Korea is a civil law country with procedures that are similar to those of other civil law countries such as Germany, France and Japan. In principle, the civil litigation system in Korea is designed to be adversarial, but inquisitorial procedures are also incorporated within the system.

The court considers both oral and written submissions from the parties. Presentations in court are becoming more common and the electronic case filing system facilitates effective debate at the hearing as the contents of written submissions and/or the related evidence can be viewed in the courtroom through a projector. Still, written submissions carry considerable weight with the judge, especially when the factual and/or legal issues are complex and a series of hearings are held to conclude a case.

Korea is not a federal state and, as such, has a single judicial system.

The Korean court system for civil cases consists of three levels:

• the courts of first instance;
• the courts of appellate level; and
• the Supreme Court.

There are no separate commercial courts and commercial cases are treated as ordinary civil cases. 

There are no separate courts established to hear small claim cases. Instead, cases are assigned at the courts of first instance level based on the size of the claim, as follows:

• where the claim amount is KRW200 million or less, the case is heard by a single judge; and
• where the claim amount is more than KRW200 million, or if the claim amount cannot be determined, the case is heard by a panel of three judges.

The claim size also determines which court hears the appeal. For smaller claims of KRW200 million or less, appeals are heard by appellate benches at district court level. For larger claims, appeals are heard at one of the five high courts located in different regions: Seoul, Busan, Daegu, Daejeon and Gwangju.

Specialised Courts

In addition, there are specialised courts, such as the Family Court, Administrative Court and Patent Court. The Family Court and the Administrative Court are the courts of the first instance level and the appeals of the decisions rendered by such specialised courts are heard by the courts of the appellate level (three level system retained). The Patent Court is treated as a court of the appellate level and reviews the decisions by the Intellectual Property Trial Board. As such, any appeal to the judgment of the Patent Court should be submitted to the Supreme Court. Similarly, disputes in which the Korea Fair Trade Commission is a party are heard at the Seoul High Court, and appeals to the Seoul High Court’s judgment can be reviewed by the Supreme Court. Also, the Seoul Rehabilitation Court has been established to handle administration of bankruptcy proceedings and related disputes.

In principle, anyone can attend a court hearing in session. However, as an exception, a court may keep the hearings confidential for national security or public policy reasons.

A copy of the court’s decision can be made available to the public. However, the personal information of the relevant parties included in the court’s decision shall be redacted before disclosing the decision to the public. The pleadings and other documents from the case are usually not available to the public. Only the parties to the dispute or others who can prove that they have a legitimate interest in the case are allowed access to these records.

If information regarding privacy or trade secret is stated in the document, the relevant party may ask the court to limit access to such document by submitting an application to the court.

Under the Korean court system, except for cases where the alleged claim amount is KRW100 million or less, cases which are heard by single judge panels (for which cases family members or employees may act as legal representatives subject to the court’s approval) and small-claims cases where the alleged claim amount is KRW30 million or less, legal representatives must be an attorney qualified in Korea. Foreign attorneys are not allowed to represent a party in civil actions. While anyone can attend a public court hearing, the audience has no right to participate.

Third-party funding is not a concept that is well-known in Korean litigation and there are no laws or regulations on this type of arrangement as yet. However, the Attorney-at-Law Act prohibits a lawyer from becoming an assignee to any rights in dispute.

See 2.1 Third-Party Litigation Funding.

See 2.1 Third-Party Litigation Funding.

See 2.1 Third-Party Litigation Funding.

See 2.1 Third-Party Litigation Funding.

Except in criminal cases, conditional or contingency fee arrangements are allowed in South Korea, and are frequently used in practice. Various legal fee structures including, but not limited to, hourly rates and task-based billing can also be used.

However, if the court determines that the amount of an agreed-upon legal fee is unreasonably excessive, it can reduce a legal fee otherwise payable to counsel, as per the arrangement between counsel and the client, to an amount as deemed “fair and reasonable” by the court.

See 2.1 Third-Party Litigation Funding.

In general, there are no pre-action procedures in place in Korea. 

However, in certain proceedings, there are pre-conditions for filing a lawsuit that must be met in accordance with the relevant provisions of the law. Examples are as follows:

• when initiating a class action relating to securities, the representative plaintiff must obtain the permission from a court in advance; and
• in order to file a tax revocation lawsuit, the plaintiff must exhaust their remedies by undergoing a tax administrative trial.

The general statute of limitations under the Korean Civil Code is ten years. A shorter period applies to claims arising out of commercial transactions in accordance with the Korean Commercial Code, which is, in principle, five years. In addition, the Korean Civil Code, the Korean Commercial Code and other special laws stipulate the special statute of limitations applicable to certain types of claims. 

The statute of limitation starts on the day immediately following the date the claim could have been exercised (namely, the due date of each account receivable or, if the due date is not decided in advance, the day the obligation accrued). For claims regarding breach of agreements, the statute of limitation starts to run from the date of such breach.

Tort claims must be brought within the following periods (whichever ends earlier):

• within ten years from the date the tort was committed; and
• within three years from the date the claimant becomes aware of damages suffered and the identity of the tortfeasor.

