

1. 1.  First Point

   The lower court found that the arbitral award explained that according to the summary of the Third Agreement of 31 January 1990 one of the contractual parties was ‘Hui-Su Kim’ instead of ‘Claimant Keumjung Corporation Representative Director Hui-Su Kim’. Afterward, in the legal determination section, the award appears to have held that the legal effect of the settlement applied to the ‘Claimant’, which meant Plaintiff Keumjung, and not the natural person Hui-Su Kim. The lower court found that the reason that the amount herein should revert to Keumjung and not Hui-Su Kim was unclear in the award. The basis of the award’s factual or legal determination could not be ascertained, and the reason for the award could be considered as contradictory. The lower court thus determined that with regard to Keumjung the arbitral award should be set aside based on grounds under the later part of Article 13(1)(4) of the Arbitration Act.²⁴

   The phrase ‘when an arbitral award does not include its reason’ in the latter part of Article 13(1)(4) of the Arbitration Act 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. 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.²⁵

   We observe the arbitral award from this perspective. When explaining the Third Agreement, the arbitral tribunal mistakenly stated the party as ‘Plaintiff Keumjung Corporation Representative Director Hui-Su Kim’ instead of just ‘Hui-Su Kim’. Yet, if we consider the (p. 287) remaining reasoning of the arbitral award before and after the explanation on the Third Agreement, we can easily see that the arbitral tribunal intended to state ‘Plaintiff Keumjung Corporation Representative Director Hui-Su Kim’ but by mistake stated ‘Hui-Su Kim’. We find that based only upon the arbitral award we can tell how the arbitrators reached their conclusion. We conclude that we do not find, as the lower court recognized, that grounds exist to set aside the award. We thus hold that the assertion that raises the first point is warranted.

2. 2.  Second Point

   Within the reasoning of the arbitral award, the reason behind the basis for Plaintiff Mun Hwa Mulsan, among Claimants, to have a right to request the return of KRW 2 billion (USD 1.74 million) against Defendant does not appear anywhere at all. We hold that the part of the arbitral award concerning Mun Hwa Mulsan did not state a reason anywhere so should be set aside based on the grounds under the latter part of Article 13(1)(4) of the Arbitration Act. We therefore hold that the lower court in this regard was justified and the second point is unwarranted.

3. 3.  Third Point

   The lower court determined that as long as the arbitral tribunal had determined that the Joint Venture Contract and the 1 March 1990 Third Agreement had been rescinded to perform their obligation to restore the status quo, Plaintiff Keumjung was obligated to restore Defendant’s management control as the largest shareholder of Mun Hwa Mulsan by reclaiming Mun Hwa Mulsan’s capital and returning the company to its state before the joint venture. If Mun Hwa Mulsan could not be returned to Defendant and it had to remain under the control of Keumjung, then Keumjung was obligated to return the rights to develop the Seowongok amusement park back to Defendant. Defendant argued as a simultaneous performance defence that Mun Hwa Mulsan had an obligation to restore the status quo, but the arbitral tribunal did not make any determination thereof. The lower court determined that the arbitral award should be set aside based upon the grounds of ‘omission of decision on an important matter that would have influenced the rendering of the award’ under Article 13(1)(5) of the Arbitration Act and Article 422(9) of the Civil Procedure Act.

   Yet, according to the record, Keumjung entered into a Joint Venture Contract with Mun Hwa Mulsan, which held the right to develop the Seowongok amusement park and which Defendant controlled as the largest shareholder and representative director. The Joint Venture Contract provided that Keumjung would invest into Mun Hwa Mulsan to allow them to secure the funds to carry out development of the amusement park. Mun Hwa Mulsan would have a large rights offering to increase their stated capital and Keumjung and Defendant would each acquire shares at the ratio of 9 to 1. Mun Hwa Mulsan would also reorganize their directors so that Keumjung, as the new largest shareholder, would exercise control. Article 20(1) of the Joint Venture Contract provided that if one party did not perform their obligations within a certain period then the other party could terminate the contract. Paragraph 2 provided that ‘if the contract is terminated under para 1 above, then the party responsible for the termination must transfer the shares they possess to the other party pursuant to the reasonable conditions as decided by the board of directors’.

   In this case, even if the Joint Venture Contract is rescinded due to a cause attributable to Keumjung, the contract is premised on Mun Hwa Mulsan not being returned to its state prior to the contract through a reduction in capital. Restoring Mun Hwa Mulsan to its (p. 288) original state of stated capital and management through a reduction in capital should not be allowed. Furthermore Article 20(2) of the Joint Venture Contract is premised on the responsible party completely withdrawing from Mun Hwa Mulsan, regardless of who it is, and Mun Hwa Mulsan continuing to retain the rights to develop the amusement park. We cannot accept Defendant’s argument that as part of restoring the status quo the right to develop the amusement park should be transferred from Mun Hwa Mulsan to Defendant. (We also do not find that the right to develop the amusement park, which is an urban design project, can be transferred at will between private persons.)

   Ultimately, Article 20(2) of the Joint Venture Contract was an agreement that Keumjung would continue to control Mun Hwa Mulsan, which retained the right to the project even if the contract was rescinded through a cause attributable to Defendant. In this regard, Keumjung’s agreement to pay an appropriate amount to Defendant for acquiring control over Mun Hwa Mulsan, which had the right to the project, would also continue to remain valid despite rescission of the contract. Yet if, as they argue, Keumjung incurred damages from Defendant’s non-performance of their obligations, they could claim compensation thereof.

   The arbitral tribunal did make the mistake of ordering Defendant to return to Plaintiff the consideration (this is combined with the consideration for Defendant’s land and trees in the project zone) they received for the management control rights. Yet, this mistake was not the result of an omission to decide regarding Defendant’s foregoing simultaneous performance defence but was based upon the arbitral tribunal erring in the interpretation of the Joint Venture Contract. We conclude as found above that Defendant’s mutual foregoing simultaneous performance defence regarding the obligation to restore the status quo was unwarranted. Ultimately, we find that even if the arbitral tribunal did not make a decision therein regarding Defendant’s foregoing simultaneous performance defence such an omission would not have influenced the rendering of the award.

   Despite this, the lower court determined that the arbitral tribunal’s omission to decide would have influenced the award. We find that the lower court judgment committed an error of law concerning the legal principles related to restitution arising out of a rescinded contract and omission to decide as a ground to set aside an arbitral award.

Second Issue on Final Appeal

The lower court held that the parties agreed that the arbitration herein would be subject to the laws of the Republic of Korea. The arbitral award determined that the delay damages credit was a credit due in foreign currency and ordered Plaintiff to pay in foreign currency.

(p. 289) The arbitral tribunal recognized that the damages credit was a credit due in foreign currency on the following grounds: ‘According to the sale and purchase agreement between the parties, the parties agreed to pay the price of the goods in US currency. Article 5(b) of the General Provisions²⁶ also provided the delay damages shall be calculated based upon the price of the goods and provided that the remainder of directly deducting the delay damages from the contract price of the goods should be paid. Based on these facts, the parties agreed to pay the delay damages in US currency.’

The lower court then found that under Korean law the damages credit for non-performance could not be due in foreign currency unless special circumstances existed such as if the parties agreed to pay in foreign currency. But in the arbitral award herein, based upon the grounds above, the tribunal found that the parties agreed to pay the credit in foreign currency and ordered Plaintiff to pay in US currency.

The lower court held that this arbitral award could not be considered contrary to the law of the Republic of Korea, the governing law, and the arbitral proceedings could not be considered as not being in accordance with the arbitration agreement.

At the same time, the situation where an arbitral award does not include its reason refers to when 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, even if aspects of the determination are unjust or incomplete, we would not consider it such a situation.²⁷

The lower court determined that the arbitral award herein decided that the delay damages credit was due in foreign currency based on the grounds above and that this did not constitute a situation where the reason was not provided.

According to the record, we hold that the lower court’s factual findings and determination were justified and as argued on final appeal we cannot hold they committed an error of law such as concerning the set aside of an arbitral award. These arguments in the final appeal are unwarranted.

(Third Issue on Final Appeal)

Article 14(2) of the 1997 Arbitration Act only provides that an enforcement judgment cannot be rendered if grounds for bringing an action to set aside an arbitral award exist. An action for set aside of an arbitral award alone does not provide grounds for blocking an action seeking an enforcement judgment.

We hold that the lower court was justified in finding in the same regards that not bringing an action for set aside of an arbitral award within the required statutory period could not act as a condition for bringing an action for enforcement judgment of an award. As argued on final appeal, we cannot hold the lower court committed an error of law such as concerning the set aside of an arbitral award. These arguments in the final appeal are unwarranted.

1. 3.  Third Issue on Final Appeal

   Article 32(2) of Arbitration Act provides ‘An arbitral award shall state the reasons upon which its determination is based. Yet, this shall not apply if the parties have an agreement or in the case of a consent award under Article 31.’ Article 36(2)(1)(d) provides that one ground for setting aside an arbitral award is if it is proven that ‘the arbitral proceedings were not in accordance with agreement of the parties, which was not contrary to a mandatory provision of this Act, or failing such agreement, were not in accordance with this Act’. An arbitral award may be set aside if the award did not state the reasons upon which it was based, despite there not being an agreement between the parties that a statement of the reasons was not required.

   The phrase ‘when an arbitral award does not state its reasons’ 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 state its reasons.²⁹

   (p. 291) In light of the legal principles in the lower court’s judgment, we hold that this part of the explanation in the lower court’s judgment is not without some inappropriate points but we rule that its conclusion was justified when it held that it was difficult to find the arbitral award’s reasons themselves contradictory.

   We hold the lower court judgment did not commit an error of law regarding the grounds to setting aside an arbitration award as argued on final appeal.

   Therefore we do not accept that portion of the arguments in the final appeal.

