[1] The meaning of "when the grounds for an arbitral award have not been stated", which is the grounds for setting aside the arbitral award, and whether it falls under the case where the statement of reasons to be attached to the arbitral award and its judgment are improper or incomplete (negative in principle)

[2] The meaning of "the recognition or enforcement of an arbitral award violates good morals and other social order of the Republic of Korea" under Article 36 (2) 2 (b) of the Arbitration Act as the court may ex officio set forth in the grounds for setting aside the arbitral award

[3] The case affirming the judgment of the court below which held that the enforcement of an arbitral award does not constitute "when it violates the good morals and other social order of the Republic of Korea" merely because the arbitral award differs from the Supreme Court precedents on the same kind of case and the interpretation of laws or contracts

[1] Article 32(2) of the Arbitration Act provides that “The arbitral award shall state the grounds on which the award is based: Provided, That this shall not apply where there exists an agreement between the parties or where it is an arbitral award by compromise under Article 31; Article 36(2)1(d) of the Arbitration Act provides that “if the arbitral procedure is not in accordance with the agreement between the parties that do not go against the mandatory provisions of this Act or there is no such agreement, the fact that the procedure does not comply with this Act.” Thus, if the parties fail to state the grounds in the arbitral award even though there is no agreement between the parties, it shall be the grounds for the revocation of the arbitral award.” In this case, “when the reasons are not stated” means the case where it is inconsistent with the case where it is impossible to prove that the arbitral award is based on any factual or legal judgment or where it is difficult to state the reasons in the arbitral award, and it shall be sufficient and incomplete to determine whether it does not constitute a justifiable or incomplete judgment, and the reasons for the decision shall not be based on an unfair and incomplete law.

[2] In Article 36 (2) 2 (b) of the Arbitration Act, "if the recognition or enforcement of an arbitral award is contrary to the good morals and other social order of the Republic of Korea," which provides that the court may ex officio revoke the arbitral award, means not only all cases where it is erroneous in the fact-finding conducted by the arbitrator, or where the contents of the arbitral award are deemed unreasonable because the legal judgment of the arbitrator is in violation of the law, but also cases where the issuance of the arbitral award is contrary to the good morals and other social order

[3] The case affirming the judgment of the court below which held that the enforcement of an arbitral award does not constitute "when it violates good morals and other social order of the Republic of Korea" merely because the arbitral award differs from the Supreme Court precedents on the same kind of case and the interpretation of laws or contracts

[1] Articles 32(2) and 36(2)1(d) of the Arbitration Act / [2] Article 36(2)2(b) of the Arbitration Act / [3] Article 36(2)2(b) of the Arbitration Act

Korea International Cooperation Agency (Law Firm Yang, Attorneys Hong Il-il et al., Counsel for the plaintiff-appellant)

Hent Trade Co., Ltd. (Law Firm Namsan, Attorneys Hah Ho-ho et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 2006Na107687 decided September 12, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

We examine the grounds of appeal.

1. Regarding ground of appeal No. 1

In full view of the evidence duly admitted by the lower court, it is justifiable to have acknowledged that the Defendant asserted that the Plaintiff is liable to compensate for damages due to nonperformance or tort during the instant arbitral proceedings.

As alleged in the grounds of appeal, the court below did not err by exceeding the bounds of the principle of free evaluation of evidence selection and fact-finding.

The ground of appeal on this part is without merit.

2. Regarding ground of appeal No. 2

According to the reasoning of the judgment of the court below, the defendant's claim for arbitration of this case: (a) if the goods transaction of this case is found not to be subject to zero tax rate later, there was an implied agreement that imposes the value-added tax on the above goods price on the plaintiff; (b) because the plaintiff neglected to provide a tax exemption, the defendant did not zero tax rate and paid value-added tax; and (c) the defendant asserted that he paid the value-added tax on the goods transaction of this case due to the tax office's taxation measure, and that the plaintiff had gained profits equivalent to that of the amount; and (d) as to the claim for the above contract, claim for damages, claim for restitution of unjust enrichment, while denying the defendant's claim for the above contract amount, the value-added tax is included in the price of the goods; and the defendant's claim for the price of the goods is asserted to have been extinguished by the three-year short-term extinctive prescription under Article 163 subparagraph 6 of the Civil Act.