The Act on Private International Law (the “Act”) applies when there is a question of whether a Korean court may exercise jurisdiction over a dispute that involves a foreign party or a subject located outside Korea.

Under the aforementioned statute, a Korean court has jurisdiction over a dispute when either party or the dispute itself has “substantial nexus” with Korea. When determining whether there is such nexus, the court shall consider, among others, fairness and judicial economy.

According to the Act, a Korean court has jurisdiction under the following circumstances:

• when either party is domiciled or has residence in Korea;
• when either party has a principal place of business or operations in Korea, or was established or incorporated under the laws of Korea;
• when either party has a place of business in Korea and the subject of the dispute relates to such business;
• when either party engages in continuous and organised business activities in Korea and the dispute relates to such business activities; or
• when the subject of the dispute is assets located in Korea, or the defendant’s assets with respect to which the plaintiff may seek an attachment are located in Korea.

Furthermore, if a court has jurisdiction over any one claim among multiple claims asserted in a dispute or has jurisdiction over any one party among multiple parties to a dispute, the court may exercise jurisdiction over the entire dispute in certain circumstances.

Even if none of the above conditions is met, unless the case involves an issue for which certain specified courts have exclusive jurisdiction (eg, the cases involving certain corporate matters for which only the local court has jurisdiction), then jurisdiction can be recognised in the following cases:

• if the parties have agreed to the jurisdiction of the district court in writing; or
• if the plaintiff filed a complaint to the court that does not have a jurisdiction but the defendant does not raise an objection regarding the jurisdiction and proceeds with presenting its defence at the hearing.

Complaints must clearly state the name, address and other identifiable elements of the parties, the tenor of claim and cause of action. The complaint may be amended during the course of the litigation proceedings through a written submission under the below conditions:

• the underlying factual basis of the claim remains unchanged;
• the amendments do not result in significant delays to the proceedings;
• the amended claims do not fall within the exclusive jurisdiction of a different court; and
• the hearings are not closed.

It is permissible for the plaintiff(s) to amend the cause of action or the remedy sought so long as the basis of the claims remains the same. As a practical matter, it is not uncommon for plaintiff(s) to amend the claim amount after filing a complaint.

In Korea, the service of process is done ex officio – ie, by the court. In principle, service of process is completed when a court officer or a mailman delivers the documents directly to the person to be served. However, if certain conditions are met, service of process can be done by leaving the documents at or sending the documents to the place where service should have been completed. If the address of the defendant is unknown and there is no other way to serve, the court may allow the documents to be served through public notice.

The mechanism of service of process for a party residing outside of Korea depends on whether they reside in a member state of the “Hague Convention on Service” (the Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil or Commercial Matters). If the foreign party resides in a member state, the process under the Hague Convention on Service will apply. Otherwise, the service will be done in accordance with the process set by the Act on International Judicial Cooperation for Civil Matters, by which the service of the relevant court document shall be entrusted by the presiding judge to the Korean ambassador, minister or consul stationed in that foreign country or to the competent government authority of that foreign country. If certain conditions are met, service of process to a person or a corporation with an address in a foreign country may be done through public notice.

Once the defendant is served with the complaint, they are required to submit an answer to the court within 30 days from the date of service of the complaint (except for when the service is done through a public notice), which is extendable. The defendant is not time-barred from submitting an answer, even after this 30-day period. However, if a defendant does not submit a written answer to the complaint at all, the Korean Civil Procedure Act (KCPA) empowers the court to issue a default judgment without holding a hearing. Under a default judgment, the court may deem that the defendant has admitted the facts and claims set out by the plaintiff.

In Korea, the class action system recognised in the USA is available only to claimants who sustain damages from certain types of securities transactions. There have been efforts to expand the area to include product liability in particular, but such efforts have not yet resulted in actual legislation. 

The Securities-Related Class Action Act provides that class actions can be used to recover certain types of securities-related damages, including damages arising from false disclosure, insider trading or market manipulation. Similar to the class actions in the USA and some common law jurisdictions, there must be a certifiable class and their claims should have common questions of law and fact. The following requirements must be met to certify a class:

• the suit must involve 50 or more class members and, at the time of the action that constitutes the cause of the lawsuit, the sum of the shares held by the class members must be 1/10,000 or more of the defendant company’s total number of outstanding shares;
• the claims of the class members must have common questions of law and fact; and
• the suit must constitute an appropriate and effective means of realising the rights of the class members or protecting their interests.

The results of the class action lawsuit will bind all of the class members except for those who have opted out.

There are no particular requirements when providing a cost estimate of the potential litigation to the client.

There are no interim applications/motions available before a trial or hearing of a claim for the purpose of case management. As a temporary remedy, before the court renders a judgment, a plaintiff may file for preliminary attachment or provisional injunction. These procedures are not a part of the main action.

There is no system under Korean law that would be comparable to a “motion to dismiss” or a “motion for summary judgment” as in the USA. If the claim of the plaintiff is groundless, the defendant may point this out in an answer or a brief and make such arguments at the hearing. The court shall dismiss the plaintiff’s claim if it is proven groundless.