Article 32(2) of the Arbitration Act provides that ‘the arbitral award shall state the reasons upon which it is based, unless the parties agreed that no reasons are to be given or the award is an award on agreed terms under Article 31’. Article 36(2)(1)(d) describes one reason for setting aside an arbitral award would be where it is proven that ‘the arbitration procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with any provision of this Act which the parties cannot derogate or, failing such agreement, were not in accordance with this Act’.

If the parties have not agreed that it was not necessary to state the reasons, but the arbitral award does not state its reasons, it will be set aside. ‘When the arbitral award does not state its reasons’ refers to when the award does not state its reasons at all, or the reasons provided are so unclear that the factual or legal basis on which they are derived from cannot be established or the reasons are contradictory. As long as the arbitral award has a description of its reasons, the determination would still be justified even if it was based on fairness instead of substantive law. The reasons that must be included in the arbitral award do not require a clear and detailed determination concerning the legal relationship that serves as the premise of the case. It is sufficient if one can comprehend how the arbitrators reached their determination. As long as the determination does not clearly lack commonsense and is not contradictory, having some unjustifiable or incomplete aspects does not mean that it did not state its reasons.³¹

The lower court rejected Plaintiff’s (Counterclaim Defendant) argument that the arbitral award should be set aside under Article 36(2)(1)(d) of the Arbitration Act. Plaintiff argued that the guaranteed liability should be reduced pursuant to Article 485 of the Civil Code. In evaluating Plaintiff’s argument, the court found the arbitral tribunal rejected all defences other than those based on the principle of good faith, among other things, because the secondary loan guarantee obligations were an independent guaranty. The lower court (p. 292) found that the arbitral tribunal’s determination did not clearly lack commonsense or was not contradictory. Therefore, concerning Plaintiff’s argument for the reduction of the guaranteed liabilities, they found it was not a case where the arbitral award did not state its reasons or the reasons provided were so unclear that the factual and legal basis on which they were based could not be established.

Based upon the above legal principles and record, we find the lower court’s above determinations justified. As argued on the final appeal, we cannot find any error such as an error of law regarding independent guarantees or concerning the arbitral award’s failure to state its reasons or omit its determination, or a failure to conduct the necessary review that would have affected the judgment.

Therefore, we dismiss the final appeal and assess all costs associated with the final appeal against the losing party, and by unanimous decision of all participating Supreme Court Justices enter judgment as provided in the disposition.

1. 3.  Arguments and Determination

   1. A.  Grounds for Set Aside under Article 36(2)(i)(d) of the Arbitration Act

      • [(1)–(4) covered in paras 6.38, 4.05, 5.42.]

      1. (5)  Assertion of Wrongfulness for not Following the Arbitration Act When Recognizing Plaintiff’s Violation of the Licence Agreement’s Confidentiality Obligation

         1. (A)  Plaintiff’s Argument

            Based upon the fact that the First and Second Ovens were in essence the same, the arbitration tribunal decided that ‘Plaintiff manufactured the Second Oven by forwarding the specification of the First Oven to Olbrich and other third parties in violation of the Licence Agreement’s confidentiality obligations and oven reproduction prohibition obligation so they must pay compensation damages’. Plaintiff did not forward the specification of the First Oven to Olbrich and other third parties. No basis exists for the determination that the First and Second Ovens were in essence the same. Even if the First and Second Ovens were in essence the same, this cannot automatically serve as a basis for finding that the confidentiality obligation was violated. The tribunal’s determination was clearly lacking in common sense and contradictory, and violated Article 32(2) of the Arbitration Act that requires the reason be stated in an award. The award should be set aside under Article 36(2)(1)(d) for ‘the arbitration proceedings … were not in accordance with the (Arbitration) Act’.

         2. (B)  Determination

            According to Plaintiff Exhibit No. 1, as the basis for finding that the First and Second Ovens were practically the same, the arbitral award noted that the structure of the core parts were the same and only a partial replacement of structural components (p. 293) occurred. Before Plaintiff received the First Oven from Defendant, they did not have any experience in installing equipment for this type of vertical oven. Plaintiff entered into the licence agreement with Defendant and received the First Oven. Several years later, they installed the Second Oven and the Second Oven is practically the same as the First Oven. We note that based upon these points, the award established that Plaintiff violated, among other things, the confidentiality obligation under the Licence Agreement. The arbitral award does not directly recognize that Plaintiff forwarded technical specifications of the First Oven to Olbrich or other third parties. Yet, the foregoing facts established in the arbitral award served as strong indirect facts that confirmed that Plaintiff forwarded technical specifications of the First Oven to Olbrich or other third parties. We find that the tribunal established Plaintiff’s violation of, among other things, the confidentiality obligation under the Licence Agreement based upon the foregoing facts. We do not find the tribunal’s determination was clearly lacking in common sense and contradictory so Plaintiff’s foregoing argument lacks merit.³²

1. 3.  Determination

   1. A.  Grounds for Set Aside under Article 36(2)(1)(d) of Arbitration Act

      1. 1)  Standard for Contract Interpretation

         Article 36(2)(1)(d) of Arbitration Act provides that if ‘the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, which was not contrary to a mandatory provision of this Act, or, failing such agreement, was not in accordance with this Act’ then an arbitration award may be set aside. The agreement between the parties on contract interpretation is not about the composition of the arbitral tribunal or the arbitral procedure. Even if the arbitral tribunal did not follow the parties’ agreement concerning the standards for contract interpretation, we do not find that it would be grounds to set aside the arbitral award under Article 36(2)(1)(d) of Arbitration Act. Therefore, we do not accept this part of Plaintiff’s arguments.

      2. 2)  Whether an Error of Omission of Decision or Failure to State Reasons Exists

         1. A)  Level of Reasoning Stated in the Arbitral Award

            Article 32(2) of the Arbitration Act provides that ‘[t]he award shall state the reasons upon which it is based. Yet, it shall not state so if the parties have agreed or the award is an arbitral award on agreed terms under Article 31.’ Article 36(2)(1)(d) of the same law declares that one ground for setting aside arbitral award is when it is proven that ‘the arbitral procedure was not in accordance with the agreement of the parties, which was not in conflict with a mandatory provision of this Act, or, failing such agreement, was not in accordance with this Act’. When an arbitral award does not state its reasons even though the parties did not agree that the reasons need not be stated, this becomes a ground to set aside an award.

            The phrase ‘when an arbitral award does not state its reasons’ 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.³³

         2. B)  Whether a Decision was Omitted on Certain Issues Concerning the Outage that Were Not Attributable to Plaintiff

            During the arbitration proceedings, Plaintiff submitted a chart on the part of the generators’ outage time that was not attributable to Plaintiff. The parties did not contest, or it is recognized by Plaintiff Exhibit No. 5, that the arbitral tribunal did (p. 295) not make a specific determination regarding some of the items in the foregoing chart. The arbitral tribunal, however, did reject Plaintiff’s argument regarding the generators’ outage time. They cited as the basis that in each case ‘Plaintiff did not notify, or receive permission from, Defendant at the time of the outage from the breakdown’. The arbitral tribunal found that ‘based solely upon the references that Plaintiff submitted we find it difficult to recognize that the breakdown time was not due to a fault attributable to Plaintiff’. They thus noted that Plaintiff bore the burden of proof on this point.³⁴

            Taking this into consideration, we note that, among the issues raised by Plaintiff, the arbitral award rejected some issues without making a specific determination but it did so on the same basis as the issues where it did make a determination.

            Therefore, we do not find that the arbitral tribunal omitted to decide regarding this part or that they did not state their reasons.

         3. C)  Omitted to Decide the Assertion Related to the Starting Date of Delay Damages

            According to Plaintiff Exhibit No. 5, the tribunal partially accepted Defendant’s claim and ordered Plaintiff to pay compensation damages, designating the starting date of the delay damages as 11 June 2011, the day after Defendant’s request for arbitration was delivered.³⁵ Accordingly, the arbitral tribunal decided to reject Plaintiff’s argument regarding the starting date of the delay damages. Therefore, we do not find that the arbitral award omitted to decide regarding this matter.

         4. D)  Whether a Contradictory Determination was Reached

            The arbitral tribunal excluded the period in the Vestas employee’s report when maintenance was not possible from the generator’s breakdown outage time because, during the arbitration proceeding, Defendant expressed their intent to exclude the period in the foregoing report from the breakdown outage time.³⁶ We do not find that this part of the award conflicted with the dismissal of Plaintiff’s argument regarding the stoppage of the generator.

         5. E)  Whether the Grounds for Accepting Defendant’s Arguments were Ambiguous

            The arbitral award dealt with in detail each issue that the Parties argued and the basis of their arguments and is organized according to the arbitral tribunal’s determination thereof. As long as the arbitral award explains in detail the basis of Defendant’s arguments, even if the award adopts the basis thereof but does not explain again the reasons for adopting it, we still find that we can sufficiently ascertain how the award reached its determination. We do not find it convincing that the arbitral award’s reasoning was ambiguous.

         6. F)  Sub-conclusion

            We do not find that the arbitral tribunal omitted to decide or did not state their reasons. We do not accept this part of Plaintiff’s arguments.

      3. 3)  [covered in para. 5.43.](p. 296)

         1. B.  Grounds for Set Aside under Article 36(2)(2)(b) of the Arbitration Act

            Under Article 36(2)(2)(b) of Arbitration Act, the grounds under which an arbitration award may be set aside ex officio by the court consist of ‘when recognition and enforcement of the arbitral award is contrary to the public policy of Korea’. This provision does not apply to all situations where an arbitral award could be viewed as unreasonable because the arbitrator’s fact finding was mistaken or the arbitrator’s legal determination violates a statute but instead refers to when the outcome ordered by the award must be contrary to the public policy of Korea.³⁷

            We do not find that the provision on the estimated amount of compensation damages provided in each contract is contrary to Article 103 of the Korean Civil Act and invalid just because the estimated amount is much higher than the Publically-Notified Standard Price for Wind Energy. The arbitral award ordered payment of the estimated amount of compensation damages pursuant to the agreement between Plaintiff and Defendant. We do not find that the award led to a result that was contrary to the public policy of Korea. Therefore, we find this part of Plaintiff’s argument cannot be accepted.

