Resources
AN INTRODUCTION TO NORTH KOREA’S EXTERNAL ECONOMIC ARBITRATION ACT

1. Introduction

Singapore hosted the historic US-North Korea Summit meeting that was held on June 14, 2018,and in September 2018, South Korea’s President, Moon Jae-in, had his third meeting with the North Korean leader, Kim Jong-un. In the September 2018 meeting, President Moon visited North Korea together with the CEOs of some of Korea’s largest companies, such as Samsung, LG and SK. The prospect of potential investment and business opportunities for foreign investors and companies in North Korea is better than ever. However, foreign investors and companies would be reluctant to put their feet in North Korea until they are comfortable that their investments and assets would be protected by a sound and predictable legal system, including a fair dispute resolution system.

Very few are familiar with North Korea’s dispute resolution system. Accordingly, we believe that one would be surprised to find out that North Korea has an arbitration law that applies to disputes between foreign investors and North Korean entities that involve a foreign element. The name of this arbitration law is the External Economic Arbitration Act of the Democratic People’s Republic of Korea (the “External Economic Arbitration Act”). In this article, our goal is to provide a brief overview of the External Economic Arbitration Act, with an in-depth discussion on the law’s articles relating to interim measures. This is because given North Korea’s political risks, the interim measures that are available before the final award would be especially important to prospective foreign investors.

2. Brief Overview of the External Economic Arbitration Act

The External Economic Arbitration Act was first enacted in 1999, revised in 2008 and was most recently revised in July 2014. The External Economic Arbitration Act has seven chapters and 65 articles as follows:

(1) Chapter 1. Fundamentals of the External Economic Arbitration Act (Articles 1 ~ 11)
(2) Chapter 2. Arbitration Agreement (Articles 12 ~ 19)
(3) Chapter 3. Arbitral Tribunal (Articles 20 ~ 32)
(4) Chapter 4. Arbitral Proceedings (Articles 33 ~ 44)
(5) Chapter 5. Award (Articles 45 ~ 54)
(6) Chapter 6. Effect of and Setting Aside Awards (Articles 55 ~ 59)
(7) Chapter 7. Enforcement of Awards (Articles 60 ~ 65)

We will explain each chapter in more detail.

(1) Chapter 1. Fundamentals of the External Economic Arbitration Act (Articles 1 ~ 11)

Topics that are covered in Chapter 1 include objectives of the law (Article 1), disputes resolved through external economic arbitration (Article 4), eligible parties to arbitration (Article 5), principles of dispute resolution (Article 6), and guaranteeing the independence of arbitration tribunal (Article 10).

Under Article 4, the types of disputes that can be resolved through external economic arbitration are (1) a dispute arising in the course of external economic activities that involves a foreign element where the parties have an arbitration agreement or (2) a dispute delegated to an arbitration committee by a competent government authority to be resolved through external arbitration proceedings. Article 5 provides that relevant authorities, enterprises, entities and foreign invested enterprises may become parties to external economic arbitration. Further, under certain circumstances, North Koreans may also become parties. Similar to many other arbitration laws, this law provides that objective, scientific, fair and speedy proceedings (Article 6), as well the independence of the arbitral tribunal, shall be guaranteed (Article 10).

(2) Chapter 2. Arbitration Agreement (Articles 12 ~ 19)

Chapter 2 discusses various issues regarding arbitration agreements. For example, while the arbitration agreement in principle shall be in writing (Article 13), whether as an arbitration clause or a separate agreement (Article 12), an arbitration agreement may also be recognized if a claimant files a request for arbitration and the respondent does not object to the request for arbitration (Article 14). A party may be represented by a representative, who may be the country’s citizen or a foreigner (Article 19). This means that a foreign qualified lawyer could represent a foreign investor in a dispute subject to the External Economic Arbitration Act.

(3) Chapter 3. Arbitral Tribunal (Articles 20 ~ 32)

This chapter includes topics such as the manner of composition of an arbitral tribunal (Article 20), procedures for appointing arbitrators (Article 21), the arbitration committee’s role in appointing arbitrators (Article 22), qualifications of arbitrators (Article 23), grounds and procedures for challenging arbitrators (Article 24 and 25), and interim measures (Articles 31 and 32). Under Articles 20 and 21, the parties can agree and determine the number of arbitrators, as well as the procedures for appointing the arbitrator(s). In the absence of such an agreement, the arbitration committee determines the number of arbitrators, which shall be either one or three. Similar to many other arbitration rules/laws, each party appoints one arbitrator and the two appointed arbitrators shall jointly appoint the presiding arbitrator, failing which the arbitration committee shall make the appointment. Interestingly, a foreigner renowned in the field of arbitration is qualified to become an arbitrator (Article 23). Powers of the arbitrators include rendering interim measures to preserve assets or suspending the process (Article 31). We will discuss issues regarding interim measures in more detail below.

