CONTENTS
- 1. International Disputes (International Litigation) | Concept and Significance
- 2. International Disputes (International Litigation) | Causes and Main Types
- 3. International Disputes (International Litigation) | Procedures and Characteristics
- 4. International Disputes (International Litigation) | Response Methods
- - Significance of Preventive Measures
- - Prompt Initial Response
- - Collaboration with Local Law Firms
- - Strategies for Enforcing Foreign Judgments
- 5. International Disputes (International Litigation) | Key Issues and Points to Note
- - International Litigation vs. International Arbitration: Concepts and Comparison
- - Reasons Assistance May Be Needed in International Disputes (International Litigation)
1. International Disputes (International Litigation) | Concept and Significance
International disputes (international litigation) have become an increasingly important field as domestic companies expand their overseas presence and exchanges among domestic and foreign companies grow more active.
As the global market has expanded, the number of companies aiming to enter overseas markets or already actively operating in them has increased, and as a result, legal disputes are also arising in a variety of forms.
For various disputes and conflicts that a company cannot resolve on its own, when settlement or mediation procedures do not resolve them, international litigation comes to be considered.
For example, this includes cases where a domestic company files a lawsuit on the ground that a foreign company has failed to perform a contractual obligation, or where it asserts rights over assets located in a foreign country.
Before proceeding with international litigation, various issues may arise, such as the appointment of litigation representatives, the submission of various documents, the translation of materials and attendance on hearing dates, the high cost of litigation, and the application of the governing law.
Therefore, before moving on to international litigation, it is advisable to use a dispute arbitration system when an international dispute arises or for both parties to reach an amicable settlement.
In particular, disputes between countries with different languages, cultures, and legal systems are far more complex than ordinary civil litigation.
Complex legal considerations are required, such as each country's private international law, the requirements for recognition and enforcement of foreign judgments, and arbitration agreements and governing law clauses.
Where a matter proceeds to international litigation, it is important to quickly carry out a prompt initial response, an assessment of whether and how legal provisions apply, their interpretation, and an understanding of the facts of the case in dispute, in order to prepare a suitable course of action.
2. International Disputes (International Litigation) | Causes and Main Types
▶International contract disputes
Disputes over the interpretation of a contract, such as non-performance, damages, notice of termination, and liquidated damages, are the most common. The court or arbitral institution with jurisdiction and the applicable law (governing law) specified in the contract become the key issues.
▶International arbitration disputes
Where there is an arbitration clause in the contract, dispute resolution through arbitration is attempted instead of litigation.
International arbitration is determined by various factors, such as which arbitral institution’s arbitration rules apply and who the arbitrators are.
Representative arbitral institutions include the Singapore International Arbitration Centre (SIAC), the Korean Commercial Arbitration Board (KCAB), and the International Court of Arbitration of the International Chamber of Commerce (ICC).
▶Overseas investment and market-entry disputes
During the process of entering overseas markets, disputes over the equity of a local subsidiary, business suspension, government regulation, and the like may arise, and these can lead to civil or criminal litigation or investor-state dispute settlement (ISDS).
▶International tax and financial disputes
Disputes with tax authorities arise over double taxation, the accounting treatment of overseas funds, suspected tax evasion, and the like, and accordingly tax litigation or criminal proceedings are conducted.
▶International intellectual property infringement
Infringement issues surrounding patents, trademarks, designs, and the like are a representative type of dispute in international litigation, as the laws differ from country to country.
3. International Disputes (International Litigation) | Procedures and Characteristics
The procedure for international litigation is similar to that for domestic litigation, but it includes the following complex elements.
① Determination of jurisdiction
Which country's court may hear the case is the first issue in international litigation.
In the Republic of Korea, international adjudicatory jurisdiction is provided for through the Act on Private International Law, and it is determined according to the following criteria.
-The defendant's address or principal office is located in the Republic of Korea
-The place of performance of the contract or the place where the dispute arose is the Republic of Korea
-There is an agreement on jurisdiction between the parties
-The defendant responded to the litigation without raising an objection to jurisdiction (jurisdiction by pleading)
② Service procedure
Where the counterparty resides in a foreign country, the complaint must be served through the Hague Service Convention, a bilateral treaty, diplomatic channels, or the like, which can take several months.
③ Proof activities
Foreign-language translations, interpretations of foreign law, overseas notarized documents, and the like are required, and the evidence collection process is also complex. Where there is no foreign Discovery procedure, the voluntary securing of materials becomes the key.