1. 2.  B. Judgment regarding the Necessity of Preservation

   [Non-arbitration section has been omitted.]

   Based on the undisputed Plaintiff Exhibit No. 97 (Arbitral Award) and Plaintiff Exhibit No. 45-2 (Request of Arbitration), the authenticity of which is substantiated by the overall gist of arguments, according to the arbitration agreement between the parties at the time of contract, the creditor filed for arbitration at the LCIA in the UK to settle the dispute that arose out of (p. 297) the Contract’s termination. We find that as a result, an arbitral award that partially recognized creditor’s claim was rendered on 7 May 1994. Yet, we find no references exist to show that the prerequisites to recognize the effects of the foregoing arbitral award domestically have been fulfilled. We therefore cannot recognize that the award has a res judicata effect upon the foregoing right to preservative measures, yet we do accept it as a basis for one of their arguments. Furthermore, no references exist that could substantiate that an enforcement judgment has been rendered concerning the arbitral award or that it is otherwise enforceable. Hence, we find that the mere fact the above arbitral award was rendered does not affect the decision regarding the necessity of the foregoing preservative measure.

2. 3.  In this case, the foregoing ruling on provisional seizure³⁹ recognized the right for preservative measures and the need for such preservation. Thus, we conclude that because it is reasonable to maintain it should be approved accordingly. We find the first instance judgment that concluded as such is just, and dismiss the Debtor’s appeal as untenable. Regarding the apportionment of litigation costs, we rule according to Articles 95 and 89 of the Civil Procedure Act.

Whether the Action Violates the Res Judicata Effect of the Arbitral Award

According to the facts established above, Plaintiff Whanin’s action against Defendant Merck concerns whether they are obligated to Defendant Merck as provided in Annex 1. Based upon a violation of the Confidentiality Agreement, the Arbitral Award with res judicata effect already determined that such an obligation existed.

We cannot allow Plaintiff, the losing party in the Arbitral Award, to again contest whether the same obligation exists through this action. This would contravene the res judicata effect of the Arbitral Award. The court cannot make a determination in conflict with the Arbitral Award. We hold Plaintiff’s action is unwarranted.

1. 2.  Determination Concerning Plaintiff’s Principal Claim

   1. C.  Determination

      1. 1)  An arbitral award has the same effect on both parties as a final and conclusive court judgment (Article 35, Arbitration Act). The res judicata effect of a final and conclusive judgment means that the legal determination in the disposition of a final and conclusive judgment shall be the new standard that thereafter governs the relations between the litigating parties. Thus, if an identical matter becomes an issue in a litigation, then parties cannot make a contradictory argument. A binding effect exists that courts also cannot make a contradictory determination therein.⁴¹ Therefore, as long as an arbitral award is not clearly invalid or has not been set aside through a set aside action, a contradictory or conflicting argument cannot be made.

         Returning to this case, we examine whether Plaintiff’s asserted right for compensation damages in lieu of repairs for defects and unfinished parts was already determined in the arbitration proceedings. During the arbitration proceedings, in response to Defendant seeking payment of the outstanding construction costs, Plaintiff argued for a setoff against, among other things, the right for compensation damages in lieu of repairs for defects and unfinished parts. They obtained a determination as provided above. We then find that Plaintiff’s foregoing principal argument is the same as the setoff argument in the arbitral award such that practically, the argument (p. 299) is contrary to the arbitral award and its conclusion. Therefore, Plaintiff’s foregoing argument conflicts with the res judicata of the arbitral award so we cannot accept it.

      2. 2)  In this regard, Plaintiff argues that the right for compensation damages arising out of repairs for defects and unfinished parts does not conflict with the res judicata of the arbitral award. According to Article 216(2) of the Civil Procedure Act,⁴² the res judicata effect of Plaintiff’s setoff defence in the arbitration proceedings is ‘limited to the setoff amount claimed’. Plaintiff claims a total setoff amount of KRW 88,985,936 (USD 77,000) against Defendant. This consists of KRW 53,206,692 (USD 46,000), which includes the missing steel and costs for deficient construction, and the reduced construction costs of KRW 35,779,244 (USD 31,000), which includes the unfinished costs and duplicative entries. Yet, in the arbitration proceedings, the Korean Institution of Arbitration sua sponte calculated the defect repair costs of items that Plaintiff did not list in the ‘setoff amount claimed’ and merely deducted it from Defendant’s outstanding construction credit.

         We observe that Article 216(2) of the Civil Procedure Act recognizes res judicata effect to a court’s determination regarding a setoff argument even if it was a determination that was part of the reasoning of a court’s judgment. If res judicata was not recognized, a dispute over a Plaintiff’s right to make a claim could later transform into a dispute over a counter-obligation in a different litigation. The counterparty could then be adversely affected since the person claiming the setoff could raise a duplicative claim based on the counter-obligation. Furthermore, the concern exists that the judgment in the original case concerning Plaintiff’s right to make a claim based on a determination of the setoff argument could ultimately become meaningless. Thus, to prevent this, courts recognize res judicata.⁴³

         We note the following circumstances based upon the foregoing established facts and evidence and overall oral arguments:

         1. (1)  Plaintiff argued in the arbitration proceeding that defects and unfinished parts existed and setoff should be made against the right to compensation damages due to the repair for the defects and unfinished parts; but they did not submit the 4 March 2010 written statement (page 10 of the arbitral award) that contained the setoff claim to the present court;

         2. (2)  Plaintiff’s claim against Defendant was for a total of only KRW 88,985,936 (USD 77,000) consisting of KRW 53,206,692 (USD 46,000) that includes the missing steel and outstanding construction costs, and KRW 35,779,244 (USD 31,000) for the reduced construction costs that includes the non-construction costs and duplicative entries. In addition, although the exact setoff amount at the time is unclear, in a list of items for rebuilding and supplemental construction, it appears Plaintiff asserted 15 additional items such as the C-shaped reinforcement in the two building complex and panel rebuilding;

         3. (3)  Pursuant to Plaintiff’s claim for repairs for the defects and unfinished parts and the rebuilding and supplemental construction, during the arbitration proceeding four appraisal proceedings were conducted. The appraisals covered (p. 300) such matters as whether the complex had to be demolished and reconstructed due to the serious defects in the items in Plaintiff’s ‘setoff claimed amount’ and the complex itself and how much the total amount to repair the defects of the entire complex would be if they could be done without reconstruction;

         4. (4)  The Korean Institution of Arbitration rendered the arbitral award by making a determination on the setoff argument based upon the above appraisal results; and,

         5. (5)  At the same time, in the present case, appraiser B conducted an appraisal pursuant to Plaintiff’s claim for compensation damages based on the defects and unfinished parts of the complex. The appraisal covered such matters as whether the complex had any safety problems and what would be the specific method to repair the defects if safety problems existed. Plaintiff made their primary claim based upon the appraisal.

         We combine these circumstances to find that if res judicata was not recognized for the determination in the arbitration proceedings regarding the repair for the defects and unfinished parts and the rebuilding and supplemental construction, then Defendant could be adversely affected by Plaintiff bringing a duplicative claim. We are concerned that the arbitral award that was rendered concerning Plaintiff’s right to a make a claim based on a determination on the setoff argument could ultimately become meaningless. We do not accept Plaintiff’s foregoing argument.

1. F.  Plaintiff’s Tenth Claim

   1. (1)  The parties do not contend that on 16 October 1990 Defendant paid the portion listed in Annex 2 that constituted the principal amount of the Fifth Claim stipulated under the arbitral award.

   2. (2)  Determination Regarding Defence Raised Before Addressing the Merits

      Defendant raises a defence before addressing the merits that Plaintiff expressed their intent not to enforce the arbitral award for the part that was already paid even if they received an enforcement judgment. Defendant argues that an enforcement judgment for the foregoing part is being sought to psychologically receive final satisfaction but since the legal action lacks any interest it should be dismissed. We observe that according to Plaintiff Exhibit No. 5 (Payment Notification), it is undisputed that Plaintiff notified Defendant to pay the amount deducted by the above amount. We cannot conclude that (p. 301) just because such intent was expressed that the above case was brought solely for psychological satisfaction. Since no other contrary evidence exists to support Defendant’s arguments, we find Defendant’s defence before addressing the merits untenable.

   3. (3)  Determination Regarding Defendant’s Contentions

      1. (A)  Defendant contends that they⁴⁴ paid the above amount to Plaintiff after 30 September 1989, the deadline for submitting the last written statements concerning the claims in the arbitration proceedings. Defendant contends the payment amounted to performance after the arbitral award acquired res judicata effect that extinguished Plaintiff’s right to bring a claim. It would be inappropriate to allow enforcement because it could lead to the risk of double payment.

         Plaintiff argues that the arbitral award acquired res judicata effect on 27 July 1992 when it was signed by the arbitrators and the above payment occurred before this date. Even if it occurred after this date, the enforceability of the award occurs when the enforcement judgment becomes final and conclusive. Plaintiff thus contends that an action to preclude the enforceability of an arbitral award that has yet to occur is only possible through a provisional counteraction and cannot serve as the basis for a defence.