There are no dispositive motions (ie, application for summary determination or judgment) available in Korea that can be made before a trial.

An interested third party may join a lawsuit that is pending between the plaintiff and the defendant and become a party to the case under the following circumstances: 

• if the third party claims that the subject matter of the lawsuit belongs to the third party; or
• if the rights of the third party are likely to be infringed by the outcome of the lawsuit.

A third party who has a legitimate interest in the lawsuit can also participate in the lawsuit as an intervening party for the purpose of assisting one of the parties to the lawsuit. Given that an intervening third party may participate in the lawsuit only to support one of the parties, the intervening third party will not be considered a litigant of the lawsuit, and will not be allowed to take actions unfavourable to, or inconsistent with, the relevant supporting party. 

A third party who intends to join or participate in the pending lawsuit shall express their intention to the court orally or in writing and must receive the court’s approval. 

Court Decisions and Third Parties

The parties may have the effect of the court decision extending to a third party as if the third party participated in the lawsuit, by notifying the third party that the relevant lawsuit is pending in the court. Either a plaintiff or a defendant may ask the court to notify a third party who has a legitimate interest in the current case of the fact that the lawsuit is currently pending at the court. Upon service of such notice, the third party has an opportunity to participate in the pending case as an intervening third party.

The third party may freely choose whether to participate in the pending lawsuit. Regardless of whether the third party participates in the lawsuit, however, once the third party has received the notice, in a subsequent litigation between the third party and the party of the previous lawsuit, the third party shall be prohibited from making arguments that are contrary to facts and/or legal reasoning that constitute the basis of the judgment in the previous litigation. For this reason, the third party typically elects to participate in the pending case when it is informed of the fact that the relevant lawsuit is pending.

When the plaintiff does not have a presence in Korea, or it is obvious from the complaint, written submissions, or other case records that the plaintiff’s claim is groundless, the defendant may motion the court to order the plaintiff to pay security for litigation costs.

The court shall decide the level of security based on the total amount of costs that the defendant is expected to spend at each level of the lawsuit. In practice, the security does not normally exceed 4% of the claim amount. Subject to court approval, the security for litigation costs may be satisfied by way of a surety bond.

If the plaintiff fails to pay the security within the period set by the court, the court may dismiss the claim without holding a hearing.

Interim applications/motions are not considered as separate procedures. As such, even if a party applies for interim applications/motions, the costs are not calculated separately. The court must consider the amount of the costs incurred in such proceedings when allocating the costs of the entire proceeding in the judgment.

There is no limited or fixed timeframe for the court to review an interim application/motion. It could take a few days to a few weeks.

Generally speaking, the scope of discovery in Korea is substantially limited compared to some common law jurisdictions, including the USA. All forms of discovery are conducted by and are under the direct supervision of the court. For example, a party cannot directly ask the other party to produce documents or witnesses. All requests for discovery must be made to the court and must be approved by the court.

The judge has wide discretion on whether to allow discovery, the discovery method and the scope of discovery with respect to the parties and also to third parties. Accordingly, although discovery is relatively limited in the general sense, there is some room to obtain evidence through discovery. 

When a party fails to comply with the court’s document production order, the court may draw an adverse inference from the lack of action. The same applies when a party, upon receiving a document production order, intentionally destroys the document or makes it unusable. The court may then draw an adverse inference from the document which was not produced. If it was a third party which did not comply with the court’s document production order, the third party shall be subject to administrative fines of up to KRW5 million.

Document production orders can be made to third parties that are not named as a plaintiff/claimant or defendant. In the event that the document holder is a third party, the court must conduct examination by asking relevant questions to the third party holder or its designee before deciding whether the document in question is to be produced. The court may order document production only after it has completed its examination of the third party in possession of the document or its designee.

The parties in possession of the relevant document shall submit the document to the court so that the documents can be evidence that the court can then rely on.

If the document is in the possession of the counterparty or a third party who is under the obligation to produce such document, the party may request the court to issue a document production order. This request must clearly indicate the following:

• the document requested;
• the contents of the requested document;
• the document holder;
• the fact to be proved by the document; and
• the grounds by which the document should be produced.

Based on the party’s application, the court may order the document holder to disclose a list of documents which they have in their possession, and/or documents they intend to submit as evidence that are related to the party’s application.

Obligation to Produce

In general, the obligation to produce documents is recognised in the following circumstances: 

• when the other party possesses the document that it cited during the lawsuit; 
• when the applicant party is legally entitled to request the holder of the document to deliver it or make it available for inspection; or 
• when the document has been prepared for the benefit of the applicant, or prepared as a result of the legal relationship between the applicant and the holder of such document. 

Even if the document holder is not under obligation to produce the document, a party may still ask the court to make a formal request that the document holder submit the relevant document to the court. When requested by the court, the document holder has to submit the requested document to the court, unless there are justifiable reasons not to do so.

