A recent amendment of the Korean Civil Procedure Act added Article 217-2 came into effect. The Amendment to the Civil Procedure Act of Korea has codified a holding by the Seoul Central District Court and other Korean courts noting, in part, that Korean Courts may refuse to “recognize foreign damage awards that clearly exceed amounts considered reasonable in Korea in violation of good morals and the social order of Korea” (99 KaHap 14496, S. Cent. Distr. Court, 10/20/2000).
The Amendment allows Korean Courts, in Korea, the power to not recognize a damage award that the Korean Court’s perceives as “excessive.” This standard-less “standard” leaves much wiggle room for Korean Courts to invalidate punitive and liquidated damage awards.
A typical situation is a case where an American importer sues a Korean conglomerate in a U.S. Court and damages are awarded to the U.S. company. The damages may include liquidated, punitive and non-“actual” damages. The American importer, then, attempts to enforce the judgment in Korea.
There is a simple way to avoid the risk of your judgment not being enforced in Korea. Don’t require yourself to have a need to enforce your judgment in Korea – if possible. If course, in many cases this is not possible.
Be smart – sign the agreement, not, with a Korean conglomerate’s Korean HQ, but with the American subsidiary of the Korean conglomerate if, inter alia, the Korean subsidiary is capitalized and has assets to attach. Most large Korean companies have substantial assets tucked away in Hong Kong, U.S. and in European companies.
Please have an attorney with significant experience with enforcing judgments against Korean conglomerates review your agreement. Signing an agreement with a subsidiary poses, potentially, other risks.
The reality is, with this amendment and a few noted cases, a foreign judgment may not be fully enforced in Korea. Thus, put strategy to work for you.
For an article on enforcing foreign judgments in Korea, please see: Enforcing Foreign Judgments in Korean Courts.
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- Korean Court Recognition and Enforcement of American, European & other Court Judgments in Korean Courts
- Liquidated (Penalty) Damages Necessary in Most Korean NDA and Non-Compete Agreements
- U.S. Court Refuses to Enforce Taiwan Arbitral Award: Lesson for Drafting Arbitration Clauses in Korea
- Liquidated Damages Clauses Upheld by Korean Courts
- Korean Civil Litigation Pre-Judgment & Post-Judgment Interest Awarded by Korean Courts
- Liquidated Damages v. Penalties in Korean contracts
- Does a Korean court have the power to issue a preliminary attachment on Korean assets stemming from a foreign court claim?