      2. (B)  We observe that Article 505 of the Civil Procedure Act⁴⁵ provides that an objection against claims that became final and conclusive through a judgment may be brought only by filing an action objecting to execution based upon events that occurred after the conclusion of oral arguments.⁴⁶ The conclusion of oral arguments is the reference point because factual references can be submitted up to this juncture and judgment is a product based upon references submitted up to that point. Article 12 of the Arbitration Act⁴⁷ provides that ‘arbitral awards shall have the same effect on the parties as a final and conclusive judgment of the court’ and Article 42 of the above law⁴⁸ provides ‘[t]he Tribunal shall, when it determines that the parties have exhausted all their arguments and evidence, declare the closure of the hearings (para 1). If the parties are required to submit summary versions of memorials, the hearings shall be deemed to be closed as of the final date set by the Tribunal for the submission of the aforementioned memorials (para 2).’ Article 43(3) of the above law⁴⁹ states ‘[w]hen the hearing is reopened, the closing date of the hearing shall be the date that the proceedings of the reopened hearing were concluded’.

         Based upon these provisions, we find it reasonable to conclude that an arbitral award acquires res judicata effect like judgments upon closure of the hearing when the last factual examination occurs. We find that continuing the hearing procedures based upon Defendant’s request to reopen the hearings before the signing but after the closure of the hearing or using the exchange rate of the day the arbitral award was (p. 302) signed when converting the Korean Won in the award to French Francs did not affect the conclusion of the award.

      3. (C)  Based upon the relevant evidence and oral arguments, we find that the arbitral tribunal held three days of hearings in Seoul from 30 June to 2 July 1989 and then requested the parties to submit post-hearing briefs by 30 September 1989. The tribunal did not permit a reply thereof and announced that the proceedings could be closed after the submission. It is undisputed that on 20 September 1989 the tribunal ‘reopened the hearing for the First Claim among the domestic claims and for the First and Second Claims among the international claims and allowed the parties to submit arguments and defences by 10 October 1990 but limited the reopening to only these claims (by an additional order the deadline for briefs was extended by 15 days to 31 October 1990)’. Therefore, we conclude that the closing date of the hearing for the Fifth Claim was 30 September 1989 and Defendant’s payment after this date could constitute grounds for an action against the claim.

      Furthermore, an enforcement judgment for an arbitral award is a litigation procedure to provide enforceability to an arbitral award lacking in enforceability (because the state has exclusive authority to grant enforceability) and is achieved through a separate judgment procedure before compulsory execution. We thereby find it is not necessarily inappropriate to examine the substantive rights to a claim. Furthermore, it would go against the basic principles of compulsory execution to close one’s eyes to a claim that lacks enforceability when the basis of the claim changed due to events that occurred after the above reference point. Therefore, we find a defence may be brought based upon the grounds for an action against Plaintiff’s claim.

      As a result, we hold that the above part of the substantive rights to the claim lapsed due to Defendant’s payment to Plaintiff of the amount listed in Annex 2 after the above closure of the hearing. Since compulsory execution of such part is not allowed, we find Defendant’s objection is warranted.

   4. (4)  We dismiss Defendant’s counterclaim concerning this portion as inappropriate because no interest is separately served by seeking an action for a judgment objecting to execution when we have already accepted Defendant’s challenge in the main legal action.

1. D.  Determination Concerning Defendant’s Defence

   1. 2)  On 26 May 2011, Plaintiff sent an email to Defendant before the request for arbitration claiming USD 28,108.68 in compensation damages. Defendant indicated that the amount of damages sought was unjustly excessive. Defendant argues that even if their liability for failing to perform their obligations is recognized, the maximum limit for compensation damages should have been the USD 28,108.68 that Plaintiff originally sought. Defendant defends that the arbitral award ordered compensation of USD 309,000, which was 11 times the amount that Plaintiff originally sought. It was manifestly contrary to the public policy of Korea and its enforcement should be refused under Article V(2)(b) of the New York Convention.

      We observe that Article V of the New York Convention restrictively enumerates the grounds for refusing enforcement of a foreign arbitral award. In particular, Article V(2)(b) provides that the court in the enforcing country may refuse recognition and enforcement of an arbitral award where recognition and enforcement would be contrary to the public policy of that country. The provision seeks to prevent the recognition or enforcement of the arbitral award from harming the fundamental moral beliefs and social order of the enforcing country, and to protect these concerns. The determination thereof must together take into consideration not only the perspective of the domestic circumstances but also the stability of the international trading order and must be based on a narrow interpretation. (p. 305) Only when the specific result of recognizing the award is contrary to Korea’s public policy will recognition and enforcement be refused.⁵⁶

      In light of these legal principles, we consider Defendant’s foregoing defence and note the following: (1) Even if Plaintiff sent an email to Defendant claiming USD 28,108.68 in compensation damages before they filed their request for arbitration, based solely upon that fact, we cannot interpret that the maximum amount of compensation damages arising from Defendant’s non-performance would be limited to USD 28,108.68; (2) Plaintiff’s request for arbitration sought compensation from Defendant for USD 960,000, but CIETAC only recognized USD 309,800 in compensation; and, (3) Given the size of the sales contract where the total contract price amounted to USD 2.1 million, the USD 309,000 that CIETAC recognized in compensation damages does not appear to be strikingly unjust.

      In light of these points, we do not find that the recognition and enforcement of the arbitral award could lead to an outcome that would be against the public policy of Korea, so we find this part of Defendant’s defence is also groundless.

1. 2.  Determination on Defendant’s Defence Before Addressing the Merits

   1. (1)  Determination Concerning Argument that the Award was Beyond the Scope of the Submission to Arbitration

      Article V(1)(c) of the New York Convention provides that recognition and enforcement of the award may be refused if the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced.

      We observe that according to Plaintiff Exhibit No. 1, section 1 paragraph 16 of the arbitral award states that the ‘Plaintiff requests injunctive relief against all the parties of Defendant (Defendant corporation, Defendant F, Qingdao Yu Siyuan Building Material Inc.)’ in these arbitral proceedings. Section 2 of the arbitral award provides that ‘the injunctive relief shall apply to i) all the parties of Defendant; ii) each executive, president, director, employee, agent, legal entity or non-legal entity affiliate or successor of Defendant; iii) all other entities and individuals controlled by Defendant; and, iv) all entities and individuals who are actively cooperating or participating with specific parties of Defendant who receive notification of this decision or are notified through other means of the overall circumstances of this interlocutory order’.

      According to the facts established above, under the arbitral award, the persons subject to the injunction order are Defendant corporation’s executives, employees, members, and others under the direction or control of Defendant who actually perform such acts as copying Plaintiff’s products. We find it reasonable that the injunction order that sought appropriate relief to prohibit such acts as Defendant copying Plaintiff’s products should be considered as falling under Plaintiff’s arbitration submission clause or within its scope. Even if one found that the decision against those other than Defendant does not fall under scope of the arbitration submission agreement, we consider that the part of the award concerning Defendants could be separated by the part of the award concerning the others. The part of the arbitral award under which Defendant clearly falls within the scope of the submission to arbitration can be thus recognized and enforced. We therefore do not accept Defendant’s arguments in this regard.

1. E.  Whether the Arbitral Award Contravened Public Policy

   1. 5)  The Earnings from the Joint-Venture Business as Defendant’s Lost Profits

      Based on the joint venture contract between Defendant and Iran Pouya,⁵⁷ the arbitrator recognized in the arbitral award as part of Defendant’s lost profits the profits that they would have been gained from the joint venture project and partially from the SKD⁵⁸ business. In light of the above established facts and the following circumstances, we do not find that the arbitrator’s foregoing finding of fact was unjust and that the arbitral award contravened public policy:

      1. (1)  In an arbitral award, the arbitrator has complete authority over admissibility of evidence, evidentiary value, and probative value. A re-examination in essence of the arbitral award is only recognized in a limited manner. In principle, an arbitrator’s determination concerning probative value needs to be respected. Even if an arbitrator conducts finding of facts based on somewhat insufficient evidence, as long as the determination could not be considered as arbitrary and manifestly lacking in fairness and rationality, we cannot conclude that the determination on probative value was unjust and that the arbitral award rendered accordingly contravened Korea’s public policy.

      2. (2)  With regard to the lost profits from Defendant’s joint venture business, in the case of the contract entered into with Sepand Afrooz,⁵⁹ Pars and E, Defendant had the right to distribute Plaintiff’s products based upon the contract between them. We conclude it is reasonable to find that E did not enter the foregoing contract in their individual capacity but on behalf of Defendant.

      3. (3)  Even if a definite transaction agreement had not been executed between Defendant and Arya, a short-term transactional relationship existed in anticipation of transactional negotiations between the parties as partially verified through, among other things, emails and testimony. The arbitrator determined that if Plaintiff had faithfully performed the contract, the business would have been performed according to the joint venture contract between Defendant and Arya. We do not find it convincing that the arbitrator’s determination was totally without any basis or was manifestly lacking in appropriateness even if it was considered a prediction regarding undetermined future facts.

      4. (4)  With regard to lost profits from part of the SKD business, we do not find it convincing that it was totally without any basis or was manifestly lacking in appropriateness. We hold as such even if it was considered a prediction regarding undetermined future facts by recognizing indirect facts such as Defendant’s experience and personal network in the Iranian market and the product assembly agreements entered into with counterparties such as Sepand Afrooz.

      5. (5)  The fact finding concerning the joint venture business was an important issue in the arbitral award and sufficient opportunity was guaranteed to both parties to argue and prove themselves during the hearing proceedings.

      6. (p. 308) (6)  Even according to Korean law, to prove profits that may be gained in the future, the degree of proof is lessened compared to proving facts from the past. It is sufficient to prove within the scope of reasonableness and objectivity the considerable possibility of profits. Specific and certain profits that the creditor can realistically obtain do not have to be proven.⁶⁰

      7. (7)  We find that the opinion of Defendant’s expert U that the arbitrator chose to accept, given the uncertainty, reduced the amount of lost profits from the joint venture business and this somewhat diluted the propensity of a determination arising from hopeful expectations. The arbitrator not only accepted U’s reduction in value but also separately repeated another reduction in value.