In relation to discovery, there are no applicable mechanisms other than the Document Production Order. In practice, the applicant party will make a request for clarification from the counterparty, on the basis of which the court will proceed by issuing a Clarification Order (pursuant to Article 137, Korean Civil Procedure Act). In such cases, the counterparty may be required to submit the relevant documents.

According to the KCPA, documents containing the advice/work which is the product of lawyers, patent attorneys, certified accountants, tax accountants, doctors, pharmacists, priests, etc, who have a duty of confidentiality under applicable laws are protected from disclosure and are not subject to document production orders of the court. Advice from an in-house lawyer who is locally licensed could also be considered privileged to the extent that the contents of the advice satisfy the above requirement. It is the prevailing view that the term “lawyer” in the relevant provision of the KCPA indicates lawyers licensed in Korea.

The document holder may refuse to produce the document in the following cases:

• government/official documents; 
• documents which may incriminate or defame the requested person or their relatives; 
• documents to which they have an obligation of confidentiality or which contain trade secret information; or
• a document prepared by the requested person for their own use (such as diary and notes).

If there is risk of confidential information being leaked in the process of reviewing whether there is any legitimate basis for refusing production of the document, the court may, based on its discretion, hold an in camera session and order the document holder to first submit the requested documents to the court for its review. In such case, the court is prohibited from disclosing those documents to other persons, including the parties to the case during its internal review. Neither the parties nor their counsel can participate in this “in camera proceeding”.

One can seek provisional remedies, even before filing the complaint, in the form of: 

• preliminary attachment; or
• provisional injunction.

A preliminary attachment is used to preserve and freeze the property or assets of a debtor (who is often the defendant in a lawsuit). This serves as security for discharge of a monetary payment obligation by the defendant. The courts will allow preliminary attachments if the applicant establishes a need to preserve the assets, a prima facie case in its favour, and shows that the assets are owned by the debtor (defendant).

In case of the provisional injunction, there are generally two types.

• The most common type of provisional injunction is to temporarily prohibit the debtor from disposing of their property which is the subject matter of the dispute. The injunctions may be issued in cases where, if the existing situations are altered, the party becomes unable to exercise their rights, or there is concern over substantial difficulties in exercising it.
• The other type of provisional injunction is to temporarily fix the position of the disputed right. This type of provisional injunction is issued when the petitioner is likely to incur substantial injury before the court can render a final judgment in its favour. This type of preliminary injunction is different from other types of provisional remedies in that instead of securing the future enforcement of a favourable judgment, it seeks to protect the petitioner from present injuries caused by delays in the enforcement of their rights.

Korean law and jurisprudence are silent on whether anti-suit injunctions, barring a parallel litigation in a foreign court, are allowed.

The court usually issues a preliminary attachment order within two to three weeks from the application. Depending on the urgency of the matter, a decision may be issued within one to two weeks.

A provisional injunction order, depending on the urgency of the case, may be rendered within a month of the application. It could take one or two months longer if the court decides to hold a hearing. An out-of-hours arrangement is not available in Korea.

According to the Civil Execution Act, an injunctive relief can be obtained on an ex parte basis without hearing the case from the parties. However, for injunctive orders in which the temporary position against the disputed relation of right will be fixed, the court shall schedule a court hearing, unless the purpose of the injunctive order cannot be achieved if the parties wait until the hearing is held.

The applicant can be held liable for damages suffered by the respondent, if the respondent succeeds in the main action. 

The court may order the applicant to provide an adequate amount of security, when the court issues an injunctive relief. The same applies when the injunctive relief is granted ex parte.

A mareva injunction is not available or recognised in Korea. Preliminary attachment of assets is available in Korea, but it is limited to assets in Korea, as Korean courts do not have jurisdiction to grant application to attach assets outside of Korea. In the case of monetary claims, the claimant may preliminarily “attach” a claim the respondent has against a third-party debtor even if the third-party debtor resides outside of Korea. However, since the preliminary attachment of a claim becomes effective when the preliminary attachment order is served on the third-party debtor, it would be difficult to enforce the preliminary attachment order over a claim against the third-party debtor residing outside of Korea.

A provisional injunction over a subject located outside Korea cannot be granted, unless the Korean court has jurisdiction over the disputed subject located abroad.

However, under the Act on International Private Law, even in cases where a Korean court has no jurisdiction over a dispute or where the subject of the dispute is located abroad, a petitioner may still seek a preliminary attachment or an interim injunction, which if granted, would be effective only in Korea, so long as the petitioner has an urgent need for such relief.

In principle, preliminary attachments could be made only on the defendant (debtor)’s property, and not on the property of third parties. However, if the subject asset constitutes a claim that the defendant has against a third-party debtor, the court may order a third party to refrain from performing its payment obligation to the defendant while the case is pending.

There are no civil or criminal sanctions applicable to a respondent who fails to comply with the terms of an injunction under Korean law. However, the court may state in the injunction order that the respondent must pay a fine if they violate a provisional order of continual forbearance.

