2018Du548321 Compensation for delay

Korea Southern Development Co., Ltd.

Law Firm LLC et al., Counsel for defendant-appellant

Attorney Limited-Governing Law, Constitutional Court, and Beneficiaries

A Stock Company

Law Firm LLC (LLC) LLC, Counsel for the defendant-appellant

Attorney Lee Han-han, Attorney Park Jong-ho, and promotional leather

January 17, 2019

January 31, 2019

1. The instant lawsuit shall be dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

With respect to the Plaintiff KRW 2,021,575,916 and KRW 1,455,534,659 among them, the Defendant shall pay to the Plaintiff 6% interest per annum from December 17, 2015 to the service date of a duplicate of the complaint of this case, and 15% interest per annum from the next day to the day of full payment, with respect to KRW 566,041,257 interest per annum from the delivery date of the copy of the complaint of this case to the day of full payment.

1. Basic facts

A. The Plaintiff and the Defendant entered into a B purchase contract for the manufacture and supply of equipment necessary for B installation work, transportation and storage, and installation and construction work (hereinafter “instant construction contract”). The Defendant is a contractor who performed the instant construction work under the instant construction contract with the Plaintiff.

B. On December 26, 2012, the Plaintiff and the Defendant concluded the instant construction contract on December 31, 2014 with the contract amount of KRW 63,80,00,00 (i.e., the fixed amount of equipment and material expenses, the “establishment construction expenses” + KRW 63,210,287,00,00 in total + the “technical support expenses” as the “technical support expenses,” the “employee training expenses,” the “special tools expenses,” and the “special tools expenses” as the total of KRW 589,713,00,000 in total, and the date of completion of the construction as of December 31, 2014.

D. On the other hand, around April 2016, the Defendant filed an application for arbitration with C to seek payment of additional construction cost, etc. regarding the instant construction contract (ArbitralD). The Plaintiff claims that the dispute between the Plaintiff and the Defendant ought to be settled by the litigation procedure of the court, and thus, the application for arbitration is unlawful. However, on December 28, 2018, the intermediate trial court rejected the Plaintiff’s assertion and rendered an arbitral award with the purport that the Plaintiff is obliged to pay additional construction cost, etc. to the Defendant.

E. The content of Article 1.13. (Article 1.13.1 through 1.3.7, hereinafter collectively referred to as the “instant arbitration clause”) of the General Terms and Conditions included in the instant construction contract is as follows.

1.13.1. If the matter of fact arising under this contract cannot be resolved by agreement between the parties to the contract, the matter of fact shall be determined by the plaintiff's decision. The decision shall remain conclusive if the defendant does not raise any objection to the plaintiff within 30 days of receipt of the plaintiff's decision. If the defendant raises an objection to the plaintiff's decision and notifies in writing (written notice of dispute) that it will be resolved by arbitration as provided for in this article, the dispute shall be resolved by arbitration as provided for in this article: Provided, That within 30 days of receipt of the plaintiff's notice of dispute, the dispute shall be resolved by the court of the Republic of Korea in accordance with the law of the Republic of Korea within 30 days of receipt of the plaintiff's total discretion, and the Seoul Central District Court shall exclude the application of the Private International Law, and the dispute shall be resolved by the final judgment of the parties to the contract in accordance with the C Arbitration Rules and the law of the Republic of Korea within 130 days of receipt of the final judgment of the parties to the contract.

[Ground of recognition] The fact that there is no dispute, Gap's 1 through 3, 5, 6, 8, Eul's 1 through 3 (including each number), and the purport of the whole pleadings

2. Determination on the defense prior to the merits

A. The parties' assertion

1) The defendant asserts to the effect that the plaintiff's lawsuit of this case seeking compensation for delay is unlawful in light of the Arbitration Agreement (Article 9.1 of the Arbitration Act) which decided to resolve all disputes arising in relation to the construction contract of this case by arbitration by C, and that the defendant has deposited all compensation for delay in accordance with the arbitral award, and thus has no interest in the lawsuit and thus has to be dismissed.

2) On this issue, the Plaintiff asserts to the effect that there is no arbitration agreement between the Plaintiff and the Defendant on the grounds that the terms and conditions of the contract contained in the instant construction contract are the selective arbitration clause to resolve all disputes arising out of the instant construction contract by arbitration or trial upon the Plaintiff’s choice, and that Article 1.13.2 of the Act applies only to cases where the Plaintiff has selected a dispute resolution by arbitration. The Plaintiff submitted a written reply to the effect that the Plaintiff would resolve the dispute by trial and oppose the dispute resolution by arbitration in the arbitral proceedings requested by the Defendant.