      8. (8)  As found above, the arbitrator determined that Defendant’s lost profits were foreseeable damages at the time of the execution of the contract. Based on this, he recognized Plaintiff’s liability for damages. When rendering the arbitral award, we do not find that the arbitrator did not consider at all whether Plaintiff could have foreseen Defendant’s lost profits and whether it was fair for Plaintiff to compensate for such lost profits. The arbitrator’s determination concerning Plaintiff’s foreseeability is also part of finding of fact so the arbitrator’s determination should be respected.

      9. (9)  We conclude it is difficult to find Plaintiff could not have foreseen as a method of profit seeking that Defendant would sell their products by using their position as an exclusive distributor of Plaintiff’s products through a joint venture with another company in Iran. Plaintiff themselves argued that ‘Defendant could have performed the contract through the SKD and CKD⁶¹ methods regardless of the Iranian court’s orders, and we needed to find a company to assemble Plaintiff’s electronic products and to sell them within Iran’. Through this argument itself, Plaintiff acknowledged that to a degree they expected that Defendant would seek a joint venture with a partner company. In fact, Defendant informed Plaintiff about the joint venture contract with Iran Pouya. We cannot find that the arbitrator’s determination concerning Plaintiff’s ability to foresee was incorrect.

         We conclude this part of Plaintiff’s argument is groundless.

   2. 6)  Whether the Arbitral Award’s Method of Calculating the Lost Profits was Unjust

      As provided above, the arbitral award calculated lost profits based upon E’s prediction regarding an undetermined future event whereby E first calculated the amount of lost profits then reduced the calculated amount by a certain ratio to factor into the uncertainty therein. Taking into consideration the foregoing facts and the following circumstances, we do not find that the arbitrator’s foregoing determination undermined the principle of adjudication based on evidence⁶² and judicial discretion to assess the evidence.⁶³ The arbitral award was not contrary to the public policy:(p. 309)

      1. (1)  Even under UAE Law, the applicable law of the arbitral award, when damages exist but the amount of compensation has not been established, the court or arbitrator may decide the amount of damages that the injured party actually incurred.

      2. (2)  The method of calculating the amount of damages is an area that the arbitrator has authority to decide. Re-examination of an arbitral award in essence can only occur on a limited basis. The arbitrator’s method of calculating the amount of damages should be respected. Even if the arbitrator’s method is not used by our courts or appears to be an exceptional method, as long as it does not appear to be an arbitrary determination manifestly lacking in fairness or reasonableness, then we cannot conclude that such method is unjust and that an arbitral award rendered accordingly is contrary to public policy.

      3. (3)  Both parties in the arbitration did not contest that Defendant would incur lost profits if Plaintiff’s termination was deemed unjust. Yet, a difference of opinion did appear to exist over the amount.

      4. (4)  It would be contrary to the principle of equity if we do not recognize the amount of damages solely because Defendant could not clearly prove it due to a lack of, among other things, documentary evidence even though some damages could be established. Even under Korean law, when material damages⁶⁴ can be established but it is difficult to prove the specific amount of damages due to the characteristics of the matter, the court can determine the amount of damages that are based on a substantial cause. The court must comprehensively consider all related, indirect facts such as the results of the evidentiary investigation, the relationship between the parties as revealed through the overall oral arguments, the background behind the material damages that arose due to non-performance of the obligation, the characteristics of the damages, and the overall circumstances after the damages arose.⁶⁵

      5. (5)  Defendant’s lost profits are an important issue in the arbitral award. During the proceedings, both parties were guaranteed an opportunity to sufficiently and fairly express their views. The arbitrator adopted the above method after sufficient examination of both side’s expert witnesses.

      6. (6)  As provided above, even under Korean law, the degree of proof to prove lost profits is lessened compared to proving facts that occurred in the past.

      7. (7)  Moreover, even if the foregoing method of calculating damages contains some unreasonable aspects, if you consider that it was one of the possible methods chosen to reach a fair outcome between the disputing parties, then one cannot find it was markedly contrary to the principle of equity or the selection of such a method by itself contravened Korean public policy.

         We conclude that this part of Plaintiff’s argument is groundless.

      8. 8)  Whether the Amount of the Arbitral Award is Contrary to Public Policy

         According to Article 36(2)(2)(b) of the Act, which states ‘recognition or enforcement of the arbitral award would be contrary to the public policy of Korea’, ‘social order’ can include economic order. The amount of a claim recognized in an arbitral award (p. 310) can be a factor when considering whether a violation of public policy exists. The following factors can serve as important standards in examining whether an arbitral award that recognizes a substantial claim amount violates the domestic legal order and public policy: (1) Where it has been clearly proven that the claim amount recognized in the arbitral award is excessively large compared with the amount that would be recognized through a Korean court judgment in an identical case; (2) Even though formally compensatory damages, if the amount of compensation calculated was actually based on the principle of punitive damages that is not actually recognized under Korean law; and, (3) In the process of recognizing a substantial claim amount, one party could not properly exercise their right of defence.

         According to the above established facts, we do find that the lost profits recognized in the arbitral award were a substantial amount. Based on the above established facts and the following circumstances, just because the lost profits recognized in the arbitral award were a substantial amount, we do not find that the arbitral award contravened public policy:

         1. (1)  Arbitration is a procedure where parties agree to resolve a dispute between them not by a court judgment but by an arbitrator’s award and in most cases is premised on the equality of status of the parties;

         2. (2)  If all countries’ courts interfered in international arbitration proceedings or refused enforcement of arbitral awards in the name of ‘public policy’ to protect the interests for their own country or own people, then international transactions would be incredibly unstable and the utility of the arbitration system would be lost. As a result, a determination thereof must together take into consideration not only the perspective of domestic circumstances but also the stability of the international trading order and must be based on a narrow interpretation;⁶⁶

         3. (3)  Both parties in the arbitration equally participated in the arbitration proceedings and were guaranteed the opportunity to sufficiently argue and prove themselves regarding the various issues that comprised the cause of action. The arbitrator considered all arguments from both sides before rendering the arbitral award;

         4. (4)  The amount recognized as Defendant’s lost profits was for compensation damages. We do not find it convincing that the amount meant to include a punitive sanction against Plaintiff for failure to perform their obligations or that when calculating the amount it was based upon the principle of punitive damages;

         5. (5)  As found above, Defendant’s lost profits were calculated by an expert witness by multiplying a profit margin for each of Plaintiff’s products with the forecasted sales amount followed by a partial reduction. We do not find it convincing that such a method was unjust. Even if it could be proven that the arbitrator based his determination on a somewhat lower standard of probative value than what the Korean court’s would have demanded, we do not find that such finding of fact would be considered as without basis or so unjust and arbitrary that it could not be respected;

         6. (p. 311) (6)  Furthermore, in light of the facts established above, even if this case was reviewed by a Korean court, it is not clear that Defendant’s lost profits would be manifestly lower than the amount recognized by the arbitral tribunal. (It actually appears that this court could objectively and clearly calculate Defendant’s lost profits based solely upon the references submitted. In the end, the decision on lost profits was an issue concerning the selection of evidence among the estimations of both party’s expert witnesses that served as the primary evidence. If Defendant’s lost profits were recalculated by either (a) selecting Plaintiff’s expert witnesses’ estimated value, which the arbitrator already determined was not as reasonable as Defendant’s expert witness’s opinion, or (b) simply reducing the lost profits recognized by the arbitrator in the arbitral award by reducing it by a percentage, it would be inappropriate in light of the principle that re-examination of an arbitral award should in essence be prohibited); and,

         7. (7)  Finally, the examples of foreign enforcement judgments that Plaintiff raises differ from the arbitral award and its proceeding. The foreign courts in those cases recognized a substantial amount of non-economic damages without any particular basis or explanation or based on the principle of punitive damages, or one party in essence had difficulty in exercising their right of defence concerning such court judgments.

            We find this part of Plaintiff’s argument also groundless.

1. 8.  Final Appeal concerning Delay Damages

   We find that when an arbitral award orders performance of monetary obligations and orders the payment of delay damages at the statutory interest rate as prescribed in Article 3(1) (p. 313) of the Litigation Expedition Act⁷³ the award cannot be deemed to amounting to ordering an act in violation of mandatory laws and regulations or contrary to public order or good morals.

   In the same regard, we find that the lower court was justified in determining that even if the arbitral award herein ordered the payment of delay damages at 25 per cent per annum according to Article 3(1) of the Litigation Expedition Act for monetary payment from the date following the service of the arbitration award to the date of full payment, the award cannot be deemed to have ordered a party to carry out a legally prohibited act as provided under Article 13(1)(3) of the 1998 Arbitration Act. We do not find an error existed based on an error law regarding Article 3(1) of the Litigation Expedition Act. We hold again that this part of the final appeal cannot be accepted.

1. 3.  Lastly, we review Plaintiff’s claim for delay damages at the annual rate of 19 per cent of the total amount provided in the arbitral award.

   Plaintiff argues that the claim seeking an enforcement judgment of an arbitral award in real terms is equal to a legal proceeding seeking performance of a monetary obligation. Based upon the purpose of the Litigation Expedition Act that seeks to prevent delays in legal proceedings and expeditious realization of rights and obligations, Plaintiff believes it is appropriate to pay 25 per cent of the amount provided in the arbitral award as delay damages as provided under the Act. Plaintiff thus seeks payment of an additional 19 per cent for delay damages which is the difference between the 25 per cent provided above and the annual 6 per cent provided in the arbitral award.

   We find that based upon its characteristics an action for an enforcement judgment of an arbitral award should be considered a legal action for modification of rights⁷⁴ that grants enforceability to an arbitral award. It does not have the characteristics of a legal action for performance⁷⁵ that seeks performance of substantive rights finalized in an arbitral award. We hold that the part of Plaintiff’s claims that is based on the action being a claim to seek performance of monetary obligations is untenable and the other points need not be reviewed.

