Supreme Court Decision
2001Da20134 Delivered on April 11, 2003 [Execution]
[Main Issues]
[1]
The standard for determining whether the public policy of the enforcing country
would be violated by the recognition and enforcement of arbitral awards in
light of Article 5.2 (b) of
the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York Convention), which provides grounds for refusal of recognition
and enforcement of foreign arbitral awards
[2]
Whether a court of law may apply Article 5.2 (b) of the New York Convention to
refuse execution of an arbitral award, where a ground for objection to the
claim occurred after an arbitral award had been issued (affirmative)
[Summary of Decision]
[1]
Article 5 of the New York Convention limits the grounds to refuse enforcement
of arbitral awards. Article 5.2 (b) provides that a court of law in the country
where the recognition and enforcement is sought may refuse if either the recognition
or the enforcement of the award would be contrary to public policy of that
country. A refusal is not contrary to public policy if the recognition and
enforcement of a foreign arbitral award does not effect
the fundamental moral norms and social order of the enforcing country is
preserved. In determining whether public policy is violated, a court of law
should consider not only the internal circumstances of the enforcing country,
but also the impact on the country's international transactions. Accordingly,
the grounds for refusing recognition or enforcement must be narrowly
interpreted, and thus, the recognition and enforcement of an arbitral award
shall be refused only if concrete results of its recognition would be contrary
to sound social policy and other social order of the enforcing country.
[2]
A judgment of execution provides a compulsory execution procedure so that a
foreign arbitral award may be executed under the laws of the
[Reference
Provisions]
[1] Article 5.2 (b) of
the Convention on the Recognition and Enforcement of Foreign Awards, Articles
37 (1) and 39 (1) of the Arbitration Act / [2] Article 5.2 (b) of the
Convention on the Recognition and Enforcement of Foreign Awards, Article 26 of
the Civil Execution Act
Article 5.2 of
the Convention on the Recognition and Enforcement of Foreign Awards
2. 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:
(b) The recognition or
enforcement of the award would be contrary to the public policy of that
country.
Article 37 of
the Arbitration Act (Recognition
or Enforcement of Arbitral Award) (1) Recognition or enforcement of an award shall be confirmed
by the judgment by a court.
Article 39 of
the Arbitration Act
(Arbitral Award in Foreign Country) (1) Recognition or enforcement of a foreign award
which is subject to the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, shall be governed by that Convention.
Article 26 of the Civil
Execution Act
(Compulsory Execution by Foreign Judgment) (1) A compulsory execution based
upon the judgment of a foreign court may be conducted only if a court of the
Republic of Korea has made a declaration of its legality by means of a judgment
of execution.
(2) A lawsuit seeking a
judgment of execution shall be under the jurisdiction of the district court
located at the debtor's general forum, and if there exists
no general forum, it shall be under the jurisdiction of the court having
jurisdiction over a lawsuit against the debtor under the provisions of Article
11 of the Civil Procedure Act.
[Reference
Cases]
[1] Supreme Court
Decision 89DaKa20252 delivered on April 10, 1990(Gong1990, 1043), Supreme Court
Decision 93Da53054 delivered on February 14, 1995(Gong1995Sang, 1321)
[Plaintiff, Appellant] K&V International Emb. Co., Ltd. (Law Firm Keo-Re, Attorneys Lee Kyung-taek
and one other, Counsel for plaintiff-appellant)
[Defendant, Appellee] Sunstar Precision Company
(Former trade name: Hankook Precision Industrial
Company) (Attorney Lee Yong-hoon,
Counsel for defendant-appellee)
[Judgment of the court below] Seoul High Court Decision 2000Na23725 delivered on
February 27, 2001
[Disposition]
We
reverse and remand the portion of the lower court¡¯s judgment against the
Plaintiff, relating to section 1.1 of the arbitral award of the present case,
and dismiss the Plaintiff's remaining grounds for appeal.
[Reasoning]
1.