④ Pronouncement and enforcement of judgment
Even if a judgment is obtained abroad, if the counterparty holds property within Korea, ‘recognition’ of the judgment is required in order to enforce it.
4. International Disputes (International Litigation) | Response Methods
The following reviews methods of responding to international disputes (international litigation) and practical strategies.
Significance of Preventive Measures
It is most important to take measures that can prevent disputes from the time an international contract is concluded.
The contract should clearly state the court of jurisdiction, the governing law, whether and how arbitration applies, the method of notice, force majeure clauses, and the like.
Many companies seek legal assistance after a dispute arises, but in most cases the actual outcome of a dispute is determined by the wording of the contract.
The contract must specify a clause on the method of resolution in the event of a dispute.
A ‘designation of the court of jurisdiction’ or an ‘international arbitration clause’ falls under this.
Most parties seek to designate the courts of their own country as the court of jurisdiction, but because this is determined by bargaining power, designating a neutral arbitral institution in a third country can be advantageous in securing fairness.
Let us provide an example of arbitration procedures that would be good to set out in detail in the contract.
Example contract items:
-Negotiation (consultation) → Mediation → Arbitration
-Arbitral institution: SIAC, ICC, KCAB
-Governing law: Korean law or the law of a third country
-Number of arbitrators: 1 or 3
-Language of arbitration: English or Korean
Such a multi-tiered dispute resolution procedure encourages prompt resolution when a dispute actually arises and can reduce cost and time compared with litigation.
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Prompt Initial Response
When a dispute arises, one should respond promptly, preparing for the preservation of evidence, service of documents, and appearance on the hearing date.
A strategy that reflects the local legal structure and cultural differences is needed.
Collaboration with Local Law Firms
Because a response in accordance with the laws of the country concerned is necessary, collaboration with a local law firm or an international law firm is indispensable.
It is advisable to receive assistance from a law firm with a legal network in major destination countries such as Japan and the United States.
Strategies for Enforcing Foreign Judgments
Once a foreign judgment is recognized, an execution judgment must be obtained from a court of the Republic of Korea.
An execution judgment is a procedure that determines whether the content of a foreign judgment can be compulsorily executed in a court of the Republic of Korea.
A review of the requirements for recognition of a foreign judgment (reciprocity, due process, whether it violates public order and good morals, and the like) is necessary.
Article 217 of the Civil Procedure Act (Recognition of Foreign Judgments): A final and conclusive judgment of a foreign court, or a judgment recognized as having the same effect, is recognized only if it meets all of the following requirements.
1. That the international jurisdiction of that foreign court is recognized under the principles of international jurisdiction in accordance with the statutes or treaties of the Republic of Korea
2. That the defeated defendant was served, in a lawful manner allowing sufficient time to prepare a defense, with the complaint or a document equivalent thereto and with the notice of the date or order (excluding cases of service by public notice or similar service), or responded to the litigation even without being so served
3. That, in light of the content of the final judgment and the like and the litigation procedure, recognition of that final judgment and the like does not contravene the good morals or other social order of the Republic of Korea
4. That there is a mutual guarantee, or that the requirements for recognition of a final judgment and the like in the Republic of Korea and in the country to which that foreign court belongs do not significantly lose balance and have no substantial difference in important respects
② The court shall examine ex officio whether the requirements under paragraph (1) have been met.
5. International Disputes (International Litigation) | Key Issues and Points to Note
We will look at the practical issues and points to note in international disputes (international litigation).
▶Caution regarding overlapping jurisdiction and forum shopping
The courts of different countries may assert jurisdiction, or 'forum shopping' to select a favorable court may occur.
In this case, there is a concern that a court may deny its own jurisdiction or that procedural delay may result from duplicate litigation.
▶ Difficulty of service
Where the address of a foreign national cannot be specified, or where the service procedure is complex under local law, the trial may be delayed or rendered void.
It is necessary to confirm matters such as whether the country is a party to the 'Hague Service Convention' on international service.
▶ Translation and cost burden
All documents needed for the litigation require accurate translation, and interpretation and translation costs are substantial.
In particular, misunderstandings due to differences in the interpretation of legal terms can affect the outcome of the trial, so careful translation is a necessity.
▶ Effectiveness of enforcement of the judgment
Even after obtaining a judgment abroad, where the other party conceals assets overseas or a foreign court refuses enforcement, it may be difficult to realize an actual benefit.