1. 3.  Whether Ordering 25 Per Cent Annual Interest in Delay Damages was Without Merit

   The phrase ‘when an arbitral award does not include its reasons’ found in the latter part of Article 13(1)(4) of the 1998 Arbitration Act 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.⁷⁶

   According to the record, the arbitral award ordered Plaintiff to return to Defendant the deposit and intermediate payment that they received and to pay additional delay damages of 25 per cent interest from the day after the award was rendered. We find the award was based upon considerations of fairness and we do not find it contrary to public policy just because it was not based upon any positive law. The arbitral award calculated the interest rate for additional delay damages if Plaintiff, who was obligated to return the payments received, did not perform its obligation after the award was rendered. We find that unlike what is argued on final appeal this does not constitute a case ‘where the reason has not been attached to the arbitral award’ because the arbitral award did not state its reasons at all or even if the reasons were stated one could not ascertain on what factual or legal determination they were based upon. We also rule that the cases cited in the final appeal differ in scope of application and relevant issues. It would be inappropriate to invoke them in this case. We therefore deny this part of the final appeal.

1. 1.  Determination Concerning the Claim for Delay Damages

   1. (1)  Defendant’s Defence before Addressing the Merits

      1. A.  Defendant’s Argument

         In addition to the action seeking an enforcement judgment of the Arbitral Award, as a request for performance, Plaintiff sought delay damages for the USD 217,364.26 ordered in the Arbitral Award as follows: (a) primarily, applying the law of Korea as the lex fori of the enforcement of the Arbitral Award, 6 per cent interest per annum from 2 July 1996 until service of the copy of the complaint in this case and 25 per cent interest per annum as prescribed under the Litigation Expedition Act from the day after until the date of full payment; or (b) alternatively, applying English law as the place where the award was rendered, 8 per cent interest per annum from 2 July 1996 until the date of payment. Defendant defends that the foregoing claim for delay damages is unlawful because it violates the arbitration agreement between the parties.

      2. B.  Determination

         We observe as provided above that the arbitral clause (Article 17) of the Contract between the parties provides that ‘if a dispute arises between the parties for any reason, such dispute shall be referred to arbitration in London by an arbitral tribunal consisting of three arbitrators. Both parties shall each appoint an arbitrator, and then the third arbitrator shall be appointed by the two designated arbitrators. The arbitral award rendered unanimously or at least by two arbitrators shall be regarded as the final determination and to enforce such an arbitral award the contract hereof may act as the standing rule of the court.’

         The foregoing arbitration agreement was an agreement to settle by arbitration any disagreement between the parties regarding the Contract. The legal relationship concerning the enforcement of the Arbitral Award that was rendered according to the arbitration agreement should be considered differently from the legal relationship concerning the Contract. Moreover, we do not find that the part in the arbitral agreement that states ‘to enforce such an arbitral award, the contract hereof may act as the standing rule of the court’ seeks to exclude Plaintiff’s request for performance or demand for this part to be again subject to arbitration. Thus, Defendant’s foregoing defence before addressing the merits is unfounded.(p. 316)

   2. (2)  Determination Regarding the Merits

      1. A.  Underlying Facts

         According to 1 and 2 of Plaintiff Exhibit No. 4, Section 20⁷⁷ of the UK Arbitration Act stipulates that ‘a sum directed to be paid by an award shall, unless the award otherwise directs, carry interest as from the date of the award and at the same rate as a judgment debt’. Section 17 of the UK Judgments Act⁷⁸ stipulates that the statutory interest on judgment debts shall arise ‘from the time of entering up the judgment (thereafter omitted)’. In the UK, even if the payment of interest after the court judgment or arbitral award is not specified in the judgment or award, such interest payment will also be levied under a writ of execution issued for⁷⁹ the enforcement officer at the enforcement stage. Moreover, we find that according to the UK Judgments Act the statutory interest rate when the Arbitral Award was rendered on 1 July 1996 was 8 per cent per annum, and no rebuttal evidence exists otherwise.

      2. B.  Determination Concerning the Primary Claim

         Plaintiff argues that they seek delay damages for the amount awarded under the Arbitral Award according to the procedural law of Korea, the lex fori for the enforcement judgment. We observe as provided above that the governing law of the Contract is English law. In light of the point that the Arbitral Award was rendered in London, UK according to the arbitral clause of the Contract, we find the applicable law regarding the extent of the effect of the Arbitral Award should also be English law. Thus, we find the governing law regarding whether to recognize delay damages concerning the amount awarded and its extent should also be English law. We rule that Plaintiff’s foregoing primary claim, which was made under the premise that the law of Korea would apply regarding the interest rate for delay damages, is unwarranted with no need for further determination.

      3. C.  Determination Concerning the Alternative Claim

         According to the UK Arbitration Act and Judgments Act that are the governing laws of the Arbitral Award concerning the amount awarded herein, as provided above, we find that 8 per cent per annum delay damages as provided under the foregoing laws arise from the day the arbitral award was rendered until full payment. Therefore, since we permit compulsory execution of the Arbitral Award and grant provisional execution hereof through this judgment, we find that Defendant has an obligation to pay Plaintiff delay damages at 8 per cent interest per annum on the USD 217,364.26 awarded amount from 2 July 1996, the day after the award was rendered, under the UK Arbitration Act and Judgments Act, the governing laws regarding the effect of the Arbitral Award.

         In this regard, Defendant argues that Plaintiff harmed their credibility by advertising exaggerated facts after the dispute arose between the parties regarding the Contract and that their claim for compensation damages due to this tortious act should be offset by the same amount from the delay damages claim. However, we find Defendant’s exhibits by themselves insufficient to establishing such harm to their (p. 317) credibility. Since no other evidence to prove otherwise exists, without any further need for examination, we find Defendant’s offset defence is unwarranted.

Under the Arbitral Award, Defendant Unimark Maritime is obligated to pay USD 53,160.80 and JPY 3,739,241,⁸⁰ and interest at the rate of 6 per cent per annum thereon for the period from 9 November 2004 for the USD 53,160.80 and from 9 November 2005 for the JPY 3,005,281 until the date of full payment. (Plaintiff seeks delay damages at the interest rate of 20 per cent per annum as provided under the Litigation Expedition Act, from the service date of the complaint until the date of full payment. But, since the applicable law is the Code of Washington State, payment of delay damages under the Litigation Expedition Act cannot be sought. We find Plaintiff’s argument thereof regarding the payment of delay damage unwarranted.)

Plaintiff first sought only an enforcement judgment of the arbitral award and then from the current court additionally sought an enforcement judgment of part of the confirmation judgment (the part ordering payment of delay damages on the principal). Defendant notes that Plaintiff’s newly added claim for the enforcement judgment of part of the confirmation judgment is different from the claim for the enforcement judgment of the arbitral award in terms of the subject matter of the action, the applicable laws and regulations for enforcement and the related evidence. If allowed, not only would this lead to Defendant’s right of defence and interest in the respective court of instance being denied, but also the litigation proceedings will be clearly delayed. Defendant thereby argues that Plaintiff’s claim for an additional change should not be permitted.

We observe that although the claim for the enforcement judgment for the arbitral award is based on the New York Convention and on Article 14 of the 1973 Arbitration Act, the claim for the enforcement judgment of the confirmation judgment is based on the 1992 Civil Procedure Act in Articles 476 and 477. The applicable law and regulations and subject matter of the action may be different. Yet, as provided above, the parties’ respective request to confirm or set aside the arbitral award at the California Santa Clara County Superior Court resulted in the court confirming the award. The court entered a confirmation judgment that added that Defendant should pay Plaintiff delay damages according to the California civil statutory interest rate of 10 per cent per annum on the USD 1,000,000 principal cited in the arbitral award starting from the day after the award until full payment.

In light of the above, the part of the confirmation judgment that orders payment of the delay damages arose incidentally pursuant to the statutory regulations concerning the principal amount of the licensing fee in the arbitration judgment. Even if Plaintiff additionally sought an enforcement judgment for the delay damages part of the confirmation judgment, we find it difficult to clearly view that the fundamentals of their claim were changed or the litigation herein would be delayed. We thereby hold that Defendant’s foregoing arguments are unwarranted.

[…]

Lastly, Defendant argues that in essence the enforcement judgment should not be allowed because ultimately the confirmation judgment was rendered by a court that did not have jurisdiction. According to Defendant, under California law, the California Santa Clara County Superior Court did not have the authority to change the arbitral award but still rendered a confirmation judgment that ordered additional payment of delay damages against the licensing fee principal of the arbitral award. Defendant asserts that whether delay damages can be paid can only be decided by an arbitral award pursuant to an arbitration agreement between the parties.

We observe that Plaintiff made a request seeking confirmation of the arbitral award at the foregoing court that had jurisdiction pursuant to the California Code of Civil Procedure. In (p. 319) its challenge, Defendant in its request sought to set aside the award in the same proceedings. As a result, as found above, the court, which had jurisdiction over the requests, rendered a confirmation judgment.

We recognize based upon the record that the California Code of Civil Procedure provides the following provisions and no counterevidence exists: (1) Article 685(010)(a) provides that interest accrues at the rate of 10 per cent per annum on the principal amount of a money judgment that remains unsatisfied; (2) Article 1285 provides that a party to an arbitration in which an award has been made may petition the court to confirm, correct or set aside the award. The petition shall name as respondents all the parties to the arbitration and may name any other persons bound by the arbitral award; (3) Article 1285(2) provides that a response to a petition above may request the court to dismiss the petition or to confirm, correct or set aside the award; and, (4) Article 1287(4) provides that if an award is confirmed, judgment shall be entered in conformity therewith. The judgment so entered has the same force and effect as, and is subject to all the provisions of law relating to, a judgment in a civil action. Such a judgment may be enforced like any other judgment of the court in which it is entered.

