Korea-U.S. FTA and the Right to National Referendum

[25-2(B) KCCR 559, 2012Hun-Ma166, November 28, 2013]

In this case, the Constitutional Court dismissed the complaint on the reason that the Free Trade Agreement between the Republic of Korea and the United States of America holds no possibility of violating the fundamental rights of the people including the right to national referendum or right to equality.

Background of the Case

(1)Complainant, who is a lawyer, filed this constitutional complaint on February 20, 2012, claiming that the ‘Free Trade Agreement between the Republic of Korea and the United States of America’ consented by the National Assembly on November 22, 2011 (hereinafter, the “FTA”) which alters the scope of legislative power, the subject and scope of judicial power, and the meaning of the economic clause in the Constitution (Article 119 and 123), amounts to a substantial revision of the Constitution, and therefore an omission of national referenduminfringed the complainant's right to national referendum. The complainantalso challenged Chapter 11 Section B Article 11.16 of the FTA on dispute resolution procedure between investors and states, arguing that it infringes the right to property and right to equality by allowing U.S. investors preferential treatment.

(2)The FTA took effect on March 15, 2012, grounded on mutual agreement.

Provision at Issue

The subject matter of review is whether the FTA (Treaty No. 2081 on March 12, 2012) infringes the fundamental rights of the complainant. The specific part on which the complainant raises an issue is Chapter 11 Section B Article 11.16 of the FTA. The contents of the provisions at

issue are as follows (other parts are intentionally omitted):

Article 11.16: Submission of a Claim to Arbitration

1. In the event that a disputing party considers that an investment dispute cannot be settled by consultation and negotiation:

(a) the claimant, on its own behalf, may submit to arbitration under this Section a claim

(i) that the respondent has breached

(A) an obligation under Section A,

(B) an investment authorization, or

(C) an investment agreement;

and

(ii) that the claimant has incurred loss or damage by reason of, or arising out of, that breach; and

(b) the claimant, on behalf of an enterprise of the respondent that is a juridical person that the claimant owns or controls directly or indirectly, may submit to arbitration under this Section a claim

(i) that the respondent has breached

(A) an obligation under Section A,

(B) an investment authorization, or

(C) an investment agreement;

and

(ii) that the enterprise has incurred loss or damage by reason of, or arising out of, that breach,

provided that a claimant may submit pursuant to subparagraph (a)(i)(C) or (b)(i)(C) a claim for breach of an investment agreement only if the subject matter of the claim and the claimed damages directly relate to the covered investment that was established or acquired, or sought to be established or acquired, in reliance on the relevant investment agreement.

2. At least 90 days before submitting any claim to arbitration under this Section, a claimant shall deliver to the respondent a written notice of its intention to submit the claim to arbitration (notice of intent). The notice shall specify:

(a) the name and address of the claimant and, where a claim is

submitted on behalf of an enterprise, the name, address, and place of incorporation of the enterprise;

(b) for each claim, the provision of this Agreement, investment authorization, or investment agreement alleged to have been breached and any other relevant provisions;

(c) the legal and factual basis for each claim; and

(d) the relief sought and the approximate amount of damages claimed.

3. Provided that six months have elapsed since the events giving rise to the claim, a claimant may submit a claim referred to in paragraph 1:

(a) under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID Convention;

(b) under the ICSID Additional Facility Rules, provided that either the respondent or the non-disputing Party is a party to the ICSID Convention;

(c) under the UNCITRAL Arbitration Rules; or

(d) if the claimant and respondent agree, to any other arbitration institution or under any other arbitration rules.

4. A claim shall be deemed submitted to arbitration under this Section when the claimant's notice of, or request for, arbitration (notice of arbitration):

(a) referred to in paragraph 1 of Article 36 of the ICSID Convention is received by the Secretary-General;

(b) referred to in Article 2 of Schedule C of the ICSID Additional Facility Rules is received by the Secretary-General;

(c) referred to in Article 3 of the UNCITRAL Arbitration Rules, together with the statement of claim referred to in Article 18 of the UNCITRAL Arbitration Rules, are received by the respondent; or

(d) referred to under any arbitral institution or arbitral rules selected under paragraph 3(d) is received by the respondent.

A claim asserted by the claimant for the first time after such notice of arbitration is submitted shall be deemed submitted to arbitration under

this Section on the date of its receipt under the applicable arbitral rules.

5. The arbitration rules applicable under paragraph 3, and in effect on the date the claim or claims were submitted to arbitration under this Section, shall govern the arbitration except to the extent modified by this Agreement.

6. The claimant shall provide with the notice of arbitration:

(a) the name of the arbitrator that the claimant appoints; or

(b) the claimant's written consent for the Secretary-General to appoint that arbitrator.

Summary of the Decision

1. Prerequisites of a Constitutional Complaint

A constitutional complaint in not justiciable if a provision at issue does not affect the legal status of the complainant in any way because the possibility of violating the fundamental rights is not found.

2. Whether the Right to National Referendum in the Revision Process of the Constitution is Relevant

The Constitution may be revised by the submission of the revised bill of the Constitution. The revision rule of the Constitution does not allow the revision of the Constitution by the general legislative process, and also in a form of statute which is subordinate to the Constitution. A statute that is inconsistent with the Constitution is subject to be declared unconstitutional, but has no effect to revise the Constitution.

The Constitution presumes its supremacy over treaties, not allowing the so-called ‘constitutional treaty’ that is equivalent to the Constitution in terms of its effect. The FTA, one of treaties of friendship, commerce and navigation, needs the consent of the National Assembly and only hold the effect as statutes. Thus the FTA is not authorized to revise the Constitution.

As the FTA has no effect on the revision of the Constitution, there is no possibility that the signing of the FTA may infringe on the right to national referendum required for the revision of the Constitution.

3. Whether Other Fundamental Rights are relevant

Complainant does not present any specific circumstances in which the FTA infringes on his right to property or right to trial. In addition, the complainant fails to present any specific circumstances pertaining to his status as an investor or owner of an investment enterprise, or a possibility of his being in a dispute involving his investment with relation to the Republic of Korea. The record only shows that the complainant is a lawyer of the Republic of Korea. Therefore, the FTA does not discriminate the complainant against a U.S. investor nor is there any possibility the FTA may infringe on the fundamental right of the complainant.