A civil action begins with the plaintiff filing a complaint with the court that has jurisdiction over the case. The court will then serve a copy of the complaint on the defendant. Once the complaint is served, the defendant has 30 days to submit an answer to the court although the time limit can be extended, at the discretion of the court, upon request by the defendant. There is no set timeframe for subsequent written submissions; the parties are free to make additional written submissions and file exhibits until close of the hearing.

Preparatory Hearing

Once the reply by the defendant is submitted, the court may schedule a preparatory hearing to determine the factual and legal issues relevant to the dispute and whether parties are willing to enter into settlement or conciliation proceedings. Preparatory hearing is at the discretion of the court, which will determine whether such hearing is necessary considering the size and complexity of the case, etc.

If no preparatory hearings are held, or upon the closing of the preparatory hearing, the court will typically hold more than one main hearing. The interval of each hearing may differ depending on the complexity of the case.

Witnesses and Oral Testimonies

Witness/expert examination can be pursued upon the request of a party. Witnesses/experts normally provide oral testimony at the hearing, although, in some cases, the court may allow a witness/expert to provide testimony in writing. A party is entitled to cross-examine the witness/expert, and the court will ask questions after the examination of the parties. Korean courts are increasingly encouraging oral testimony at hearings, highlighting the benefits of oral arguments. Nevertheless, written submissions and documentary evidence still hold great importance in the court. 

Once the hearing is closed, the court will schedule the date for announcement of its judgment, which is typically two to six weeks after closure of the hearing.

In Korea, the court holds short, regular hearings rather than one concentrated hearing, usually until the parties agree that they have submitted all the arguments and evidence they have.

Although the court has discretion to set the schedules for procedure, the parties may request the court to provide them sufficient time to prepare and to extend or change the scheduled dates from time to time. The court usually allows such changes as long as it is not deemed to be an undue delay of the case.

There is no jury trial in civil actions in Korea. Only for a limited number of criminal cases has Korea adopted a public participatory trial, which adopts some of the features of a jury trial. Members of the public participate in the hearings of the criminal proceedings and can offer a collective opinion on the verdict of the criminal case. The court, however, is not bound by their opinion.

There are no strict rules on admissibility of evidence in civil action in Korea.

Judges may determine whether the facts alleged by a party are true on the basis of its full discretion and there are no restrictions on the form of the evidence that can be relied upon by the judge. Documents prepared after the commencement of the case, or a copy of the document, are also acceptable. Even a document produced in the course of settlement discussion is admissible as evidence.

An expert may provide testimony in Korean civil proceedings, upon appointment by the court. If there is need for an expert, a party may file an application with the court, explaining the need for expert testimony and the matters requiring the expert’s review and opinion. The applying party needs to pay the court expert's costs in advance.

The court may also appoint an expert on its own. A party can challenge the court’s appointment if there are circumstances that would prevent the expert from providing expert analysis in good faith.

Although an expert’s opinion is not legally binding, the court will often respect the outcome of the expert examination or the expert report. The parties may provide comments on the expert opinion, although it is up to the judge’s discretion whether to take them into account.

A party may submit an expert report from a party-appointed expert. Such an expert report will be treated as a documentary exhibit and not expert evidence. In general, more weight will be given to a court-appointed expert than an opinion of a privately retained expert.

Civil court proceedings are, as a rule, open to public. The court may limit public access to a hearing if it considers that this might endanger national security, public peace and order, or good public morals. Even in a closed hearing, the presiding judge may specifically allow persons to stay in the courtroom if deemed proper.

Generally speaking, there is a high level of intervention by the judge during civil case hearings in Korea. The presiding judge can seek clarification from the parties by questioning the parties about factual or legal matters and by urging the parties to present further evidence.

In addition, the judge must investigate and determine sua sponte not only procedural matters (such as elements for a cause of action), but also certain substantive matters (for example, the degrees of contributory negligence between the parties, and quantification of alimony).

A date of the court decision will be separately designated, usually within two to six weeks from the date of the last hearing. For small cases with a claim amount of KRW30 million or less, a judgment may be rendered immediately after the final hearing on the same day.

Once the plaintiff files a complaint to the court, the court will serve the complaint together with a guide on how to respond to the defendant within one to two weeks. The defendant is required to file an answer to the court within 30 days upon receipt of the complaint. 

If deemed appropriate, the court may schedule a preparatory hearing after the exchange of the complaint and the answer to the complaint. It is common that the court schedules multiple main oral hearings, each with an interval of four to six weeks. The number of main hearings may depend on the complexity of the case and, especially, the number of witnesses.

Once the main hearings are closed, the court will issue its judgment on the case, typically within two to six weeks. Usually the court will deliver a copy of the judgment to the parties or their counsels. It generally takes one to two weeks for the written judgment to be delivered.

High Court Appeals

Appeal to the High Court must be filed within two weeks after receipt of the written judgment from the court of first instance. Similarly, an appeal to the Supreme Court must be filed within two weeks after receipt of the written judgment from the court of appellate level. Proceeding in the appellate level is the same as in the court of first instance. However, at the Supreme Court there is usually no oral hearing and the proceeding is conducted based on written submissions only.