Accordingly, we rule it is reasonable to find that pursuant to the relevant legal provisions the court could order payment of delay damages on the unsatisfied principal amount when entering a confirmation judgment regarding the arbitral award. We do not find that this could be deemed as infringing the parties’ arbitration agreement such that it became a judgment by a court that did not have jurisdiction. We rule that Defendant’s foregoing argument shall also not be accepted.

1. 2.  Determination Regarding the Claim

   1. A.  Cause of Action

      1. 1)  Accepted Section

         According to the established facts above, the arbitral award ordered Defendant to pay Plaintiff damages (USD 1,446,664), legal costs (USD 424,314.43), and the costs of arbitration (USD 80,000) for a total of USD 1,950,975.43, and an annual interest (p. 320) of 5.33 per cent on the damages (USD 1,446,664) from 24 June 2013 until complete payment. Unless grounds to refuse the recognition and enforcement under Article V of the New York Convention can be established, Plaintiff can seek approval for compulsory execution within the scope of the funds established above.

      2. 2)  Dismissed Section

         1. A)  Plaintiff argues that compulsory execution should also be permitted at an annual interest of 5.33 per cent on the legal costs and the costs of arbitration from 24 June 2013 until complete payment.

         2. B)  When the objective meaning of the wording of a dispositive document cannot be clearly discerned and the legal act that one party asserts imposes a substantial responsibility on the other party, then the wording must be even more strictly interpreted.⁸¹ This legal principle should also apply in the same way when the interpretation of an arbitral award is contested. In light of the following circumstances, we conclude it is appropriate to interpret the arbitral award as not ordering delay interest on such matters as the legal costs.

            • (1)  Part 6 of the arbitral award that covered such things as the legal costs and Part 7 of the arbitral award that constituted the overall conclusion on such matters as the damages and legal costs do not mention delay damages; only Part 5, which covered damages, mentions delay damages.

            • (2)  Paragraph 146 of Part 5 states ‘The Tribunal … award it (loss of profits in this amount)’, and Paragraph 148 states ‘the Award carries … interest’. Paragraph 150 of Part 6 that concerns such things as legal costs states ‘The Tribunal … concludes and rules … Claimant is entitled to recover … its own legal costs … and to be reimbursed … the costs of the arbitration’, and Paragraph 152 states ‘The Tribunal concludes and rules … pay … the sum of USD 424,314.43.’

              We find the interest to be applied to the Award, as provided in Paragraph 148 of Part 5, refers to the award of interest to the damages in loss of profits as provided in Paragraph 146. The term ‘award’ was used regarding the award for payment of damages, whereas expressions such as ‘conclude’ and ‘rule’ were used with respect to the award for payment of such things as legal costs, and also the context and meaning of the words support this finding.

            • (3)  Paragraph 149 of Part 5 dismisses Plaintiff’s claim for payment of interest on the damages starting from the termination date. Throughout the arbitral award, we cannot it find where Plaintiff claimed interest for such things as the legal costs.

1. B.  Legal Principles

   [The judgment cites K&V (I) concerning the application of Article V(2)(b) of the New York Convention.]

2. C.  Determination

   1. 1)  The issue in this case is whether Defendant’s payment of USD 68,290 to the Vietnam Ho Chi Minh tax authorities for the value added and corporate tax on behalf of Plaintiff is validly part of the payment due under the Consent Award. During the arbitration proceedings, the legal representatives for the parties conducted negotiations regarding a settlement amount. On 14 June 2010, Defendant’s legal representative sent an email to Plaintifft’s representative that ‘Defendant offers as a settlement amount including all costs of USD 700,000’. Thereafter, Plaintiff’s legal representative accepted this proposal and the settlement amount that Defendant was to pay Plaintiff was confirmed as USD 700,000. After the settlement amount was confirmed at USD 700,000, Plaintiff’s legal representative prepared a draft Consent Award with the permission of the SIAC appointed arbitrator that included ‘legal costs’ in Article 3. Defendant’s legal representative requested that this be amended to ‘all legal and other costs’, which Plaintiff’s legal representative accepted. The Consent Award thus provided in Article 2 that ‘Defendant will pay to Plaintiff by 13 August 2010 as “complete and final settlement” concerning the entire dispute of this arbitration USD (p. 322) 700,000’ and in Article 3 that ‘settlement amount includes all interest, all legal and “other costs” ’.

      We find that Plaintiff knew that if a Consent Award was reached, then Defendant would have to pay for the value added and corporate tax for the Consent Award to the Vietnam Ho Chi Minh tax authorities. In interpreting a dispositive document, if there is no clear and persuasive counterevidence to deny its express contents, the wording as stated in the dispositive document will be recognized as an expression of the existence and substance of intent. If a difference of opinion occurs between the parties regarding the interpretation of a contract such that an issue arises concerning the interpretation of the intention of the parties in the dispositive document, then the general principle for interpreting a dispositive document requires a comprehensive review and a reasonable interpretation based upon rule of logic and general principles based on experience. Such facts as the content of the wording, the reason and background for entering into the agreement, the goal that the agreement seeks to achieve, and the sincere intentions of the parties are considered.⁸² We find that Articles 2 and 3 of the Consent Award should be interpreted to mean that the Consent Award amount of USD 700,000 was payment for the services under the advisory contract, and not only included costs spent in the arbitration proceedings but also all expenses that arose out of the advisory contract. Therefore, Defendant’s payment of USD 68,290 on Plaintiff’s behalf for the value added and corporate tax for the Consent Award to the Vietnam Ho Chi Minh tax authorities was validly paid as part of the Consent Award.

   2. 2)  Plaintiff contest that as long as the parties agreed at the time of the Consent Award that the governing law of the Consent Award would be English law then Defendant’s argument that is based on withholding tax pursuant to Vietnam law cannot be accepted. As provided in the foregoing evidence, we find it reasonable to conclude that whether Defendant has a withholding tax obligation, and whether Plaintiff has a tax obligation or other matters pursuant to the advisory contract between the parties should be decided pursuant to Vietnam law. (As found above, at the time the parties entered into the advisory contract, the parties agreed that Plaintiff would not withhold any applicable tax under Vietnam law pursuant to the advisory contract and they would all be Defendant’s responsibility. In light of this, the parties also expected that whether taxes arose pursuant to the performance of the advisory contract would be decided according to Vietnam law.) We also find it reasonable to conclude that the consent award was to ultimately decide the party obligated to pay taxes that arose out of the foregoing Vietnam law. We find Plaintiff’s foregoing arguments based on a contrary premise unwarranted.

   3. 3)  Next, Plaintiff contests that the amount in the Consent Award was pursuant to the compensation damages for failing to perform obligations under the advisory contract. Thus, under Vietnam law, Defendant could not deduct, among other things, the value added tax from the award. In light of such factors as the background to how the arbitration proceedings were reached and the details of the Consent Award, we find it reasonable to conclude that the amount in the Consent Award was payment for services pursuant to the advisory contract. We find Plaintiff’s foregoing arguments based on a contrary premise unwarranted.

3. (p. 323) D.  Sub-Conclusion

   Therefore, we hold that the amount in the Consent Award was extinguished with Defendant’s payment and this amounted to grounds to refuse recognition and enforcement under Article V(2)(b) of the New York Convention. We hold that the Consent Award cannot be enforced.

1. B.  Determination⁸⁴

   1. (6)  Compensation Damages from Arbitration due to Breach of Contract with I Corp

      Combining together Plaintiff Exhibits Nos. 17–29 and the overall oral arguments, on 22 March 2007, the Subject Company signed an exclusive supply agreement for automated waste collection systems with an Italian corporation (‘I Corp’). According to the agreement, the following facts can be established:

      1. (1)  a duty not to compete prohibited ‘competing with I Corp in the designated sale areas or other areas by direct or indirect production, distribution or marketing of the system above or similar products during the contract period’, and ‘acting as a representative of a third company such as being a licensor, retailer, broker or agent that directly or indirectly produces or distributes products that compete with the above system in designated sale areas or other areas’;

      2. (p. 324) (2)  I Corp claimed EUR 1.5 million in compensation damages against the Subject Company at the ICC in Paris, France for breach of the exclusive supply agreement. They claimed that after entering into the waste management facility construction agreements at the sites provided in the Table below, Subject Company did not submit any orders with I Corp and instead installed Siemens’s automated waste collection system.

         Agreement Date	Owner	Construction Site
         28 December 2007	V Construction Consortium	(1)  Southeastern Ga-Block Construction Site
         27 May 2008	W Construction, X Construction, Y	(2)  Pangyo 2-1 Block Construction Site
         13 May 2008	Z	(3)  Pangyo 27 Block Construction Site

      3. (3)  On 10 February 2011, the Subject Company agreed to pay the I Corp EUR 300,000⁸⁵ in the international arbitration case; and,

      4. (4)  The Subject Company spent KRW 152,728,243 (USD 134,000) on advisory fees for legal advice from the law firm Kim & Chang between July 2010 to Feb 2011 due to I Corp’s arbitration, expended EUR 4,400⁸⁶ for advisory fees from a local Italian law firm, and paid USD 47,500 to the ICC for charges related to appointment of the arbitrator.⁸⁷

Nevertheless, for Plaintiff to claim from Defendants the arbitration expense and legal costs paid to I Corp, they must prove that the breaches of the exclusive supply agreement with I Corp occurred before the transfer of ownership on 9 May 2008.

With respect to the (1) Southeastern Ga-Block Construction Site, combining together Plaintiff Exhibit Nos. 18, 20-1 & 20-2 and the overall oral arguments, we find that when the Subject Company entered into the waste management facility construction contract with V Construction Consortium on 28 December 2007, they did not send an order to I Corp. They thereafter installed Siemens’ automated waste system and not I Corp’s at the construction site. Therefore, the Subject Company breached the exclusive supply agreement with I Corp with regard to the Southeastern Ga-Block Construction Site before the transfer of ownership.