(4) Chapter 4. Arbitral Proceedings (Articles 33 ~ 44)

Arbitration commences on the date on which the Respondent receives the notification of arbitration filing (Article 36) and the Respondent is permitted to file a counterclaim that is directly related to the main arbitration (Article 44). The parties can agree to the place of arbitration (Article 35). This means that the arbitration does not necessarily have to take place in North Korea and it could take place in a country outside of North Korea. Further, the parties are not obliged to use the North Korean language as the language of arbitration. The parties may agree to the language of arbitration and in the absence of such an agreement, the arbitral tribunal shall determine the language and the North Korean language shall be used if the arbitral tribunal fails to determine the language (Article 37). If the parties agree, the arbitral tribunal could make its decisions based solely on the written statements of the parties. In other words, an oral hearing is not a mandatory procedure (Article 39). Experts and witnesses may appear and testify in the hearing at the request of a party or if the arbitral tribunal considers it to be necessary (Article 41).

(5) Chapters 5 ~7. Award (Articles 45 ~ 54); Effect of and Setting Aside Awards (Articles 55 ~ 59); and Enforcement of Awards (Articles 60 ~ 65)

Chapters 5 to 7 contain articles about the law applicable to the award (Article 45), settlement and mediation (Article 47 and 48), form of an award (Article 49), grounds and limitation period for applying for setting aside an award (Articles 57 and 59), recognition and enforcement, as well as grounds for refusing to enforce an award by an arbitral tribunal of another state (Articles 64 and 65).

As to the applicable law, the parties are free to agree and determine the applicable law (Article 45) and in the absence of such an agreement, the arbitral tribunal shall apply the law that is most relevant and shall also consider the terms of the contract and internal practice in making a decision or an award (Article 45). The law allows the parties to conclude the dispute based on the settlement decision of the arbitral tribunal (Article 47) or a mediation decision of the arbitral tribunal (Article 48), which has the same effect as an award.

Within 2 months after a party receives the award (Article 58), either party may apply for an application for setting aside an award before the courts (Article 56). The grounds for applying to set aside an award are familiar ones, such as lack of competency of a party to the arbitration agreement, invalid arbitration agreement, improper service or when the award deals with a dispute outside the scope of the arbitration agreement or when the composition of the arbitral tribunal or the arbitral proceedings were inconsistent with the parties’ agreement or the applicable law (Article 57).

Lastly in Chapter 7, either party may enforce the award before a court in or outside North Korea, as the case may be (Articles 60 to 63). If a party applies for recognition and enforcement of an award made by an arbitral tribunal of another state (i.e., not North Korea), then it will be subject to the laws and regulations of North Korea (Article 64). The grounds for refusing to enforce an award by an arbitral tribunal of another state should already be familiar to arbitration practitioners. The grounds are lack of competency of a party to the arbitration agreement, improper service, the award deals with a dispute outside the scope of the arbitration agreement or when the award is against the public policy of the country (Article 65). However, parties considering having an arbitration award made outside of North Korea that would subsequentlyneed to be recognized and enforced in North Korea should note that North Korea is not a member state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

3. Interim Measures under the External Economic Arbitration Act

We will discuss in more detail about the articles related to interim measures under the External Economic Arbitration Act. Given North Korea’s political risks, it would be important to understand interim measures available under the External Economic Arbitration Act. There are three articles in the External Economic Arbitration Act applicable to interim measures:

Article 16 (Relationship between arbitration agreement and interim measure)
An application by one of the parties to the arbitration committee, arbitral tribunal, courts or relevant authority requesting it to order interim measures to preserve assets or suspend the process as well as the approval of such application, prior to request for arbitration or during the handling of the case, are not contrary to the arbitration agreement.

Article 31 (Interim measures)
(1) The arbitration committee or an arbitral tribunal may decide on interim measures relating to dispute resolution such as those to preserve assets or to suspend the process. In such circumstances, the party may be requested to provide security in connection with the interim measure.
(2) If the party does not enforce the interim measure decision, the arbitral tribunal may request its enforcement to a court or relevant authority.
(3) The court or the relevant authority shall take appropriate measures within 10 days after receiving the request (for interim measures) and inform the arbitral tribunal of the result.

Article 32 (Revocation and termination of interim measures)
The arbitration committee or an arbitral tribunal shall immediately terminate or suspend an interim measure when the interim measure decision and its enforcement are proven to be no longer necessary or to be wrong.

