Non-Payment of Costs as Breach of the Arbitration Agreement under Korean Law

Abstract

Due to arbitrator fees and other institutional costs that must be paid for upfront, international commercial arbitration can be surprisingly costly, especially when one party refuses or is unable to pay for its share of such arbitration costs. In that situation, most arbitral institutions require the other party to pay for both sides. Otherwise, the arbitral proceedings are terminated. This Article explores whether a party that has paid for its opponent’s arbitration costs can seek relief for breach of the arbitration agreement under Korean law. First, this Article summarizes how parties may get away without paying for arbitration costs and points out that non-payment is in fact rational from the perspective of a respondent to an arbitration. Next, this Article turns to relevant case law from common and civil law jurisdictions. Subsequently, this Article argues that parties should draft their arbitration agreement carefully so that non-payment of arbitration costs constitutes a clear breach of the arbitration agreement. On a final note, this Article argues that breaching the arbitration agreement by way of non-payment of arbitration costs should warrant damages or perhaps even rescission of the arbitration agreement under Korean law.