[1] The standard for determining whether the recognition or enforcement of an arbitral award under Article 5(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which is a ground for refusal to recognize or enforce a foreign arbitral award, is contrary to the public order of that country

[2] Where a ground for objection arises after the establishment of a foreign arbitral award, whether the enforcement of the arbitral award may be refused by applying Article 5(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards at the stage of a trial (affirmative)

[1] Article 5 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York) lists grounds for refusal of enforcement on a limited basis. Among them, if recognition or enforcement of an arbitral award is contrary to the public order of that country, the court of the enforcing country may refuse recognition or enforcement of the arbitral award. This purpose is to prevent recognition or enforcement of the arbitral award from undermining the basic moral belief and social order of the enforcing country and to protect it. Thus, in its judgment, it shall be interpreted in a limited manner by taking into account not only domestic circumstances but also international trade order stability. If recognition of the arbitral award is made, the recognition or enforcement of the arbitral award may be refused if the specific result goes against the good customs and other social order of the enforcing country.

[2] A judgment of execution, which grants executory power to a foreign arbitral award so that it may proceed to compulsory execution procedures under the laws of the Republic of Korea, is judged based on the time of the closing of argument. Thus, in a case where a ground for a demurrer under the Enforcement Act, such as the extinguishment of an obligation after the establishment of the arbitral award, has occurred and the circumstance that allowing compulsory execution procedures based on an arbitral award contradicts the fundamental principles of our law, the court may refuse the enforcement of the said arbitral award by deeming that it constitutes a violation of public order under Article 5(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

[1] Article 5(2)(b) of the Convention on the Recognition and Enforcement of Foreign Arbitral 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 Arbitral Awards, Article 26 of the Civil Execution Act

[1] Supreme Court Decision 89Meu20252 decided Apr. 10, 1990 (Gong1990, 1043) Supreme Court Decision 93Da53054 decided Feb. 14, 1995 (Gong1995Sang, 1321)

KWB’s personal IMB ELD (K&V; International Emb Co., Ltd., LD.) (Law Firm BJB, Attorneys Lee Gyeong-si et al., Counsel for the plaintiff-appellant)

Sick Special Close Co., Ltd. (former Trade Name: Korea Special Close Industries Co., Ltd.) (Attorney Lee Yong-hoon, Counsel for defendant-appellant)

Seoul High Court Decision 2000Na23725 delivered on February 27, 2001

The part of the lower judgment against the Plaintiff regarding Article 1.1 of the instant arbitral award is reversed, and that part of the case is remanded to the Seoul High Court. The Plaintiff’s remaining appeal is dismissed.

1. Summary of the judgment below

The court below, based on the evidence, found that the plaintiff filed a suit against the defendant on February 6, 199 against Vietnam Commercial Arbitration Board on the ground that there was a defect in the self-denunciation period that the defendant produced and supplied the defendant, and that the defendant replaced and installed the same performance of the arbitral award within 30 days from the date of the award (this paragraph 1.1), paid damages of US$ 17,010 to the plaintiff, and paid damages for delay at the interest rate of Vietnam Bank (this paragraph 1.2), and issued an arbitral award on the ground that the plaintiff did not pay damages of US$ 5,36 to the plaintiff on March 13, 199, on the ground that the execution of the arbitral award was not completed on behalf of the defendant, and that the defendant did not lawfully transfer the part of the arbitral award to the plaintiff on the ground that the plaintiff had no obligation to pay damages of US$ 17,008 and US$ 36,368,86,000,000).

2. Judgment on the grounds of appeal

A. As to Article 1.1 of the arbitral award of this case

(1) Since the arbitral award of this case is a foreign arbitral award subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as the "New York Convention"), its enforcement shall be made by applying the New York Convention pursuant to Articles 37(1) and 39(1) of the Arbitration Act. Article 5 of the New York Convention is limited to the grounds for refusal of enforcement. Among them, if the recognition or enforcement of an arbitral award is contrary to the public order of the country, the court of enforcement may refuse recognition or enforcement of the arbitral award. The purpose of this decision is to prevent the recognition or enforcement of the arbitral award from undermining the basic moral belief and social order of the enforcing country as well as the stability of international trade order, and if the arbitral award is recognized, the recognition or enforcement of the arbitral award may be refused when it goes against the good morals and other social order of the enforcing country (see Supreme Court Decision 200Da4539, Apr. 29, 205).

In addition, a judgment of execution grants executory power to a foreign arbitral award so that it may proceed to a compulsory execution procedure under the laws of the Republic of Korea. The judgment of execution is judged on the basis of the time of the closing of argument. Thus, in a case where the grounds for a demurrer under the Civil Execution Act, such as the extinguishment of an obligation after the establishment of the arbitral award, have occurred and the circumstance that allowing compulsory execution procedures based on an arbitral award violates the fundamental principles of our law, the court may refuse the enforcement of the arbitral award by deeming that it constitutes a violation of public order under Article 5(2)(b) of the New York Convention. Such interpretation is reasonable in light of our legal system that provides for a judgment of execution in accordance with the form of the judgment after the conclusion of the judgment of execution, as well as the litigation economy, rather than disputing a separate claim through a lawsuit after the conclusion of the judgment of execution.

(2) However, in light of the duty to replace the machinery under Article 1.1 of the instant arbitral award, the facts acknowledged by the lower court are as follows: (a) although the Defendant provided the duty to replace the machinery, the instant self-denunciation was not replaced or installed due to the Plaintiff’s rejection of receipt, and is currently kept by the import agent; and (b) it cannot be deemed that the Defendant had extinguished the obligation to replace the machinery due to the completion of the performance of the duty to replace the machinery and the completion of the performance of the duty to replace the machinery, and even after examining the record, it is not recognized that there was a different ground for objection.

Nevertheless, the court below applied the provision of Article 5(2)(b) of the New York Convention on the premise that there was a ground for objection regarding the duty to replace machinery under Article 1.1 of the New York Convention. In so doing, the court below erred by misapprehending the rules of evidence and misapprehending the legal principles on the "violation of Public Order" under Article 5(2)(b) of the New York Convention, thereby adversely affecting the conclusion of the judgment. The ground of appeal assigning this error is with merit.

B. As to the part of the judgment below dismissing the enforcement claim against Paragraph (2) of the instant arbitral award, the Plaintiff did not pay any grounds for objection within the submission period of the appellate brief.

3. Therefore, without further proceeding to decide on the remaining grounds of appeal, the part against the Plaintiff as to Article 1.1 of the arbitral award of this case against the Plaintiff is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The remaining grounds of appeal by the Plaintiff are dismissed as it is without merit. It is so decided as per Disposition by the assent

Justices Lee Ji-dam (Presiding Justice)