The overall procedure in the first instance court will normally take from eight to 16 months, in the appellate level from six to 12 months, and in the Supreme Court from four months to two years. This may differ depending on the subject matter and nature of the specific case.

In Korea, both out-of-court and in-court settlements are available. The settlement made out of court does not require an approval from the court.

The parties may settle a case at any time during the course of a civil proceeding by making mutual concessions. As in the case for out-of-court settlements, the parties do not need to obtain an approval from the court in order to enter into a settlement agreement. If the parties have successfully settled the case, the result of the settlement will be officially recorded in the court protocol, thereby having the effect of a final judgment so long as the parties do not withdraw from the case immediately upon reaching a settlement. Hence, such settlement protocol has an equivalent effect to a final judgment and, thus, is fully enforceable.

Furthermore, during the course of a civil action, the judge may recommend a settlement and act as a mediator. If the parties do not reach a settlement during such mediation, then the court may issue a recommendation order for settlement. Unless any party files an objection to the court’s settlement recommendation order within two weeks from the date of the service of such order, the objection is time-barred and the settlement recommendation order shall have the same effect as a final and conclusive judgment. If, however, an objection is raised by either of the parties to the settlement recommendation ordered by the court, the proceeding will return to its status prior to the order.

The terms of an in-court settlement will be recorded in the hearing protocol. The pleadings and other documents from the case records are usually not available to the public, but the parties to the case, or others who can prove that they have a legitimate interest in the case, are allowed access to these records.

If information involving privacy or trade secrets is stated in a document, the relevant party may ask the court to limit the access to such document by submitting an application regarding the confidentiality of the document.

Once a settlement is made and is recorded by the court in the protocol, the protocol holds the same status as a final and conclusive court judgment. Therefore, the settlement is fully enforceable.

Since a settlement protocol has the same effect as a final and conclusive judgment, unless there is a statutory ground for a retrial, such settlement protocol cannot be revoked or set aside.

There are three types of dispositive sections that a Korean court can issue:

• a judgment ordering performance of obligations;
• a declaratory judgment (ascertaining rights or obligations of a party); and
• a judgment forming or creating legal relationships.

Courts may make rulings for the payment of pecuniary damages, for both economic and non-economic damages. Some sector-specific statues include the following.

• Punitive damages are generally not allowed under Korean law. However, as an exception to this principle, there are statutes under which punitive damages (three to five times the amount of actual damages) may be recovered, such as the Subcontract Act and the Personal Information Protection Act.
• The Products Liability Act provides for compensation of damages up to three times the amount of actual damages/losses in cases where the manufacturer knew of the defect in its product but failed to take necessary measures to rectify such defect, which resulted in death or serious bodily injuries.
• Since 2019, compensation of damages up to three times the amount of actual damages/losses has been allowed under the Patent Act (wilful infringement of patent or exclusive rights), the Unfair Competition Prevention Act (wilful misappropriation of trade secret), and the Monopoly Regulation and Fair Trade Law (price-rigging or retaliatory measures for reporting of unfair trade practice).
• The Credit Information Act and the Motor Vehicle Management Act were amended in 2020 and 2021, respectively, and under these amended statutes, compensation of damages up to five times the amount of actual damages/losses may be recovered. Under the amended Credit Information Act, such damages may be recovered in cases where credit information companies and other entities who are entrusted with individuals’ credit information, lose, disclose or otherwise destroy such information due to gross negligence or wilful misconduct. Under the amended Motor Vehicle Management Act, such damages may be recovered in cases where manufacturers or importers conceal a defect or otherwise belittle the severity of the defect, or fail to take prompt corrective action, after they become aware of the defect.
• Furthermore, under the Serious Accident Prevention Act, enforced starting in 2022, a person who violates the statute and causes a serious accident that results in a loss of life or bodily injury may be liable for damages up to five times the amount of actual damages.

There are no particular rules limiting the maximum amount of damages. However, the court may, at its discretion, deduct the amount of liquidated damages sought by a party if it considers that the amount levied is unduly excessive.

Pre- and post-judgment interest is usually sought by the parties and recognised by the court. Typically, a plaintiff will ask for pre-judgment interest as applicable under contract or law. Unless agreed otherwise by the parties, the statutory interest rate applicable for commercial claims is 6% per annum and for general civil claims, 5% per annum.

There is also a post-judgment interest applicable under the relevant law. Under this act, interest accrues on the amount of the money judgment from the time the unsuccessful defendant was served with the complaint, or if the court finds that the defendant had justifiable grounds to dispute the complaint, from the time of the court’s judgment. The current applicable post-judgment interest rate under this act is 12% per year.

Once a judgment becomes final and conclusive, a party can file an application to the courts for compulsory auction or compulsory administration, or seizure of the obligor’s property, depending on the nature of the creditor’s right that has been recognised by the judgment. A party can also apply to the court to set a specific date by which the obligor needs to perform its obligation and order compensation in case such performance is delayed.