Article 16 expresses the principle that an interim measure applied by a party to the arbitration committee, arbitral tribunal, courts or competent authority is not incompatible with an arbitration agreement. One can find the same principle in Article 9 of the UNICTRAL Model Law on International Commercial Arbitration (1985) (the “1985 UNICTRAL Model Law”) and in Article 9 of the UNICTRAL Model Law on International Commercial Arbitration (2006) (the “2006 UNICTRAL Model Law”).

Article 31 of the External Economic Arbitration Act is different from Article 17 of the 2006 UNICTRAL Model Law in the sense that Article 31 limits the scope of interim measures to those “relating to dispute resolution,” whereas Article 17 of the 2006 UNICTRAL Model Law is silent on this issue. This is an amendment from Article 17 of the 1985 UNICTRAL Model Law, which included the words “in respect of the subject matter of the dispute.”. On a strict construction, Article 31 of the External Economic Arbitration Act means, for example, that only assets relating to the pending arbitration are subject to interim measures, such as provisional attachment and preliminary injunction. This limitation should be considered when the applicant plans for the scope of the assets or the subject matters subject to the interim measures. On the other hand, the 2006 UNICTRAL Model Law could be interpreted to allow parties to apply interim measures, for example, on assets that are not related to the pending arbitration.

Article 31 of the External Economic Arbitration Act lists two types of interim measures – preservation of assets and suspension of process. On the other hand, Article 17 of the 2006 UNICTRAL Model Law lists more specific types of interim measures as follows:
“….

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.”

Both the External Economic Arbitration Act (Article 31) and the 2006 UNICTRAL Model Law (Article 17E) provide that the requesting party may be asked to provide appropriate security. Both laws also do not specify what is considered as an “appropriate type of security” (e.g., cash only, bond or a mixture of the two). Both the External Economic Arbitration Act (Article 32) and the 2006 UNICTRAL Model Law (Article 17D) provide the mechanism for termination of the interim measures.

Interestingly, the External Economic Arbitration Act (Article 31) aims to guarantee that applications for interim measures are dealt with expeditiously by explicitly requiring that the court or the competent authority take appropriate measures within a specific period of time (10 days after receiving the request for interim measure).

4. Conclusion

An arbitration practitioner would agree that the External Economic Arbitration Act addresses most of the key issues that may arise in international arbitration cases. For example, the law attempts to guarantee objective, fair and speedy proceedings, as well as the independence of the arbitral tribunal. It also gives much flexibility to the parties by allowing the parties to agree on important issues of their arbitration case, such as the governing law, location, number of the arbitrators and language. Either party may also request interim measures to preserve their assets before the final award. However, notwithstanding the wording of the External Economic Arbitration Act, the actual implementation in accordance with international practice and principles would be more important.

In his visit to Singapore in July 2018, the North Korean leader, Kim Jong-un, did a surprise night tour of Singapore to learn about Singapore’s economic development. Maybe the next step would be for North Korea’s Arbitral Committee and arbitration practitioners to visit Singapore to learn from Singapore’s advanced arbitration system.


WonsikYoon

Mr. Wonsik Yoon is the Co-Chair of the International Arbitration & Cross-Border Litigation Practice Group at Barun Law LLC. He is a member of the Korean Bar Association and the State Bar of California. He has handled numerous international arbitration cases before numerous institutions including KCAB, AAA/ICDR, LCIA, CAS and ICC. He has also successfully represented domestic and foreign clients in court proceedings in multiple jurisdictions including all levels of the Korean courts.

Mr. Yoon graduated from Seoul National University with a B.S. in Economics in 1981. He also holds an LLM from the University of Washington School of Law. He commenced his legal practice in 1989 upon completion of a two-year legal training program at the Judicial Research and Training Institute, the Supreme Court of Korea.

Prior to practicing law, Mr. Yoon worked for the Ministry of Foreign Affairs as a diplomatic official. He currently serves as a director of the Korean Arbitrators Association and a member of the international panel of the Korean Commercial Arbitration Board. He was recognized by Asialaw as a Leading Lawyer for Dispute Resolution & Litigation 2016, 2017 and 2018.

Email. This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel. +82.2.3479.7824


RieuKim

Mr. Rieu Kim is a senior foreign attorney at Barun Law LLC. Mr. Kim has extensive experience advising Korean and international companies in relation to both contentious and non-contentious matters in Korea and outside of Korea. He has represented clients in arbitration cases before the KCAB, the ICC, the HKIAC, the AAA, and the CAS.

