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3 Apr 2018

Successful Representation of Client in an Unprecedented Leading Case on the Interpretation, Effectiveness, and Scope of Application of an Arbitration Agreement

In a suit brought by a Korean company (“Plaintiff”) against a U.S. company (“Client”) for compensation and damages, Yulchon successfully represented Client in obtaining dismissals from the court of first instance as well as the appellate court by presenting a robust and compelling argument about the applicability of an arbitration agreement to the facts of the case.


The key issue in this case was whether an arbitration agreement between the Parties would apply to Plaintiff’s non-contractual causes of action, namely a statutory claim based on a commercial agent’s indemnity rights and a torts claim based on an alleged violation of the Unfair Competition Prevention and Trade Secret Protection Act (“Unfair Competition Act”) by a third party. Also, there was an intense controversy between the Parties over the issues that (i) the agreement was unenforceable because Client’s company name did not match the name of the signatory of the contract, and that (ii) the contract had been terminated for a considerable period of time.


Given the unprecedented complexity of the issue and the wide-ranging dispute as to the interpretation, effectiveness, and the scope of application of the arbitration agreement, the appellate court (Seoul High Court) recognized this case as a potentially leading domestic precedent and emphasized that domestic and foreign theories and cases shall be examined carefully on appeal, despite the dismissal granted by the court of first instance. Accordingly, Yulchon’s International Dispute Resolution (IDR) Team utilized its international and domestic arbitration expertise, as well as its utmost research capability, to create a sophisticated argument based on persuasive evidence. As a preliminary matter, Yulchon endeavored to, and succeeded in, conveying that a contractual arbitration agreement must be interpreted with a “presumption in favor of arbitration,” as established by leading foreign precedents and textbooks on international arbitration. Next, Yulchon effectively challenged Plaintiff’s torts claim, which was technically a claim against a third party based on the third party’s alleged violation of the Unfair Competition Act, by conducting extensive research on U.S. and English case law that have similar facts and structures to this case. Based on such cases, Yulchon constructed a convincing argument that the arbitration agreement between the Parties also applied to Plaintiff’s torts claim.


This is a meaningful case that will be a leading precedent encompassing virtually every issue that may be raised in connection to an arbitration agreement, such as interpretation, effectiveness, and the scope of its application.


Sae Youn Kim and Tae Joon Ahn of the International Dispute Resolution team were involved in the case.  

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