A judgment is, in principle, enforceable when it is not subject to further appeal. However, in practice, a judgment is most often enforceable even before it becomes final and non-appealable because the first instance court often issues an order allowing provisional enforcement.

In order to enforce a foreign judgment in Korea, a party must obtain an enforcement judgment from the Korean court. 

Korean courts recognise and enforce the foreign judgment if the following conditions are met:

• the foreign judgment (including order, decision, etc) is final and conclusive;
• the foreign court’s jurisdiction is recognised under Korean law or treaties;
• the defendant (ie, the Korean party) was properly served with the complaint (or equivalent document), summons or any orders in a lawful manner (other than by public notice or similar methods) in advance so as to have sufficient time to prepare their defense, or the defendant participated in the foreign proceedings without having been served;
• the foreign judgment does not violate the public policy of Korea; and
• a Korean court judgment would be similarly recognised and enforced by the courts in the foreign country in question.

If a foreign judgment on damages is contrary to Korean law or the basic policy of international treaties Korea has entered into, the court may not recognise the whole or part of the judgment. A Korean court recently permitted enforcement of the judgment by a US court which awarded a plaintiff three times the amount of actual damages, reasoning that even under the applicable Korean statute, the plaintiff could have received punitive damages.

If a decision of the court of first instance (district court) is appealed, the court of appellate level conducts the proceedings de novo (afresh). The decision of the appellate court can be appealed to the Supreme Court only on questions of law.

Appeal to the Appellate Court

The grounds for appeal to an appellate court under Korean law are much broader than under most common law jurisdictions. Either party can make an appeal on both legal and factual matters. An appeal must be made by filing a written motion of appeal before the lower court within two weeks from the original judgment being served. Parties are allowed to introduce new evidence and arguments, and the court considers the case de novo and upholds or overturns the lower court’s judgment as necessary.

Appeal to the Supreme Court

A subsequent appeal to a judgment of the appellate court (ie, the High Court) can be made to the Supreme Court. Unlike an appeal to the High Court, the grounds for appeal to the Supreme Court are strictly limited to questions of law. 

In addition, the Supreme Court shall dismiss a case without hearing the case any further if any of the following grounds are not found in an appeal: 

• if the judgment of the appellate court is in violation of the constitution; 
• if the determination on whether an order, rule or disposition is unlawful is wrong; 
• if any act, order, rule or disposition has been interpreted contrary to a precedent of the Supreme Court; 
• if a relevant precedent of the Supreme Court on the interpretation of any act, order, rule or disposition does not exist or a precedent of the Supreme Court needs to be altered; 
• if there exists a serious violation of any act or subordinate statute; or 
• if there exists any ground prescribed in the provisions of Article 424(1)1 to 5 of the KCPA.

A party who wishes to appeal must file a written motion of appeal before the lower court within two weeks from the original judgment being served. 

When appealing to the appellate court, the appealing party is not required to submit a written statement that specifies the grounds and the scope of appeal. However, when appealing to the Supreme Court, if the appellant has not stated the grounds for appeal in the petition, they must submit a written statement of grounds of appeal within 20 days of receiving a notice from the Supreme Court that the case records have been transferred to the Supreme Court. If the appellant fails to comply with this deadline, the appeal will be immediately dismissed by the Supreme Court without further hearing the case.

An appeal to the appellate court can be made on both points of law and fact. The appellate court conducts the proceedings de novo and both parties may present new arguments and submit new evidence. However, the appellate court can only hear the case to the extent that it is appealed by either of the parties.

An appeal to the Supreme Court is limited to legal matters only. Thus, in principle, the facts of the case will not be re-examined by the Supreme Court. Exceptionally, facts relevant in determining legal issues may be revisited by the Supreme Court to the extent necessary.

There are no statutory provisions that empower a Korean court to impose any particular conditions on granting an appeal.

The appellate court may uphold or overturn the lower court’s judgment at its own discretion.

In Korea, the court will order the allocation of litigation costs in the judgment. In principle, such costs are borne by the losing party. In a case where a party has only partially succeeded, the court may allocate the costs at its discretion between both parties. In practice, these costs are often apportioned to each party in proportion to the success achieved by each party, but the court is not required to do so.

Court costs generally consist of stamp taxes (filing fees), service of process fees, and other out-of-pocket expenses (per diem fees for witnesses, photocopies, etc) and attorneys’ fees. It should be noted that the entire amount of the actual legal fees incurred by the parties is not recognised as litigation cost, but only a fixed amount calculated according to a formula specified in the court regulations. This amount is typically nominal compared to the actual incurred legal costs.

In a case where a party has only partially succeeded, the court may allocate the costs at its discretion between both parties. In practice, these costs are often apportioned to each party in proportion to the success achieved by each party, but the court is not required to allocate costs in such manner and may choose to allocate as it deems appropriate.

The Korean court does not award interest on the litigation costs.

The statistics in Korea show a remarkable increase in the use of alternative dispute resolution (ADR) as a method for resolving disputes, including mediation and arbitration. The increased use of arbitration in Korea is based on several factors, including an increase in Korean companies' involvement in international transactions and the general tendency of the South Korean courts to enforce arbitral awards.