He is a member of the California Bar. Mr. Kim graduated from Yonsei University, College of Business and Economics (B.A.) in 2002, and received his J.D. from the University of Minnesota Law School in 2008, as well as MBT (Masters of Business Taxation) from University of Minnesota. Before joining Barun Law LLC, he worked as a legal counsel at LG Electronics and an associate at a boutique corporate law firm in California.

He is a co-author of the Korea Section in the Dispute Resolution Review (Law Business Research Ltd, 2013 Edition) and Korean Arbitration Review (9th Issue) : Recognition and Enforcement of the Exemplary Damages Portion of an International Arbitral Award in Korean Courts (Korean Commercial Arbitration Board, 2018).

Email. This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel. +82.2.3479.5768

Press Releases

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9

SIAC Announces the Official Release of the SIAC Rules 2016

30 June 2016SIAC Announces the Official Release of the SIAC Rules 2016The Singapore International Arbitration Centre (SIAC) is pleased to announce the official release of the sixth edition of the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules 2016”). The SIAC Rules 2016 will be available on the SIAC website from 1 July 2016, and will come into e...

Read more

SIAC Signs Memorandum of Agreement with GIFT

3 June 2016SIAC Signs Memorandum of Agreement with GIFT The Singapore International Arbitration Centre (SIAC) is pleased to announce that it has entered into a Memorandum of Agreement (MOA) with the Gujarat International Finance Tec-City Company Limited (GIFTCL) and GIFT SEZ Limited (GIFT SEZ). Under the MOA, SIAC, GIFTCL and GIFT SEZ will collaborate to promote the use of arbit...

Read more

SIAC Announces Appointment of New Registrar and Promotion of Deputy Registrar

27 April 2016SIAC Announces Appointment of New Registrar and Promotion of Deputy RegistrarThe Singapore International Arbitration Centre (SIAC) is pleased to announce the appointment of Ms Delphine Ho as Registrar of SIAC with effect from 20 May 2016, and the promotion of its Deputy Registrar, Mr Kevin Nash, to Deputy Registrar and Centre Director, effective 1 May 2016. Ms Ho wi...

Read more

SIAC Signs Memorandum of Understanding with Oe-Cusse Administration

28 March 2016SIAC Signs Memorandum of Understanding with Oe-Cusse AdministrationThe Singapore International Arbitration Centre (SIAC) is pleased to announce that it has entered into a Memorandum of Understanding with the Authority of the Special Administrative Region of Oe-Cusse Ambeno (SAROA) and Special Zones for Social Market Economy (ZEESM) Timor-Leste (SAROA-ZEESM TL), form...

Read more

SIAC Announces Record Case Numbers for 2015

25 February 2016SIAC Announces Record Case Numbers for 2015 The Singapore International Arbitration Centre (SIAC) is pleased to announce the official release of its 2015 Annual Report at the SIAC Annual Appreciation Event this evening. 2015 was a milestone year for SIAC. SIAC recorded the highest ever number of cases filed, highest ever number of administered cases and highest e...

Read more

Public Consultation on Draft SIAC Investment Arbitration Rules

1 February 2016Public Consultation on Draft SIAC Investment Arbitration RulesThe Singapore International Arbitration Centre (SIAC) is pleased to announce the commencement of the public consultation process on its draft Investment Arbitration Rules 2016 (the “draft IA Rules”), a comprehensive set of specialised rules for the administration of investment arbitrations by SIAC.The d...

Read more

SIAC Appoints New Court Member

1 February 2016SIAC Appoints New Court MemberThe Singapore International Arbitration Centre (SIAC) is pleased to announce the appointment of Mr Darius Khambata, Senior Counsel, to the SIAC Court of Arbitration with effect from 1 February 2016.Mr Khambata practises before the Bombay High Court and the Supreme Court of India. He has previously held two distinguished public law off...

Read more

Opening of SIAC Office in Shanghai

25 January 2016Opening of SIAC Office in ShanghaiThe Singapore International Arbitration Centre (SIAC) is pleased to announce the opening of a representative office in the China (Shanghai) Pilot Free Trade Zone (FTZ). The launch of the Shanghai office underpins SIAC’s steadily growing popularity amongst Chinese parties, and is an integral part of SIAC’s continuous efforts to for...

Read more

Public Consultation on Draft SIAC Arbitration Rules

18 January 2016Public Consultation on Draft SIAC Arbitration RulesThe Singapore International Arbitration Centre (“SIAC”) is pleased to announce the opening of the public consultation process on its draft revised Arbitration Rules 2016 (the “draft Rules”). The revision of SIAC’s Arbitration Rules takes into account recent developments in international arbitration practice and pr...

Read more
You are here: Home Resources Articles & Publication Articles An Introduction to North Korea’s External Economic Arbitration Act