B. Determination

1) An arbitration agreement to which the Arbitration Act applies refers to an agreement between the parties to resolve all or part of a dispute that has already occurred or may arise in the future through arbitration, regardless of whether it is a contractual dispute. In the event that such arbitration agreement is deemed to exist, it is reasonable to deem that the parties have agreed to resolve all or part of a dispute arising from a specific legal relationship between the parties through arbitration, barring any special circumstance. An arbitration agreement takes effect by a written agreement to resolve all or part of a dispute that has already occurred or may arise in the future through arbitration, instead of a court decision, without going through the court decision. Thus, in order to deem a specific arbitration clause to be effective as an arbitration agreement, it shall be determined by comprehensively taking into account specific circumstances, such as the relevant arbitration clause based on the concept of arbitration under the Arbitration Act, the nature or method of the arbitration agreement, the circumstances surrounding the parties to the arbitration clause having been placed (see, e.g., Supreme Court Decisions 2004; 2004Da42166, May 31, 2007).

2) Considering the following circumstances as to the instant construction contract, the first interpretation right on factual issues in the instant construction contract is reserved to the Plaintiff, apart from the fact that the Plaintiff and the Defendant had an arbitration agreement to resolve all the disputes except the aforesaid factual issues arising in relation to the instant construction contract by arbitration, in light of the following circumstances revealed by adding up the respective descriptions in the evidence Nos. 22 and 36 as well as the purport of the entire arguments and arguments as seen earlier.

A) Article 1.13.1 of the Arbitration Clause of this case provides that "the matter of fact that occurs under a contract" shall be decided by the plaintiff, and if the defendant raises an objection within 30 days, the resolution shall be made by arbitration, but the resolution shall be made by arbitration if the plaintiff selects the litigation procedures of the court, and Article 1.13.2 provides that "any dispute arising between the parties in connection with the contract" shall be finally resolved by arbitration. As such, the former concerns a factual issue, and the former concerns selective arbitration clause and the latter concerns all disputes, and the latter may be deemed to have the form of the exclusive arbitration clause. However, there is no clear ground to interpret the term "fact-finding" as any dispute arising under a factual issue, as alleged by the plaintiff.

B) As to the motive and background of the instant arbitration clause, the Plaintiff asserted that the Plaintiff newly established the proviso to Article 1.13.1 of the instant arbitration clause, which had not existed prior to the instant construction contract, was to resolve disputes by litigation proceedings. However, there is no evidence to deem that the Plaintiff’s intent was expressed to the other party in the process of concluding the instant construction contract. Moreover, the Plaintiff still agreed to the construction contract similar to the instant construction contract as a dispute resolution method in both consultations, arbitrations, and judgments. In order to clarify the intent of the Plaintiff, it is difficult to take into account the interpretation of the instant arbitration clause as alleged in the Plaintiff in the instant case, even though it was possible to have any selective arbitration clause that would compromise all disputes concerning the instant construction contract by consultation, arbitration, and judgment.

C) Furthermore, even if the arbitration clause of this case provides a method of dispute resolution concerning factual issues under Article 1.13.1, the Plaintiff is unable to clearly distinguish factual issues and legal issues from those of this case, and it is difficult to present the situation where pure factual issues are resolved by litigation, not legal provisions, so that all disputes are resolved by arbitration, and Article 1.13.1.1. of this case is no dispute which is resolved by arbitration, and Article 1.13.1. of this case may bring about loss of meaning. Thus, Article 1.13.1 should be interpreted as the whole arbitration clause under Article 137 of the Civil Act, and if so, it is obvious that the dispute related to the construction contract of this case should ultimately be resolved in accordance with the principle of partial invalidation under Article 137 of the Civil Act, and it is not possible for the Plaintiff to interpret Article 1.13.13 of the Arbitration Agreement with the meaning of interpreting Article 131.13 of the Arbitration Agreement as the content of the arbitration agreement.

3) Therefore, the existence and scope of the Plaintiff’s claim for liquidated damages as the instant lawsuit shall be the subject of the dispute, which deviates from the factual issues, such as the causes attributable to delay, causation, and scope of responsibility.

Therefore, it cannot be resolved by the primary interpretation on the plaintiff's factual relations, which shall be subject to the arbitration agreement in accordance with the contents of the arbitration agreement in this case. Accordingly, the lawsuit in this case is brought against the arbitration agreement, which is unlawful in accordance with the main sentence of Article 9 (1) of the Arbitration Act, and the defendant's defense prior to the merits pointing this out has merit.

3. Conclusion

Therefore, the lawsuit of this case is unlawful and dismissed, and it is so decided as per Disposition.

The presiding judge, judges and vice-directors

Judges Kim Gin-han

Judges Primarys

(i) Article 9 (Arbitration Agreement and Lawsuit to Court)

(1) In a case where a lawsuit is brought on a dispute which is the subject of an arbitration agreement, and the defendant has set up a defense that the arbitration agreement exists, the court shall do so.

(1) A lawsuit shall be dismissed: Provided, That if no arbitration agreement exists, or if an arbitration agreement is null and void, loses its effect, or it is impossible to carry out such agreement,

subsection (b) of this section.

(2) The defendant shall make a plea under paragraph (1) not later than the time he/she makes an initial pleading on the merits of the case.

(3) If an action under paragraph (1) is pending before the court, the arbitral tribunal may commence or proceed with the arbitral proceedings or make an arbitral award.

[Specialized Amendment : March 31, 2010]