The court tends to encourage resolving disputes which are brought to the court through judicial conciliation. This can be conducted by a judge presiding over the litigation, by a different judge (solely for the purpose of the conciliation), or by a conciliation committee comprising one judge and two or more private citizens. This is, however, not compulsory and the parties are free to object to the recommendation of the court. There is also no particular sanction for the parties who do not wish to settle their dispute under an ADR mechanism.

The Korean Commercial Arbitration Board is the primary institution in Korea for the provision of ADR services, and provides both mediation and arbitration services.

The Korean courts also play a significant role in resolving disputes through judicial conciliation. Recently, the Korean courts have established mediation centres across Korea in order to assist the courts by handling mediation cases.

The primary source of law relating to arbitral proceedings in Korea is the Arbitration Act of Korea (the Korean Arbitration Act), which is based on the UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law). The most recent major revisions to the Korean Arbitration Act were made in May 2016, primarily adopting the 2006 amendments of the 2006 UNCITRAL Model Law, with some variations. One of the key features of this bill is that the provisions empower and enable the arbitral tribunal to issue a wide array of interim measures enforceable by court decisions.

Under Article 3 of the Korean Arbitration Act, only the disputes on property rights and those on non-property rights which the parties may resolve through private settlement may be the subject of arbitration. Pursuant to Article 36 of the Korean Arbitration Act, the court may set aside the award if it finds on its own initiative that the subject matter of the dispute cannot be subject to arbitration under Korean law, or that the recognition and enforcement of the award is in conflict with the good morals or other public policy of Korea.

Pursuant to Article 36 of the Korean Arbitration Act, recourse against an arbitral award may be made only by an application to a court to set aside the award. Any such application must be made within three months of the date on which the party making such an application received a duly authenticated copy of the initial award.

An arbitral award may be set aside by the court only if the party making the application provides proof that:

• a party to the arbitration agreement lacked capacity under the law applicable to such party, or the arbitration agreement is not valid under the law selected by the parties to govern the agreement (or, failing any such indication, under Korean law);
• the party making the application was not given proper notice of the appointment of the arbitrators or of the arbitral proceedings, or was otherwise unable to present its case;
• the award deals with a dispute not contemplated by or subject to the arbitration agreement, or contains decisions on matters beyond the scope of the arbitration agreement, provided that if a portion of the arbitration award that will be set aside in accordance with this provision can be separated from the remaining portion of the award, only the portion of the arbitration award violating this provision may be set aside; or
• the composition of the arbitral tribunal or the procedure of arbitration were not in accordance with the agreement of the parties or the Korean Arbitration Act.

A party may apply to the court for recognition and enforcement of the arbitration award. The party must submit a copy of the arbitral award. If the award is in a foreign language, there needs to be an accompanying Korean translation.

Under Article 39 of the Act, where the New York Convention applies, recognition and enforcement of the foreign arbitral award shall be granted in accordance with the Convention.

Where it does not apply, foreign arbitral awards are reviewed in the same manner as foreign court judgments, pursuant to the relevant law. A Korean court will recognise and enforce a foreign award not subject to the New York Convention if:

• the award is final and conclusive;
• the jurisdiction of the arbitral tribunal is consistent with Korean law and treaties to which Korea is a party;
• the losing party received adequate notice of the arbitration and sufficient time to defend its case;
• the award is not in conflict with the good morals or other public policy of Korea; and
• the country in which the arbitral award was issued provides reciprocity to Korean judicial decisions and arbitral awards.

Generally speaking, Korean courts are considered to be friendly to arbitration. The Korean Supreme Court has ruled that, under the New York Convention, considerations of public policy must take into account not only Korea’s domestic situation, but also the need for foresight and stability in international business transactions.

On 23 September 2020, the Ministry of Justice (MOJ) announced it would propose a new legislation to introduce a general class action system and punitive damages in Korea (the “Bill”).

If the Bill passes, the Commercial Code would be amended such that a general punitive damages system would be introduced for various types of claims. Specifically, a person would be liable for damages of up to five times the amount of actual damages if they cause damages to a third party due to their wilful or gross negligence. Furthermore, contracts or contractual provisions that exclude or limit such punitive damages would be deemed null and void.

The Bill contemplates an opt-out class action lawsuit system similar to that permitted under the Securities-Related Class Action Act. The following must be met for class certification purposes:

• the suit must involve 50 or more class members;
• the claims of the class members must have common questions of law and fact; and
• the suit must constitute an appropriate and effective means of realising the rights of the class members or protecting their interests.

If the Bill passes, a class action could be heard by the court together with a jury (ordinary citizens with no legal background). A jury's verdict would not be legally binding on the court, which would render the final decision. Furthermore, if the Bill passes, the new law will apply retroactively to claims that arose before the effective date of the law.

There have been instances where court hearings were postponed due to COVID-19, but overall, it has not had much impact on the operation of courts and court hearings. The government has not passed any legislation or issued orders suspending the operation of limitation periods due to COVID-19.