According to the facts acknowledged by the court below, it is reasonable to view that the plaintiff's claim for the completion of the extinctive prescription under the arbitral procedure of this case is about the claim equivalent to the value-added tax amount among the defendant's selective claims, and it cannot be deemed that the claim is included in the expiration of the extinctive prescription as to the claim for damages equivalent to the value-added tax amount (see Supreme Court Decision 96Da5110, May 29, 198)

In the same purport, the lower court’s determination that it is difficult to recognize that the Plaintiff asserted extinctive prescription as to the above claim for damages in the arbitral proceedings of this case is justifiable.

The court below did not err in the misapprehension of legal principle as to extinctive prescription as otherwise alleged in the ground of appeal.

On the other hand, the Supreme Court precedents cited by the plaintiff in the grounds of appeal are different from the case and they are inappropriate to be invoked in this case.

The remaining grounds of appeal are without merit to find facts that fall under the exclusive authority of the fact-finding court, and it cannot be a legitimate ground of appeal.

This part of the grounds of appeal is without merit.

3. As to the third ground for appeal

Article 32(2) of the Arbitration Act provides that “Arbitral Award shall state the grounds on which the award is based: Provided, That this shall not apply where there exists an agreement between the parties or where it is a compromise arbitral award under the provisions of Article 31,” and Article 36(2)1(d) of the same Act provides that “In the event that an arbitral proceeding does not comply with an agreement between the parties that do not go against the mandatory provisions of this Act, or if there is no agreement between the parties, the arbitration procedure does not comply with this Act.” Thus, if the parties fail to state the grounds for the arbitral award even though there is no agreement between the parties, it shall be the grounds for the revocation of the arbitral award.” In this case, “when the reasons for the arbitral award are not stated” refers to cases where it is impossible to prove that the arbitral award is based on any factual or legal judgment or it is inconsistent with the reasons, and it shall be sufficient and incomplete to determine whether it does not constitute a justifiable or incomplete judgment, and the reasons for the decision shall not be based on the clear and incomplete legal relationship of the arbitrator in question.

Examining the reasoning of the lower judgment in light of the aforementioned legal doctrine, the lower court’s reasoning was partially inappropriate, but the conclusion that it is difficult to view the instant arbitral award as being inconsistent with the reasoning itself is justifiable.

The court below did not err in the misapprehension of legal principles as to the inconsistency of the grounds for revocation of arbitral award as alleged in the ground of appeal.

This part of the grounds of appeal cannot be accepted.

4. As to the fourth ground for appeal

In Article 36 (2) 2 (b) of the Arbitration Act, "if the recognition or enforcement of an arbitral award is contrary to the good morals and other social order of the Republic of Korea", which provides for grounds for the revocation of the arbitral award ex officio by a court, means not all cases where it is erroneous in the fact-finding conducted by an arbitrator, or the contents of the arbitral award may be deemed unreasonable because the legal judgment of the arbitrator is in violation of the laws and regulations, but means where the result of the order of the arbitral award is contrary to the good morals

In the same purport, the lower court’s determination that the enforcement of the instant arbitral award does not constitute a violation of good morals and other social order of the Republic of Korea is justifiable in light of the

The court below did not err in the misapprehension of legal principles as to the grounds for revocation of arbitral awards under Article 36 (2) 2 (b) of the Arbitration Act, as otherwise alleged in the ground of appeal.

In addition, it cannot be deemed that the instant arbitral award constitutes “a case in which the enforcement of the arbitral award is contrary to the good morals and other social order of the Republic of Korea” merely because it differs from the Supreme Court precedents on the same case and from the interpretation of statutes or contracts.

This part of the grounds of appeal cannot be accepted.

5. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Yang Chang-soo (Presiding Justice)