The status of assets and the possibility of enforcement should be investigated sufficiently in advance.
International Litigation vs. International Arbitration: Concepts and Comparison
When a dispute arises in an international transaction, one of either international litigation or international arbitration is chosen as the means of resolution.
These two methods differ in procedure, enforcement, cost, time, and similar respects, and they should be clearly chosen and prepared for from the contract stage.
✅ What is international litigation?
International litigation is a method in which the court of one of the countries of the disputing parties has jurisdiction and renders a legal judgment through trial proceedings.
It involves complex private international law issues such as jurisdiction, governing law, and whether a foreign judgment is recognized and enforced.
The procedure is strict, and there are several stages, including appeal and final appeal.
It proceeds as an open trial, and the trial record and content may become known to outside parties.
✅ What is international arbitration?
International arbitration is a procedure in which the contracting parties entrust the resolution of the dispute to an arbitral institution or arbitrator agreed upon.
A neutral third party renders a decision by applying the governing law on the basis of the parties’ arguments and evidence.
In the states party to the New York Convention, the enforceability of an arbitral award is guaranteed.
✅ Which method is better?
Where the counterparty country’s judicial system is unstable or there is concern that the procedure may be prolonged, international arbitration may be advantageous.
Where the amount in dispute is large or the legal interpretation is at issue, international litigation, which allows a review of the legal reasoning through the appeal procedure, may be appropriate.
When drafting a contract, it is advisable to specify in detail whether arbitration applies, the arbitral institution, the seat of arbitration, the arbitration rules, and similar matters, and also to set the court of jurisdiction and the governing law in preparation for international litigation.
Reasons Assistance May Be Needed in International Disputes (International Litigation)
Unlike domestic cases, international disputes go beyond simply interpreting statutory provisions and require broad and deep expertise in the legal system, culture, litigation procedures, and arbitration rules of the country concerned.
In addition, there are many practical tasks such as enforcement of foreign judgments, review of the validity of arbitration agreements, and preparation of translations, so there are practical limits to an ordinary company responding on its own.
✅ Expertise in Private International Law and Foreign Law Is Needed
Because the judicial systems, procedural law, and substantive law of each country all differ in international litigation or arbitration, a basic understanding of foreign laws such as U.S. law, English law, and Chinese law, in addition to Korean law, is needed.
A specialized attorney can respond strategically to a range of legal issues, from determining the governing law and jurisdiction of a contract to the procedures for recognition and enforcement of foreign judgments.
✅ Strategy Design Including Determination of Jurisdiction, Governing Law, and Enforceability
When a dispute arises, the first things to review are "which court has jurisdiction," "which law applies," and "whether a judgment can actually be enforced if one prevails."
A specialized attorney can be involved throughout the entire process, from advising at the contract drafting stage to prevent jurisdictional disputes in advance, to designing strategies to prevent duplicate litigation and forum shopping.
✅ Designing Arbitration Clauses and Securing Their Validity
In practice, a single phrase in an arbitration clause can make the commencement of arbitration proceedings itself impossible.
A specialized attorney drafts the contract in a way that clearly sets the arbitral institution, the seat of arbitration, the language, the number of arbitrators, and the governing law, and that enhances the validity of an international arbitration agreement.
In addition, after international arbitration commences, practical know-how such as document disclosure procedures, witness statements, and handling discovery is crucial.
✅ Collaboration With Local Law Firms When Responding to Foreign Litigation or Arbitration
International disputes are likely to fall under the jurisdiction of foreign courts or arbitral institutions.
In this case, collaboration with a local law firm in the country concerned is critical, and most procedures are difficult for a Korean attorney to handle directly.
An experienced specialized law firm has a track record of collaborating with local law firms in Japan, the United States, Europe, and Southeast Asia, enabling a prompt and effective response.
International disputes involve risks that go beyond a simple legal matter.
Because actual harm to a company's reputation, the continuity of its business, and the recoverability of its investment may follow, thorough preparation and response from the preliminary stage are needed.
Disputes can arise at any time.
However, a company that has prepared strategically can turn a crisis into an opportunity.
This firm, with attorneys experienced in international litigation and international trade experts who have supported the domestic entry of many global companies, has strong responsiveness to legal disputes related to cross-border transactions.
With expertise in complex international issues such as foreign investment, the content industry, and customs and trade, Daeryun provides strategic and effective legal services in international litigation as well.