Regarding the (2) Pangyo 2-1 Block Construction Site and the (3) Pangyo 27 Block Construction Site, however, Plaintiff Exhibits Nos. 22–25 establish that the Subject Company participated in the bids for the waste management facility construction (p. 325) contracts of the construction sites before the transfer of ownership. Yet, participation in the bids alone are not enough to conclude that they breached the exclusive supply agreement (because whether the agreements had been executed was not established). These waste management facility construction agreements were ultimately executed after the transfer of ownership. After acquiring management control of the Subject Company, we find Plaintiff could have considered the exclusive supply agreement with I Corp when choosing whether to sign the waste management facility agreements with each construction site. Therefore, we dismiss Plaintiff’s claim regarding the above construction sites given the lack of evidence that the Subject Company breached the exclusive supply agreement before the transfer of ownership.

Consequently, among the three construction sites asserted by Plaintiff, it has only been established that the Subject Company breached the exclusive supply agreement with I Corp before the transfer of ownership with regard to the (1) Southeastern Ga-Block Construction Site. Under Article 11(4)(4) of the Contract, Defendants are jointly and severally liable to I Corp for the compensation damages that they claimed and for that which arose through the arbitration. Yet, considering Plaintiff Exhibits Nos. 18-1 and 18-2 in addition to the overall oral arguments, when I Corp requested arbitration at the ICC, they claimed not only a breach of duty not to compete but also the non-performance of the sales promotion and advertisement obligation, report delivery and feedback obligation, and the commission fee payment obligation. The arbitration agreement did not specify just the breach of the duty not to compete. The Seller is only responsible for one of the three construction sites where the non-compete duty is mentioned. Considering all these circumstances, we ultimately deem it proper that Defendants should bear 25 per cent of the losses (including the arbitration fee and legal costs) that arose out of the arbitration with I Corp.

In that case, Defendants are jointly and severally liable for the settlement amount of KRW 169,025,085 (rounding to the nearest whole) (USD 148,000) that arose out of the arbitration with I Corp. The amount equals 25 per cent of KRW 676,100,341 (USD 594,000), which is the sum of the KRW 462,609,000 (USD 406,000) in settlement payments arising from the arbitration between the Subject Company and I Corp and the KRW 213,491,341 (USD 188,000) expended in legal costs (KRW 152,728,243 (USD 134,000) in local law firm advisory fees, KRW 6,684,348 (USD 6,000) in foreign law firm advisory fees, and KRW 54,078,750 (USD 48,000) in ICC expenses).

1. 2.  Determination

   1. B.  Determination Regarding Defendant’s Assertion

      Defendant asserts that the arbitral award used a novel concept called contributory interest to calculate the damages. The award included fixed costs that should have been deducted and accordingly did not offset profits and losses. Moreover, in deciding who should bear the arbitration costs, the award should have decided the amount based on the ratio of Plaintiff’s claimed amount relative to the amount actually ordered but instead ordered Defendant to bear all the cost of the arbitration. Defendant argues that since this expressly violates the public policy of Korea, enforcement of the award should be refused pursuant to Article V(2)(b) of the New York Convention.

      Article V of the New York Convention restrictively enumerates the grounds for refusing recognition and enforcement. In particular, Article V(2)(b) provides that the court in the enforcing country may refuse recognition and enforcement of an arbitral award where recognition and enforcement would be contrary to the public policy of that country. The provision seeks to prevent the recognition or enforcement of a foreign arbitral award that is subject to the Convention from harming the fundamental moral beliefs and social order of the enforcing country, and to protect these concerns. The determination thereof must together take into consideration not only the perspective of the domestic circumstances but also the stability of the international trading order and must be based on a narrow interpretation. Even though the foreign law that applies to the foreign arbitral award violates mandatory laws and regulations under Korean substantive law, this does not automatically constitute grounds for refusing recognition of the award. Only when the specific result of recognizing the award is contrary to Korea’s public policy will recognition and enforcement be refused.

      To determine whether foreign arbitral awards subject to the New York Convention may be refused enforcement under Article V, the enforcing country’s courts can independently examine and determine issues that were determined under the arbitral proceedings to the extent necessary. At the same time, Article V lists the grounds for refusing enforcement in a limited fashion and, among other things, excludes errors of fact and errors of law by the arbitrators. Arbitral awards also have the same effect as final and conclusive judgments such that, based on res judicata, claims that have been subject to the award are already deemed final and conclusive between the parties. In light of these points, when an enforcing country’s court needs to examine and determine substantive issues that have already been decided during the arbitral proceedings to determine (p. 327) whether grounds for refusing enforcement exist, they must do so in an exceptional, limited manner.⁸⁸

      We observe in this case the above established facts and the following circumstances that occurred during the oral arguments: (1) When Defendant entered into the contract with Plaintiff, they agreed that if a dispute arose that could not be settled it would be resolved by arbitration pursuant to the UK⁸⁹ ICC Arbitration Rules based upon English law; and, accordingly, an arbitral award was rendered based upon English law; and (2) The proviso under Article 102 of the Civil Procedure Act of Korea provides that ‘where a party partially loses a case, depending on the circumstances, they may bear the entire costs of the action’.⁹⁰ In light of these points, we do not find that recognition and enforcement of the arbitral award would lead to an outcome contrary to Korean public policy. We do not accept this part of Defendant’s arguments.

1. 2.  Final Appeal Grounds Related to the Interpretation of Article V(1) and Article V(2) of the New York Convention

   1. A.  [See para. 9.59 for Article V(1)(b).]

   2. B.  [See para. 5.12 for Article V(1(d).]

   3. C.  The Points Concerning Article V(2)(b) of the New York Convention

      According to Article V(2)(b) of the New York Convention, the court in the enforcing country may refuse recognition and enforcement of an arbitral award where recognition and enforcement would be contrary to the public policy of that country. The provision seeks to ensure that the arbitral award and its recognition protect the fundamental moral beliefs and social order of the enforcing country. The determination thereof must take into consideration not only the internal circumstances but also the (p. 328) perspective of the stability of the international trading order and must be based on a narrow interpretation.⁹¹

      Defendant argues that in reaching the arbitral award in this case the hearing was concluded in Defendant’s absence with Plaintiff’s unilateral attendance. In deciding the amount that Defendant should compensate Plaintiff, they argue that the LCIA recognized an amount beyond the original sales price disregarding logic and rational considerations. Furthermore the delayed interest was also calculated, without any clear basis, not upon the statutory rate under the applicable law of the United Kingdom but by applying the higher prime rate of the United States. Finally, the arbitral award did not provide the grounds for its decision so recognition and enforcement of the arbitral award violated Korea’s public policy (legal order concerning interest rates). According to Defendant, the lower court should have refused recognition but instead did not properly determine Defendant’s arguments concerning these points and recognized the arbitral award. The failure to make a determination and not provide grounds amounted to an error of law concerning Article V(2)(b) of the New York Convention.

      According to the record, we find that the lower court’s decision included the basis for rejecting the above arguments. As long as the special provisions concerning the notice of the arbitration in this case did not violate Korean legal principles, as seen above, just because the arbitral award was rendered in Defendant’s absence based on the mentioned reasons does not mean that enforcement contravened Korea’s public policy. We also do not find a basis to hold that Korea’s public policy was contravened based upon enforcement of the amount of compensation that the LCIA recognized. At the same time, in international business transactions it is standard practice to order payment of delay damages, based upon a generally recognized, appropriate international interest rate, for a party’s failure to perform its obligations. The LCIA’s order that Defendant pay delay damages at the generally applied international interest rate of the US bank prime rate (the maximum 20.5 per cent rate is also within the limits of Korea’s Interest Limitation Act⁹²) was justified. The mere lack of a detailed explanation of the grounds to the arbitral award is not enough to contravene Korea’s public policy so we find the lower court’s decision was proper and the above arguments are groundless.

1. B.  Determination

   1. 3)  Determination Concerning the Deduction

      Enforcement judgments confer enforceability upon foreign arbitral awards to allow the compulsory execution procedures to proceed under Korean law. The trial determines whether enforceability exists based upon its status at the conclusion of oral arguments. After the arbitral award has been rendered, an action objecting to execution could be brought under the Civil Execution Act based on such grounds as expiration of the obligation. It may then be revealed during the oral arguments of the enforcement trial that permitting the compulsory execution procedures to continue would contravene fundamental principles of Korean law. In this case, the court may refuse enforcement of the arbitral award thereof by finding that it would violate public policy under Article V(2)(b) of the New York Convention. Instead of contesting the award after the enforcement judgment has been confirmed through a separate action objecting to execution, this interpretation better accords with litigation economy. Furthermore, it is appropriate under the Korean legal system that enforcement judgments should proceed by means of a judgment based upon an oral argument.⁹³

      We observe that according to paragraph 7.2 of the arbitral award, Plaintiff has an obligation to pay GBP 2,135 to Defendant. Plaintiff also does not contest that the GBP 2,135 that they have to pay Defendant should be deducted from the USD 276,552.63 that Defendant has to pay them. Therefore, as of 10 December 2013, the date of the arbitral award, we hold that out of the USD 276,552.63 award, the amount of USD 3,239.02,⁹⁴ which is GBP 2,135 converted into US dollars, should be considered extinguished. We accept this part of Defendant’s claim and find that granting enforcement of the entire arbitral award would constitute a violation of public policy under Article V(2)(b) of the New York Convention. Hence, this part of Defendant’s argument is warranted.

2. C.  Sub-Conclusion

   Therefore, in ICA⁹⁵ Arbitration Case No. A01/2012/103 between the parties, of the ICA Technical Appeal Committee’s arbitral award rendered on 10 December 2013, we grant compulsory execution of USD 273,313.61 (USD 276,552.63—USD 3,239.02) and the consequent delay damages (Appendix, Article 1).