Summary of the decision of the lower court:
The
following facts have been derived from the present case that was submitted to
the Vietnamese Commercial Arbitration Board. In this case the Plaintiff sued
the Defendant over a defective embroidery machine that was produced and
supplied by the Defendant. On February 6, 1999, an arbitral award was issued
ordering the Defendant to install a new embroidery machine as a replacement for
defective one (section 1.1 of the arbitral award); pay damages in the amount of
US$17,010.88 with additional damages for deferred payment, to be calculated
based on the interest rate published by the Vietnamese bank (section 1.2 of the
arbitral award); and to pay costs of the arbitration proceeding in the amount
of US$5,336 (section 2 of the arbitral award). On March 13, 1999, in accordance
with the arbitral award, the Defendant wire transferred the total sum of
US$22,346.88, comprising of US$17,010.88 in damages plus US$5,336 for the cost
of the arbitration proceeding. Then the Defendant produced a replacement embroidery
machine and on March 26, 1999, transported the new machine to
2.
Judgment on the grounds for appeal
A.
With respect to section 1.1 of the arbitral award of the present case
(1)
Since the arbitral award of the present case is a foreign arbitral award issued
under the New York Convention, its enforcement shall be decided upon by this
convention pursuant to Paragraph
1 of Article 37 and Paragraph
1 of Article 39 of the Arbitration Act. The New York Convention
limits the grounds to refuse enforcement of awards to those listed under
Article 5.2 (b) provides that a court of law in the country where the
recognition and enforcement is sought may refuse to recognize and enforce an
arbitral award if the recognition or enforcement would be contrary to public
policy of that country. This ground for refusal is provided to preserve the
fundamental moral norms and social order of the enforcing country. A court in
rendering a judgment to refuse recognition and enforcement should consider not
only the internal circumstances of the enforcing country, but also the
stability of the country's international transactions. Accordingly, the grounds
for refusing recognition or enforcement must be narrowly interpreted: The
recognition and enforcement of an arbitral award shall be refused only if
concrete results of its recognition would be contrary to sound social policy
and other social order of the enforcing country (see Supreme Court Decisions
89DaKa20252 delivered on April 10, 1990, and 93Da53054 delivered on February
14, 1995).
Furthermore,
a judgment of execution provides an executing force to a foreign arbitral award
so that a compulsory execution procedure under the laws of the
Such
an interpretation complies with the ideas of the economical litigation
procedures more than any other procedural ideas, which may mandate a separate
lawsuit of a demurrer after a final and conclusive judgment. It is also
justified in view of the legal system of the
(2)
With respect to an obligation of replacing a machine under section 1.1 of the
arbitral award and in accordance with the reasoning above, the court
established these facts: Even though the Defendant offered the tender of
performance of replacing the machine, the Defendant could not replace the
machine because of the Plaintiff's refusal to accept the Defendant's offer;
thus, the new machine remains in the hands of an import agent. However, based
on the aforementioned facts and the contention that the Plaintiff was
responsible for the delay of acceptance of the Defendant's tender of
performance, we cannot decide that an obligation to replace a machine was
extinguished. Therefore, a ground for demurrer did not occur, and an
examination of the record did not reveal any other ground for demurrer.
Nevertheless,
with respect to an obligation to replace a machine under section 1.1 of the
arbitral award, the court below applied the provision of Article 5.2(b) of the New York Convention under
the presumption that a ground for a demurrer had occurred. In such a holding
there were errors of misconceiving facts against the rules of evidence and
misunderstanding legal principle as to "contrary to public policy"
provision of Article 5.2(b) of
the New York Convention, which affected the conclusion of the
judgment. Therefore, this ground for appeal to Supreme Court has merit.
B. The Plaintiff failed to submit a timely appellate brief
supporting the grounds for appeal of the lower court¡¯s dismissal of a claim for
execution of section 2 of the arbitral award.
3.
Therefore, without reviewing the remaining grounds for appeal, we reverse the
part of the judgment of the court below against the Plaintiff as to section 1.1
of the arbitral award of the present case, and remand the case for a new trial
and determination of the aforementioned part of the case. We dismiss the other
grounds for appeal for lack of support. This decision is delivered with the
assent of all Justices who reviewed the appeal.
Justices
Yoo Ji-dam (Presiding Justice)
Cho
Moo-jeh
Lee
Kyu-hong
Son
Ji-yol
(Justice in charge)